https://russellinvestments.com/us/blogUS blog feeden{2AA1C124-A4F6-4FC4-9F8E-5A1A0FEBC2E9}https://russellinvestments.com/us/blog/consumer-spending-market-struggles-mwir<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Recession risks rise after new tariff announcement. </span></li> <li><span>U.S. government bonds rally</span></li> <li><span>All eyes on the U.S. consumer</span></li> </ul>Fri, 04 Apr 2025 05:10:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;U.S. recession risks have increased&lt;/li&gt; &lt;li&gt;U.S. government bonds are rallying&lt;/li&gt; &lt;li&gt;The health of the U.S. consumer is an important watchpoint&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Director and Senior Investment Strategist Alex Cousley discussed the details of the Trump administration&amp;rsquo;s tariff plan and the market&amp;rsquo;s reaction.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Negotiate or retaliate?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Cousley began by noting that U.S. President Donald Trump&amp;rsquo;s reciprocal tariff plan could increase the effective U.S. tariff rate by 14%. He said this &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/tariff-day&quot;&gt;estimated increase&lt;/a&gt;&lt;/span&gt;&lt;span&gt; is greater than expected and is also very large in a historical context.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;We believe these tariffs have increased &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/trade-war-recession-risks-mwir&quot;&gt;recession risks&lt;/a&gt;&lt;/span&gt;&lt;span&gt; in the United States. In our view, the chances of a recession in the next year are now close to 50%,&amp;rdquo; Cousley remarked. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He said the new U.S. tariffs target Asian countries&amp;mdash;including China, Japan, South Korea and Taiwan&amp;mdash;more aggressively than the rest of the world. While it&amp;rsquo;s unclear exactly how countries will respond, some nations&amp;mdash;particularly in Asia&amp;mdash;have signaled they&amp;rsquo;ll look to lower tariffs on U.S. imports. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;Vietnam is one of the most prominent examples of this, but Japan and South Korea have also suggested they&amp;rsquo;ll take a negotiating stance,&amp;rdquo; Cousley remarked.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;On the other hand, in a significant move of retaliation, China announced Friday that it will slap a 34% tariff on all U.S. imports starting April 10.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Cousley finished by noting the European Union hasn&amp;rsquo;t been as vocal about any actions it might take.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Market movers&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;In the aftermath of the announcement, U.S. stocks sold off sharply on Thursday, with the S&amp;amp;P 500 declining by approximately 4.5%. Cousley said non-U.S. markets also fell, but by a lesser extent. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;In U.S. government bond markets, yields fell as prices rose. &amp;ldquo;We saw a pretty aggressive rally in 2-year and 10-year Treasury notes as investors piled into bonds,&amp;rdquo; Cousley remarked. The outperformance is a result of rising recession risks, he said, adding that Treasurys still look close to fair value. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;With recession risks increasing, the U.S. Federal Reserve (Fed) may cut rates by more than expected at the start of 2025,&amp;rdquo; Cousley noted. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Switching to currencies, he said the U.S. dollar sold off Thursday in an unusual move. Meanwhile, the euro rallied, as did typical safe-haven currencies like the Japanese yen and Swiss franc. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Spending under scrutiny&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Cousley wrapped up with a look at recent U.S. economic data, which was a bit of a mixed bag. The latest ISM (Institute for Supply Management) surveys were weaker than many economists were expecting, while initial U.S. jobless claims edged down last week. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;In general, the data shows U.S. consumers are still behaving in a normal manner. The decline in consumer confidence hasn&amp;rsquo;t led to a decline in consumer spending. However, we expect that the latest tariffs will be a headwind to consumer spending moving forward,&amp;rdquo; Cousley stated. He said uncertainty around the tariff situation&amp;mdash;and how it could potentially impact U.S. capital expenditures&amp;mdash;is what led Russell Investments&amp;rsquo; strategist team to increase its recession risk this week. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Cousley explained the team uses a cycle, valuation and sentiment framework to guide its investment decision-making process. He said the business cycle outlook has deteriorated in the wake of the tariff announcement, while the team&amp;rsquo;s measure of investor sentiment has reached pessimistic levels.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;We haven&amp;rsquo;t seen sentiment move to a level of panic yet, but it&amp;rsquo;s firmly in the pessimistic stage,&amp;rdquo; Cousley stated, adding that reaching the panic threshold could present potentially attractive buying opportunities.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/eRFT2oYr34c&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/16917668&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt;Alexander Cousley<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p><p> CORP-12753</p> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{EE42D20A-300F-491E-8B98-DAE6BB7FF68B}https://russellinvestments.com/us/blog/tariff-dayPresident Trump's sweeping announcement on retaliatory tariffs is complex. We break down the potential impacts for investors.Thu, 03 Apr 2025 13:43:00 -0700&lt;p&gt;&lt;em&gt;Updated Thursday, April 3 at 8 a.m. Pacific time&lt;/em&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;U.S. stocks underperformed in the first quarter of 2025, hit by a double whammy from intensifying policy uncertainty and a U-turn in select mega cap stocks. Into this volatile backdrop, April 2&amp;mdash;President Trump&amp;rsquo;s so-called Liberation Day&amp;mdash;was circled on investors&amp;rsquo; calendars as a catalyst.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Tariff talk&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Yesterday&amp;rsquo;s announcement from the Rose Garden marked another bold policy step, charging large reciprocal tariffs against many of the United States&amp;rsquo; largest trading partners. For example, the policy includes:&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;A new 10% base tariff on most trading partners, effective April 5 &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;A ramp-up a few days later to match half of the tariff and non-tariff barriers that countries impose on the U.S.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; We estimate the average effective tariff rate could increase by almost 14%&amp;mdash;a historically large increase in trade duties. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Two higher level observations are important here. First, the reciprocal tariffs leave room for the duties to get negotiated away. Case-in-point: Some very large exporters like Vietnam have already said that they will cut all tariffs on U.S. products. Second, the exemptions separate the reciprocal policy from Trump&amp;rsquo;s sector-level tariffs like steel, aluminum, and automobiles. This suggests to us that those sector-level tariffs are likely to be more permanent.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &amp;nbsp;&lt;img alt=&quot;Paul Eitelman, CFA&quot; style=&quot;width: 130px; height: 127px; float: left; margin-right: 30px; margin-bottom: 20px; margin-top: 20px;&quot; src=&quot;/-/media/images/global/headshots/a-g/eitelman-paul.png?w=130&amp;amp;h=127&amp;amp;hash=F60296297BD2AC1C5EA69BCD338C07D3&quot; /&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top: -5px;&quot;&gt;&lt;em&gt;&lt;strong&gt;&quot;We estimate the average effective tariff rate could increase by almost 14%&amp;mdash;a historically large increase in trade duties.&quot;&lt;/strong&gt;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;strong&gt;Paul Eitelman, CFA&lt;/strong&gt;&lt;br /&gt; Senior Director, Chief Investment Strategist&lt;br /&gt; Russell Investments&lt;/p&gt; &lt;hr /&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Growth hit&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The administration had already pushed harder than expected on trade policy with tariffs on imports from China, Canada, Mexico, steel, aluminum, and automobiles &amp;amp; parts. While the policies could support domestic manufacturing over the longer-term, we &lt;a href=&quot;/us/blog/estimating-tariff-impacts&quot;&gt;estimated these measures&lt;/a&gt;&amp;nbsp;were likely to act as a drag on real GDP growth of 0.5-0.75% and a boost to core PCE inflation of 0.75%.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Today&amp;rsquo;s reciprocal tariffs could dent real GDP growth by another 0.75% and lift core PCE inflation by an additional 1%. That would likely leave the U.S. growth outlook at 1% or less for 2025 and push core inflation north of 3.5%. Accordingly, we&amp;rsquo;ve raised our estimate of U.S. recession risk in the year ahead from 30% to 35-40%.&lt;br /&gt; &lt;/span&gt;&lt;/p&gt; &lt;div&gt;&amp;nbsp;&lt;/div&gt; &lt;strong&gt;Stunted growth?&lt;br /&gt; &lt;/strong&gt;&lt;em&gt;Estimated tariff impacts on GDP for 2025 vary&lt;br /&gt; &lt;/em&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/apr2tariff.jpg&quot;&gt;&lt;img alt=&quot;Tariff GDP estimates&quot; src=&quot;/-/media/images/global/blogs/images/apr2tariff.jpg&quot; /&gt;&lt;/a&gt;&amp;nbsp;&lt;br /&gt; &lt;em style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Source: Russell Investments adaptation of model-based estimates in &quot;The Fiscal, Economic, and Distributional Effects of a 20% Broad Tariff&quot; (The Budget Lab, 2025) and &quot;How Will Trump&#39;s Universal and China Tariffs Impact the Economy?&quot; (Tax Foundation, 2024). Our adaption assumes a 14-percentage-point increase in the U.S. effective tariff rate.&lt;br /&gt; &lt;/span&gt;&lt;/em&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Pessimism not panic&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;U.S. markets were moderately risk-on through Wednesday&#39;s session, but sold off sharply Thursday morning. As of 8 a.m. Pacific time on Thursday, the S&amp;amp;P 500 was down approximately 4% and the Dow Jones had shed roughly 1,500 points. Meanwhile, Treasury yields declined by approximately 15 basis points as investors flocked to the safety of bonds.&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;We remain focused on holding diversified portfolio strategies into this period of extreme policy uncertainty. And we will be closely monitoring our measures of market psychology for potential dislocations in markets. Currently our signals show pessimism in the U.S. stock market but haven&amp;rsquo;t reached an extreme level of panic. Treasury yields at 4% are in line with our estimates of fair value for bonds.&lt;/span&gt;&lt;/p&gt;Paul Eitelman<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12749<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{BFBA20E4-5241-4965-A57A-B667B616DB8B}https://russellinvestments.com/us/blog/trade-war-recession-risks-mwir<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Tariff uncertainty persists</span></li> <li><span>Canadian small-business confidence plummets</span></li> <li><span>Q1 earnings season preview</span></li> </ul>Fri, 28 Mar 2025 05:10:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;Tariff uncertainty is continuing&lt;/li&gt; &lt;li&gt;Canadian small-business confidence fell sharply&lt;/li&gt; &lt;li&gt;7.5% earnings growth is anticipated for U.S. Q1 earnings season&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Senior Investment Strategist and Head of Canadian Strategy, BeiChen Lin, discussed the latest tariff developments. He also revealed key watchpoints for upcoming U.S. and Canadian employment reports and finished with a preview of U.S. first-quarter earnings season. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Unanswered questions&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;The week began on an optimistic note after hints that the United States&amp;rsquo; reciprocal tariffs&amp;mdash;slated to go into effect April 2&amp;mdash;might be smaller in scope. This led to a significant rally in the S&amp;amp;P 500 on Monday, Lin said, before a midweek announcement on U.S. auto tariffs caused stocks to drop again.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;Originally, investors were thinking these tariffs might not be implemented until after the reciprocal tariffs take effect. Instead, it looks like the auto tariffs will only lag the reciprocal tariffs by one day,&amp;rdquo; he remarked. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Lin stressed that the &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/volatility-vengeance-mwir&quot;&gt;tariff situation&lt;/a&gt;&lt;/span&gt;&lt;span&gt; remains very dynamic, with the possibility that things could change up to the last minute. There&amp;rsquo;s also a lot of uncertainty about how these tariffs will be applied, including the countries and products that might be taxed. In addition, other nations might retaliate by slapping their own tariffs on U.S. imports, Lin said. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Because of all these unknowns, it&amp;rsquo;s unclear &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/stagflation-lite-fed-growth-outlook&quot;&gt;how the tariff situation could impact the U.S. economy&lt;/a&gt;&lt;/span&gt;&lt;span&gt;. &amp;ldquo;Our central scenario is that the U.S. should be able to avoid a recession&amp;mdash;but we do think recession risks are &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/dont-fear-volatility&quot;&gt;still somewhat above average&lt;/a&gt;&lt;/span&gt;&lt;span&gt;,&amp;rdquo; Lin stated. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Unemployment watch &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Turning to the labor market, Lin said both Canada and the U.S. will publish employment reports for March next week. In Canada, the unemployment rate will be a big focus due to the country&amp;rsquo;s weaker jobs market relative to the U.S., he said.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Confidence among small businesses in Canada has plummeted in recent weeks amid anxiety over U.S. tariffs, Lin noted. This is because Canada will probably be more negatively impacted than the U.S. if the tariffs remain in place for a while, he explained.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;I&amp;rsquo;ll be looking closely at the March report to see how much business anxiety weighed on job creation and the unemployment rate. If the unemployment rate comes in higher, this could bolster the case for the Bank of Canada to cut rates again next month,&amp;rdquo; Lin commented. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;In the U.S., the unemployment rate and the sectors where jobs are being created and lost will both be of interest, he said. The government sector in particular will be a key watchpoint due to the recent layoffs, Lin noted. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;So far, government layoffs haven&amp;rsquo;t had a significant impact on overall job creation numbers. This next report will show if the U.S. labor market remains resilient,&amp;rdquo; he remarked. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Earnings expectations&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Lin wrapped up with a peek at the upcoming first-quarter earnings season, which kicks off in mid-April. The industry consensus is for 7.5% growth on a year-over-year basis, which he said is a bit of a step down compared to the &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/themes-q4-2024-earnings-mwir&quot;&gt;fourth quarter of 2024&lt;/a&gt;&lt;/span&gt;&lt;span&gt;. However, Lin stressed that companies sometimes beat initial earnings expectations.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;This has happened a lot in recent seasons, so it&amp;rsquo;s worth watching. I&amp;rsquo;ll also be looking at what consumer-facing companies are saying about their plans to potentially adjust pricing due to recent tariff announcements,&amp;rdquo; Lin said. He concluded by emphasizing that how much companies absorb price increases through their profit margins versus how much they pass along the increase to consumers will be a key focus.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/hIU_N-qg7B4&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/16876574&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt;BeiChen Lin<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p><p> CORP-12747</p> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{FD4F09B1-CD84-4DEC-AD66-C1BBD234060F}https://russellinvestments.com/us/blog/germany-handbrake-off-mwir<p><strong><span>In the latest update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Fed, BoE hold rates steady</span></li> <li><span>Germany votes to change debt policy</span></li> <li><span>U.S. jobless claims tick up</span></li> </ul>Fri, 21 Mar 2025 05:10:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;The Federal Reserve and the Bank of England held rates steady&lt;/li&gt; &lt;li&gt;Germany voted to change its debt policy&lt;/li&gt; &lt;li&gt;U.S. jobless claims ticked up&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Director and Global Head of Solutions Strategy, Van Luu, discussed the latest rate decisions from key central banks. He also talked about fiscal reform in Germany and reviewed recent U.S. market performance.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;No cuts&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Luu began by noting the U.S. Federal Reserve (Fed) opted to leave interest rates unchanged at its March 18-19 meeting, maintaining its policy rate in a range of 4.25%-4.50%. This marked the second straight meeting where the Fed held rates steady, he said.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;The central bank&amp;rsquo;s updated economic projections suggest a &lt;/span&gt;&lt;a href=&quot;https://russellinvestments.com/us/blog/stagflation-lite-fed-growth-outlook&quot;&gt;&lt;span&gt;growing risk of stagflation&lt;/span&gt;&lt;/a&gt;&lt;span&gt;,&amp;rdquo; Luu remarked, explaining that the Fed raised its forecast for inflation while lowering growth expectations. The central bank also announced it will slow the pace of its balance sheet reduction beginning in April. The Fed is doing this to avoid disruptions to markets as political negotiations to raise the U.S. debt limit play out, Luu stated. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Markets reacted positively to the Fed&amp;rsquo;s decision, he said, noting Chair Jerome Powell downplayed inflation and recession risks at the follow-up press conference. &amp;ldquo;This helped lift the mood in markets,&amp;rdquo; Luu remarked.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Shifting to the UK, he said the Bank of England (BoE) also left its key lending rate unchanged at 4.5% in an 8-1 vote. &amp;ldquo;This was a slight hawkish surprise for economists, who had expected one more voting member to join Swati Dhingra in favoring a cut,&amp;rdquo; Luu commented.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He added that both central banks attributed their wait-and-see attitude on rates to high uncertainty &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/economic-vitals-strong&quot;&gt;surrounding international trade policy&lt;/a&gt;&lt;/span&gt;&lt;span&gt;. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Looser limits&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Turning to Germany, Luu said the country&amp;rsquo;s parliament&amp;mdash;known as the Bundestag&amp;mdash;passed a constitutional amendment on Tuesday to reform its &amp;ldquo;debt brake&amp;rdquo; policy. The &amp;ldquo;debt brake&amp;rdquo; &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/german-elections-2025&quot;&gt;restricts how much money&lt;/a&gt;&lt;/span&gt;&lt;span&gt; the government can borrow. The amendment, which passed with the required two-thirds majority, will allow for much higher spending on defense, infrastructure, and environmental protection, Luu said. He added that Germany&amp;rsquo;s upper house&amp;mdash;the Bundesrat, which represents the state governments&amp;mdash;is expected to pass the legislation Friday. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;From my vantage point, this fiscal reform in Germany is very important and positive for the growth prospects of Europe&amp;rsquo;s largest economy. It resembles former European Central Bank President Mario Draghi&amp;rsquo;s &amp;ldquo;whatever it takes&amp;rdquo; attitude in 2012 when the integrity of the euro area was in doubt,&amp;rdquo; Luu remarked.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Stabilizing markets&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Luu finished with a look at recent U.S. economic data and market performance. The latest data was mostly in-line with economists&amp;rsquo; expectations, he said. &amp;ldquo;Jobless claims edged up and the Philadelphia Fed&amp;rsquo;s manufacturing index was slightly better than expected, although the outlook component of the index worsened,&amp;rdquo; he said. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Meanwhile, U.S. stock markets stabilized this week&amp;mdash;a welcome reprieve for investors after &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/volatility-vengeance-mwir&quot;&gt;last week&amp;rsquo;s decline&lt;/a&gt;&lt;/span&gt;&lt;span&gt;. Through Thursday, the S&amp;amp;P 500 was positive on the week, Luu noted.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;The respite comes as our proprietary measure of investor sentiment is suggesting oversold conditions in the U.S. stock market, which could indicate a potential buying opportunity,&amp;rdquo; Luu stated. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He concluded by adding that on the fixed income side, bond yields fell moderately and prices rose as investors were soothed by Powell&amp;rsquo;s optimistic remarks on tariff and inflation risks.&lt;/span&gt;&lt;/p&gt;Van Luu<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p><p> CORP-12743</p> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{08107ABD-DD7D-4FB1-B9F7-822C527CD450}https://russellinvestments.com/us/blog/thinking-about-market-timing-today<p style="line-height: normal;">The recent increase in market volatility has stirred up questions about moving out of the market for the safety of cash. Check out these key considerations before doing so.</p>Thu, 20 Mar 2025 00:55:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key Takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;Market timing is difficult and not the type of behavior we would encourage for most advisors and investors.&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;A historical perspective on how frequently portfolios have lost money may help investors remain invested.&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;We also suggest some key considerations to discuss with investors contemplating a move to cash.&lt;/li&gt; &lt;/ul&gt; &lt;hr align=&quot;left&quot; size=&quot;1&quot; width=&quot;33%&quot; /&gt; &lt;p&gt;In recent weeks, how many times have you fielded the question &amp;ldquo;Should I be moving to cash?&amp;rdquo; Or maybe it&amp;rsquo;s come in the form of a bold (panicked?) statement &amp;ldquo;I need to move to cash.&amp;rdquo;&lt;/p&gt; &lt;p&gt;We have certainly seen an uptick in this sentiment accompanying the &lt;a href=&quot;/us/blog/volatility-vengeance-mwir&quot;&gt;increase in market volatility&lt;/a&gt; since the start of the year.&lt;/p&gt; &lt;p&gt;Skittish investors are eyeing current rates on Certificates of Deposit (CD) and thinking &amp;ldquo;A 3% to 4% return looks pretty attractive relative to a market correction.&amp;rdquo;&lt;/p&gt; &lt;p&gt;So that begs the question: Are investors best served by abandoning their long-term allocations to move to the safety, but limited return potential of &lt;a href=&quot;/us/blog/the-hidden-costs-of-carrying-cash&quot;&gt;cash&lt;/a&gt;? It&amp;rsquo;s never been easy to correctly time markets&amp;mdash;but is this time different?&lt;/p&gt; &lt;p&gt;Let&amp;rsquo;s &lt;a href=&quot;/us/blog/tips-advisors-stay-calm&quot;&gt;put emotions aside&lt;/a&gt; for a minute and look at some historical perspective to &lt;a href=&quot;/404 error page?item=web%3a%7b22B07EE3-1A28-4F7A-B5E0-C604456E7C1C%7d%40en&quot;&gt;help investors&lt;/a&gt; wrestling with the notion of exiting the market.&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;What to think about&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;Before considering a move to cash, investors should assess a few factors:&lt;/p&gt; &lt;ul&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;How frequently have markets and portfolios turned negative&amp;mdash;and stayed negative?&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;How confident are you about the &amp;ldquo;sell&amp;rdquo; signal and how will it feel if you&amp;rsquo;re wrong?&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;It&amp;rsquo;s true that capital markets produce periods of high volatility and negative results for investors. However, those periods tend to be short-lived and reverse fairly quickly as demonstrated by the calendar year results shown below. This histogram shows that over the last 45 years, a balanced 60% equities/40% fixed income index portfolio has produced negative results in only seven of those years. In other words, a balanced portfolio has had positive results in 38 of the 45 calendar years (84%). And in the case of the most negative years, such as 2008 and 2022, they were followed by strong positive years.&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;Additionally, over the last 45 years there have only been a few times that negative investor returns stretched beyond 12 months. To attempt to correctly, and consistently, time those narrow windows of negative results is a difficult task.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Click image to enlarge&lt;br /&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/chart-1-q4-emr.webp&quot; target=&quot;_blank&quot;&gt;&lt;img alt=&quot;Marginal income tax rates&quot; src=&quot;/-/media/images/global/blogs/images/chart-1-q4-emr.webp&quot; /&gt;&lt;/a&gt;&lt;br /&gt; &lt;/span&gt;&lt;/em&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;em&gt;Index portfolio of 40% Russell 3000 Index, 20% MSCI EAFE Index, and 40% Bloomberg US Gov/Corporate Bond Index. Index returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. Indexes are unmanaged and cannot be invested in directly.&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;To address the &amp;ldquo;sure it&amp;rsquo;s a narrow window, but this is a clear sell signal&amp;rdquo; argument, let&amp;rsquo;s review a couple historical signals that were &amp;ldquo;obvious&amp;rdquo; sell warnings and their eventual outcomes.&amp;nbsp;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Market timing signal&amp;mdash;Exhibit A: The Global Pandemic&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;The most recent clear &amp;ldquo;sell&amp;rsquo; signal was the COVID outbreak of early 2020. The global economy shut down and the outlook for stocks turned grim early. The stock market started pulling back in February and by the end of the first quarter, stocks were down more than 20%. With so many unknowns, many fearful investors withdrew and parked cash on the sidelines. Unfortunately, this meant these investors missed much, if not all, of the market bounce off the bottom as stocks rallied by 45% over the last nine months of the year. The year of the COVID outbreak produced a 20%+ stock market return!&lt;/p&gt; &lt;p&gt;How could a one-in-a-hundred years pandemic, which caused historically high unemployment and a global recession, not be a sell signal? It wasn&amp;rsquo;t, and in fact, the 2020 stock market return of 20+% was followed by a 2021 that produced a return of 25+%. Anyone who interpreted the pandemic as an obvious &amp;ldquo;sell&amp;rdquo; signal by removing money from the stock market, missed out on some strong portfolio returns.&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Market timing signal&amp;mdash;Exhibit B: When Lehman Brothers declared bankruptcy in September 2008&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;Remember the Great Financial Crisis? At the time, when Lehman Brothers surprisingly declared bankruptcy, that certainly seemed like a sell signal. Or was it?&lt;/p&gt; &lt;p&gt;Investors who experienced the bankruptcy and decided to get out of the market on September 30, 2008, missed out on a 4.4% gain over the following 12 months (ending September 2009). Yes, there was a significant equity market drawdown in that window, but investors who stayed invested profited from the 2009 market rally. Many of the investors who bailed after the Lehman bankruptcy stayed out too long and didn&amp;rsquo;t benefit from the historic recovery.&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Market timing signal&amp;mdash;Exhibit C: The inverted yield curve&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;A market &amp;ldquo;signal&amp;rdquo; that occurs more frequently than a global pandemic or a historic economic crisis is an inverted yield curve. This occurrence is mainly associated with predicting an economic recession, but recessions and market corrections tend to go hand-in-hand.&lt;/p&gt; &lt;p&gt;This &amp;ldquo;signal&amp;rdquo; sounded five times between 1980 and 2019 and in each case a recession&amp;mdash;typically accompanied by a significant equity correction&amp;mdash;followed. These recessions have taken place anywhere from five months to 24 months after the curve initially inverts&amp;mdash;and even during recessions, markets often experience periods of positive returns that should not be missed.&lt;/p&gt; &lt;p&gt;So, an inverted yield curve may not be an immediate market signal despite its recession warning capability. In fact, actual historical results suggest the inverted yield curve may not give much of a market warning signal at all.&lt;/p&gt; &lt;p&gt;On average, the measured time periods above following inversions have produced positive returns. The first six months have typically produced higher than average results, hardly an indicator to &amp;ldquo;get out&amp;rdquo; of the market. Expanding beyond one year generally produces positive stock and bond returns. More conversative allocations do better over three years while more aggressive portfolios do better over five years. This is likely the result of bonds getting an intermediate post-inversion boost as interest rates are lowered to combat economic slowing and stocks retreat due to that same economic slowing. Regardless, the hypothetical index portfolios have appeared to recover quickly and post positive results on average following yield curve inversions.&lt;/p&gt; &lt;p&gt;The Global Pandemic and Lehman Brothers bankruptcy and the inverted yield curve scenarios, all &amp;ldquo;strong&amp;rdquo; sell signals, are just two examples that indicate timing cash moves around market or economic events can be difficult. Conditions or events that investors may view as clear &amp;ldquo;Get Out&amp;rdquo; signals can be cloudier than you may think.&lt;/p&gt; &lt;p&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Click image to enlarge&lt;br /&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/chart-market-timing-2025.webp&quot; target=&quot;_blank&quot;&gt;&lt;img alt=&quot;Marginal income tax rates&quot; src=&quot;/-/media/images/global/blogs/images/chart-market-timing-2025.webp&quot; /&gt;&lt;/a&gt;&lt;br /&gt; &lt;/span&gt;&lt;/em&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;em&gt;Source: Bloomberg, FTSE&lt;br /&gt; Note: Hypothetical analysis provided for illustrative purposes only.