What made emerging markets shine this week?

In this week’s video update:

  • U.S. equities remain lackluster, despite improvement of U.S. corporate earnings numbers compared to last quarter of about 5.5%.
  • Third consecutive quarter of negative U.S. corporate earnings, down about 2.6%.
  • Emerging markets improve this week, with cyclical headwinds now in their favor.
  • Continued strength in European markets with the STOXX 600® Index up about 1.5%., as worst-case scenarios anticipated from the recent Brexit vote appear to not be happening.

On this week’s update Chief Investment Strategist Erik Ristuben discusses the latest U.S. corporate earnings figures. While improving by 5.5% compared to last quarter, it is the third consecutive quarter of negative results, still down about 2.6%. Additionally, the U.S. market is showing signs of increasing wage pressure, which combined with other economic indicators, has Russell Investments’ strategists viewing U.S. equities as relatively expensive compared to other investing alternatives, such as emerging markets.

While slightly quiet in the markets this week, the light is shining on emerging markets in a strong way. This week the Russell Emerging Market® Index is up 16% year-to-date, ending the week up 3%. Russell Investments’ view is that emerging markets offer potential value to investors and it appears the markets agree this week.

Lastly Ristuben shifts to Europe, seeing continued strength in European markets. The STOXX 600® Index is up about 1.5% for the week. Ristuben believes that markets are likely starting to realize that the worst case scenarios from June’s Brexit vote appear to not be happening, and our strategists expect European equities will be strong relative to U.S. equities for the remainder of the year.

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