&lt;br /&gt; 1Diversified Portfolios: Two Index Portfolios Comprised of Russell 1000 Index (R1000), and Bloomberg U.S. Aggregate Bond Index (AGG); 30% Equity: 30% R1000/70%AGG, 50% Equity: 50% R1000/50% AGG, 70% Equity: 70% R1000/30%AGG&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;The bottom line&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;The recent increase in market volatility has appeared to stir up questions about moving out of the market for the safety of cash. We caution &lt;a href=&quot;/404 error page?item=web%3a%7bEBC3D204-6A0F-4213-8206-B9CCAFF85E11%7d%40en&quot;&gt;against market timing for most investors&lt;/a&gt; because that decision is often not rewarded. If investors ignore this and insist on &amp;ldquo;doing something&amp;rdquo; in the face of perceived increasing risk, one idea you could pursue is to convince them to temporarily reduce market exposure.&lt;/p&gt; &lt;p&gt;Reducing their equity allocation by 10% to 20% may provide additional cushion if the market does pull back and still allow for participation if markets snap back quickly or don&amp;rsquo;t drawdown at all.&lt;/p&gt; &lt;p&gt;One final consideration for those contemplating this path is to document the reasons for getting out and the catalyst for getting back in. These decisions are &lt;a href=&quot;/404 error page?item=web%3a%7b264A1B34-2275-49EA-97DC-C2515F74D700%7d%40en&quot;&gt;often driven by emotions&lt;/a&gt; and not by a long-term perspective, so having a written plan in place may help improve the odds of success or mitigate the amount of harm made by a bad call.&lt;/p&gt;Mike Smith<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity. </p> <p>This material is not an offer, solicitation or recommendation to purchase any security. </p> <p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment. </p> <p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional. </p> <p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns. </p> <p>The information, analysis and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual entity.</p> <p><strong>Russell 3000&reg; Index</strong>: Measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market.</p> <p><strong>MSCI EAFE (Europe, Australasia, Far East) Index</strong>: A free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada.</p> <p><strong>Bloomberg US Gov/Corporate Bond Index</strong>: Measures the non-securitized component of the US Aggregate Index.&nbsp; It includes investment grade, US dollar-denominated, fixed-rate Treasuries, government related and corporate securities.&nbsp;</p> <p><strong>Russell 1000&reg; Index</strong>: Measures the performance of U.S. large-capitalization equity universe.</p> <p><strong>Bloomberg U.S. Aggregate Bond Index</strong>: An index, with income reinvested, generally representative of intermediate-term government bonds, investment grade corporate debt securities, and mortgage-backed securities. (specifically: the Government/Corporate Bond Index, the Asset-Backed Securities Index, and the Mortgage-Backed Securities Index).</p> <p>Russell Investments' ownership is composed of a majority stake held by funds managed by TA Associates Management L.P., with a significant minority stake held by funds managed by Reverence Capital Partners L.P.. Certain of Russell Investments' employees and Hamilton Lane Advisors, LLC also hold minority, non-controlling, ownership stakes. </p> <p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the &ldquo;FTSE RUSSELL&rdquo; brand. </p> <p>The Russell logo is a trademark and service mark of Russell Investments. </p> <p>Copyright &copy; 2025 Russell Investments Group, LLC. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an &ldquo;as is&rdquo; basis without warranty. </p> <p><strong>Russell Investments Financial Services, LLC, member FINRA (<a rel="noopener noreferrer" href="https://www.finra.org" target="_blank">www.finra.org</a>), part of Russell Investments.</strong></p> <p><strong>RIFIS-26495</strong></p><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{D6E0DAE1-46BB-4EA9-BB3C-1E50A23C4553}https://russellinvestments.com/us/blog/stagflation-lite-fed-growth-outlookThe Federal Reserve left interest rates unchanged but ratcheted down growth forecasts as inflation concerns came to a head.Wed, 19 Mar 2025 13:43:00 -0700&lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The Fed left interest rates unchanged today as widely anticipated, noting uncertainty around the economic outlook has increased. The central bank made a technical move on the balance sheet, reducing the pace of permitted runoff in its Treasury holdings from $25 to $5 billion per month. The move&amp;mdash;following a $2 trillion decline in the size of the Fed&amp;rsquo;s balance sheet from April 2022&amp;mdash;was designed to ward off a repeat of the crisis in short-term funding markets from 2019.&lt;/span&gt;&lt;/p&gt; &lt;img alt=&quot;Paul Eitelman, CFA&quot; style=&quot;width: 130px; height: 127px; float: left; margin-right: 30px; margin-bottom: 20px; margin-top: 20px;&quot; src=&quot;/-/media/images/global/headshots/a-g/eitelman-paul.png?w=130&amp;amp;h=127&amp;amp;hash=F60296297BD2AC1C5EA69BCD338C07D3&quot; /&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top: -5px;&quot;&gt;&lt;em&gt;&lt;strong&gt;&quot;The U.S. economic outlook is highly uncertain with policy whiplash jostling a solid macro foundation. We&amp;rsquo;re looking for more clarity on the path forward for trade policy on April 2.&quot;&lt;/strong&gt;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;strong&gt;Paul Eitelman, CFA&lt;/strong&gt;&lt;br /&gt; Senior Director, Chief Investment Strategist&lt;br /&gt; Russell Investments&lt;/p&gt; &lt;hr /&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Stagflation Lite&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The changes to the Fed&amp;rsquo;s economic outlook were stagflation-lite. Expected growth in 2025 was revised down from 2.1% to 1.7%&amp;mdash;not a recession but weaker. And core PCE inflation was revised up from 2.5% to 2.8%. The dot plot forecasts for the federal funds rate moved up slightly in a hawkish direction but not by enough to jostle the median expectation for two rate cuts this year&amp;mdash;matching our own baseline scenario for reductions in both June and December.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Transitory tariff inflation?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Our focal point for today&amp;rsquo;s FOMC meeting was how Chair Powell and company were thinking about the intersection of trade policy and monetary policy. Powell gave the textbook answer, saying the central bank could look through tariff-driven inflation if long-term inflation expectations remain well anchored.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Markets seemed to take Powell&amp;rsquo;s notion of &amp;ldquo;transitory&amp;rdquo; tariff-driven inflation as a dovish outcome. We weren&amp;rsquo;t particularly surprised by the tenor of that discussion or of today&amp;rsquo;s press conference as a whole, but Fed pricing moved down slightly (chart) and U.S. equities rebounded, with the S&amp;amp;P 500 trading almost 1.75% higher at noon Pacific time.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;&lt;em&gt;Market projections for short-term rates tick lower after Fed meeting&lt;br /&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/eitelman319rates.jpg&quot;&gt;&lt;img alt=&quot;Rate expectations&quot; src=&quot;/-/media/images/global/blogs/images/eitelman319rates.jpg&quot; /&gt;&lt;/a&gt;&lt;/em&gt;&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Source: Russell Investments, LSEG Eikon, March 19, 2025.&lt;/span&gt;&lt;/em&gt; &lt;hr /&gt; &lt;p&gt; &lt;/p&gt; &lt;h2&gt;&lt;strong&gt;The bottom line&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt; The U.S. economic outlook is highly uncertain with &lt;a href=&quot;/us/blog/economic-vitals-strong&quot;&gt;policy whiplash&lt;/a&gt;&amp;nbsp;jostling a solid macro foundation. We&amp;rsquo;re looking for more clarity on the path forward for trade policy on April 2.&amp;nbsp;&lt;/p&gt; &lt;p&gt;Right now, we are seeing some risk aversion in the stock market. However, the decline &lt;a href=&quot;/us/blog/volatility-vengeance-mwir&quot;&gt;hasn&amp;rsquo;t been significant enough for us&lt;/a&gt;&amp;nbsp;to say we&amp;rsquo;ve reached an unsustainable extreme of panic&amp;mdash;a threshold that could warrant a more material change in our dynamic positioning.&lt;/p&gt;Paul Eitelman<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12742<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{B0C8F34F-7845-4013-A99F-74052FC19F92}https://russellinvestments.com/us/blog/rethinking-diversification-webinar-recapWhile bonds have traditionally been relied upon to help manage risk, they haven’t always delivered as expected. Enter alternative diversifiers.<br />Tue, 18 Mar 2025 13:43:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Alternative diversifiers can strengthen portfolios without reducing equity exposure.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Actively managed long-volatility strategies can reduce costs by optimizing exposure timing and selecting efficient instruments. In trend-following, a multi-manager approach is preferred.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;span&gt;Systematic rebalancing can provide additional benefits.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;On March 11, Russell Investments hosted a webinar examining the challenges and opportunities presented by alternative diversifiers, including strategies for incorporating these solutions into portfolios.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The discussion featured insights from a panel of Russell Investments experts: Amneet Singh, director of asset allocation strategy; Cedric Fan, senior director and head of hedge funds; and Mark Raskopf, hedge funds portfolio manager. Also joining the discussion was Patrick Kazley, head of solutions at One River Asset Management. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Below is a summary of their conversation.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;High valuations&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The discussion began with an analysis of current equity market valuations by Kazley. He noted that equity returns today are in the 97th percentile of rolling 10-year averages, meaning they have performed exceptionally well. While this suggests caution, history shows that high valuations do not necessarily imply imminent declines. Instead of reducing equity exposure, the panel advocated for a &quot;barbell approach&quot;&amp;mdash;maintaining strong equity allocations while using diversifiers to mitigate risk.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Traditional risk mitigation strategies&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Fan noted that institutions often rely on bonds to hedge against equity downturns. However, the effectiveness of this approach has diminished in recent years, especially in inflationary environments like today&amp;rsquo;s where stocks and bonds may move in tandem. The panel highlighted that 2022 was a stark example of this, when many 60/40 portfolios suffered drawdowns comparable to those seen in the Global Financial Crisis.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Alternative diversifiers&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;To address the shortcomings of traditional hedging, the panel introduced an alternative approach based on:&lt;/span&gt;&lt;/p&gt; &lt;ol start=&quot;1&quot; style=&quot;margin-top: 0in;&quot;&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Long volatility (Long Vol):&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; Strategies that gain value during periods of market turbulence.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Cross-asset trend following:&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; Strategies that dynamically allocate to asset classes that are performing well while reducing exposure to underperforming ones.&lt;/span&gt;&lt;/li&gt; &lt;/ol&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Both strategies offer structural diversification benefits, meaning they are inherently uncorrelated with equities rather than relying on macroeconomic conditions to perform well.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Why these strategies can work&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Singh explained that long volatility strategies act as a &lt;em&gt;fast-twitch&lt;/em&gt; defense, reacting quickly to sharp market shocks. Conversely, trend-following strategies are &lt;em&gt;slow-twitch&lt;/em&gt;, protecting against prolonged downturns like 2022. Together, they provide complementary protection against different types of equity drawdowns.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Another advantage is cost efficiency. Active long-volatility management can reduce costs by selectively increasing exposure only when volatility is cheap. Trend-following strategies can also offset costs by capturing gains during sustained market movements.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Constructing the alternative diversifier portfolio&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Through research, Russell Investments determined that an optimal mix could consist of a:&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;margin-top: 0in; list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;60% allocation to cross-asset trend &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;40% allocation to long volatility &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;This combination provides robust risk mitigation while maintaining capital efficiency. Additionally, these strategies are derivatives-based, meaning they hold significant cash balances, allowing investors to benefit from rising interest rates.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The role of active management&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The panel emphasized that active management enhances these strategies:&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;margin-top: 0in; list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;In long-volatility strategies, active managers can reduce costs by choosing the right volatility instruments and optimizing exposure timing.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;In trend-following, a multi-manager approach is preferred, as no single manager consistently outperforms across all market conditions.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Implementation via overlays&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Fan stressed that institutions should not reduce equity exposure but rather overlay these diversifiers to maintain their long-term asset allocation. The key benefit of the alternative diversifier approach is its ability to generate gains in downturns, which can then be systematically reallocated to equities when they are undervalued. This systematic rebalancing provides additional return enhancement.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Demonstrating the rebalancing effect&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Kazley illustrated the power of rebalancing through a simulation. By maintaining a 20% allocation to the alternative diversifier and systematically rebalancing gains into equities, an investor could have generated an additional 85% return over a 17-year period. This &quot;rebalancing alpha&quot; stems from the simple mathematical benefit of reinvesting during market downturns.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Potential risks and drawbacks&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Despite its potential strengths, the panelists noted that an alternative diversifier strategy is not without risks. The primary downside scenario occurs when trend-following strategies fail to offset the cost of long-volatility exposure. Historically, this has happened during range-bound markets with low volatility, such as 2011. However, over long-term investment horizons, the combination of long-volatility and trend-following has been shown to provide positive returns while maintaining diversification benefits.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The bottom line&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The panelists stressed that an alternative diversifier approach can be an effective solution in today&amp;rsquo;s environment. By combining trend-following and long-volatility strategies, institutional investors can potentially strengthen the resilience of their portfolios without sacrificing equity exposure. &lt;/span&gt;&lt;/p&gt;Amneet SinghCedric FanMark Raskopf<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12739<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{F093AEB3-4442-4D32-BE3E-A1F6D66A1951}https://russellinvestments.com/us/blog/more-with-same-power-ocioThe budget and team you’ve been given to manage your investment program is likely etched in stone. But the workload on your plate may be staggering. How can you make the most of your finite resources? <br />Mon, 17 Mar 2025 13:43:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Outsourcing specialization&amp;mdash;like cash equitization or hedging strategies&amp;mdash;can free you up to focus on your core assignments.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Adding expertise&amp;mdash;such as implementing a private markets strategy&amp;mdash;can help increase bandwidth and portfolio performance, by expanding your team capabilities.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;It&amp;rsquo;s OK to start small&amp;mdash;by outsourcing a single assignment. That way, you can see if the experience is right for you.&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;I recently celebrated another trip around the sun, which meant I couldn&amp;rsquo;t let the occasion pass without enjoying some birthday cake. As I mulled over which type sounded best&amp;mdash;chocolate, red velvet, or strawberry&amp;mdash;I realized there were three ways of obtaining this quintessential birthday treat. I could make it myself, I could ask a friend to do it, or I could go to a bakery.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;As you would expect, each option involved costs and resources. The first choice&amp;mdash;doing it myself&amp;mdash;meant I&amp;rsquo;d need to purchase the ingredients and spend an ample amount of my limited time making the cake. The second option&amp;mdash;asking my friend to do it&amp;mdash;meant I&amp;rsquo;d need to pay them and then &lt;em&gt;they&lt;/em&gt; would have to carve time out of their busy schedule to prioritize making the cake. Because both of these choices placed the entire burden on a single resource (myself or my friend), neither sounded appealing to me. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The third option of buying a cake at a bakery, however, struck just the right chord. In this scenario, the cost to get the cake was about the same as in options one and two, but from a resourcing standpoint, there were far less constraints. The job of making the cake wasn&amp;rsquo;t on me or my friend&amp;mdash;it was on a well-resourced bakery staffed with multiple employees and stocked with a vast supply of ingredients. And, perhaps just as importantly, getting the cake from a place that specialized in baking tasty deserts ensured that the cake would probably taste pretty darn good. (No offense to my friend or to my own ego.)&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;So, what does my experience purchasing birthday cake have to do with &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b45BE511F-2CA0-44CD-8428-B4F2953F9E66%7d%40en&quot;&gt;OCIO (outsourced chief investment officer)&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;? At a high level, the process for deciding who does the work is remarkably similar&amp;mdash;whether that work consists of making a cake or managing investments. I.e., will the assignment be handled alone? Given to a teammate? Or transferred to a third party?&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Let&amp;rsquo;s dive deeper into the investment-management process by exploring each of these choices from a cost and resourcing standpoint. When we&amp;rsquo;re done, I&amp;rsquo;m confident you&amp;rsquo;ll agree that OCIO and a slice of cake from a bakery have something key in common. They both go down well. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Resource constraints&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;For most new investment leaders, the budget and resources they&amp;rsquo;re given to run an organization&amp;rsquo;s investment program are etched in stone. By this I mean they&amp;rsquo;ve already been set and decided upon before the leader arrives on the job. Take it from me, a former CIO with a two-decade stint at a public energy utility. As the head of the utility&amp;rsquo;s investment program, I had &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/ocio-confessions-already-outsourced&quot;&gt;a staff of two and a budget that was inflexible&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;. There was no chance I was ever getting more budget dollars to add another staff member. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;And yet, the amount of work on my plate was staggering. I had to rejigger the company&amp;rsquo;s investment policy and research top-performing managers across a wide breadth of asset classes. I had to figure out how to set up a dynamic asset allocation and ensure our portfolios could withstand a slew of potential challenges. I had to implement these strategies efficiently and effectively &amp;hellip; and so on and so forth. You get the drift.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;[promobox]&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;I soon realized&amp;mdash;as have many investment leaders before and since&amp;mdash;that my team and I &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b78E6D101-2914-4003-94AE-A2A29F205AA9%7d%40en&quot;&gt;simply could not do everything&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; we wanted to do. As a staff of three, our internal resources were too stretched, and there simply weren&amp;rsquo;t enough hours in the day. So I was faced with the ultimate decision: I could either do less, or somehow find a way to do more with the same. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Expanding your budget&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;How could I possibly do less? Well, there was one way&amp;mdash;I could simplify the structure of our portfolios by using more passive strategies instead of actively managed ones. But that meant leaving potential money on the table. As a fiduciary, that didn&amp;rsquo;t sit right with me. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;What about doing more with the same? A tall ask, right? That&amp;rsquo;s how it seemed to me at first, anyway, before I had an epiphany moment. While it was true that I couldn&amp;rsquo;t get more internal resources, what about &lt;em&gt;external&lt;/em&gt; resources? Was there a way to utilize my budget to outsource some investment assignments to an external provider? That way, I reasoned, my team and I would have more time to focus on urgent assignments, while tasking an OCIO provider with other work that still needed to get done.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The answer, I soon discovered, was a resolute yes. In a nutshell, partnering with an OCIO provider allowed my team to do more with the same&amp;mdash;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7bAEB256F6-B63C-492C-8D0A-AAB7AECE3412%7d%40en&quot;&gt;because OCIO essentially &lt;em&gt;extended&lt;/em&gt; my team&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;. We started by transferring cash equitization and currency hedging assignments, which freed up bandwidth for myself and my team members to handle other pressing functions. Our outsourcing journey was gradual, but in time, I came to realize &lt;/span&gt;&lt;a href=&quot;https://russellinvestments.com/us/blog/ocio-confessions-already-outsourced&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;that fully leveraging my external resources&lt;/span&gt;&lt;/a&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; allowed me to run a more efficient and productive investment program. And at the end of the day, that&amp;rsquo;s what OCIO is&amp;mdash;a service that allows you to expand your resource budget so that you can do more with the same. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;I also contend that OCIO also allows organizations to do &lt;em&gt;better&lt;/em&gt; with the same. For instance, maybe your organization is managing an allocation to small cap equities. But are you getting the most out of it? How much money is being left on the table? Working with a provider that specializes in finding best-in-breed managers&amp;mdash;for instance, a manager of managers&amp;mdash;could be a real eye-opener. They might use strategies that you&amp;rsquo;ve never thought of, or work with managers you&amp;rsquo;ve never heard of. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The private markets example&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;By harnessing the external resources that come from an OCIO partnership, organizations can also gain access to complex investment solutions they typically would not have the capacity to take on themselves. A highly relevant example of this is private markets.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;We believe the private sector today is &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b746B61D4-FFE8-4E90-9C71-67A68FE04A19%7d%40en&quot;&gt;rife with investment opportunities&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, especially as the number of publicly listed firms continues to shrink. And we&amp;rsquo;re not alone&amp;mdash;I&amp;rsquo;d bet a pretty penny that any recent asset/liability modeling study would show that incorporating an allocation to private equity, private real estate, and private credit is beneficial to long-term investors. To put it bluntly, for many organizations, incorporating alternatives into an all-weather portfolio is strategically a no-brainer. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;But deciding you should add an alts allocation is the easy part. The hard part is the walk and talk&amp;mdash;the implementation of these strategies. Call it the &lt;em&gt;big-brainer&lt;/em&gt;. Integrating private markets into a portfolio is a highly involved process that involves things like capital calls, hiring managers, managing distributions over time, valuations, and accounting. These are all complex assignments. They&amp;rsquo;re not straight forward&amp;mdash;and they eat away at time and resources. This isn&amp;rsquo;t to say organizations can&amp;rsquo;t take them on themselves&amp;mdash;but at what cost? How much time will they suck up? What other priorities will be forced to take a backseat? &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;In many cases, this leads to two choices: Foregoing private markets all together, or hiring a specialist that can slot in a turnkey alts solution. I&amp;rsquo;d find a way to do more with the same by choosing the latter.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The bottom line&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Look, I get it. Managing an investment program is an intensely demanding job&amp;mdash;made even more so stressful by today&amp;rsquo;s cost-cutting environment, complete with tight budgets and thinly staffed internal teams. But we believe there&amp;rsquo;s a solution if you tap into your creative juices and grow your resources. Ask yourself, what am I doing today that someone else could do? What am I &lt;em&gt;not &lt;/em&gt;doing today that someone else could do? &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Jot down your answers. And then consider using an external investment solutions provider to handle these tasks. Because just like with birthday cake, some things turn out better when they&amp;rsquo;re put on someone else&amp;rsquo;s plate.&lt;/span&gt;&lt;/p&gt;Peter Corippo<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12701<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{CC5590AB-FA17-431F-838D-D1D11A36B84C}https://russellinvestments.com/us/blog/volatility-vengeance-mwir<p><strong><span>In the latest update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Tariff uncertainty batters markets</span></li> <li><span>U.S. inflation slows</span></li> <li><span>Investor sentiment nears oversold levels</span></li> </ul>Fri, 14 Mar 2025 05:10:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;Tariff uncertainty is spooking markets&lt;/li&gt; &lt;li&gt;U.S. inflation slowed in February&lt;/li&gt; &lt;li&gt;Investor sentiment is nearing oversold levels&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Director and Senior Investment Strategist Alex Cousley discussed recent developments in the trade war and the impact on markets. He also dug into the latest U.S. economic data and provided an update on investor sentiment.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Tariff whiplash&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Cousley began by noting that market volatility intensified this week, with investors trading on each new tariff headline.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;The week got off to a &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/dont-fear-volatility&quot;&gt;rocky start&lt;/a&gt;&lt;/span&gt;&lt;span&gt; after U.S. President Donald Trump said he couldn&amp;rsquo;t rule out a recession sparked by the escalating trade war. This was later followed by the president noting that he doesn&amp;rsquo;t think a recession is likely. Following that, markets were repeatedly jolted by tariff announcements as the week progressed, Cousley said. These included the United States&amp;rsquo; decision to raise tariffs on Chinese imports and implement a 25% tariff on all steel and aluminum goods from other countries. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;China, the European Union (EU), and Canada all swiftly responded by slapping tariffs on U.S. imports, Cousley noted. &amp;ldquo;China retaliated by increasing tariffs on U.S. agricultural goods&amp;mdash;similar to how it responded to U.S. tariffs in 2018-19. Meanwhile, the EU and Canada also struck back with retaliatory tariffs targeting a broad range of American goods,&amp;rdquo; he explained. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Cousley said that the current slate of tariffs could have a modest impact on U.S. economic growth, with one of Russell Investments&amp;rsquo; models estimating a 0.4% hit to GDP (gross domestic product). &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Encouraging economic numbers&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p style=&quot;margin-bottom: 8pt; line-height: 115%;&quot;&gt;&lt;span&gt;Pivoting to economic data, Cousley said the latest JOLTS (Job Openings and Labor Turnover Survey) report provided some encouraging news. &amp;ldquo;The report showed that U.S. job openings ticked up during January, while the so-called &lt;em&gt;quit rate&lt;/em&gt;&amp;mdash;the percentage of individuals who voluntarily left their jobs&amp;mdash;also edged higher. These are both healthy signs for the economy,&amp;rdquo; he remarked. &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;margin-bottom: 8pt; line-height: 115%;&quot;&gt;&lt;span&gt;Meanwhile, &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/economic-vitals-strong&quot;&gt;U.S. inflation slowed to 0.2% during February&lt;/a&gt;&lt;/span&gt;&lt;span&gt;&amp;mdash;coming in slightly below consensus expectations. Cousley said that price changes in rent, autos, insurance, and airfare were key drivers behind the softer numbers. &amp;ldquo;While these sectors don&amp;rsquo;t have much of an impact on the U.S. Federal Reserve&amp;rsquo;s (Fed) preferred measure of inflation&amp;mdash;the core PCE price index&amp;mdash;this is an encouraging trend nonetheless,&amp;rdquo; he remarked. Cousley added that the numbers could also help strengthen the case for additional rate cuts in the second half of the year.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Souring sentiment&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Cousley finished with a look at how market volatility is impacting investor attitudes. He said that Russell Investments&amp;rsquo; proprietary measure of investor sentiment is showing further signs of reaching oversold levels. In addition, the latest Investors Intelligence survey&amp;mdash;which tracks the sentiment of investment newsletter writers&amp;mdash;showed there are more writers with a bearish market view than writers with a bullish one. &amp;ldquo;This is a relatively rare phenomenon,&amp;rdquo; Cousley noted.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He said that Russell Investments is paying close attention to changes in investor sentiment as well as the business cycle outlook. &amp;ldquo;We&amp;rsquo;re monitoring both for opportunities to incrementally add risk to our portfolios following the recent selloff, but we don&amp;rsquo;t think the market has crossed that threshold yet,&amp;rdquo; Cousley concluded.&lt;/span&gt;&lt;/p&gt;Alex Cousley<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p><p> CORP-12741</p> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{6AF37768-4EC5-4B43-9B66-CB701F9AEDB0}https://russellinvestments.com/us/blog/canada-election-debrief<p style="line-height: normal;">Senior Investment Strategist and Head of Canadian Strategy, BeiChen Lin, explains how the results of Canada’s federal elections may shape legislative and monetary policies in the months to come. </p>Thu, 13 Mar 2025 13:43:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;While one election has wrapped up, the next one might be underway soon. Mark Carney is expected to be sworn in on Friday as the next prime minister, and potentially call for a federal election.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Canada&amp;rsquo;s economy is likely to remain under pressure, with elevated uncertainty persisting.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Interest rates could fall much more than what the market expects.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Fiscal policy could be a mixed bag, irrespective of who forms the next government.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;We continue to believe Canadian investors will likely benefit from sticking to a long-term framework in their portfolios.&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The Liberal Party of Canada has wrapped up its leadership race, with Mark Carney winning by an overwhelming margin. He&amp;rsquo;s expected to be officially sworn in as the next prime minister this Friday, replacing Justin Trudeau. But despite one electoral race wrapping up, the era of uncertainty in Canada may continue.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Another election?&lt;/strong&gt;&lt;/h2&gt; &lt;strong&gt;&lt;/strong&gt; &lt;h2&gt; &lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Even though the Liberal Party of Canada has just wrapped up its election, another election could soon be underway in Canada. Unlike in the U.S., Canada&amp;rsquo;s parliamentary system does not impose a &lt;em&gt;fixed date&lt;/em&gt; for federal elections. Rather, Canada sets a &lt;em&gt;maximum gap &lt;/em&gt;between when consecutive elections must be held. For Canada, this means that the election must be held before October 20, 2025. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;But the next election might come much sooner than that. The latest Nanos polling suggests that the Liberal party now trails the Conservative Party by only one percentage point&amp;mdash;well within the margin of error. Mark Carney may opt to capitalize on the newfound momentum of the Liberal Party, and call an early election. With a minimum required campaigning period of just 37 days, Canadians could head to the polls as early as April. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The tight race means predicting the winner of the next election will be challenging. And regardless of which party takes the helm, chances are it will be a minority government, meaning that legislative compromises will be necessary. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Yelling &amp;ldquo;cut&amp;rdquo;&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;First, let&amp;rsquo;s start with the good news: Canadians may see some tax relief soon. That&amp;rsquo;s because both Pierre Poilievre (the leader of the Conservative Party) and Mark Carney have spoken out in favor of eliminating Canada&amp;rsquo;s carbon tax. While it can be tough to estimate the &lt;em&gt;magnitude &lt;/em&gt;of the impact, &lt;em&gt;directionally&lt;/em&gt; the lifting of the tax should help boost growth. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;In addition, both Carney and Poilievre have indicated that they want to permanently axe the temporarily suspended plan to increase the capital gains inclusion rate. With the capital gains inclusion rate now remaining unchanged, it means that Canadians will no longer have to contend with an increase in the effective rate of tax on capital gains. &amp;nbsp;&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;But taxes aren&amp;rsquo;t the only thing on the chopping block. Both Poilievre and Carney have spoken out in favor of fiscal restraint, and suggested that they may seek to cut government spending. So where will fiscal policy end up? Canadians might have to wait for the next federal budget to find out. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Trade tensions linger &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Canada and the U.S. are still embroiled in a &lt;/span&gt;&lt;a href=&quot;/us/blog/dont-fear-volatility&quot;&gt;trade standoff&lt;/a&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;. As of mid-March, the U.S. has imposed 25% tariffs on Canadian steel and aluminum, as well as on goods that are not covered by the Canada-United States-Mexico Agreement (CUSMA). Meanwhile, Canada has responded with retaliatory tariffs on a subset of its imports from the U.S. &lt;br /&gt; &lt;br /&gt; The situation continues to remain fluid. On the one hand, Canada could see &lt;/span&gt;&lt;a href=&quot;/us/blog/tariff-uncertainty-markets-mwir&quot;&gt;even more tariffs imposed in early April&lt;/a&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, if the U.S. proceeds with tariffs on all Canadian imports after the exemption for CUSMA-covered goods lapses. And in addition, the U.S. could announce more tariffs as a part of its &amp;ldquo;reciprocal tariff plans.&amp;rdquo; &lt;br /&gt; &lt;br /&gt; On the other hand, perhaps Canada and the U.S. may eventually reach a deal to settle the trade standoff. But even if a deal is reached, the exact parameters could still differ from the previous terms of trade. With the CUSMA up for renegotiation soon, it&amp;rsquo;s possible that the new CUSMA may apply to a smaller proportion of goods.&lt;br /&gt; &lt;br /&gt; We continue to believe that Canada may be &lt;/span&gt;&lt;a href=&quot;/us/blog/rba-lowers-rates-mwir&quot;&gt;more adversely impacted by a protracted trade standoff&lt;/a&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; than the U.S., in large part because Canada is much more reliant on U.S. exports than vice-versa. Should the trade standoff persist, the Canadian economy could face a significant likelihood of tipping into a recession. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Interest rate uncertainty &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The Bank of Canada (BoC) has now already cut rates at seven consecutive meetings. But the resting point for interest rates is still uncertain. Although markets currently anticipate that interest rates will settle at around 2.3% by the end of 2025, the BoC&amp;rsquo;s decision will ultimately be guided by the incoming economic data. With the Canadian unemployment rate still more than 1.5 percentage points above its 2023 low, we&amp;rsquo;ve already seen some signs of economic fragility in Canada. And if a deeper economic slowdown were to take hold, the Bank of Canada may have to cut rates quite aggressively to stabilize the economy. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/linchartmar12.jpg&quot;&gt;&lt;img alt=&quot;Canadian vs US unemployment rate&quot; src=&quot;/-/media/images/global/blogs/images/linchartmar12.jpg?h=456&amp;amp;w=500&amp;amp;hash=7BE9901237B2C87E45512449A3CAA120&quot; style=&quot;width: 500px; height: 456px;&quot; /&gt;&lt;/a&gt;&lt;br /&gt; &lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Source: LSEG DataStream, February 2025&lt;/span&gt;&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Staying the course&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Despite the significant economic risks and heightened uncertainty, we still believe that staying the course may be the most prudent way of navigating these challenges. Unless markets take a significant turn for the worse, we think investors may benefit from sticking close to their strategic asset allocations and letting security selection be the main source of risk.&lt;/span&gt;&lt;/p&gt;BeiChen Lin<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12733<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{A04683A8-F30E-44BC-B905-E78986587B1D}https://russellinvestments.com/us/blog/tips-advisors-stay-calm<p style="line-height: normal;"><span>Markets are volatile. What’s an anxious advisor to do?  Use these 4 tips to CALM down.</span></p>Thu, 13 Mar 2025 13:43:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;When markets are volatile, investors get nervous and are likely to make decisions that could hurt them in the long run&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;An advisor can help their clients avoid behavioral mistakes&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;One of our senior regional directors has four tips to help you keep your clients invested through turbulent times&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;I believe the next few months are going to be tough and if what I see on TV is any indication&amp;hellip;real tough. You have an escalating trade war, ongoing geopolitical tensions, and fiscal uncertainty, and if that isn&amp;rsquo;t enough, concerns about the economic outlook. All appear to be &lt;a href=&quot;/us/blog/dont-fear-volatility&quot;&gt;influencing the stock market&lt;/a&gt;.&lt;span&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;With these issues it&amp;rsquo;s easy to understand why many clients are frazzled and concerned about the &lt;a href=&quot;/us/blog/us-tariffs-stocks&quot;&gt;potential for more volatility&lt;/a&gt;.&lt;span&gt;&amp;nbsp; &lt;/span&gt;&lt;span&gt;&lt;/span&gt;When clients become nervous, they are more prone to making bad decisions.&lt;/p&gt; &lt;p&gt;Think about all the bad decisions you have made in your own life. Were these decisions made when you were rested and thinking clearly? Or, when you were upset and stressed? If you are me, it is the latter. Every time I make a bad decision it is usually because I am under some sort of stress or fatigued. The number one thing many clients pay us to do is to &lt;a href=&quot;/404 error page?item=web%3a%7b22B07EE3-1A28-4F7A-B5E0-C604456E7C1C%7d%40en&quot;&gt;help them avoid bad decisions amid turbulence&lt;/a&gt;.&lt;span&gt;&amp;nbsp; &lt;/span&gt;That&amp;rsquo;s why we believe a&lt;a href=&quot;/404 error page?item=web%3a%7b547E0962-D7DF-452D-A0D6-CE80BA5CD100%7d%40en&quot;&gt;dvisors are most valuable in challenging times&lt;/a&gt;.&lt;span&gt;&amp;nbsp; &lt;/span&gt;Current events point to the potential for ongoing turbulence. What should you do? &lt;span&gt;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Stay C-A-L-M:&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;strong&gt;C&lt;/strong&gt;-Communicate&lt;/p&gt; &lt;p&gt;&lt;strong&gt;A-&lt;/strong&gt;Allocate&lt;/p&gt; &lt;p&gt;&lt;strong&gt;L&lt;/strong&gt;-Levitate&lt;/p&gt; &lt;p&gt;&lt;strong&gt;M&lt;/strong&gt;-Meditate&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Communicate&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;We believe &lt;a href=&quot;/404 error page?item=web%3a%7bCCB788FE-7B93-4E06-8A72-EB2D55C83408%7d%40en&quot;&gt;communication&lt;/a&gt;&amp;nbsp;is key to &lt;a rel=&quot;noopener noreferrer&quot; href=&quot;https://russellinvestments.com/us/resources/individuals/cycle-of-investor-emotions&quot; target=&quot;_blank&quot;&gt;helping clients navigate&lt;/a&gt; the highs and the lows of the market.&lt;span&gt;&amp;nbsp; &lt;/span&gt;Emotions can threaten an investor&amp;rsquo;s financial health.&lt;span&gt;&amp;nbsp; &lt;/span&gt;In fact, we publish a &lt;strong&gt;Challenging Conversations Guide &lt;/strong&gt;(ask your Russell Investments team for a copy) and an &lt;a rel=&quot;noopener noreferrer&quot; href=&quot;https://russellinvestments.com/us/resources/financial-professionals/client-conversation-center&quot; target=&quot;_blank&quot;&gt;online resource&lt;/a&gt; dedicated to helping advisors communicate effectively with clients.&lt;span&gt;&amp;nbsp; &lt;/span&gt;A quick call or voice mail goes a long way. I also think sending a client a cup of coffee or going for a walk with them is huge. One of the greatest tools you have in your kit is letting clients know you are available to talk and what you are doing for them. I think some advisors worry that they are communicating too much.&lt;span&gt;&amp;nbsp; &lt;/span&gt;Yes, there are some clients who don&amp;rsquo;t want a lot of communication, but that&amp;rsquo;s not likely the majority. Just make sure the &lt;a href=&quot;/us/blog/importance-of-personalization&quot;&gt;communication is personal and intentional&lt;/a&gt;.&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Allocate&lt;span&gt;&amp;nbsp;&amp;nbsp; &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;Make sure every client&amp;rsquo;s asset allocations are &lt;a href=&quot;/404 error page?item=web%3a%7bE1AC0034-3C59-4B61-9F94-EBE585CBE120%7d%40en&quot;&gt;aligned to their risk tolerance&lt;/a&gt;. It&amp;rsquo;s likely that recent market swings have pushed their asset allocations away from their policy allocations.&lt;span&gt;&amp;nbsp; &lt;/span&gt;We recommend reviewing their situation to help minimize the drift.&lt;span&gt;&amp;nbsp; &lt;/span&gt;Clients love upside volatility but not downside volatility. Once you and your client agree on the allocation, then document and share with your client how sticking to a &lt;a href=&quot;/404 error page?item=web%3a%7bE1AC0034-3C59-4B61-9F94-EBE585CBE120%7d%40en&quot;&gt;disciplined rebalancing policy&lt;/a&gt;&amp;nbsp;can help them avoid costly mistakes, such as &lt;a href=&quot;/404 error page?item=web%3a%7b22B07EE3-1A28-4F7A-B5E0-C604456E7C1C%7d%40en&quot;&gt;buying high and selling low&lt;/a&gt;.&lt;span&gt;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Levitate&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;Stay above the fray and away from the negative conversations. You are not going to change anyone&amp;rsquo;s mind and no one is going to change yours. If you engage in negative discussions, not only do you feel worse, it makes everyone involved feel worse. I have let &lt;span&gt;&lt;/span&gt;my friends and family know that &lt;span&gt;&lt;/span&gt;I do not want to &lt;span&gt;&lt;/span&gt;talk about politics. The reason is not that I don&amp;rsquo;t like to talk ---my advisors know I do -- I just don&amp;rsquo;t want to lose friends and family over a difference in opinion. Do not get sucked in. Even if you &lt;em&gt;think&lt;/em&gt; you know what someone believes, you may be wrong.&lt;span&gt;&amp;nbsp; &lt;/span&gt;So, don&amp;rsquo;t chance it.&lt;span&gt;&amp;nbsp; &lt;/span&gt;These conversations breed emotional reactivity, and this is the enemy of sound investing.&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Meditate&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;I can see eyes rolling. I have been meditating for several years now and it has been a life changer. I know some people pray instead of meditating, and that is great as well. The reason I started to mediate was because I was feeling anxious and becoming short with my family. Something needed to change.&lt;span&gt;&amp;nbsp; &lt;/span&gt;I personally use the Headspace app, but there are a lot of great meditation apps out there. Pick one and watch the difference in how you feel and act. The biggest lesson I have learned from mediation is:&lt;span&gt;&amp;nbsp; &lt;/span&gt;It&amp;rsquo;s not the situation (or words or event) that affects you, it is &lt;a rel=&quot;noopener noreferrer&quot; href=&quot;https://russellinvestments.com/us/resources/individuals/cycle-of-investor-emotions&quot; target=&quot;_blank&quot;&gt;your &lt;em&gt;response&lt;/em&gt; to it that makes a difference&lt;/a&gt;. You alone can decide how to react to a situation. In other words, stop watching news that upsets you. Get off social media. Instead, read a book that makes you feel better. Being of a calm and sound mind will help you navigate decisions. &lt;span&gt;&lt;/span&gt;Don&amp;rsquo;t let anyone or anything make you feel a certain way.&lt;span&gt;&amp;nbsp; &lt;/span&gt;You decide.&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;The bottom line&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;What does this all mean? Clients pay your fee because they are looking for &lt;a href=&quot;/404 error page?item=web%3a%7b547E0962-D7DF-452D-A0D6-CE80BA5CD100%7d%40en&quot;&gt;someone to help them reach their goals&lt;/a&gt;. The only way they can reach their goals is to &lt;a href=&quot;/us/blog/q4-2024-economic-and-market-review&quot;&gt;stick with their plan during turbulent times&lt;/a&gt;. You have to decide if you will be the reason they are able to reach their goals or just another advisor they don&amp;rsquo;t need. Keep CALM and carry on.&lt;/p&gt;Tim Halverson<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p><p><strong>Russell Investments Financial Services, LLC, member <a rel="noopener noreferrer" href="https://www.finra.org/" target="_blank">FINRA</a>, part of Russell Investments.</strong></p>RIFIS 26487<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{9251C4E0-98E5-4A8B-B7CE-AA7A25F83072}https://russellinvestments.com/us/blog/economic-vitals-strongThe latest inflation numbers suggest the U.S. economy is still chugging along despite the recent trade turmoil, Paul Eitelman writes.Wed, 12 Mar 2025 13:43:00 -0700&lt;p class=&quot;delta&quot;&gt;Stocks rebounded on Wednesday as core inflation in the United States came in below consensus expectations and news of a possible 30-day truce in the Russia-Ukraine war emerged. Big tech stocks also recovered after flirting with bear-market territory earlier this week.&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Tariff tension&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;Extreme trade policy uncertainty continues to be a theme investors are grappling with. We don&#39;t know if the U.S. administration is focused more on pursuing better trade deals or transforming trade policy altogether. Comments from Commerce Secretary Howard Lutnick overnight suggest both are at play. &lt;/p&gt; &lt;p&gt;What Russell Investments is doing:&lt;/p&gt; &lt;ol&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Examining the fundamentals of the U.S. economy to see how it might weather elevated policy uncertainty&lt;/li&gt; &lt;li&gt;Assessing the risk aversion of other investors to see if there are potential opportunities&lt;/li&gt; &lt;/ol&gt; &lt;h2&gt;&lt;strong&gt;Inflation softens&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;The good news? The latest data continues to suggest the U.S. economy remains on a solid foundation. &lt;/p&gt; &lt;p&gt;The inflation numbers today were encouraging, with the closely watched core CPI report undershooting consensus expectations. We continue to think moderating rent and wage pressures will allow inflation to ease further. And a deeper look at product-level price increases suggests the inflation picture is starting to look more normal&amp;mdash;like the pre-COVID period.&lt;/p&gt; &lt;hr /&gt; &lt;img alt=&quot;Paul Eitelman, CFA&quot; style=&quot;width: 130px; height: 127px; float: left; margin-right: 30px; margin-bottom: 20px; margin-top: 20px;&quot; src=&quot;/-/media/images/global/headshots/a-g/eitelman-paul.png?w=130&amp;amp;h=127&amp;amp;hash=F60296297BD2AC1C5EA69BCD338C07D3&quot; /&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top: -5px;&quot;&gt;&lt;em&gt;&lt;strong&gt;&quot;A full-throttle trade war could slow&amp;mdash;or even reverse&amp;mdash;recent progress, with some of our scenarios showing core inflation reaccelerating to 3% or higher by year-end.&quot;&lt;/strong&gt;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;strong&gt;Paul Eitelman, CFA&lt;/strong&gt;&lt;br /&gt; Senior Director, Chief Investment Strategist&lt;br /&gt; Russell Investments&lt;/p&gt; &lt;hr /&gt; &lt;p&gt; &lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Trade war risks&lt;/strong&gt;&lt;/h2&gt; Trade policy remains a key risk to the inflation outlook, although it&#39;s too early to see a material impact in February&#39;s report. But a full-throttle trade war could slow&amp;mdash;or even reverse&amp;mdash;recent progress, with some of our scenarios showing core inflation reaccelerating to 3% or higher by year-end. Trade policy and the next few months of inflation data will help shine a brighter light on these trends. Meanwhile, amid questions of a possible pullback in consumer spending, data from select credit card companies suggests spending is still chugging along. Again, the next few months will be key. &lt;p&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/eitelman312p_1.jpg&quot;&gt;&lt;img alt=&quot;Price inflation&quot; src=&quot;/-/media/images/global/blogs/images/eitelman312p_1.jpg&quot; /&gt;&lt;/a&gt;&lt;/p&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Bears top bulls&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;Finally, on market psychology, the Investor Intelligence survey of newsletter writers showed more bears than bulls today&amp;mdash;a rare occurrence that&#39;s provided a useful buying signal around recent market bottoms.&lt;/p&gt; &lt;p&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/eitelman312p_2.jpg&quot;&gt;&lt;img alt=&quot;Investor survey&quot; src=&quot;/-/media/images/global/blogs/images/eitelman312p_2.jpg&quot; /&gt;&lt;/a&gt;&lt;/p&gt; &lt;p&gt;While there&#39;s no guarantee we are at a market bottom right now, it&#39;s important to remember that moments of uncertainty and risk aversion in markets are &lt;a href=&quot;/us/blog/dont-fear-volatility&quot;&gt;often periods that ultimately reward long-term investors&lt;/a&gt;&amp;nbsp;for sticking to their strategic plan.&lt;/p&gt;Paul Eitelman<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12740<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{53E574A7-12B3-4137-9CDC-35F23AFE2F8E}https://russellinvestments.com/us/blog/europe-bright-spotOur chief investment strategist shares why he’s optimistic about the outlook for European markets.<br />Wed, 12 Mar 2025 00:00:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;European equities have outperformed U.S. equities since the start of 2025&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Increased bank lending, easing inflation and a boost to the German economy are some of the key reasons behind this.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;The escalating trade war with the U.S. could derail some of this progress, but for now, we&amp;rsquo;re cautiously optimistic on Europe.&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;News headlines this week have been dominated by recession fears in the U.S., with the S&amp;amp;P 500 and the Magnificent 7 shedding value. Yet, amid this rising uncertainty, a positive story is emerging&lt;span style=&quot;line-height: 115%;&quot;&gt;&amp;mdash;&lt;/span&gt;the performance of European markets.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;For years, European equities have been viewed as slow-moving and overshadowed by the U.S., but current performance tells a more positive story. Since the start of the year European equities have outperformed the U.S. market, with the MSCI European Monetary Union index up +8.6% YTD vs a -5% decline in the S&amp;amp;P 500.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;img alt=&quot;&quot; src=&quot;/-/media/images/emea/us_vs_equities_returns.png&quot; /&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Europe&amp;rsquo;s markets are demonstrating resilience, with a variety of factors contributing to the improved outlook, albeit with a few significant headwinds:&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;European tailwinds&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Germany&#39;s fiscal shift: &lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Post-election changes in Germany have led to optimism in what has been a stagnant European economy in recent years. German government efforts to bypass the &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/german-elections-2025&quot;&gt;debt brake&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; and establish a &lt;/span&gt;&lt;a href=&quot;https://www.reuters.com/world/europe/germanys-conservatives-spd-meet-talks-coalition-major-spending-hike-eyed-2025-03-04/&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&amp;euro;500 billion infrastructure plan&lt;/span&gt;&lt;/a&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, could help contribute to growth and create investment opportunities in the region.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Favorable policy environment: &lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The European Central Bank has been the most aggressive globally at &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/tariff-uncertainty-markets-mwir&quot;&gt;rate easing&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, with a corresponding surge in bank lending. The chart below illustrates how bank lending to households and non-financial businesses has trended upwards since late 2023, which is a positive indicator for business growth.&lt;/span&gt;&lt;/p&gt; &lt;img alt=&quot;&quot; src=&quot;/-/media/images/emea/bank-lending-to-households--nonfinancial-business.png&quot; /&gt;&amp;nbsp; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Defense spending: &lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Plans to increase defense budgets, potentially funded by joint bonds, could strengthen European economic cohesion and create investment opportunities.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Falling inflation: &lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Core inflation in Europe is now largely in&lt;strong&gt; &lt;/strong&gt;line with that of the U.S. While European gas prices remain ~3x higher than U.S. prices, they have come down since 2022. Price decreases could be further supported by a potential ceasefire in Ukraine.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;European headwinds&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;However, despite reasons for optimism, there are significant headwinds that could undermine Europe&amp;rsquo;s growth story:&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;U.S. trade war: &lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;U.S. tariffs&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; could cut Europe&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;an GDP by ~0.5%, which is significant given the low 1% GDP growth consensus. European exports to the U.S. represent only around 3% of the Eurozone&#39;s GDP, but the overall exposure to global trade is much larger. With Europe reliant on exports, any significant tariff-related disruptions, both European-specific or globally, could have a meaningful economic impact.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Fiscal deficits&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;: While countries such as Germany have increased fiscal space, this is not the case for all European countries.&lt;strong&gt; &lt;/strong&gt;For instance,&lt;strong&gt; &lt;/strong&gt;France&amp;rsquo;s high deficit (~6% of GDP) limits its fiscal flexibility, creating potential risks for broader European stability.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The bottom line&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;There&amp;rsquo;s reason to be cautiously optimistic in Europe. We&amp;rsquo;ll need to see how the trade war plays out, but the uptick in bank lending in Europe is a positive sign. After a tough decade, Europe is showing signs of resilience and renewed optimism. The big question now is whether this can last.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt;Andrew Pease<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{62D70B57-0CD7-4B7D-A76C-B82FC82CA2BA}https://russellinvestments.com/us/blog/dont-fear-volatilityNew tariffs have shaken the stock market, pushing it into correction territory, but recession fears may be overblown, writes BeiChen Lin.Tue, 11 Mar 2025 13:43:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 16px;&quot;&gt;Warmer weather means that many animals come out of hibernation. Unfortunately for investors, market bears have also awakened from their slumber.&lt;/span&gt;&lt;/p&gt; &lt;p class=&quot;delta&quot;&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 16px;&quot;&gt;The recent selloff in U.S. stocks continued this week, with the S&amp;amp;P 500 dropping by nearly 3% on Monday, and nearly an additional percentage point today. With the recent market moves, the stock market has now fallen nearly 10% below its all-time highs.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Recession fears resurface&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;a href=&quot;/us/blog/tariff-uncertainty-markets-mwir&quot;&gt;Trade policy uncertainty&lt;/a&gt; has stirred more anxiety around U.S. growth projections. In recent days, there has been a noticeable spike in the amount of &quot;recession&quot; related searches on the internet. &lt;/p&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;&lt;em&gt;&lt;span style=&quot;font-size: 18px;&quot;&gt;The dreaded R-word&lt;/span&gt;&lt;/em&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/lintariff_1.jpg&quot;&gt;&lt;img alt=&quot;Recession searches&quot; src=&quot;/-/media/images/global/blogs/images/lintariff_1.jpg&quot; /&gt;&lt;/a&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;em&gt;Source: Google trends&lt;/em&gt;&lt;/p&gt; &lt;p&gt;Still, our U.S. recession risk dashboard paints a more encouraging picture, especially compared to 2023. We are entering these turbulent times from a starting point of resilience. Against that backdrop, we think the risk of a U.S. recession occurring sometime over the next 12 months is 30%. Although the risk of a recession is still above-average, our base case still calls for the United States to achieve a soft landing. That&#39;s likely to be true even if the currently announced tariff measures remain in place for an extended period of time&amp;mdash;although U.S. growth could slow modestly in that case.&lt;/p&gt; &lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;&lt;em&gt;U.S. recession risk dashboard&lt;/em&gt;&lt;/strong&gt;&lt;/p&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/lindashboard.jpg&quot;&gt;&lt;img alt=&quot;Dashboard&quot; src=&quot;/-/media/images/global/blogs/images/lindashboard.jpg&quot; /&gt;&lt;/a&gt;&amp;nbsp; &lt;p class=&quot;deci&quot;&gt;&lt;em&gt;Source: Russell Investments, March 2025. Red represents areas of high risk. Orange and yellow represent areas of intermediate risk. Green represents areas of low risk.&lt;/em&gt;&lt;/p&gt; &lt;hr /&gt; &lt;img alt=&quot;BeiChen Lin&quot; style=&quot;width: 130px; height: 127px; float: left; margin-right: 30px;&quot; src=&quot;/-/media/images/global/headshots/h-q/lin-beichen.webp?w=130&amp;amp;h=127&amp;amp;hash=BD4DA9433FA5C0E53504D13FCABD73AF&quot; /&gt; &lt;p class=&quot;delta&quot; style=&quot;margin-top: -5px;&quot;&gt;&lt;em&gt;&lt;strong&gt;While stock-market drawdowns might be difficult to stomach, volatility is normal.&lt;/strong&gt;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;strong&gt;BeiChen Lin, CFA, CPA&lt;/strong&gt;&lt;br /&gt; Senior Investment Strategist, Head of Canadian Strategy&lt;br /&gt; Russell Investments&lt;/p&gt; &lt;hr /&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Oversold sentiment&lt;/strong&gt; &lt;/p&gt; &lt;p&gt;The U.S. stock market selloff has resulted in investor sentiment becoming noticeably oversold. Our sentiment indicator now stands at +1.7&lt;strong&gt; &lt;/strong&gt;standard deviations, reaching levels last seen in December 2022.&lt;/p&gt; &lt;p&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/lintariff_3.jpg&quot;&gt;&lt;img alt=&quot;Composite contrarian indicator&quot; src=&quot;/-/media/images/global/blogs/images/lintariff_3.jpg&quot; /&gt;&lt;/a&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;em&gt;Source: Russell Investments, as of March 10, 2025&lt;/em&gt;&lt;/p&gt; &lt;p&gt;But historically, U.S. equities have rebounded roughly 11% over the next 12 months once sentiment gets to these levels. And, if sentiment reaches a panic, that return improves to roughly 20%.&lt;/p&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Gut check&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;While stock-market drawdowns might be difficult to stomach, &lt;a href=&quot;/-/media/files/global/insights/keepcalm2025.pdf&quot; target=&quot;_blank&quot;&gt;volatility is normal&lt;/a&gt;. In the past 60-plus years, markets have seen 9% drawdowns roughly half of the time. But following those drawdowns, investors who stick to their plan are often rewarded with double-digit gains.&amp;nbsp;&lt;/p&gt; &lt;p&gt;However, there is a risk that this time could be different. While we believe President Trump&#39;s trade policy is aimed at reinvigorating the U.S. manufacturing sector and may be part of his negotiation strategy, there is still a lot of uncertainty around where these policies will settle. A prolonged trade standoff may eventually dampen business and consumer activity to the point where economic growth slows meaningfully.&amp;nbsp;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;em&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/lintariif_4.jpg&quot;&gt;&lt;img alt=&quot;Pullbacks&quot; src=&quot;/-/media/images/global/blogs/images/lintariif_4.jpg&quot; /&gt;&lt;/a&gt;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;&lt;em&gt;Source: U.S. Equity: Russell 3000 Index. as of 12/31/2024. Source: Morningstar. Returns calculated with dividends included. Maximum peak-to-trough represents the return difference between the peak and trough during the calendar year. Index returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. Indexes are unmanaged and cannot be invested in directly.&lt;/em&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;Russell Investments continues to monitor this fluid situation closely and will adjust portfolios as warranted. If the selloff continues and U.S. equity valuations improve, we may consider potentially adding incremental risk to the portfolios. For now, we continue to believe that staying invested, rather than going to cash, could be the most prudent course of action.&lt;/span&gt;&lt;/p&gt;BeiChen Lin<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12737<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{ED440403-2927-479A-824E-7AC628CD473F}https://russellinvestments.com/us/blog/manager-views-ipo-environment<p style="line-height: normal;"><span>Leveraging our unique relationship with underlying managers, we share their insights on the current state of the IPO market—and what it might take for more companies to go public.</span></p>Mon, 10 Mar 2025 13:43:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Strong returns in U.S. stocks, particularly over the past two plus years, have led investors to question the relative lack of companies going public via the IPO process&amp;mdash;as well as the potential implications for the IPO market in the long term.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;According to active equity managers, a combination of increased public market regulation, a reduced pipeline of potential offerings following the prior boom, the rising role of large private asset managers in capital raising, and &lt;a href=&quot;/us/blog/active-equity-managers-tariffs&quot;&gt;near-term uncertainty&lt;/a&gt;&amp;nbsp;surrounding government policy are all contributing factors.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;At Russell Investments, we think investors benefit from taking a long-term view. We construct portfolios with this in mind, building in the right blend of &lt;a href=&quot;/404 error page?item=web%3a%7bA941A725-1A5C-4E94-BA99-D0D940F1DEB5%7d%40en&quot;&gt;public&lt;/a&gt;&amp;nbsp;and &lt;a href=&quot;/404 error page?item=web%3a%7b260B57C8-A821-491E-9844-2A9754D75CCA%7d%40en&quot;&gt;private&lt;/a&gt;&amp;nbsp;assets to achieve client investment goals.&amp;nbsp;&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Three months into 2025, the U.S. IPO (initial public offering) market remains in a rut. Why? And, perhaps just as importantly, is a rebound still possible?&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Drawing on our unique relationship with underlying managers, we&amp;rsquo;ll shed some light on the latter question by tapping into the views of specialist managers. But first, let&amp;rsquo;s take a step back and examine the potential reasons for the slump.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Decrease in IPOs&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Recent &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/volatility-equity-markets-recent-mwir&quot;&gt;volatility&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; aside, equity market returns in the U.S. have been &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/considerations-surging-markets-mwir&quot;&gt;strong&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; in recent years, with the Russell 1000 rising by more than 20% in both 2023 and 2024&amp;mdash;and in five of the past six calendar years. Valuations for U.S. companies are (broadly) within the upper band of their historical valuation ranges, indicating increased investor confidence in the prospective outlook. That constructive backdrop of strong returns and relatively high valuations would normally be a close-to-ideal environment for companies to come public via an initial public offering (IPO), providing an exit for early backers and increased liquidity for employees. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;That, however, is not what has transpired. As can be seen in the below chart, IPOs in 2022, 2023, and 2024 were all well below the long-term annual average of ~$50 billion in capital raised (exclusive of &amp;lsquo;blank check&amp;rsquo; special purpose acquisition companies). While there is a noticeable cyclical pattern to capital raised in IPOs in the chart, there is also an accompanying correlation with underlying market returns. Case-in-point: Prior highwater marks in 1999/2000, 2014, and 2021 all followed extended periods of strong market performance.&lt;br /&gt; &lt;br /&gt; &lt;strong&gt;&lt;em&gt;Capital raised in IPOs&lt;br /&gt; &lt;/em&gt;&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/ipocapital.jpg&quot;&gt;&lt;img alt=&quot;IPO capital&quot; src=&quot;/-/media/images/global/blogs/images/ipocapital.jpg&quot; /&gt;&lt;/a&gt;&lt;br /&gt; Source: Financial Times, Dealogic.&lt;/span&gt;&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;Behind the decline&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;So, what is different this time? Two key factors:&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;First&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, in contrast to prior cycles, the strong market performance since year-end 2022 has predominantly been driven by larger stocks, with the large cap Russell 1000 rising at more than twice the rate of the small cap Russell 2000 in recent years. Even after taking into account recent volatility, large cap stocks continue to trade near all-time highs while small cap stocks are still languishing below their early 2021 levels. With smaller companies usually representing much of the IPO pipeline, market conditions for going public are perhaps less favorable than they might at first appear.&lt;br /&gt; &lt;br /&gt; &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Second&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, companies are staying private longer than before for a multitude of both internally motivated and market environment reasons. These include an SEC-driven increased regulatory and expense burden for public companies, and a desire by founders to retain control. Likewise, the growth of private equity firms into today&amp;rsquo;s giants&amp;mdash;and the resultant ready availability of capital&amp;mdash;has given companies that would previously have had no choice but to go public a sizable alternative source of funding. &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;What gives? &lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Active equity managers, particularly quality-focused small cap managers who had historically relied on the IPO market to act as a conveyor belt of new opportunities, have had to contend with these challenging dynamics for years. In partnering with these preferred &lt;/span&gt;&lt;a href=&quot;https://russellinvestments.com/us/blog/february-2025-active-management-insights&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;managers&lt;/span&gt;&lt;/a&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, we are able to share the insights below, detailing their views on the current environment for IPOs and what it might take for more companies to go public. &lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Small cap managers&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; described the current environment as at least partially a &amp;lsquo;hangover&amp;rsquo; from the post-Covid boom in equity issuance in 2021. In particular, they pointed to the more speculative offerings of special purpose acquisition companies (essentially &lt;em&gt;blank check&lt;/em&gt; companies intended as a financing vehicle to acquire other listed companies), many of which underperformed following their listings.&lt;br /&gt; &lt;br /&gt; The more speculative environment and increased investor appetite in 2021 also had the side effect of &amp;lsquo;bringing forward&amp;rsquo; the IPOs of less mature, riskier companies, leaving a reduced pipeline for subsequent years. After three relatively weak years for new offerings, managers are cautiously optimistic that higher quality companies will decide to come public, although recent offerings are not confidence-inducing.&lt;br /&gt; &lt;br /&gt; &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Large cap and small cap managers&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; alike pointed to the steadily increased regulatory burden for companies to go public (including rules added after the 2021 boom) as an added disincentive to list. &lt;br /&gt; &lt;br /&gt; Increased direct listing costs, higher associated legal fees, added obligations for senior executives, and additional reporting expenses were all cited as hindrances to all but the largest candidate companies undertaking an IPO. While there is hope that a changing of the guard at the SEC could crack open the door to lower regulation, companies so far are broadly taking a wait-and-see attitude to any prospective regulatory changes.&lt;br /&gt; &lt;br /&gt; &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Managers&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; also pointed to the increased role played by private equity firms in providing capital for growing companies that previously would have had no choice but to tap the public markets.&lt;br /&gt; &lt;br /&gt; As private equity and private credit have become more mainstream asset classes accessible to a wider segment of underlying investors, the amount of capital managed by the largest PE firms has grown considerably, enabling them to invest ever-larger amounts in later-stage private companies. Yet, while PE&amp;rsquo;s asset base has grown, the underlying mechanics and cyclicality of fundraising and realizations have not, as the chart below shows. Broadly speaking, active equity managers believe the now long-in-the-tooth nature of some earlier PE fund vintages and the need for exits from maturing investments will help to revive the market for IPOs later this year and next.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/fundraising.jpg&quot;&gt;&lt;img alt=&quot;Fundraising&quot; src=&quot;/-/media/images/global/blogs/images/fundraising.jpg&quot; /&gt;&lt;/a&gt;&lt;br /&gt; Source: Goldman Sachs&lt;/span&gt;&lt;/em&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The bottom line &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Capital markets exist to provide a venue and mechanism for price discovery and capital raising. As they always have, the markets will continue to evolve to meet investor needs. &lt;br /&gt; &lt;br /&gt; At Russell Investments, we believe investors benefit from taking a long-term view and a diversified approach to portfolio construction. True to our multi-manager heritage, we build portfolios with those principles in mind, providing access to the value creation opportunities identified by our preferred managers across a wide spectrum of both &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7bA941A725-1A5C-4E94-BA99-D0D940F1DEB5%7d%40en&quot;&gt;public&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; and &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b260B57C8-A821-491E-9844-2A9754D75CCA%7d%40en&quot;&gt;private&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; strategies to achieve client investment goals.&lt;/span&gt;&lt;/p&gt;Chris Banse<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12722<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{4E76921B-BAEB-4820-94C4-4DE2DBA317D8}https://russellinvestments.com/us/blog/us-dollar-losing-luster<p style="line-height: normal;"><span>As global alliances shift, the unquestioned dominance of the U.S. dollar is fading. How can investors adapt?</span></p>Mon, 10 Mar 2025 13:43:00 -0700&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;The U.S. dollar&amp;rsquo;s dominance is slipping amid a highly concentrated stock market and shifting global alliances.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;While no single currency is poised to replace the dollar, we believe investors should consider diversifying their currency exposure.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;We think the Japanese yen offers potential safe-haven benefits.&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;For decades, the U.S. dollar&amp;rsquo;s dominance has rested on two pillars: America&amp;rsquo;s deep capital markets and its global security alliances. Today, both are under strain. Shifting U.S. foreign policy, &lt;a href=&quot;/us/blog/tariffs-portfolios&quot;&gt;rising geopolitical uncertainty&lt;/a&gt;, and an overextended stock market are making investors and policymakers reconsider their exposure to the greenback.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;Fundamental forces have driven a stronger U.S. dollar (USD) in the last five years. After the Covid pandemic, the U.S. &amp;nbsp;Federal Reserve (Fed) started raising interest rates earlier and more aggressively than most other major central banks, leading to an interest rate advantage for the USD. Energy prices spiked when Russia invaded Ukraine in 2022, putting energy importers in Europe and Asia at a disadvantage to the U.S. due to America&amp;rsquo;s energy independence. Lastly, the global dominance of the U.S. technology sector and outperformance of its stock market over other regions gave rise to the notion of &amp;ldquo;U.S. exceptionalism&amp;rdquo;. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;These forces have propelled the U.S. dollar&amp;rsquo;s valuation to a historically high level. Among the 10 most traded developed-market currencies, the USD is the second-richest relative to its purchasing power parity level&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;1&lt;/span&gt;&lt;/sup&gt;, only behind the Swiss franc. Another valuation metric, the real trade-weighted dollar index published by the Bank for International Settlements, suggests that the dollar is expensive compared to its long-run average (see chart). It was significantly higher only once in the last 55 years&amp;mdash;in 1985, when the &amp;ldquo;Plaza agreement&amp;rdquo; between the U.S. and four major trading partners to deliberately push the value of the dollar down led to a multi-year dollar bear market.&lt;/span&gt;&lt;/p&gt; &lt;div&gt;&lt;strong&gt;&lt;em&gt;USD valuation is stretched&lt;br /&gt; &lt;br /&gt; &lt;/em&gt;&lt;/strong&gt;&lt;/div&gt; &lt;p&gt;&lt;strong&gt;&lt;em&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/luu37currencies.jpg&quot;&gt;&lt;img alt=&quot;US trade weighted dollar&quot; src=&quot;/-/media/images/global/blogs/images/luu37currencies.jpg&quot; /&gt;&lt;/a&gt;&amp;nbsp;&lt;/em&gt;&lt;/strong&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;Shifting alliances&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;The United States has long been the guarantor of global stability, a role that reinforced the dollar&amp;rsquo;s status as the world&amp;rsquo;s reserve currency. Berkeley economist Barry Eichengreen and his co-authors&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;2&lt;/span&gt;&lt;/sup&gt;&amp;nbsp;argue that security alliances play as important a role as economic fundamentals in the choice of reserve currencies. Countries that are reliant on the United States for military support hold more USD than is justified on purely economic grounds. Yet as Washington&amp;rsquo;s commitments appear more conditional&amp;mdash;see the recent frictions between the U.S. and Ukraine over military support&amp;mdash;its allies are reassessing their strategic and financial dependencies.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;Last week, &lt;/span&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;&lt;a href=&quot;/us/blog/german-elections-2025&quot;&gt;Germany&amp;rsquo;s incoming government&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt; decided to exempt defense spending from its deficit limits, paving the way for much increased military spending. Europe&amp;rsquo;s renewed focus on defense autonomy and China&amp;rsquo;s continued push for alternative payment systems underline a broader trend that has so far been developing gradually: diversification away from the dollar. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;Where to hide?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;Beyond geopolitics, another risk looms: the high concentration of U.S. stock markets. The S&amp;amp;P 500&amp;rsquo;s dependence on a handful of technology giants has created an increasingly &lt;/span&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7bEFEA71AE-9002-4159-94CE-FF1B2BAD7BE3%7d%40en&quot;&gt;top-heavy market&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;, with the &lt;em&gt;Magnificent Seven&lt;/em&gt;&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;3&lt;/span&gt;&lt;/sup&gt;&amp;nbsp;companies at times accounting for more than one-third of the market capitalization of the index. Concerns around &lt;/span&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b5A2925F9-EA62-43F1-98CB-849991E4F8F3%7d%40en&quot;&gt;high market concentration in U.S. equity markets&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt; could induce capital outflows. With roughly 60% of global reserves still held in dollars, even a modest reallocation would have significant consequences for exchange rates. However, no single currency or asset is poised to replace the dollar, but a more fragmented order is emerging.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;[promobox]&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;Gold &lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;is one alternative reserve asset. Central bank purchases of gold have increased in recent years, signalling demand for hedges against monetary uncertainty. The World Gold Council estimates that central banks added around 1,000 tons of gold reserves in 2024. This is well reflected in high gold prices of $2,920 per ounce as of March 7, a rise of nearly 80% since November 2022.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;We believe that the &lt;strong&gt;Japanese yen&lt;/strong&gt; is a more attractive safe-haven asset than gold today, given its defensive characteristics. If global markets hit a rough patch, the yen&amp;rsquo;s undervaluation makes it one of the most attractive risk-off bets for investors seeking refuge. Over the period in which gold rose by 80%, the yen has fallen by around 5% against the U.S. dollar. In 2025, it has started to reverse that trend and is nearly 7% stronger year-to-date. We believe the yen can rise further, especially if market turbulence continues. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;The new order&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;In hindsight, international diversification was not beneficial to U.S. investors in the last five years as U.S. stocks outperformed and the USD strengthened. The dollar&amp;rsquo;s supremacy has withstood repeated challenges, and it would be premature to predict its demise. Yet its era of unquestioned dominance is fading. We believe investors should adjust accordingly, accounting for currency diversification, geopolitical shifts, and a world in which international capital increasingly seeks alternatives. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;Amid these shifts, investors should reconsider how they manage foreign exchange (FX) exposure. &lt;/span&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b09510252-3E46-4C52-8810-B65CB3501423%7d%40en&quot;&gt;Currency strategies using a rules-based approach&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;, focusing on Carry, Value, and Trend factors, offer return potential and diversification benefits. Thoughtful FX management is no longer optional. It&amp;rsquo;s essential in a multipolar financial system.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;Adaptation, not complacency, will define the next era of global capital markets.&lt;/span&gt;&lt;/p&gt; &lt;hr align=&quot;left&quot; size=&quot;1&quot; width=&quot;33%&quot; /&gt; &lt;div id=&quot;ftn1&quot;&gt; &lt;/div&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;sup&gt;1&lt;/sup&gt;&amp;nbsp;Purchasing power parity measures at which exchange rate the cost of living would be equalized in two different countries. It is a commonly used metric for the &amp;ldquo;fair value&amp;rdquo; of a currency.&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;sup&gt;2&lt;/sup&gt; See&amp;nbsp;&lt;a href=&quot;https://cepr.org/voxeu/columns/mars-or-mercury-geopolitics-international-currency-choice&quot;&gt;https://cepr.org/voxeu/columns/mars-or-mercury-geopolitics-international-currency-choice&lt;/a&gt;&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;margin-bottom: 1.125rem; letter-spacing: -0.56px;&quot;&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;sup&gt;3 &lt;/sup&gt;The &amp;ldquo;Magnificent Seven&amp;rdquo; are&amp;nbsp;Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla.&lt;/span&gt;&lt;/p&gt;Van Luu<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12722<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{3C3AA156-F5A3-4861-B498-8DC9A9048B85}https://russellinvestments.com/us/blog/tariff-uncertainty-markets-mwir<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Volatility continues amid trade war worries </span></li> <li><span>ECB lowers rates again</span></li> <li><span>China announces 2025 growth target</span></li> </ul>Fri, 07 Mar 2025 05:10:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;Markets remain volatile amid trade war worries&amp;nbsp;&lt;/li&gt; &lt;li&gt;The European Central Bank lowered rates again&lt;/li&gt; &lt;li&gt;China announced a 2025 growth target of 5%&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Senior Investment Strategist and Head of Canadian Strategy, BeiChen Lin, discussed how markets are reacting to U.S. trade policy uncertainty. He also reviewed the European Central Bank&amp;rsquo;s (ECB) latest decision on rates and shared key takeaways from China&amp;rsquo;s annual political meetings.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Markets jolted&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Lin began by noting it&amp;rsquo;s been a particularly bumpy week in U.S. and global equity markets, primarily due to uncertainty around tariffs. Stressing that the situation remains fluid and dynamic, he said the week began with confirmation from U.S. President Donald Trump that the U.S. would &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/us-tariffs-stocks&quot;&gt;impose previously paused 25% tariffs&lt;/a&gt;&lt;/span&gt;&lt;span&gt; on Mexican and Canadian imports and increase tariffs on Chinese imports.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Following this development, Canada announced it would implement retaliatory tariffs on a subset of U.S. exports, while Mexico said it would unveil retaliatory measures over the weekend, Lin said. As a result, &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/tariffs-portfolios&quot;&gt;equity markets sold off sharply&lt;/a&gt;&lt;/span&gt;&lt;span&gt; Monday and Tuesday, he said. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;The rollercoaster ride continued Wednesday, with a noticeable rebound in markets after senior U.S. administration officials hinted the U.S. might delay tariffs on some products from Mexico and Canada, Lin stated. This was followed by confirmation from the White House on Thursday that Mexican and Canadian imports covered under the U.S.-Mexico-Canada Agreement (USMCA) would be exempt from tariffs for 30 days, Lin explained. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Despite this news, he noted U.S. equity markets still sold off sharply on Thursday, with the benchmark S&amp;amp;P 500 Index down by 2% at one point during the day. Why? Lin explained that even with the reprieve, plenty of questions about tariffs remain. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;For instance, what percentage of Mexican and Canadian goods will count as qualifying goods under the USMCA trade pact? And what will happen after the 30-day reprieve? Will these tariffs be re-implemented? If so, how might Mexico and Canada respond? And could the U.S. potentially impose tariffs on other countries or products? Or will a deal be reached to scrap tariffs altogether? These are all important questions that remain unanswered,&amp;rdquo; Lin noted. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Ultimately, markets dislike uncertainty&amp;mdash;and that&amp;rsquo;s a big reason why there&amp;rsquo;s been so much volatility lately, he said. Lin finished by emphasizing that during times like today, it&amp;rsquo;s important for investors to stay disciplined and close to their strategic asset allocations.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;I think it&amp;rsquo;s critical for investors to take a long-term perspective when thinking about portfolio decisions, rather than reacting to all the &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/volatility-equity-markets-recent-mwir&quot;&gt;noise and volatility in the markets&lt;/a&gt;&lt;/span&gt;&lt;span&gt;,&amp;rdquo; he stated. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;ECB cuts continue&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Shifting to Europe, Lin said the ECB decided to lower interest rates by 0.25% at its March policy meeting. The decision was in line with what most economists were expecting, he added.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Lin noted the ECB characterized rates as &amp;ldquo;meaningfully less restrictive&amp;rdquo; than before, which was a change from prior statements. At the same time, however, the central bank also downgraded its growth forecast for 2025 and 2026, he said. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;The bottom line here is that moving forward, the ECB&amp;mdash;&lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/themes-q4-2024-earnings-mwir&quot;&gt;like major central banks elsewhere&lt;/a&gt;&lt;/span&gt;&lt;span&gt;&amp;mdash;will likely remain data-dependent. From my vantage point, this means if the European economy were to slow due to new tariffs or other factors, the ECB could potentially cut rates by more than markets expect,&amp;rdquo; Lin stated. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;China&#39;s growth goal&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Pivoting to China, Lin noted that the world&amp;rsquo;s second-largest economy kicked off its annual political meetings&amp;mdash;known as the Two Sessions&amp;mdash;earlier this week. At the gathering, the Chinese government announced a 5% GDP (gross domestic product) growth target for 2025, he said. &amp;ldquo;This matches the growth target China set last year, but it&amp;rsquo;s important to understand that with each passing year, a 5% increase from the prior year becomes a higher hurdle to meet,&amp;rdquo; Lin explained. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He said that from his perspective, China will likely need to &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/china-outlook-2025&quot;&gt;inject more stimulus&lt;/a&gt;&lt;/span&gt;&lt;span&gt; into the economy in order to reach this target. While government leaders did express a desire to roll out more stimulus measures, such as potential tax cuts, no major stimulus packages have been announced, Lin said. Instead, Chinese leaders have unveiled incremental stimulus measures that are roughly in line with economist expectations, he explained. However, there could still be more stimulus to come, Lin added.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;Because China is very committed to boosting economic growth, I think there&amp;rsquo;s a possibility we&amp;rsquo;ll see more stimulus measures in the months ahead,&amp;rdquo; he concluded. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/sGloiG_prD8&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/16752714&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt;BeiChen Lin<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p><p> CORP-12728</p> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{B4259A84-1B00-494A-AFB4-127F54F741D4}https://russellinvestments.com/us/blog/women-are-wired-to-invest<p style="line-height: normal;"><span>Your female clients have different wants and needs than men do. Are you catering to this important demographic?</span></p>Thu, 06 Mar 2025 00:55:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Women represent a large and growing opportunity for financial advisors&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;But advisors need to understand that their circumstances, goals, and the way they invest can be quite different from men&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Women can be great clients as they are generally less impulsive and more likely to provide referrals&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;My friend recently broke up with her boyfriend and immediately changed mechanics. What does one have to do with the other? Well, every time she took her car in for repair, the mechanic would only speak to her boyfriend even though my friend drove up to the garage, was holding the keys, and was the one to pay the bill. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Therefore, when one relationship ended, so did the other. The mechanic had never paid any attention to her anyway, she told me. She found a new mechanic who listened to her concerns and took the time to explain his diagnosis. She has now recommended him to a number of her friends. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;There&amp;rsquo;s a lesson for financial advisors in this story. If you demonstrate &lt;a href=&quot;/404 error page?item=web%3a%7b96AAF5F0-B27F-4056-89F5-59E8CE6B0F2A%7d%40en&quot;&gt;a genuine intention to engage and connect&lt;/a&gt; with your female clients, it will build relationships that could drive the growth of the business for years to come. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Are you missing out on a big opportunity? &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Women are a significant and growing economic force and represent a huge opportunity for advisors who understand their unique needs, circumstances and goals. With International Women&amp;rsquo;s Day coming up on Saturday, March 8, it&amp;rsquo;s a great time to examine how women invest and why catering to this demographic may help boost your advisory business. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;According to the Bank of America Institute, women control 33% of wealth globally, a percentage that is expected to increase substantially over time due to legal reforms, rising education levels and other factors. In the U.S., more women than men are getting doctoral degrees or opening businesses. By 2030, women are expected to control two-thirds of personal wealth in the U.S. And then there is the upcoming Great Wealth Transfer as Baby Boomers pass on their wealth to those left behind. Bank of America estimates that women in the U.S. are poised to inherit $30 trillion by 2032.&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;1&lt;/span&gt;&lt;/sup&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/missed-opportunity-or-driver-of-growth.jpg&quot;&gt;&lt;img alt=&quot;U.S. imports&quot; src=&quot;/-/media/images/global/blogs/images/missed-opportunity-or-driver-of-growth.jpg&quot; /&gt;&lt;/a&gt;&lt;br /&gt; Source 1: &lt;a rel=&quot;noopener noreferrer&quot; href=&quot;https://www.investmentnews.com/retirement-planning/most-advisors-overestimate-ability-to-serve-retirement-needs-of-female-clients/250706&quot; target=&quot;_blank&quot;&gt;Most advisors overestimate ability to serve retirement needs of female clients&lt;/a&gt;, InvestmentNews (Mar&amp;nbsp;2024) &lt;br /&gt; Source 2: &lt;a rel=&quot;noopener noreferrer&quot; href=&quot;https://www.mckinsey.com/industries/financial-services/our-insights/women-as-the-next-wave-of-growth-in-us-wealth-management&quot; target=&quot;_blank&quot;&gt;Women as the next wave of growth in US wealth management&lt;/a&gt;, McKinsey &amp;amp; Company, July 29 2020 &lt;br /&gt; Source 3, 4: &lt;a rel=&quot;noopener noreferrer&quot; href=&quot;https://rethinking65.com/why-women-leave-their-advisors/&quot; target=&quot;_blank&quot;&gt;Why Women Leave their Advisors&lt;/a&gt;, Rethinking65 (Jan 2023)&lt;/span&gt;&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Advisors who ignore women do so at their peril. Like my friend who dropped her mechanic when she parted ways with her boyfriend, women are prone to switching financial advisors when they lose their husbands, either through death or divorce. With 40% of women widowed after the age of 65 and &amp;ldquo;grey&amp;rdquo; divorce exploding, that could lead to a tsunami of women searching for a new advisor.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;font-weight: 700;&quot;&gt;Women are a different kind of investor&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Could that be you? Do you understand the challenges that your female clients face compared to men? &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;First, there&amp;rsquo;s the long-standing pay gap which is even more pronounced among Black and Hispanic women. That leaves women with smaller retirement nest eggs and fewer Social Security benefits. Additionally, as leading providers of childcare and elder care, women are more likely to take career breaks or have multi-phase careers as they try to reconcile their professional goals with their caring commitments. That also reduces their capacity to save. Women also head the majority of single-parent households. And women on average live longer than men, meaning the savings they do have need to stretch for a longer timeline.&lt;/span&gt;&lt;/p&gt; &lt;span style=&quot;line-height: 115%;&quot;&gt;Despite these challenges, women are becoming an economic force in their own right, as I noted earlier. Whether women earn it, marry it, inherit it, or outlive it, the bottom line is that 9 out of 10 women will be solely responsible for their finances at some point in their lives.&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;2&lt;/span&gt;&lt;/sup&gt;&lt;/span&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; &lt;br /&gt; So ... women need financial advice that &lt;a href=&quot;/us/blog/importance-of-personalization&quot;&gt;caters to their unique circumstances&lt;/a&gt;. They also need financial advisors &lt;a href=&quot;/404 error page?item=web%3a%7bCCB788FE-7B93-4E06-8A72-EB2D55C83408%7d%40en&quot;&gt;who understand their wants&lt;/a&gt; and the way they invest, which is often markedly different from men.&lt;/span&gt;&lt;/p&gt; &lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;Women tend to be more collaborative and coachable, may be less impulsive than men, and are generally more conservative in the way they invest&lt;/strong&gt;. Yes, it may take them a bit longer to make a decision but once they decide to work with an advisor, they tend to take a longer-term view and trade less&amp;mdash;which makes the job of a financial advisor that much easier. Rather than spending your time &lt;a href=&quot;/404 error page?item=web%3a%7b22B07EE3-1A28-4F7A-B5E0-C604456E7C1C%7d%40en&quot;&gt;coaching them to avoid potential behavioral mistakes&lt;/a&gt;, you can spend more time on &lt;a href=&quot;/404 error page?item=web%3a%7b3F32B2AA-54D0-48E8-921D-028039A12573%7d%40en&quot;&gt;aligning to their priorities and helping them achieve their goals&lt;/a&gt;. Who wouldn&amp;rsquo;t want to do more of that?&lt;/span&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/wimmar5_rev.jpg&quot;&gt;&lt;img alt=&quot;Women&#39;s expectations for client experience&quot; src=&quot;/-/media/images/global/blogs/images/wimmar5_rev.jpg&quot; /&gt;&lt;/a&gt;&amp;nbsp; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;span style=&quot;line-height: 115%;&quot;&gt;And just like my friend recommending her mechanic when she found one that served her needs, women can be a great source of growth for an advisor&amp;rsquo;s business because of their higher &lt;strong&gt;propensity to refer you, when they are happy and engaged&lt;/strong&gt;. In fact, research has found that women make 26 referrals to their financial adviser on average, compared with 11 by the typical male client over their lifetime.&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;3&lt;/span&gt;&lt;/sup&gt;&lt;/span&gt; &lt;p&gt;&amp;nbsp;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;The bottom line&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The combination of women being naturally wired to invest, and willing to work with advisors who genuinely understand their priorities and concerns, can make a partnership for women a win-win for both you and for the women you serve. In the years ahead, women are on a trajectory to control the majority of the wealth in the country. Failing to engage this demographic increases risk to the sustainability of any advisor practice. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Like my friend&#39;s former mechanic, are you prepared to potentially lose female clients by incorrectly assuming they are happy with the experience and services you and your team are providing? &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Or, is this the year you seize the opportunity to build long-lasting relationships and intentionally engage your female clients&amp;mdash;who may just become your best source of referrals for years to come? &lt;/span&gt;&lt;/p&gt; &lt;hr align=&quot;left&quot; size=&quot;1&quot; width=&quot;33%&quot; /&gt; &lt;div id=&quot;edn1&quot;&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;sup&gt;1&lt;/sup&gt; &lt;a rel=&quot;noopener noreferrer&quot; href=&quot;https://institute.bankofamerica.com/content/dam/transformation/rising-wealth-of-women.pdf&quot; target=&quot;_blank&quot;&gt;https://institute.bankofamerica.com/content/dam/transformation/rising-wealth-of-women.pdf&lt;/a&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;sup&gt;2&lt;/sup&gt; Source: &lt;a rel=&quot;noopener noreferrer&quot; href=&quot;https://www.cnbc.com/2019/05/30/heres-how-women-can-become-financially-independent.html#:~:text=Some%2090%25%20of%20women%20will,from%20%2451%20trillion%20in%202015&quot; target=&quot;_blank&quot;&gt;https://www.cnbc.com/2019/05/30/heres-how-women-can-become-financially-independent.html#:~:text=Some%2090%25%20of%20women%20will,from%20%2451%20trillion%20in%202015&lt;/a&gt;.&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;sup&gt;3&lt;/sup&gt; &lt;a rel=&quot;noopener noreferrer&quot; href=&quot;https://www.investmentnews.com/female-clients-more-likely-than-men-to-make-referrals-43802&quot; target=&quot;_blank&quot;&gt;https://www.investmentnews.com/female-clients-more-likely-than-men-to-make-referrals-43802&lt;/a&gt;&lt;/span&gt;&lt;/p&gt; &lt;/div&gt;Maria Nastasi<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity. </p> <p>This material is not an offer, solicitation or recommendation to purchase any security. </p> <p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment. </p> <p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional. </p> <p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns. </p> <p>The information, analysis and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual entity. </p> <p>Russell Investments' ownership is composed of a majority stake held by funds managed by TA Associates Management L.P., with a significant minority stake held by funds managed by Reverence Capital Partners L.P.. Certain of Russell Investments' employees and Hamilton Lane Advisors, LLC also hold minority, non-controlling, ownership stakes. </p> <p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the “FTSE RUSSELL” brand. </p> <p>The Russell logo is a trademark and service mark of Russell Investments. </p> <p>Copyright © 2025 Russell Investments Group, LLC. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an “as is” basis without warranty. </p> <p><strong>Russell Investments Financial Services, LLC, member FINRA (<a href="https://www.finra.org" target="_blank">www.finra.org</a>), part of Russell Investments.</strong></p> <p><strong>RIFIS-26476</strong></p><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{9E67D029-BC36-4EC9-ADEA-33DDF7DE5FB6}https://russellinvestments.com/us/blog/tariffs-portfoliosBeiChen Lin, senior investment strategist and head of Canadian strategy, breaks down the implications of tariff retaliation from U.S. trade partners and what it means for investors.Tue, 04 Mar 2025 13:43:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Canada and Mexico are striking a careful balance in retaliating against U.S. tariffs&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;We think President Trump sees tariffs as a negotiating tool&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;We don&amp;rsquo;t believe investors should consider making portfolio changes yet&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;em&gt;***Posted at 2:30 Pacific time***&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; line-height: 115%;&quot;&gt;With U.S. tariffs on Mexican and Canadian imports now in effect, yesterday&amp;rsquo;s &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/us-tariffs-stocks&quot;&gt;risk-off market mood&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em; line-height: 115%;&quot;&gt; continued today. Both Canadian and U.S. equities modestly sold off. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Balancing act&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Retaliation from key U.S. trading partners demonstrates that they are striking a careful balance. On the one hand, Canada and Mexico want to demonstrate their frustration and opposition to U.S. tariffs. On the other hand, they want to leave room for negotiating a mutually beneficial end to the trade standoff. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;For instance, Canada is imposing retaliatory tariffs on a subset of U.S. imports, but these tariffs may only extend to around one-third of U.S. imports. Meanwhile, Ontario&amp;rsquo;s premier has responded with a 25% &lt;em&gt;export&lt;/em&gt; tariff&amp;mdash;but only on electricity. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;China has announced it will impose counteracting tariffs on select agricultural products, with a levy of up to 15%. While Chinese officials have imposed additional restrictions on certain U.S. companies, several of these companies are U.S. defense suppliers that have limited or no direct sales exposure to China. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;For its part, Mexico has promised countermeasures, but it is waiting until Sunday to reveal specifics. President Sheinbaum hopes to iron out a deal with President Trump over the weekend. &lt;/span&gt;&lt;/p&gt; &lt;div class=&quot;col-sm-4&quot; style=&quot;padding-left: 30px; float: right;&quot;&gt; &lt;hr align=&quot;left&quot; size=&quot;1&quot; width=&quot;33%&quot; /&gt; &lt;img alt=&quot;BeiChen Lin&quot; style=&quot;width:100px;&quot; src=&quot;/-/media/images/global/headshots/h-q/lin-beichen.webp?w=100&amp;amp;hash=496DC70DC0FF3DE69DDC147477B2E94F&quot; /&gt; &lt;p&gt;&lt;em&gt;&lt;strong&gt;Right now, our view is that markets haven&amp;rsquo;t shifted enough for investors to consider making changes to their portfolios&lt;/strong&gt;&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;deci&quot;&gt;BeiChen Lin, CFA, CPA&lt;br /&gt; &lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Senior Investment Strategist, Head of Canadian Strategy&lt;br /&gt; Russell Investments&lt;/span&gt;&lt;/p&gt; &lt;hr align=&quot;left&quot; size=&quot;1&quot; width=&quot;33%&quot; /&gt; &lt;/div&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Lessons learned&amp;nbsp;&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; Even with tariffs taking effect, we believe that President Trump continues to view them as a negotiation tool. He has still not adopted the universal tariffs that he floated on the campaign trail. Nor has he ratcheted up the tariff on China&amp;rsquo;s imports to 60%.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;And while there&amp;rsquo;s a risk that the U.S. escalates the trade standoff further by unleashing new tariffs, it&amp;rsquo;s also possible that the U.S. will dial down or remove tariffs in a future deal. For instance, after the close of trading, Commerce Secretary Howard Lutnick mentioned that there could be some &amp;ldquo;tariff relief&amp;rdquo; provisions as soon as tomorrow.&amp;nbsp; &lt;/span&gt;&lt;/p&gt; &lt;span style=&quot;line-height: 115%;&quot;&gt;We still believe this trade standoff &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/us-tariffs-potential-implications&quot;&gt;will weigh most heavily on Canada and Mexico&lt;/a&gt;&lt;/span&gt;, while having a more modest effect on America and China. But the exact magnitude of the impact will depend on a key unknown&amp;mdash;how long these tariffs remain in effect for. A protracted standoff could tip Canada and Mexico into recession.&lt;br /&gt; &lt;br /&gt; &lt;h2&gt;&lt;strong&gt;Don&amp;rsquo;t panic &lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;As for valuations, U.S. stocks still look somewhat frothy, even after the recent pullback, with the forward P/E ratio on the S&amp;amp;P 500 above 20. Meanwhile, Canada&amp;rsquo;s stock valuations are near their long-term average, but there the offset of higher cyclical risks looms.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Sentiment has become noticeably oversold. We could potentially get to a panic threshold if the selloff continues. But we&amp;rsquo;re not there yet. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Right now, our view is that markets haven&amp;rsquo;t shifted enough for investors to consider making changes to their portfolios.&lt;/span&gt;&lt;/p&gt;BeiChen Lin<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12726<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{6A5360F9-F10C-4D78-AD03-3AC2B188CD9E}https://russellinvestments.com/us/blog/2025-20bn-club-updateOur annual report on trends among the largest U.S. plan sponsors reveals that 2024 was not a banner year for investment returns for this group—even though U.S equities were up over 20%. Why? Because for DB plans, maintaining a healthy funded status is a higher priority.Mon, 03 Mar 2025 14:22:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Maintaining a healthy funded status, not maximizing investment returns, is the key objective for the largest U.S. pension plan sponsors. A healthy funded status puts these plans in a better position to satisfy benefit payments in the future.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Members of the $20 billion club have increased their fixed income allocations significantly over the past 15 years&amp;mdash;from about 37% in 2010 to near 60% today&amp;mdash;as they progress on their de-risking glidepaths.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;We expect the trend toward liability-hedging fixed income to persist as funded status inches upward. We also expect ongoing interest in alternative asset classes.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;With discount rates staying relatively high since 2022, liabilities for the $20 billion club have plummeted to their lowest total in 20 years.&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;We just wrapped up our analysis of the U.S. public companies with the largest defined benefit (DB) liabilities&amp;mdash;a group that we refer to as the $20 billion club. You can read the results &lt;/span&gt;&lt;a href=&quot;/-/media/files/us/insights/institutions/defined-benefit/20-billion-pension-club-2025.pdf&quot;&gt;here&lt;/a&gt;&lt;span style=&quot;letter-spacing: -0.035em; line-height: 115%;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;. Funded status was up a bit after a year with higher discount rates and good equity returns, but the investment returns for these large plans were not as large as you might have expected.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;Even though these plans hold tens of billions of dollars each with access to a wide array of investment strategies and asset classes, investment returns were muted, at about 2% at the total portfolio level over the course of a year&amp;mdash;in a year where the S&amp;amp;P 500 was up over 20%. &lt;/p&gt; &lt;p&gt;&lt;strong&gt;Exhibit 1&lt;/strong&gt; shows the trend of portfolios returns for this group over the last 20 years. Most years are up, as equity returns are usually positive and rates have been falling. In fact, in only three years have the returns been negative (2008, 2018, and 2022). &lt;/p&gt; &lt;p&gt;&lt;strong&gt;Exhibit 1&lt;/strong&gt;&lt;em&gt;&lt;br /&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/owens2025_1.jpg&quot;&gt;&lt;img alt=&quot;Annual investment returns&quot; src=&quot;/-/media/images/global/blogs/images/owens2025_1.jpg&quot; /&gt;&lt;/a&gt;&lt;/em&gt;&lt;/p&gt; &lt;div&gt; &lt;/div&gt; &lt;p&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Source: 10-K filings, Russell Investments calculations&lt;/span&gt;&lt;/em&gt;&lt;/p&gt; &lt;p&gt;A lot has changed with these plans&amp;rsquo; asset allocations over the last fifteen years. In summary:&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;Fixed income allocations have increased from &lt;a href=&quot;/404 error page?item=web%3a%7b4A6B3EF3-7DC7-4C1F-9E9D-01820F489CE9%7d%40en&quot;&gt;about 37% to nearly 60%&lt;/a&gt;&amp;nbsp;as sponsors make progress on their &lt;a href=&quot;/-/media/files/us/insights/institutions/defined-benefit/pension-de-risking-glide-paths.pdf&quot;&gt;de-risking glidepaths&lt;/a&gt;.&lt;/li&gt; &lt;li&gt;Fixed income durations have increased as sponsors seek to hedge more interest rate risk with their &lt;a href=&quot;/-/media/files/us/insights/institutions/defined-benefit/ldi-approach-to-design-construct-manage-liability-hedging.pdf&quot;&gt;LDI strategies&lt;/a&gt;.&lt;/li&gt; &lt;li&gt;Sponsors are allocating higher amounts to &lt;a href=&quot;/404 error page?item=web%3a%7b914531EF-8FBD-445F-9459-B57E3E0143A6%7d%40en&quot;&gt;alternative strategies&lt;/a&gt;&amp;nbsp;to diversify growth assets and manage risk.&lt;/li&gt; &lt;/ul&gt; [promobox] &lt;h2&gt;&lt;strong&gt;What is the goal of these portfolios?&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;Why have these sponsors made these changes, and how did it lead to lower returns in 2024? &lt;/p&gt; &lt;p&gt;Before we jump to conclusions on the inadequacies of their &lt;a href=&quot;/us/insights/articles/strategic-asset-allocation-reviews-for-db-plan-sponsors&quot;&gt;strategic asset allocations&lt;/a&gt;, let&amp;rsquo;s consider these plans&amp;rsquo; objectives. Are they seeking a specific return target each year? Unlike other large asset pools, such as &lt;a href=&quot;/us/blog/universities-higher-returns-private-markets&quot;&gt;university endowments&lt;/a&gt;&amp;nbsp;or state pension systems, U.S. corporate DB plans often do not have an explicit return objective, and a year of low returns is not necessarily considered a setback. &lt;/p&gt; &lt;p&gt;So what is their investment objective? Let me give a few examples from these companies&amp;rsquo; annual filings:&lt;/p&gt; &lt;ul&gt; &lt;li&gt;&lt;strong&gt;Boeing&lt;/strong&gt;: &lt;em&gt;&amp;ldquo;&amp;hellip;to satisfy the benefit obligations of the pension plans&amp;hellip;&amp;rdquo;&lt;/em&gt;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;FedEx&lt;/strong&gt;: &lt;em&gt;&amp;ldquo;&amp;hellip;to earn a long-term investment return that meets our pension plan obligations.&amp;rdquo;&lt;/em&gt;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;Ford&lt;/strong&gt;: &lt;em&gt;&amp;ldquo;&amp;hellip;minimize the volatility of the value of our U.S. pension assets relative to the U.S. pension obligations&amp;hellip;&amp;rdquo;&lt;/em&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;In summary, these sponsors are trying to stay sufficiently funded to pay benefit payments in the future. And given the average funded ratio of these plans is much higher than it used to be (as shown in &lt;strong&gt;Exhibit 2&lt;/strong&gt;), coupled with the fact that many of these plans &lt;a href=&quot;/404 error page?item=web%3a%7b1B57B0E5-26B9-4D27-BC53-18C19CDA85E7%7d%40en&quot;&gt;no longer offer new benefits&lt;/a&gt;, they are able to scale back on higher-earning (and higher-risk asset classes) in pursuit of stabilizing their marked-to-market funded ratio.&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Exhibit 2&lt;/strong&gt;&lt;em&gt;&lt;br /&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/owens2025_2.jpg&quot;&gt;&lt;img alt=&quot;Average funded ratio&quot; src=&quot;/-/media/images/global/blogs/images/owens2025_2.jpg&quot; /&gt;&lt;/a&gt;&lt;/em&gt;&lt;/p&gt; &lt;p&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Source: 10k filings, Russell Investments calculations&lt;/span&gt;&lt;/em&gt;&lt;/p&gt; &lt;p&gt;We expect that the trend toward liability-hedging fixed income to persist as funded status inches upward.&amp;nbsp;We also expect continued interest in &lt;a href=&quot;/us/blog/alternatives-strategic-evaluation&quot;&gt;alternative asset classes&lt;/a&gt;.&lt;/p&gt; &lt;p&gt;Note in &lt;strong&gt;Exhibit 2 &lt;/strong&gt;that funded ratio has actually been relatively stable the last few years, even during 2022 when almost every asset class saw negative returns and these portfolios experienced nearly 20% in investment losses. This supports the idea that these portfolios are doing what they were intended to do.&lt;/p&gt; &lt;p&gt;Note that while this exhibit shows that the plans are 97% funded, this includes all non-U.S. and even unfunded nonqualified pension liabilities, which must be included in the 10-K filings. In reality, many of these sponsors have fully funded qualified U.S. pension plans with minimal contribution requirements.&lt;/p&gt; &lt;p&gt;For the time being, discount rates used for both accounting and funding/contribution purposes in the U.S. are close to the same level, but this could change anytime. Liabilities used to calculate contribution requirements are based on a discount rate averaged over 25 years and are not able to be hedged with &lt;a href=&quot;/us/blog/future-liability-driven-investing&quot;&gt;LDI (liability-driven investing)&lt;/a&gt;, but sponsors may elect to &lt;a href=&quot;https://russellinvestments.com/us/blog/synchronize-pension-liabilities&quot;&gt;change their discount rate method&lt;/a&gt; to be much closer to marked-to-market.&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Persistently low assets and liabilities&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;Given that liabilities are highly sensitive to interest rate changes, it makes sense that when discount rates increase, the liabilities decrease. Rates have stayed relatively high since they rose in 2022, and total liabilities have stayed relatively low. It&amp;rsquo;s hard to believe that total liabilities were over $1 trillion just four years ago, while they currently sit at about $650 billion&amp;mdash;their lowest total in 20 years.&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Exhibit 3&lt;/strong&gt; shows how both assets and liabilities have evolved over the last 15 years, along with the discount rate changes.&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Exhibit 3&lt;br /&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/owens2025_3.jpg&quot;&gt;&lt;img alt=&quot;Average discount rates&quot; src=&quot;/-/media/images/global/blogs/images/owens2025_3.jpg&quot; /&gt;&lt;/a&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Source: 10-K filings, Russell Investments calculations&lt;/span&gt;&lt;/em&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;The bottom line&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;With increasing allocations to fixed income, portfolio returns for the largest U.S. corporate pension plans will not necessarily match the headline market returns, but they are working toward meeting their objectives of satisfying future benefit payments. Through appropriate risk management, these sponsors can better secure benefits for future retirees. &lt;/p&gt;Justin Owens<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12723<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{E42D460F-F0A2-47A7-AAD7-4D1238CCE28C}https://russellinvestments.com/us/blog/us-tariffs-stocks<p style="line-height: normal;"><span>With the U.S. set to impose 25% tariffs on imports from Canada and Mexico, our chief investment strategist for North America assesses the potential market and economic impacts.</span></p>Mon, 03 Mar 2025 13:43:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Key takeaways:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Equity markets sold off sharply Monday after President Donald Trump confirmed that the U.S. would impose 25% tariffs on Canadian and Mexican imports beginning March 4.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;We estimate that these tariffs could boost consumer prices by 75 basis points. However, we don&amp;rsquo;t expect that they will be enough to tip the U.S. economy into a recession.&amp;nbsp;&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;We still think the Fed could cut interest rates two or three times this year.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Our measure of market sentiment is now at its most pessimistic level since 2023. Still, we believe long-term investors will benefit from staying disciplined and sticking to their strategic plan.&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Equity markets sold off on Monday with the ongoing momentum unwind in U.S. tech exacerbated by President Trump&amp;rsquo;s comment that new tariffs against Canada, Mexico, and China will all move forward on March 4. The&lt;em&gt; &lt;/em&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;risk-off&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;em&gt; &lt;/em&gt;tone was felt across asset classes.&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The S&amp;amp;P 500 traded down 1.8% and is off around 4.5% from its mid-February high&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The 10-year U.S. Treasury yield fell 7 basis points, a decline of over 60 bps &lt;a href=&quot;/us/blog/yield-spike&quot;&gt;from mid-January&lt;/a&gt;&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The Japanese yen strengthened while the Canadian dollar and Mexican peso sold off&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The steps against Canada and Mexico, in particular, were surprising as many investors thought a last second deal or delay was possible. Suffice to say: trade policy uncertainty remains extremely high.&amp;nbsp;We don&amp;rsquo;t know if these new tariffs are sustainable and how long they will last.&amp;nbsp;&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Stunted growth?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Tariffs are simply a tax on imported products&amp;mdash;a tax which should directionally slow economic growth and provide a one-time boost to the price of those goods. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Canada, Mexico and China are the United States&amp;rsquo; three largest trading partners. Our calculations suggest that sustaining tariffs at these levels would hit U.S. real GDP growth by around 75 basis points and &lt;a href=&quot;/us/blog/estimating-tariff-impacts&quot;&gt;boost core PCE (personal consumption expenditures) inflation&lt;/a&gt;&amp;nbsp;by a similar degree. But these import exposures are unlikely to be felt uniformly across the economy. We estimate that the consumer discretionary (think automobiles), industrials and materials (lumber, for example) sectors are most exposed to the new trade actions while other sectors like financials are likely to be more insulated.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;In short, we don&amp;rsquo;t think the tariffs are enough to knock the U.S. economy over into a recession but they could meaningfully dent the macro outlook.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;font-weight: 700;&quot;&gt;Doing the math&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Tariffs complicate the calculus for central bankers given cross-cutting impacts onto growth (dovish) and inflation (hawkish, particularly if inflation expectations rise). Although some measures of inflation expectations have risen, market expectations for medium-term inflation still look well-anchored for now.&amp;nbsp;We expected gradual Fed rate cuts in 2025 as underlying inflation moved closer to target. We still see gradual cuts even with a mix shift of drivers from trade policy&amp;mdash;weaker growth and stickier inflation. Indeed, the Fed cut rates in 2019 in response to the trade war with China and weaker global growth. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;What&#39;s next?&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Our strategies have broadly been focused on diversification, risk management, and security selection into high policy uncertainty. For bonds, our assessment of Treasury valuation has downshifted from attractive in mid-January to fairly priced today. For example, our estimate of fair value on the 10-year Treasury is 4.1% and we expect two or three Fed rate cuts in 2025&amp;mdash;both of which are on top of current market pricing. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;For stocks, the mega-cap selloff and trade tensions have pushed our proprietary measure of market psychology to its most pessimistic level since 2023. To be clear, we are not yet at an unsustainable extreme of investor panic that would warrant a more risk-on posture in our portfolios. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;But, even at these levels, long-term investors are usually rewarded for being in the market and sticking to their strategic plan. Our active managers continue to find opportunities in sectors like financials which offer better relative value and could benefit from some of the Trump administration&#39;s policy changes.&lt;/span&gt;&lt;/p&gt;Paul Eitelman<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12725<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{E149981F-1167-499F-A339-C8116625134E}https://russellinvestments.com/us/blog/trump-admin-webinar-recap<span style="letter-spacing: -0.035em;">Key takeaways from our discussion on the Trump administration’s impact on markets and economies so far, as seen through the lenses of tariffs, immigration, fiscal policy, and deregulation.</span>Fri, 28 Feb 2025 13:43:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Proposed policies by the Trump administration on trade and immigration are likely to have the largest impacts on economies and markets.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;The Trump administration plans to extend tax cuts, but with the U.S. facing a significant fiscal deficit, the overall fiscal impact will probably remain neutral.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;The administration&amp;rsquo;s pro-business stance has boosted CEO confidence, with deregulation in finance and M&amp;amp;A activity expected to drive corporate expansion. While this supports investment and IPOs, the long-term economic impact of reduced oversight remains uncertain.&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;On Feb. 25, Russell Investments hosted a webinar examining how the new administration of U.S. President Donald Trump has impacted markets and economies in its first 30 days. The discussion featured insights from two Russell Investments experts: Chief Investment Strategist, Andrew Pease, and Senior Portfolio Manager, Olga Bezrokov.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Below is a summary of their conversation.&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;How could tariffs impact the economic outlook?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Pease began by setting the scene with the broader economic context. Coming out of the COVID-19 pandemic and a period of aggressive monetary tightening, the U.S. economy remains on a &lt;a href=&quot;/us/blog/volatility-equity-markets-recent-mwir&quot;&gt;path to a soft landing&lt;/a&gt;, with GDP (gross domestic product) growth remaining above trend, inflation declining, and the labor market stabilizing, he said. Despite this favorable backdrop, however, &lt;a href=&quot;/404 error page?item=web%3a%7bCA85FC2C-FADB-4066-A71E-3D8BC53C86A7%7d%40en&quot;&gt;uncertainty around the policies&lt;/a&gt;&amp;nbsp;of the new U.S. administration of President Donald Trump remain a key watchpoint, Pease noted.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&amp;nbsp;Next, Pease outlined several potential scenarios that could play out depending on the policy mix from the Trump administration. These ranged from extreme protectionist measures&amp;mdash;which could trigger a global recession&amp;mdash;to more moderate policies that could maintain stability.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Regarding tariffs, he noted the Trump administration has already announced a 10% tariff on Chinese goods and a 25% tariff on steel and aluminum imports. However, more impactful measures, such as tariffs on Mexico, Canada, and European automobiles, &lt;a href=&quot;/us/blog/us-tariffs-potential-implications&quot;&gt;are under consideration&lt;/a&gt;. If implemented, Pease said these could significantly raise the U.S. effective tariff rate, potentially reducing GDP (gross domestic product) growth by 0.5% to 1% and &lt;a href=&quot;/us/blog/estimating-tariff-impacts&quot;&gt;increasing core inflation&lt;/a&gt;&amp;nbsp;by 0.5% to 0.75%. The uncertainty surrounding tariffs has also led to a slowdown in corporate investment decisions, as companies wait for policy clarity before making long-term commitments, he added.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Bezrokov noted that investors are evaluating how tariffs may impact specific market sectors. Small-cap U.S. companies, which tend to have more domestic exposure, may benefit from reshoring trends, whereas large-cap firms with global operations could face headwinds, she said. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Bezrokov also said that market reactions to tariff announcements have caused short-term selloffs in affected sectors such as industrials and consumer discretionary stocks, leading &lt;a href=&quot;/us/blog/active-equity-managers-tariffs&quot;&gt;some managers&lt;/a&gt;&amp;nbsp;to seek potential opportunities amid market overreactions.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Immigration and economic growth&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The discussion then shifted to immigration&amp;mdash;another major policy focus of the new U.S. administration with significant economic implications. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Pease said that net immigration to the U.S. has surged in the years since the pandemic, approaching nearly four million per year in 2023. This provided a crucial boost to labor supply and consumer demand, he said. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Pease explained that the administration&amp;rsquo;s goal of reducing immigration to around 750,000 annually, combined with planned deportations of undocumented workers, could have widespread effects. In particular, labor shortages in key sectors such as construction and agriculture could drive wages higher, exacerbating inflation, he said. At the same time, reduced immigration could dampen consumer spending, potentially slowing GDP growth, Pease added. The extent of these impacts remains uncertain, as companies and policymakers navigate the changing labor landscape, he remarked.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Potential fiscal policy changes&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Next, Bezrokov and Pease addressed potential changes to fiscal policy. Pease noted that the Trump administration aims to extend the 2017 Tax Cuts and Jobs Act, which is set to expire at the end of 2025. Maintaining these tax cuts would cost an estimated $4 trillion over a decade, he noted, adding to an already significant fiscal deficit of 6.5% of GDP. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;To combat this, the administration has proposed spending cuts and efficiency measures to offset costs, but achieving substantial savings remains a challenge. The budget resolution passed by Congress includes relatively modest tax cuts, limiting the potential for further fiscal stimulus, Pease said. Consequently, he expects the overall &lt;em&gt;fiscal impulse&lt;/em&gt;&amp;nbsp;to be neutral in the coming years, meaning that fiscal policy is unlikely to provide additional economic support beyond the extension of existing tax cuts.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Bezrokov noted that fiscal policy will also have significant implications on interest rates and the Federal Reserve&amp;rsquo;s (Fed) policy stance. With current U.S. 10-year Treasury yields at around 4.5%, investors remain cautious about future rate movements. Given the current deficit and inflationary pressures from tariffs and immigration policies, the Fed faces a delicate balancing act, she said. While markets have priced in one to two rate cuts by year-end, the ultimate path of monetary policy will depend on how inflation and economic growth evolve, Bezrokov noted.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Deregulation and business confidence&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Bezrokov and Pease shifted to their final topic of the discussion: the potential for deregulation. Pease noted that the Trump administration&amp;rsquo;s pro-business stance has fueled optimism among corporate leaders, as evidenced by rising CEO confidence levels. He noted that financial-sector deregulation, particularly the rollback of Basel III capital requirements, has been well received by markets. Additionally, reduced oversight of mergers and acquisitions is expected to stimulate deal-making activity, Pease said. Case-in-point: the Morgan Stanley CEO recently noted that the M&amp;amp;A pipeline he&amp;rsquo;s seeing today is the biggest in five to 10 years. This suggests that deregulation could support corporate expansion and market sentiment, Pease explained.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;He said that despite challenges in quantifying the direct effects of deregulation, its impact on business confidence and investment decisions is evident. Sectors such as private equity and venture capital stand to benefit from a more favorable regulatory environment, potentially leading to increased IPOs (initial public offerings) and M&amp;amp;A activity. However, the long-term economic implications of reduced oversight remain a subject of debate, Pease noted.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The bottom line&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Bezrokov and Pease concluded by noting that the economic and investment outlook remains highly uncertain due to the wide range of potential policy outcomes. While tariffs and immigration policies introduce inflationary and growth-related risks, deregulation and fiscal policy measures could provide offsetting benefits. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Given this uncertainty, the strategist team at Russell Investments has adopted a more conservative approach in portfolio positioning, reducing active risk and maintaining diversification. They stressed that the team is continuing to monitor key developments closely&amp;mdash;particularly in labor markets, trade policy, and Fed policy&amp;mdash;to navigate potential market volatility and identify investment opportunities.&amp;nbsp;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Ultimately, Bezrokov and Pease emphasized the importance of remaining flexible and data-driven in investment decisions.&lt;/span&gt;&lt;/p&gt;Andrew PeaseOlga Bezrokov<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12719<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{A04E945A-F318-4578-A75F-F61A36E0F0C9}https://russellinvestments.com/us/blog/volatility-equity-markets-recent-mwir<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>U.S. mega-cap tech names sell off</span></li> <li><span>U.S. tariffs on Mexican and Canadian imports could begin next week</span></li> <li><span>Consumer confidence ticks down in latest surveys </span></li> </ul>Fri, 28 Feb 2025 05:10:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;U.S. mega-cap tech names have sold off in recent weeks&lt;/li&gt; &lt;li&gt;The U.S. could implement 25% tariffs on Mexican and Canadian imports next week&lt;/li&gt; &lt;li&gt;Recent surveys show a decline in U.S. consumer confidence&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Senior Director and Chief Investment Strategist for North America, Paul Eitelman, explored key reasons behind the recent decline in U.S. equity markets. He attributed the downturn to three main factors: the selloff in mega-cap tech stocks, U.S. trade-policy uncertainty, and U.S. economic growth concerns.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Are equity markets broadening out? &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Eitelman began by noting that U.S. equities, as measured by the benchmark S&amp;amp;P 500 Index, were off by roughly 2.5% this week, as of market close on Feb. 27. The risk-off tone has helped spark a broader rally in the bond market, he said, noting that U.S. 10-year Treasury yields have fallen by roughly 50 basis points (bps) since &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/yield-spike&quot;&gt;peaking near 4.8% in mid-January&lt;/a&gt;&lt;/span&gt;&lt;span&gt;. &amp;ldquo;That&amp;rsquo;s a pretty substantial move in a short period of time,&amp;rdquo; Eitelman observed. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He said that the main market-moving event of the week was the reaction to AI (artificial intelligence)-chipmaker Nvidia&amp;rsquo;s fourth-quarter earnings results, which were released after market close on Feb. 26. The company&amp;rsquo;s earnings still topped consensus expectations, but not by nearly as much as in prior quarters, Eitelman said. This led Nvidia shares to tumble by over 8% the following day, he noted. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Zooming out for a wider look at the U.S. equity market, Eitelman said that market leadership has started to broaden out in 2025. Case-in-point: The Magnificent Seven group of stocks are actually underperforming the other 493 names in the S&amp;amp;P 500 by 12 percentage points so far this year, he said. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;This is a notable rotation in U.S. stocks&amp;mdash;and one that &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b746B61D4-FFE8-4E90-9C71-67A68FE04A19%7d%40en&quot;&gt;we expected going into the year&lt;/a&gt;&lt;/span&gt;&lt;span&gt;,&amp;rdquo; Eitelman remarked. He added that there&amp;rsquo;s also been a broadening out in market leadership globally, with both Europe and China outperforming the U.S. so far in 2025.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Trade-policy uncertainty weighs on markets &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Shifting to U.S. trade policy, Eitelman said that &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/estimating-tariff-impacts&quot;&gt;uncertainty over potential U.S. tariffs&lt;/a&gt;&lt;/span&gt;&lt;span&gt; also rattled markets this week. &amp;ldquo;U.S. President Donald Trump sounded very serious in his intent to move forward with implementing a 25% tariff on imports from Canada and Mexico,&amp;rdquo; he remarked, noting that this plan was &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/us-tariffs-potential-implications&quot;&gt;paused for 30 days in early February&lt;/a&gt;&lt;/span&gt;&lt;span&gt;. The tariffs are set to go into effect on March 4, Eitelman said, adding that the president also indicated he&amp;rsquo;ll place an additional 10% tariff on Chinese imports at the same time. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;The seriousness around a potential &lt;a href=&quot;/us/blog/active-equity-managers-tariffs&quot;&gt;follow-through on tariffs&lt;/a&gt;&amp;nbsp;by the U.S. government likely contributed to some incremental risk aversion in markets this week,&amp;rdquo; he remarked. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;U.S. unemployment claims rise&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Eitelman closed with a look at recently released U.S. economic data, which he said was disappointing at the margin. Initial weekly unemployment claims rose to 242,000 for the week ending Feb. 22, he said&amp;mdash;the highest amount since last October. Some of the new filings came from Washington, D.C., Eitelman said, noting they may be related to the Department of Government Efficiency&amp;rsquo;s (DOGE) efforts to reduce the size of the federal government. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;On top of this, the latest survey from The Conference Board showed a step-down in confidence among U.S. consumers, he noted. Those findings aligned with the results from a similar University of Michigan survey, which also showed a drop in consumer sentiment, Eitelman stated. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;However, Eitelman said &lt;a href=&quot;/us/blog/europe-canada-us-rates-mwir&quot;&gt;many fundamental measures&lt;/a&gt;&amp;nbsp;of the U.S. economy still appear fairly solid. &amp;ldquo;The economy continues to look resilient and on a path to a soft landing. That said, what happens around U.S. trade policy could have an outsized impact on the ultimate outcome,&amp;rdquo; he remarked. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Eitelman finished by noting that he&amp;rsquo;s starting to see some pessimism creep into the market. &amp;ldquo;For long-term investors, it&amp;rsquo;s important to stay disciplined and in the game during times of uncertainty like these,&amp;rdquo; he concluded. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/9JVkOe1UmQI&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/16711425&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt;Paul Eitelman<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p><p> CORP-12724</p> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{C23AF477-CBA9-4DE8-B47F-6F3D58FC4BF2}https://russellinvestments.com/us/blog/ria-how-to-attract-hnw-clientAre your value proposition and investment strategy keeping up with your ideal clients? We share how Registered Investment Advisors could attract higher net-worth investors.Thu, 27 Feb 2025 01:19:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Many Registered Investment Advisors aspire to target wealthier clients&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;These clients often have unique needs that require more than simple asset management&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Your strategy and service model needs to evolve to meet their more complex situations&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;Many independent firms and Registered Investment Advisors aspire to move upmarket, targeting wealthier clients who demand more sophisticated financial solutions.&lt;/p&gt; &lt;p&gt;It is a highly desirable segment of the population. According to the USA Wealth Report 2024 by government advisory firm Henley &amp;amp; Partners&lt;sup&gt;&lt;a herf=&quot;#footnote1&quot;&gt;1&lt;/a&gt;&lt;/sup&gt;, the U.S. has more than 5.5 million millionaires with at least $1 million in liquid investable assets.&lt;/p&gt; &lt;p&gt;But the challenge is that few advisors have been able to capture that business. On average high net worth (HNW) individuals represent only 14% of investment advisors&amp;rsquo; practices.&lt;sup&gt;&lt;a herf=&quot;#footnote2&quot;&gt;2&lt;/a&gt;&lt;/sup&gt;&lt;/p&gt; &lt;p&gt;The issue is that HNW clients have greater needs, more complex portfolios and most of all, appreciate &lt;a href=&quot;/us/blog/importance-of-personalization&quot;&gt;personalized service&lt;/a&gt;. This represents a huge opportunity. Surveys have found that only 30% of HNW investors are satisfied with &lt;a href=&quot;/404 error page?item=web%3a%7b3F32B2AA-54D0-48E8-921D-028039A12573%7d%40en&quot;&gt;the level of personalization they currently receive&lt;/a&gt; in their wealth management relationship.&lt;sup&gt;&lt;a herf=&quot;#footnote3&quot;&gt;3&lt;/a&gt;&lt;/sup&gt;&lt;/p&gt; &lt;p&gt;That leaves a big opening for RIAs or boutique firms to attract high-net-worth investors.&lt;/p&gt; &lt;p&gt;So a good question to ask yourself if you want this business is: &lt;em&gt;Has your investment philosophy and service model evolved to meet their expectations; or are you still operating with the same approach that worked for mass-affluent clients?&lt;/em&gt;&lt;/p&gt; &lt;p&gt;If you want to attract and retain more HNW clients, your strategy needs to reflect their unique needs. Here&amp;rsquo;s how to ensure your value proposition and investment philosophy are aligned with the clients you truly want to serve:&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;High-net-worth clients have different needs and expectations&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;Affluent clients expect more than just solid investment performance. Their priorities extend far beyond basic asset management:&lt;/p&gt; &lt;ul&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;strong&gt;Tax efficiency matters more than ever - &lt;/strong&gt; Many of these clients care deeply about minimizing their tax liability through strategies like &lt;a href=&quot;/404 error page?item=web%3a%7b1C3B07EB-C374-4818-B084-E1F717EA5331%7d%40en&quot;&gt;tax-loss harvesting&lt;/a&gt;, &lt;a href=&quot;/404 error page?item=web%3a%7bAF16CB1F-929A-4C76-9ABC-41DA5770FE45%7d%40en&quot;&gt;direct indexing&lt;/a&gt; and &lt;a href=&quot;/404 error page?item=web%3a%7b1A648912-FB5E-4A9A-BD9B-9325808EDCFC%7d%40en&quot;&gt;charitable giving&lt;/a&gt;. They are also concerned about &lt;a href=&quot;/404 error page?item=web%3a%7bF87316F2-3201-47F5-876F-88185F154903%7d%40en&quot;&gt;unwinding large security positions and real estate investments that may have helped build their wealth&lt;/a&gt;.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;strong&gt;Customization is non-negotiable - &lt;/strong&gt; A simple Exchange-Traded Fund (ETF) or mutual fund solution may not be enough. They expect bespoke portfolio construction &lt;a href=&quot;/us/blog/separately-managed-accounts&quot;&gt;tailored to their specific financial goals&lt;/a&gt;.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;strong&gt;Holistic wealth management is the standard - &lt;/strong&gt; Investment returns are just one piece of the puzzle. They expect expertise in estate planning, philanthropy, business succession, and legacy planning and need help bringing all the experts in their lives together to work as a cohesive team.&lt;/li&gt; &lt;/ul&gt; &lt;h2&gt;&lt;strong&gt;Your value proposition needs to speak their language&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;If your messaging is still centered around &amp;ldquo;retirement planning&amp;rdquo; or &amp;ldquo;401(k) rollovers,&amp;rdquo; you &lt;a href=&quot;/404 error page?item=web%3a%7bCCB788FE-7B93-4E06-8A72-EB2D55C83408%7d%40en&quot;&gt;may not be resonating&lt;/a&gt; with the clients you aim to attract. Consider these questions:&lt;/p&gt; &lt;ul&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Does your brand position you as a true wealth strategist or just another advisor managing assets?&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Does your client experience feel &amp;ldquo;high touch&amp;rdquo;, exclusive, and tailored to affluent individuals?&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Are you articulating the deeper value you provide beyond investment management?&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;Moving upmarket requires a shift in how you communicate your expertise and the level of service you provide.&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Evolving your solutions and services&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;If you want to work with wealthier clients, your service model must evolve to match their expectations:&lt;/p&gt; &lt;ul&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Enhance Your Service Model:&lt;/li&gt; &lt;/ul&gt; &lt;ul style=&quot;margin-left: 40px;&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Offer a concierge-level experience with proactive planning and white-glove service.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Consider a family office-style approach to provide comprehensive wealth management.&lt;/li&gt; &lt;/ul&gt; &lt;ul&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Build Strategic Partnerships:&lt;/li&gt; &lt;/ul&gt; &lt;ul style=&quot;margin-left: 40px;&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Either bringing in house or partnering with estate attorneys, tax professionals, insurance and health care providers, and business consultants to deliver a full-service wealth strategy.&lt;/li&gt; &lt;/ul&gt; &lt;h2&gt;&lt;strong&gt;Is your investment philosophy aligned with these expectations?&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;Advisors often talk about moving upmarket, but many continue using the same investment strategies designed for mass-affluent clients. Here&amp;rsquo;s where you might be falling short:&lt;/p&gt; &lt;ul&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;strong&gt;Are you offering personalized solutions that go beyond a one-size-fits-all portfolio?&lt;/strong&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;Are you still relying on standard mutual funds, Exchange-Traded Funds (ETFs) and Separately Managed Accounts (SMAs) when HNW clients seek access to private equity, hedge funds, and &lt;a href=&quot;/404 error page?item=web%3a%7bA3176175-25AD-4A3D-8BC4-8A0DEFEDC544%7d%40en&quot;&gt;alternative investments&lt;/a&gt; and the ability to customize their passive strategies?  Some turnkey strategies will remain very relevant to your high-net-worth clients, but understanding how more complex strategies might offer &lt;a href=&quot;/404 error page?item=web%3a%7b0B9899A7-B23F-46B1-BD8C-E1DE712713CB%7d%40en&quot;&gt;a specific solution to a particular life problem&lt;/a&gt;.&lt;/p&gt; &lt;ul&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;You might consider enhancing your investment philosophy and approach:&lt;/li&gt; &lt;/ul&gt; &lt;ul style=&quot;margin-left: 40px;&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Incorporate private equity, hedge funds, real estate, and structured products.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Implement &lt;a href=&quot;/us/blog/avoiding-collateral-damage&quot;&gt;tax-aware strategies&lt;/a&gt; and custom portfolio construction such as &lt;a href=&quot;/404 error page?item=web%3a%7bAF16CB1F-929A-4C76-9ABC-41DA5770FE45%7d%40en&quot;&gt;direct indexing&lt;/a&gt;.&lt;/li&gt; &lt;/ul&gt; &lt;ul&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Does your approach consider advanced risk management, tax-efficient investing, and capital preservation strategies and cash management strategies that provide leverage and agility?&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;If the answer is no, it may be time to rethink your approach.&lt;/p&gt; &lt;p&gt;&lt;img alt=&quot;Chart of Financial decisions: Complexity comes with wealth&quot; src=&quot;/-/media/images/global/blogs/images/chart-hnw-clients.webp&quot; /&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Are you actually ready for wealthier clients?&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;The desire to move upmarket is common, but the execution is what sets successful advisors apart. If your investment philosophy, service model, and value proposition haven&amp;rsquo;t evolved, you may not be as ready as you think.&lt;/p&gt; &lt;p&gt;The most successful advisors don&amp;rsquo;t just declare their intent to serve wealthier clients&amp;mdash;they transform their entire approach to match.&lt;/p&gt; &lt;p&gt;So, ask yourself: &lt;strong&gt;Where do you need to evolve? What changes will you make to truly align with the clients you want to attract?&lt;/strong&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p id=&quot;footnote1&quot;&gt;&lt;sup style=&quot;font-size: .635em;&quot;&gt;1&amp;nbsp;&lt;/sup&gt;&lt;a rel=&quot;noopener noreferrer&quot; href=&quot;https://www.henleyglobal.com/publications/usa-wealth-report-2024&quot; target=&quot;_blank&quot;&gt;https://www.henleyglobal.com/publications/usa-wealth-report-2024&lt;/a&gt;&lt;/p&gt; &lt;p id=&quot;footnote2&quot;&gt;&lt;sup style=&quot;font-size: .635em;&quot;&gt;2&amp;nbsp;&lt;/sup&gt;(Disruptors: Deloitte Study. Chart: Source: Statista- May 2023)&lt;/p&gt; &lt;p id=&quot;footnote3&quot;&gt;&lt;sup style=&quot;font-size: .635em;&quot;&gt;3&amp;nbsp;&lt;/sup&gt;&lt;a rel=&quot;noopener noreferrer&quot; href=&quot;https://www.pwc.com/us/en/industries/financial-services/asset-wealth-management/high-net-worth-investor.html&quot; target=&quot;_blank&quot;&gt;As the high-net-worth seek out new wealth managers, how do you retain clients and capture money in motion (PWC Dec 2022)&lt;/a&gt;&lt;/p&gt;Tina Downing<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p> <p>This material is not an offer, solicitation or recommendation to purchase any security.</p> <p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p> <p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p> <p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p> <p>The information, analysis and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual entity.</p> <p>Personalized Managed Accounts (&ldquo;PMA&rdquo;) is a program of Russell Investment Management, LLC (&ldquo;RIM&rdquo;) and offers customized portfolio management services.</p> <p>Each Personalized Separately Managed Account is a product of Russell Investment Management, LLC (&rdquo;RIM&rdquo;) and offered through RIM&rsquo;s Personalized Managed Accounts (&ldquo;PMA&rdquo;) program. It represents a model portfolio provided by RIM. For active SMAs, it reflects a composite of third-party investment advisors selected by RIM. When the model is implemented, PMA is a separately managed account program of individually owned securities that can be tailored to meet investor&rsquo;s investment objectives. RIM offers diversified, single or multi-asset managed accounts that can be customized to the investor&rsquo;s investment objectives, circumstances and preferences, such as (but not limited to), market exposure, risk management, tax management, category and theme-based restrictions and return objectives. Excluding any allocations to pooled investment vehicles, if any, each investor&rsquo;s account is managed separately from other investor accounts, allowing for a personalized experience to deliver unique investment outcomes.</p> <p>The decision to use PMA in investors&rsquo; portfolios and related investment advice are provided through financial advisors and other financial intermediaries that are independent of RIM and its affiliates. Investors should consult with their financial advisor to determine which services and programs are appropriate to meet their investment objectives.</p> <p>Russell Investments' ownership is composed of a majority stake held by funds managed by TA Associates Management L.P., with a significant minority stake held by funds managed by Reverence Capital Partners L.P. Certain of Russell Investments' employees and Hamilton Lane Advisors, LLC also hold minority, non-controlling, ownership stakes.</p> <p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the &ldquo;FTSE RUSSELL&rdquo; brand.</p> <p>The Russell logo is a trademark and service mark of Russell Investments.</p> <p>Copyright &copy; 2025 Russell Investments Group, LLC. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.<span style="letter-spacing: -0.035em;"></span></p> <p>RIM-03727</p><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{E9D7CD70-5EF0-4D80-BCAE-13E57001B41F}https://russellinvestments.com/us/blog/future-liability-driven-investing<p><span style="line-height: 115%;">Learn what the next phase in liability-driven investing (LDI) looks like, and see what trends are driving the evolution.</span></p>Mon, 24 Feb 2025 13:43:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Liability-driven investing is entering a new phase, where the focus is shifting from simply hedging interest-rate risk to refining liability hedging strategies and managing more nuanced risks.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Plans that have already adopted LDI are now fine-tuning their approaches to hedge liabilities more efficiently across the entire yield curve, rather than focusing solely on long-duration fixed income. Plan sponsors are also paying closer attention to the credit spread hedge.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;LDI remains crucial to protecting a plan&#39;s funded status as it approaches full funding. For plans that have achieved full funding or are frozen, LDI also plays a vital role in maintaining long-term stability by locking in the current funded position.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;With rates currently high, we believe now is an opportune time for plan sponsors to consider improving the liability hedge with LDI.&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;We recently sat down with Justin Owens, our senior director and co-head of strategic asset allocation, to discuss the next phase of liability-driven investing (LDI) and the key trends driving this evolution. Below is a recap of our conversation.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;LDI has been around for a while, but what does the next phase look like for pension plans?&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;We&amp;rsquo;re entering a new phase of LDI (liability-driven investing), where it&amp;rsquo;s not just about extending fixed income duration but about optimizing those allocations in response to a &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/-/media/files/us/insights/institutions/defined-benefit/ldi-approach-to-design-construct-manage-liability-hedging.pdf&quot;&gt;broader range of risks&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;. Many plans have reached high funding levels, so the focus is shifting from simply hedging interest rate risk to refining liability hedging strategies and managing more nuanced risks. The future of LDI involves more dynamic, diversified approaches that can include non-traditional assets and greater sophistication in liability measurement.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;What are the key trends driving this evolution in LDI?&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The biggest trend is the refining of LDI strategies. Plans that have already adopted LDI are now fine-tuning their approaches to hedge liabilities more efficiently across the entire yield curve, rather than focusing solely on long-duration fixed income. An LDI overlay can be an excellent tool in fine-tuning the hedge. Another key trend is paying closer attention to the credit spread hedge. A variety of asset classes can help hedge this risk, including asset classes not necessarily considered in the past from an LDI perspective. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;For example, we&amp;rsquo;ve seen more interest in private fixed income assets like &lt;a href=&quot;/404 error page?item=web%3a%7bCE8E6E0C-4FBC-4A8E-86EB-CCED62DF7232%7d%40en&quot;&gt;private placements&lt;/a&gt;&amp;nbsp;and investment-grade securitized fixed income. While not perfect matches to the liabilities, they can help to mitigate risk in stressed credit environments, diversify credit issuer exposure, and also potentially offer attractive excess returns.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;With many plans now close to fully funded, is there still a role for LDI?&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Absolutely. As pension plans approach full funding, LDI becomes even more critical&amp;mdash;not just to hedge volatility but to protect that funded status. For fully funded and frozen plans, LDI plays a key role in maintaining long-term stability by locking in the current funded position. The portfolio&amp;rsquo;s focus is no longer on overcoming short-term deficits but rather ensuring the plan can stay fully funded without excessive risk-taking in equities. This transition calls for a more strategic allocation to LDI, ensuring that the most significant risks are managed with the right mix of assets.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;[promobox]&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;How is the concept of glidepaths evolving in the context of LDI?&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/-/media/files/us/insights/institutions/defined-benefit/pension-de-risking-glide-paths.pdf&quot;&gt;Glidepaths&lt;/a&gt; are maturing beyond the basic concept of reducing equity exposure as funding levels improve. The next stage is about customizing glidepaths to align more precisely with a plan&amp;rsquo;s targeted hedge ratio, split between credit and Treasury LDI and long-term funding objectives. For some plans, this means integrating more LDI-focused strategies earlier in the glidepath to reduce risk and ensure stability as funded status improves. The key is to tailor the glidepath to the specific needs of the plan and adjust as circumstances change.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;What&amp;rsquo;s changing with respect to liability measurement, and how does that impact LDI strategies?&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Liability measurement is becoming more aligned with market realities. Some sponsors are &lt;a href=&quot;/404 error page?item=web%3a%7b096743AC-3393-4FC8-BE3C-F39FCD92F472%7d%40en&quot;&gt;now opting&lt;/a&gt;&amp;nbsp;for more precise, mark-to-market funding liability measures that more accurately reflect current market conditions, including interest rates and credit spreads. This shift allows LDI strategies to become more effective at managing contribution risks, which is a high priority for many clients. With this improved liability measure, LDI can be fine-tuned to hedge risks in a way that was previously very challenging, offering better alignment between asset and liability measures.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;As LDI strategies mature, what risks should pension plans be considering now?&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;One emerging concern is the potential for over-hedging, where large allocations to LDI are not appropriately balanced across the liability yield curve profile, exposing the sponsor to new risks even when the hedge ratio is high. In early stages of LDI, the highest priority is getting duration up, but it is possible to overdo it and introduce new risks. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Another one is concentration risk. As pension plans allocate larger portions of their portfolios to LDI, there&amp;rsquo;s a growing concentration in public fixed income assets, particularly credit. To address this, some plans are diversifying into new asset classes, like securitized private credit, which offers a different risk-return profile and helps mitigate risks associated with liquid credit markets. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;Rates are currently high and spreads are low. Should this impact how sponsors think about LDI?&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Yes, this is an excellent time to improve the liability hedge with LDI. For sponsors that were underhedged while rates rose, the funded status likely improved quite a bit. If and when rates fall again, underhedged plans are likely to see significant losses, but this can be mitigated by enhancing your liability hedge, effectively protecting yourself against rates falling. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Given spreads are low, it&amp;rsquo;s understandable if sponsors want to limit the amount they hold in credit, but looking ahead they should consider how the credit allocation could increase when spreads widen, and what other sources for credit spread the sponsor may want exposure to.&lt;/span&gt;&lt;/p&gt;Justin Owens<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12676<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{888E476E-572E-4D19-8330-52EB3CC0C293}https://russellinvestments.com/us/blog/german-elections-2025Germany’s right-of-center Christian Democrats emerged victorious in the country’s federal elections. How are financials markets reacting to the news?Mon, 24 Feb 2025 13:43:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;The conservative Christian Democrats (CDU/CSU), led by Friedrich Merz, won Germany&#39;s Feb. 23 elections but garnered only 28.5% of the vote. Because of this, Merz&amp;mdash;who will become the next chancellor of Germany&amp;mdash;will need to form a coalition government with at least one other party.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;The outgoing Social Democrats (SPD), headed by current Chancellor Olaf Scholz, captured just 16.4% of the vote&lt;span style=&quot;letter-spacing: -0.63px;&quot;&gt;&amp;mdash;their&lt;/span&gt;&amp;nbsp;worst performance since World War II. The party was topped in the polls by the far-right Alternative for Germany (AfD), which came in second with an unprecedented 20.8% of the vote.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Although the Social Democrats suffered heavy losses, they are still likely to be the junior partner in the next coalition government led by Merz and the CDU/CSU, as Merz has ruled out working with the AfD.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Financial markets rose on the likelihood of a two-party coalition between the CDU/CSU and the SPD, with Germany&#39;s benchmark DAX Index up 0.7%.&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Europe&amp;rsquo;s largest economy has voted for a new government. The right-of-center Christian Democrats (CDU/CSU) will lead it, and their leader Friedrich Merz is set to be the next chancellor of Germany. However, with the CDU/CSU securing only 28.52%&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;1&lt;/span&gt;&lt;/sup&gt; of the vote, they will need at least one coalition partner to form a government.&lt;/span&gt;&lt;/p&gt; &lt;div&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;&lt;strong&gt;&lt;em&gt;German election vote share&lt;/em&gt;&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/luu224_1.jpg&quot;&gt;&lt;img alt=&quot;German election results&quot; src=&quot;/-/media/images/global/blogs/images/luu224_1.jpg&quot; /&gt;&lt;/a&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;font-size: 13px; color: black;&quot;&gt;&lt;em&gt;Source: Federal Elections Returning Officer, as of 24 February 2025, 6:44 CET&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;All traditional parties have ruled out working with the far-right Alternative for Germany (AfD) who won an unprecedented 20.8% of the vote and emerged as the second-largest party. The AfD gained 10.4 percentage points compared to the 2021 election. The surge in far-right support in the German electorate, along with gains for the far-left party Die Linke on 8.77%, leaves the Bundestag as fragmented as ever. &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;The parties of the outgoing government were punished for their track record. Chancellor Olaf Scholz&#39;s Social Democrats (SPD) suffered a dramatic decline, recording their worst post-war performance at 16.41%. The Greens limited their losses and garnered 11.61%. In a sign that the electorate held them responsible for the government&amp;rsquo;s collapse, the Liberal Democrats (FDP) failed to clear the 5% hurdle and will not sit in the next Bundestag. Nor will the far-left BSW (4.97%), a breakaway party from Die Linke.&lt;/span&gt;&lt;/p&gt; &lt;h2 style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;&lt;strong&gt;Germany&amp;rsquo;s economy falling behind despite low unemployment&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;The reasons for the increasing fragmentation of the political landscape are manifold. They reflect a deeper economic paradox: near-record low unemployment yet record-high concern about the economy. Polling from Forschungsgruppe Wahlen (see Chart) shows a growing belief that the country is on the wrong track. &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;&lt;strong&gt;&lt;em&gt;Concerns for German voters&lt;/em&gt;&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;/div&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;font-size: 13px; color: black;&quot;&gt;&lt;em&gt;&lt;br /&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/luu224_2.jpg&quot;&gt;&lt;img alt=&quot;German economic concerns&quot; src=&quot;/-/media/images/global/blogs/images/luu224_2.jpg&quot; /&gt;&lt;/a&gt;&lt;br /&gt; Source: Forschungsgruppe Wahlen, 14 February 2025&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Despite full employment, Germany has been in mild recession for two consecutive years, with GDP shrinking 0.2% in 2024 and 0.3% in 2023. Stagnant growth, high energy costs, and rising global competition have fueled economic pessimism among the populace. Once a world leader in engineering, Germany is now seen as falling behind in key technologies like semiconductors, artificial intelligence, software, and - most painfully - automotive engineering. Its car industry, long an economic pillar, is struggling against fierce competition from China in the electric vehicle market.&lt;/span&gt;&lt;/p&gt; &lt;h2 style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;&lt;strong&gt;Immigration concerns underpin AfD&amp;rsquo;s surge&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;After the invasion of Ukraine by Russia in 2022, energy prices surged in Europe, straining German consumers and industries. Energy security and climate policy were major concerns for the electorate in recent years but have now been overtaken by immigration and the integration of foreigners, explaining the AfD&amp;rsquo;s surge. &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Difficult trade-offs await Mr Merz. With an ageing population, Germany needs skilled foreign workers but the attitude towards immigrants has been negatively affected by violent extremist attacks carried out by asylum seekers. The new government needs to balance the worries of a significant share of the population about immigration and integration with the need for Germany to remain open to the skilled foreign workers the country needs, and to those fleeing war and persecution.&lt;/span&gt;&lt;/p&gt; &lt;h2 style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;&lt;strong&gt;Markets focus on coalition negotiations&amp;hellip;&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Financial markets breathed a sigh of relief when it became clear that the CDU/CSU could form a government with the SPD. The euro rose by 0.5% vis-&amp;agrave;-vis the US dollar to 1.05 and DAX futures also recorded gains of 0.9% as of 7:30 GMT this morning. &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Merz (and the markets) prefer a two-party coalition to a three-party coalition that would include the Greens. The former will be easier to negotiate and more likely to last the full term. Since the FDP and far-left BSW did not clear the 5% hurdle, an alliance between the CDU/CSU and SPD will have a slim majority in the Bundestag. Once called the &amp;ldquo;grand coalition&amp;rdquo;, support for both parties has shrunk over the years. They now need to work together again, having governed Germany four times since the founding of the Federal Republic. The presumptive chancellor has given himself until Easter to conclude coalition talks, a tight timeline by German standards.&lt;/span&gt;&lt;/p&gt; &lt;h2 style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;&lt;strong&gt;&amp;hellip;and the debt brake&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Markets will closely watch the new government&amp;rsquo;s stance on the &amp;ldquo;debt brake policy&amp;rdquo;, which restricts federal budget deficits and has limited the government&#39;s ability to loosen fiscal policy. While consensus exists to uphold this policy, fierce debate surrounds its flexible interpretation, particularly regarding defense spending amid rising geopolitical tensions. &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Germany also needs more investment in transport infrastructure, energy security, and education. Markets are watching whether a new government can reform the debt brake to allow for such investments. However, the parties of the center do not hold the two-thirds seat majority needed for constitutional reform so they would need either the AfD or Die Linke to go along.&lt;/span&gt;&lt;/p&gt; &lt;h2 style=&quot;background: white; margin: 3.95pt 0in 11.25pt;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;&lt;strong&gt;The bottom line&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Germany has voted. A high turnout of 82.5% showed how much was at stake at this election. The conservative CDU/CSU is set to lead the new government by becoming the strongest party in the Bundestag, albeit with a vote share of only 28.52%. The center of German politics just about held, with the Social Democratic SPD suffering heavy losses, but still likely to be the junior partner in the next coalition government led by Friedrich Merz of the CDU/CSU. &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;background: white;&quot;&gt;&lt;span style=&quot;color: black;&quot;&gt;Financial markets were relieved that the AfD&amp;rsquo;s vote share was limited to 20.8% and that a two-party coalition between the CDU/CSU and SPD remains feasible. Germany&amp;rsquo;s traditional governing parties, from which every chancellor since 1949 has come, must now demonstrate they can address the country&amp;rsquo;s pressing challenges. If they fail, shutting out the AfD from power may prove impossible next time.&lt;/span&gt;&lt;/p&gt; &lt;hr align=&quot;left&quot; size=&quot;1&quot; width=&quot;33%&quot; /&gt; &lt;div id=&quot;ftn1&quot;&gt; &lt;/div&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;sup&gt;1&lt;/sup&gt; According to preliminary results by the Federal Elections Returning Officer (Bundeswahlleiterin).&lt;/span&gt;&lt;/p&gt;Van Luu<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12713<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{D14DA3D5-624C-4C14-8A92-DF975B99FEF2}https://russellinvestments.com/us/blog/rba-lowers-rates-mwir<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Australia’s central bank cuts rates by 25 bps</span></li> <li><span>Canadian inflation ticks up in January </span></li> <li><span>Chinese equities rally on anticipation of more stimulus</span></li> </ul>Fri, 21 Feb 2025 05:10:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;Australia&amp;rsquo;s central bank cut rates by 25 basis points&lt;/li&gt; &lt;li&gt;Canadian inflation ticked up during January&amp;nbsp;&lt;/li&gt; &lt;li&gt;Chinese equities have rallied on investors&amp;rsquo; expectations for more stimulus this year&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Senior Investment Strategist and Head of Canadian Strategy, BeiChen Lin, discussed the recent interest rate announcement from the Reserve Bank of Australia (RBA). He also assessed how the latest Canadian inflation data could impact upcoming monetary policy decisions from the Bank of Canada (BoC), and concluded by examining the recent performance of Chinese equities.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;RBA cuts rates as price pressures moderate &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Lin began with a look at the RBA&amp;rsquo;s Feb. 18 decision to lower its benchmark lending rate by 25 basis points (bps) to 4.1%. The rate cut was the Australian central bank&amp;rsquo;s first of the cycle, he said, lagging most other major central banks, which began lowering rates last year. However, despite the later start, Lin said he expects the RBA to still be able to gradually take rates to a more neutral setting as inflation continues to ease. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Following the central bank&amp;rsquo;s announcement, the Australian Bureau of Statistics released two additional data points that were supportive of the RBA&amp;rsquo;s decision, Lin noted. The first was a report showing that wage pressures during the fourth quarter of 2024 rose at a softer-than-expected pace, he said. &amp;ldquo;This was a positive development that suggests that over time, Australian inflation should be able to continue moderating,&amp;rdquo; Lin remarked. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;The second data point was the country&amp;rsquo;s unemployment rate, which rose slightly to 4.1% in January, he said. Characterizing the number as generally in line with consensus expectations, Lin said it suggests that the Australian labor market is softening a bit&amp;mdash;but importantly, not at an alarming rate. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Canadian inflation numbers surprise to the upside &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Turning to Canada, Lin said that both consumer and producer prices came in somewhat hotter than expected during January. However, he stressed the importance of looking at the country&amp;rsquo;s overall inflation rate, which currently sits at 2.5% if the BoC&amp;rsquo;s preferred measure of core inflation is used. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;This number is already within the central bank&amp;rsquo;s 1%-3% target range&amp;mdash;and it&amp;rsquo;s down significantly from its 2022 peak. In addition, if the BoC&amp;rsquo;s old measure of core inflation is applied, the annual inflation rate is even lower, at 2.1%,&amp;rdquo; Lin explained. Amid this backdrop, he said the central bank is likely to be a little more tolerant of a temporary setback in inflation than it would be if the inflation rate were higher. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Lin said that as long as inflation continues to moderate, the BoC should be able to eventually lower interest rates to a neutral setting of 2.75%. Noting that the &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/us-tariffs-potential-implications&quot;&gt;risks of an economic slowdown in Canada&lt;/a&gt;&lt;/span&gt;&lt;span&gt; are a little more elevated than in the U.S., he said the BoC could wind up cutting rates even more meaningfully if the country were to tip into a recession. Even if Canada avoids a recession, Lin said it&amp;rsquo;s still possible the central bank could drop rates below 2.7% later this year due to the country&amp;rsquo;s weak jobs market and sluggish economic growth. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Noting that markets are pricing in less than a 50% chance of a rate cut at the BoC&amp;rsquo;s next policy meeting in March, Lin said he thinks the outcome could go either way. &amp;ldquo;I believe it&amp;rsquo;s &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/considerations-surging-markets-mwir&quot;&gt;quite possible that the BoC will still cut rates next month&lt;/a&gt;&lt;/span&gt;&lt;span&gt;&amp;mdash;but the decision will probably hinge on what the next labor-market report reveals,&amp;rdquo; he stated.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;What&amp;rsquo;s helping fuel the rally in Chinese stocks?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Lin wrapped up by unpacking the recent strength in Chinese equities, which he said can be partially attributed to investor expectations for more stimulus this year. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;China will be holding its National People&amp;rsquo;s Congress meeting in March&amp;mdash;and during this meeting, the government is likely to announce its GDP (gross domestic product) growth target for 2025. We think that if a target of around 4.5%-5.0% is announced, &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/china-outlook-2025&quot;&gt;more meaningful stimulus will probably be needed&lt;/a&gt;&lt;/span&gt;&lt;span&gt;,&amp;rdquo; he explained. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Liin said that because of the recent rally, Chinese equities now appear somewhat overbought, relative to the broader equity market. That said, he noted that Chinese equity valuations still look reasonable and are more attractive than their U.S. counterparts. &amp;ldquo;With this in mind, we continue to think that having diversified portfolio exposure&amp;mdash;including an allocation to China&amp;mdash;could be important for investors,&amp;rdquo; he concluded. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/bjNPHtq1DdQ&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/16670204&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt;BeiChen Lin<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p><p> CORP-12714</p> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{D8188537-50F1-4C7B-8C6B-F62F6ED849C6}https://russellinvestments.com/us/blog/1099-forms-reviewMany investors unknowingly lose wealth to taxes on their investment income. By analyzing their 1099 forms, advisors can identify tax inefficiencies and implement strategies to reduce tax drag. Our director of tax-managed solutions explains what to look for and how to help clients keep more of what they make.Thu, 20 Feb 2025 05:43:19 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Tax season can be stressful, but with the right approach, advisors can turn it into an opportunity.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Form 1099-DIV reveals which investments are generating the largest tax burdens, helping advisors guide clients toward more tax-efficient strategies.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Using tax-managed solutions or other tax management techniques can help reduce the tax &amp;ldquo;drag&amp;rdquo; on client portfolios.&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;h2&gt;Tax season: A hidden opportunity for advisors&lt;/h2&gt; &lt;p&gt;&amp;ldquo;It&amp;rsquo;s the most wonderful time of the year&amp;hellip;&amp;rdquo; or is it? Wait, I might be experiencing some holiday season nostalgia. Most everyone I know would not sing those words to describe &amp;ldquo;Tax Season&amp;rdquo;. Tax Season instead fills people with anxiety, stress, and concern over whether the forms are filled correctly, if we have all the right documents we need, and most importantly &amp;ldquo;How much do I owe this year&amp;rdquo;! While tax law changes are forthcoming, tax rates are not at and not going to zero, so most income earners have to pay taxes.&lt;/p&gt; &lt;p&gt;Investment income is income &amp;ndash; it too is subject to taxes. For many investors it is investment income that causes &amp;ldquo;surprise&amp;rdquo; tax bills. While it feels nice to see income be generated by the various investments we have made in our portfolios, unless we truly need it for immediate expenses this investment income is more of a tax burden than additive. The reason for that is that whether it is taxed at the long-term capital gains rate or whether it&amp;rsquo;s taxed as ordinary income, it still causes a &amp;ldquo;hidden cost&amp;rdquo; &amp;ndash; a tax cost&amp;nbsp;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;&amp;ndash;&lt;/span&gt; which is most often a drag on after-tax returns. Understanding where this tax drag is coming from is the first step in mitigating it. Form 1099-DIV holds the key to unlocking these insights.&lt;/p&gt; &lt;h2&gt;Decoding Form 1099-DIV: What every advisor should know&lt;/h2&gt; &lt;p&gt;Form 1099-DIV reports the different types of investment income an investor has received. While it may be overwhelming to many, it is basically a series of line items that show each major investment income category.&lt;/p&gt; &lt;p&gt;Let&amp;rsquo;s look at key sections of Form 1099-DIV to identify what you need to be aware of:&lt;/p&gt; &lt;p style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 13px;&quot;&gt;&lt;em&gt;Click image to enlarge&lt;/em&gt;&lt;br /&gt; &lt;br /&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/rk220_1.jpg&quot; target=&quot;_blank&quot;&gt;&lt;img alt=&quot;1099&quot; src=&quot;/-/media/images/global/blogs/images/rk220_1.jpg&quot; /&gt;&lt;/a&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Line 1A&lt;/strong&gt; &amp;ndash; Total Ordinary Dividends: The total amount of almost all dividends received, including both qualified and non-qualified dividends as well as short capital gains, which are taxed differently.&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Line 1B&lt;/strong&gt; &amp;ndash; Qualified Dividends: A portion of Line 1A that qualifies for lower long-term capital gains tax rates.&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Line 1A &amp;ndash; 1B&lt;/strong&gt; &amp;ndash; Ordinary Income taxed dividend items: A little math is required to calculate what is taxed at the ordinary income tax rate by subtracting Line 1B from Line 1A. This sum&amp;mdash;which includes interest income, short-term capital gains, and non-qualified dividends-- is taxed at ordinary income tax rates which is most often a higher corresponding tax rate.&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Line 2A&lt;/strong&gt; - Total Capital Gains Distributions: Long term capital gain distributions from mutual funds or Exchange Traded Funds (ETFs), which are taxed at lower capital gains rates. (While these are preferred to short-term capital gains, in order to minimize the overall investment tax cost, these should be minimized as well.) &lt;/p&gt; &lt;p&gt;&lt;strong&gt;Line 12&lt;/strong&gt; &amp;ndash; Tax-Exempt Dividends: Typically generated from municipal bond funds, these dividends are often tax-free at the federal level, and in some cases, at the state level. This is highly preferred relative to the interest received from &amp;ldquo;taxable bonds&amp;rdquo; which is taxed at ordinary income tax rates.&lt;/p&gt; &lt;p&gt;Not all investment income is taxed the same way. By understanding the components, advisors can help clients identify high tax cost investments and take steps to minimize their tax liabilities. Talk to your clients about how much investment income they require for their needs. And then take the following steps to help minimize the investment income that is generating unnecessary tax cost.&lt;/p&gt; &lt;h2&gt;Turning insights into action: Tax-smart strategies for advisors&lt;/h2&gt; &lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;1. Identify high tax-cost investments&lt;/strong&gt; &lt;/p&gt; &lt;p&gt;Review your clients&amp;rsquo; 1099 forms to determine which investments are generating the most taxable income. Non-qualified dividends and short-term capital gains, in particular, can significantly increase tax bills.&lt;/p&gt; &lt;p&gt;&lt;em&gt;Review important Tax Facts and Figures&lt;/em&gt;&lt;/p&gt; &lt;p&gt;Look at the two tables below to see which tax rates are applicable. Table 1 is the ordinary income tax rate table. Table 2 is the capital gains tax rate table.&lt;/p&gt; &lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;2. Taxes are a drag - Calculate the tax cost&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;Many investors don&amp;rsquo;t realize how much taxes are eroding their returns. Show them the impact of taxes on each category of investment income to highlight potential savings opportunities.&lt;/p&gt; &lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;3. Create an action plan to make changes in your clients&amp;rsquo; investment portfolios by implementing tax-efficient investment strategies&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Reduce exposure to higher-taxed investments: Shift assets from tax-inefficient funds to those with lower turnover and more favorable tax treatment.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Increase tax-efficient holdings: Consider tax-managed funds and municipal bonds that generate lower taxable income.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Use tax-loss harvesting: Offset gains by selling underperforming investments to reduce taxable income.&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;By adopting a long-term, tax-managed investment approach, advisors can help clients reduce tax drag and enhance their after-tax wealth.&lt;/p&gt; [promobox] &lt;h2&gt;Final thoughts: Proactive tax planning pays off &lt;/h2&gt; &lt;p&gt;Tax season doesn&amp;rsquo;t have to be overwhelming. With the right approach, advisors can turn it into an opportunity to optimize their clients&amp;rsquo; portfolios and minimize tax burdens. Form 1099-DIV provides the insights needed to take action&amp;mdash; thereby helping clients keep more of what they make. By identifying tax inefficiencies and implementing strategic &lt;a href=&quot;/404 error page?item=web%3a%7bEE7D2475-775A-412F-A3C6-9AB422F2DDAA%7d%40en&quot;&gt;tax management techniques&lt;/a&gt;, advisors can help &lt;a href=&quot;/404 error page?item=web%3a%7b29B1F981-1D27-4A9C-B665-BD7EA1302098%7d%40en&quot;&gt;add even more value&lt;/a&gt;, ensuring investments work for their clients rather than against them.&lt;/p&gt; &lt;h2&gt;Ready to optimize your clients&amp;rsquo; portfolios for tax efficiency?&lt;/h2&gt; &lt;p&gt;Let us help. Our &lt;a rel=&quot;noopener noreferrer&quot; href=&quot;https://russellinvestments.com/Publications/US/document/RI_ReviewOf1099TaxForm.pdf&quot; target=&quot;_blank&quot;&gt;1099 Tax Form Guide&lt;/a&gt; is just one of the many &lt;a href=&quot;/404 error page?item=web%3a%7b70A62BCF-F22D-45D9-BE99-50CC749D46D6%7d%40en&quot;&gt;tax resources&lt;/a&gt;&amp;nbsp;we make available to you. It can help you calculate the tax bill for your client &amp;ndash; and that may make it easier to understand the &lt;a href=&quot;/us/blog/the-tax-drag-iceberg&quot;&gt;impact taxes are having on their investment returns&lt;/a&gt;. Our Tax Season Essentials flyer includes several strategies you can use to help your clients navigate tax season and potentially reduce tax drag. Our &lt;a href=&quot;/us/resources/financial-professionals/interactive-tools/tax-impact&quot;&gt;Tax Impact Comparison tool&lt;/a&gt;&amp;nbsp;can quantify the tax costs in your clients&amp;rsquo; portfolios and identify opportunities for improvements. Your regional &lt;a rel=&quot;noopener noreferrer&quot; href=&quot;https://russellinvestments.com/Publications/US/Document/sales_service_map.pdf&quot; target=&quot;_blank&quot;&gt;Russell Investments team&lt;/a&gt; is ready and available to help you minimize your clients&#39; tax burden and maximize their after-tax wealth.&lt;/p&gt; &lt;hr /&gt; &lt;p id=&quot;footnote1&quot;&gt;&lt;sup&gt;&lt;span style=&quot;font-size: 11px;&quot;&gt;1&amp;nbsp;&lt;/span&gt;&lt;/sup&gt;U.S. Large Cap represented by Russell 1000 Index, U.S. small cap represented by Russell 2000 Index, international stocks represented by MSCI EAFE Net Index. &lt;/p&gt; &lt;p id=&quot;footnote2&quot;&gt; &lt;sup&gt;&lt;span style=&quot;font-size: 11px;&quot;&gt;2&lt;/span&gt;&lt;/sup&gt; Source: Bloomberg, S&amp;amp;P&lt;/p&gt;Rob Kuharic<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p><p><strong>Russell Investments Financial Services, LLC, member <a rel="noopener noreferrer" href="https://www.finra.org/" target="_blank">FINRA</a>, part of Russell Investments.</strong></p><strong><span style="line-height: 115%;">RIFIS-26443</span></strong><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{BE60199B-F3EB-46B8-9A18-63E6A0B806D3}https://russellinvestments.com/us/blog/is-endowment-model-dead<p>The performance of small endowments relative to large endowments over the past two years only tells part of the story. A comprehensive look at long-term performance between the two shows that large endowments are continuing to outperform small endowments. </p>Wed, 19 Feb 2025 13:43:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Large endowments typically have allocations to alternative investments, while small endowments have more traditional portfolios with high allocations to public equities. The strong performance of equities over the past two years has led small endowments to outperform large endowments.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;However, looking back further, it&#39;s a different story, as the larger gains made by smaller endowments the past two years were offset by significant losses in fiscal year 2022. Over the past three years, there were no significant dispersions in returns between small and larger endowments.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Over the longer-term&amp;mdash;a much more important barometer of success for endowments&amp;mdash;large endowments continue to achieve meaningful outperformance relative to their smaller peers.&amp;nbsp;&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;For two years in a row now, the smallest endowments have significantly outperformed their much larger peers. This is causing some to question if the typical endowment model is still working. Is all of the complexity that larger endowments undertake by diversifying their investments even worth it? In other words, is the endowment model dead?&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Our answer: Not in the slightest.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;At Russell Investments, we strongly believe that diversification is critical to the ultimate success of endowments. To understand why, let&amp;rsquo;s examine the factors that have led to the recent outperformance of smaller endowments&amp;mdash;and how their performance stacks up against larger endowments over the long term.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;How do small endowments differ from large endowments?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;One key difference between small and large endowments is their allocation to public equities. Large endowments typically have allocations to alternative investments, while small endowments have maintained relatively traditional portfolios with high allocations to public equities. Exacerbating this is that while large endowments typically have diversified their exposure to public equities globally, small endowments have typically maintained a home-country bias within their equity portfolios in an environment in which U.S. equity has outperformed non-U.S. equity. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Public equities vs. private assets: The tale of 2022&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Given the strong performance of equities over the past couple of years, it&amp;rsquo;s hardly surprising that portfolios with large equity exposures have done quite well. Endowments with portfolios structured this way should be very happy with the returns they&amp;rsquo;ve achieved over the past two years. However, that&amp;rsquo;s not the whole story. As it turns out, a significant portion of these gains are merely making up for the losses experienced by these portfolios during fiscal year 2022, when equities&amp;mdash;as measured by the benchmark MSCI ACWI Index&amp;mdash;plunged 15.4%. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Contrast that with the performance of private assets during this time frame, where the losses were generally much smaller or non-existent. How can this be? Simply put, in 2022, private investment managers did not write down losses the same way the were experienced in public markets. The net result of this was that portfolios with allocations to the private sector did not need to generate large positive returns to recover their losses&amp;mdash;because there wasn&amp;rsquo;t much to recover from in the first place. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Putting this all together, there were no significant dispersions in returns between smaller and larger endowment over the past three years. Ultimately, the larger gains made by smaller endowments the past two years were offset by the significant losses they experienced in 2022. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;Large endowments have had a smoother ride&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;From our vantage point, this makes the real story over the past three years the smoother ride that large endowments have enjoyed when compared to their smaller counterparts. As the charts below illustrate, large endowments have experienced significantly less volatile returns over the past five years. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a&gt;&lt;/a&gt;&lt;span&gt;&lt;strong&gt;&lt;em&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Exhibit 1: Annual returns over the past five fiscal years&lt;/span&gt;&lt;/em&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;sup&gt;1&lt;/sup&gt;&lt;/span&gt;&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;div&gt; &lt;table&gt; &lt;tbody&gt; &lt;tr&gt; &lt;td&gt;&amp;nbsp;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&amp;nbsp;&lt;span style=&quot;background-color: #f2f2f2; letter-spacing: -0.56px; font-size: 16px;&quot;&gt;2020&lt;/span&gt;&lt;/strong&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;background-color: #f2f2f2; letter-spacing: -0.56px; font-size: 16px;&quot;&gt;&amp;nbsp;&amp;nbsp;2021&lt;/span&gt;&lt;/strong&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;span style=&quot;background-color: #f2f2f2; letter-spacing: -0.56px;&quot;&gt;2022&lt;/span&gt;&lt;br /&gt; &lt;/span&gt;&lt;/strong&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;background-color: #f2f2f2; letter-spacing: -0.56px; font-size: 16px;&quot;&gt;&amp;nbsp;&amp;nbsp;2023&lt;/span&gt;&lt;/strong&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;strong&gt;2024&lt;/strong&gt;&lt;/span&gt;&lt;/td&gt; &lt;/tr&gt; &lt;tr&gt; &lt;td&gt;&lt;strong style=&quot;font-size: medium;&quot;&gt;&amp;nbsp;&amp;lt; $50M&lt;/strong&gt;&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;2&lt;/span&gt;&lt;/sup&gt;&lt;strong style=&quot;font-size: medium;&quot;&gt;&lt;/strong&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;1.8&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;27.3&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;-10.7&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;9.8&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;13.1&lt;/span&gt;&lt;/td&gt; &lt;/tr&gt; &lt;tr&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%; font-size: 16px;&quot;&gt;&amp;nbsp;$51-100M&lt;/span&gt;&lt;/strong&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;1.8&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;26.6&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;-9.7&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;8.6&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;11.8&lt;/span&gt;&lt;/td&gt; &lt;/tr&gt; &lt;tr&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%; font-size: 16px;&quot;&gt;&amp;nbsp;$101-250M&lt;/span&gt;&lt;/strong&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;1.6&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;28.9&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;-9.0&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;8.1&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;11.0&lt;/span&gt;&lt;/td&gt; &lt;/tr&gt; &lt;tr&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%; font-size: 16px;&quot;&gt;&amp;nbsp;$251-500M&lt;/span&gt;&lt;/strong&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;1.3&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;31.5&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;-7.8&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;7.6&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;11.3&lt;/span&gt;&lt;/td&gt; &lt;/tr&gt; &lt;tr&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%; font-size: 16px;&quot;&gt;&amp;nbsp;$501M-$1B&lt;/span&gt;&lt;/strong&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;1.5&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;33.9&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;-5.7&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;7.8&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;10.9&lt;/span&gt;&lt;/td&gt; &lt;/tr&gt; &lt;tr&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;strong&gt;&amp;nbsp;&lt;span style=&quot;line-height: 115%;&quot;&gt;$1-5B&lt;/span&gt;&lt;/strong&gt;&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;2.5&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;37.4&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&amp;nbsp;&lt;span style=&quot;font-size: 16px;&quot;&gt;-4.5&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&amp;nbsp;&lt;span style=&quot;font-size: 16px;&quot;&gt;5.9&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;10.0&lt;/span&gt;&lt;/td&gt; &lt;/tr&gt; &lt;/tbody&gt; &lt;/table&gt; &lt;/div&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;However, it&amp;rsquo;s still fair to question if the significant additional complexity used by large endowments in their portfolios is worthwhile, given that both large and small endowments ended up with similar returns. So, let&amp;rsquo;s zoom out a bit and look at the longer-term results&amp;mdash;a much more important measure of success for endowments.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Large endowments have outperformed small endowments over the long term&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Importantly, the data reveals that over both 5- and 10-year time horizons, larger endowments have achieved meaningful outperformance relative to their smaller peers despite their recent underperformance, as shown in the table below.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;em&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Exhibit 2: Median universe returns over time&lt;sup&gt;3&lt;/sup&gt;&lt;/span&gt;&lt;/em&gt;&lt;/strong&gt;&lt;/p&gt; &lt;table&gt; &lt;tbody&gt; &lt;tr&gt; &lt;td&gt;&amp;nbsp;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;&amp;lt;50M&lt;/span&gt;&lt;/strong&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;$51-100M&lt;/span&gt;&lt;/strong&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;$101-250M&lt;/span&gt;&lt;/strong&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;$251-500M&lt;/span&gt;&lt;/strong&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;$501M-$1B&lt;/span&gt;&lt;/strong&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;$1B-5B&lt;/span&gt;&lt;/strong&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;&amp;gt;$5B&lt;/span&gt;&lt;/strong&gt;&lt;/td&gt; &lt;/tr&gt; &lt;tr&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;One year&lt;/span&gt;&lt;/strong&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;12.6&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;11.0&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;11.4&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;11.1&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;11.1&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;10.1&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;8.9&lt;/span&gt;&lt;/td&gt; &lt;/tr&gt; &lt;tr&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;Three years&lt;/span&gt;&lt;/strong&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;2.9&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;3.2&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;3.2&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;3.2&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;4.1&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;3.6&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;2.3&lt;/span&gt;&lt;/td&gt; &lt;/tr&gt; &lt;tr&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;Five years&lt;/span&gt;&lt;/strong&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;7.5&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;7.7&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;7.7&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;8.2&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;8.8&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;9.0&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;9.9&lt;/span&gt;&lt;/td&gt; &lt;/tr&gt; &lt;tr&gt; &lt;td&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;Ten years&lt;/span&gt;&lt;/strong&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;6.3&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;6.4&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;6.3&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;6.6&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;6.9&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;7.2&lt;/span&gt;&lt;/td&gt; &lt;td&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;8.2&lt;/span&gt;&lt;/td&gt; &lt;/tr&gt; &lt;/tbody&gt; &lt;/table&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;It is worth noting that over a 10-year horizon, the median endowment in the three smallest categories&amp;mdash; &lt;/span&gt;&lt;em style=&quot;letter-spacing: -0.035em;&quot;&gt;under $50M&lt;/em&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;, &lt;/span&gt;&lt;em style=&quot;letter-spacing: -0.035em;&quot;&gt;$51-100M&lt;/em&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt; and &lt;/span&gt;&lt;em style=&quot;letter-spacing: -0.035em;&quot;&gt;$101-250M&lt;/em&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&amp;mdash;didn&amp;rsquo;t jus&lt;/span&gt;&lt;em style=&quot;letter-spacing: -0.035em;&quot;&gt;t&lt;/em&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt; underperform the median endowment in the &lt;/span&gt;&lt;em style=&quot;letter-spacing: -0.035em;&quot;&gt;over $5B&lt;/em&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt; (i.e., largest) category. &lt;/span&gt;&lt;strong style=&quot;letter-spacing: -0.035em;&quot;&gt;The median small endowment would also have been among the worst 5% of performers if lumped in with the largest endowments.&lt;/strong&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt; This demonstrates that although their very recent performance differs, large endowments have been rewarded for their more complex portfolios through time.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The outlook for endowments moving forward&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;This leads to a final slew of questions: After the volatility of the past few years, what kind of returns can endowments expect from their portfolios moving forward? Is diversification still worth it? What if U.S. equities stay dominant for a long time?&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;To be blunt, we&amp;rsquo;re highly skeptical of the view that U.S. equities will outperform for years to come. History has shown us that although certain areas of the market can maintain dominance for long periods of time, returns often come in cycles and no one area of the market consistently outperforms, as shown in the exhibit below. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;em&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Exhibit 3: Experienced returns through time of asset classes and endowments&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;4 5&lt;br /&gt; &lt;br /&gt; &lt;/span&gt;&lt;/sup&gt;&lt;/span&gt;&lt;/em&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/latofebchart_rev.jpg&quot;&gt;&lt;img alt=&quot;Asset returns &quot; src=&quot;/-/media/images/global/blogs/images/latofebchart_rev.jpg&quot; /&gt;&lt;/a&gt;&lt;/span&gt;&lt;/sup&gt;&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;div&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Let&amp;rsquo;s be clear: Diversification is not dead. Today&amp;rsquo;s winners could easily become tomorrow&amp;rsquo;s losers. If anything, today&amp;rsquo;s sky-high valuations in U.S. large cap equities bolster the case for diversification, as we believe the asset class&amp;rsquo; recent sizable gains &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b436E2CE4-F063-4604-B835-9845E8E4B957%7d%40en&quot;&gt;makes it more susceptible to large drawdowns&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;. In this environment, the decisions that led to recent success for smaller endowments could be the same ones that create the potential for large drawdowns. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The bottom line&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Investors with high allocation to public equities should appreciate the gains they&amp;rsquo;ve experience these past few years, but we believe they should consider diversifying more on a going-forward basis. Because as the long-term results show, the endowment model is far from broken. It&amp;rsquo;s working just fine.&lt;/span&gt;&lt;/p&gt; &lt;/div&gt; &lt;hr align=&quot;left&quot; size=&quot;1&quot; width=&quot;33%&quot; /&gt; &lt;div id=&quot;ftn1&quot;&gt; &lt;/div&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;sup&gt;1&lt;/sup&gt; Data based on the NACUBO-Commonfund and NACUBO-TIAA Studies of Endowments from 2020-2024&lt;br /&gt; &lt;sup style=&quot;letter-spacing: -0.035em;&quot;&gt;2 &lt;/sup&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;For Fiscal Years 2020-2022 the Under $50M universe is the $25-50M universe and the $1-5B universe is the over $1B universe&lt;br /&gt; &lt;/span&gt;&lt;sup style=&quot;letter-spacing: -0.56px;&quot;&gt;3&lt;/sup&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt; Data based on the 2024 NACUBO-Commonfund Study of Endowments&lt;br /&gt; &lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;sup&gt;4&lt;/sup&gt; Data Based on the NACUBO-Commonfund and NACUBO-TIAA Studies of Endowments from 2015 through 2024. Asset class returns represent the experienced returns of NACUBO study average annual returns in the asset class, not benchmark returns. As categories changed through time in the NACUBO studies U.S. equities represents U.S. equities active and U.S. equities, Non-U.S. equities represents Non-U.S. Developed active, Non-U.S. developed and Non-U.S. equities, Private Real Estate represents Private Real Estate, Real Estate and Private Equity Real Estate, $1-$5B Endowments represents $1-5B Endowments and Over $1B Endowments and Under $50M Endowments represents Under $50M Endowments and $26-50M Endowments.&lt;br /&gt; &lt;sup&gt;5&amp;nbsp;&amp;nbsp;&lt;/sup&gt;In 2021 the large endowments were able to outperform all asset classes shown as they achieved significantly higher returns than was achieved on average within venture capital, private equity and marketable alternatives.&lt;/span&gt;&lt;/span&gt;&lt;/span&gt;&lt;/p&gt; &lt;div&gt; &lt;div id=&quot;_com_1&quot;&gt; &lt;/div&gt; &lt;/div&gt;Mary Beth Lato<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12709<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{A15ECE64-F9A4-425A-97CB-1771123DAFCB}https://russellinvestments.com/us/blog/investment-succession-planWhat would happen if your top investment brass wasn’t there tomorrow—for whatever reason? As uncomfortable as the topic can be, we believe it’s vital for all organizations to address the issue of investment succession planning as soon as possible.Tue, 18 Feb 2025 13:43:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;span&gt;Change is inevitable at all organizations&amp;mdash;which is why it&amp;rsquo;s critical to have an investment succession plan in place when managing financial assets.&amp;nbsp;&amp;nbsp;&lt;/span&gt;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;A small investment staff can create a big succession risk, but you don&amp;rsquo;t have to go it alone.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Consider reaching out to a skilled OCIO provider so that when the inevitable does strike, the transition is seamless. A deeper bench of resources can cover a multitude of risks.&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;It&amp;rsquo;s inevitable&amp;mdash;regardless of whether you&amp;rsquo;re a defined benefit (DB) or defined contribution (DC) plan sponsor, a non-profit healthcare system, or an endowment or foundation. At some point in time, the top brass that manage your organization&amp;rsquo;s investments will no longer be with the organization, whether that&amp;rsquo;s through retirement, a job change, or a change in personal circumstances.&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&amp;nbsp; &lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Then what? Who&amp;rsquo;s in charge of protecting your employees&amp;rsquo; retirement savings or the growth of your organization&amp;rsquo;s investments? Do they have the requisite investment knowledge to do so while simultaneously acting in a fiduciary capacity?&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;One thing&amp;rsquo;s for certain&amp;mdash;whether it&amp;rsquo;s people&amp;rsquo;s financial security or the financial health of the organization on the line, you better have a plan in place. This is why, as uncomfortable as the topic can be, we believe it&amp;rsquo;s vital for all organizations that haven&amp;rsquo;t already done so to fully address the issue of investment succession planning as soon as possible. For organizations that have already taken this step, we encourage you to read this article and then consider if it makes sense to re-evaluate any parts of your plan. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Below, we&amp;rsquo;ll share why we think most institutional investors should at least consider investment outsourcing as part of their succession plan. Let&amp;rsquo;s get started.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;The importance of maintaining specialized knowledge&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Institutional investing is rife with complexities. It takes a blend of deep expertise, specialized knowledge, and years of hands-on experience in the industry to successfully manage an organization&amp;rsquo;s investment program. Extensive experience in increasing returns, reducing risks, and managing costs are critical to helping achieve an organization&amp;rsquo;s investment goals. Take it from me, a former chief investment officer (CIO) at a large energy utility for nearly 20 years.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;It&amp;rsquo;s for these exact reasons that many of my peers are still at the helm of their respective company&amp;rsquo;s investment programs as they approach retirement age. Simply put, the depth of knowledge they&amp;rsquo;ve accumulated from decades on the job isn&amp;rsquo;t something that can be learned quickly or easily transferred. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;But what if that reliance on key man risk doesn&amp;rsquo;t have to be?&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;What if, instead of desperately searching for a replacement to manage your organization&amp;rsquo;s investments when the head of the program announces their departure, you had a trusted outsourced chief investment officer (OCIO) partner&amp;mdash;one with a fundamental focus on OCIO&amp;mdash;already waiting in the wings? A partner that could seamlessly step in and not only preserve the institutional knowledge within your organization&amp;rsquo;s investment program&amp;mdash;but expand upon it?&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;Why OCIO makes sense as a succession planning alternative&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;We believe there are several advantages to using OCIO as a succession planning alternative, and chief among them is the fact that investment outsourcing is the very bread and butter of a skilled OCIO provider. For these providers, OCIO isn&amp;rsquo;t a line of work they dabble in on the side&amp;mdash;it&amp;rsquo;s core to their very business model. Managing complex investment programs and implementing customized portfolio solutions for global institutional investors is simply what they do, day in and day out. Their business is &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b45BE511F-2CA0-44CD-8428-B4F2953F9E66%7d%40en&quot;&gt;fundamentally OCIO&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;. So when evaluating whether an OCIO firm should be part of your company&amp;rsquo;s investment succession plan, ask yourself: Why not consider partnering with a firm that makes their very living doing this?&lt;/span&gt;&lt;/p&gt; &lt;p&gt;[promobox]&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Another major advantage we see in utilizing an OCIO provider is that doing so &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/succession-strategy-db-plan-ocio&quot;&gt;drastically reduces the risks of institutional knowledge loss&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;. The reason why is simple: when you hire an OCIO, you&amp;rsquo;re hiring a team, rather than an individual. Doing so mitigates the risk of all of your organization&amp;rsquo;s investment knowledge disappearing if the inevitable occurs. This is not a sales pitch. It&#39;s just a fact. Asset owner succession planning risk is diminished, because firms with robust capabilities have intentional redundancy, business risk management, and business continuity teams. They manage other related continuity risks as well&amp;mdash;such as cybersecurity&amp;mdash;with robust, vigilant purpose-built efforts.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Look, at my current job, I work side-by-side with about 1,700 people dedicated to improving the financial security of individuals and organizations&amp;mdash;whether through managing a DB or DC plan or the growth of an endowment. If I leave, there are 1,699-ish other people standing by who can provide answers as well as I can. There is simply a much larger pool of expertise. So, not only do I have a drastically larger team of resources, the beneficiaries of my clients&#39; plans do as well.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;A small investment staff can create a big succession risk&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The reality is that the risk of institutional knowledge loss is often much greater at organizations with smaller investment staffs. Non-profits, endowments, and foundations in particular tend to be thinly staffed in these areas. Many companies with DB plans tend to be in a similar boat, as the dwindling popularity of pension plans means organizations are less likely to have ample resources devoted to managing them. And let&amp;rsquo;s face it, if your investment staff consists of three people, the chances that the second-in-command is ready to take over running the investment function at the drop of a hat are logically slim. Building out a meaningful career ladder on a &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/nonprofit-investment-succession-planning&quot;&gt;small team working in a non-core function&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; is tough. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;For many of these organizations, there&amp;rsquo;s also the issue of turnover on the investment committee itself. Some committees pick managers, some approve cash flows, some only approve an investment policy statement (IPS) and review staff-delegated items. In all of these cases, the committee members need to have succession planning for themselves. The fiduciary must determine their own succession plan and the plan for each operational node that has delegated responsibility. If that sounds like a headache, well, that&amp;rsquo;s because it is. A skilled OCIO provider can help sort this all out.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;But my organization&amp;rsquo;s investment team is well-staffed. So why should we consider OCIO as part of our succession strategy?&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Some of you reading this might be thinking,&lt;em&gt; &lt;/em&gt;OK, I can see why OCIO makes sense as a succession-plan option for organizations with small investment teams. But what about for organizations with substantial investment staffs&amp;mdash;like large endowments or certain large corporations that boast state-of-the-art asset management programs, for instance? Surely their succession risk must be lower?&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Not necessarily. On the one hand, it&amp;rsquo;s true that the bigger the investment team, the smaller the risk that the entire team will depart en masse. But on the other hand, it&amp;rsquo;s equally important to see this through the lens of ensuring that your top-notch investment program remains top-notch &lt;em&gt;at all times&lt;/em&gt;. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;In this case, I&amp;rsquo;d argue that even if your organization&amp;rsquo;s investment program is staffed with skilled lieutenants who are more than able to step up to the plate if the leaders leave, you simply cannot have a deep enough bench of investment experts on hand. It&amp;rsquo;s just too risky not to. And maybe that deep bench includes a partnership with an OCIO provider&amp;mdash;a firm that can step in at a moment&amp;rsquo;s notice and &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7bAEB256F6-B63C-492C-8D0A-AAB7AECE3412%7d%40en&quot;&gt;serve as an extension of your staff&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; if you hit a rough patch.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;Three additional OCIO benefits for succession planning&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Besides the specialized investment knowledge and ample resources that come with hiring an OCIO provider, we see three other reasons why organizations should explore OCIO as a potential solution:&lt;/span&gt;&lt;/p&gt; &lt;ol start=&quot;1&quot; style=&quot;margin-top: 0in;&quot;&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Economies of scale.&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&amp;nbsp;OCIO can not only help with succession risk, but can also provide an opportunity to piggyback on a drastically higher level of investment scale. Most OCIO firms are almost always able to reduce costs for their OCIO clients. Their economies of scale result from the aggregate power of managing many plans, not just one. The net result? Your organization may be able to achieve its objectives more reliably, with improved risk management and succession-risk mitigation, all for less money.&lt;br /&gt; &lt;br /&gt; &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;It&#39;s not an&amp;nbsp;&lt;em&gt;all-or-nothing&amp;nbsp;&lt;/em&gt;decision.&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&amp;nbsp;Be sure you understand the&amp;nbsp;&lt;em&gt;shades of gray&lt;/em&gt;&amp;nbsp;between insourcing and outsourcing&amp;mdash;it&#39;s not an all or nothing thing.&amp;nbsp;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/some-do-some-few-do-all&quot;&gt;The best OCIO providers will meet clients where they are&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;. Some clients see the greatest risk in manager contracting, so they may outsource most assignments, but keep actual manager selection decisions in-house. One way you could approach outsourcing would be to look at your greatest, &lt;em&gt;lay-awake-at-night&lt;/em&gt; risks and just outsource those. Regarding succession specifically, a good idea for a firm preparing for a CIO&amp;rsquo;s retirement in the next year may be to just outsource risk management. This way, the firm can test the OCIO waters with this one assignment, and then potentially move further along the outsourcing spectrum.&lt;br /&gt; &lt;br /&gt; &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Outsourcing can create valuable optionality.&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&amp;nbsp;Let&#39;s look at two succession scenarios. In option one, you implement changes by retaining a new internal staff resource&amp;mdash;either through an external recruiting and onboarding process or through promoting a junior member to the senior investment management role. In option two, you outsource to an OCIO provider. &lt;br /&gt; &lt;br /&gt; Now let&#39;s imagine, for whatever reason, you&#39;re unhappy with the results. Ask yourself: In which scenario is it simpler to make a change? In other words, is it easier to replace the new internal resource through firing and restructuring and re-recruiting and restaffing? Or is it easier to request a shift in the individual assigned to your OCIO mandate?&amp;nbsp;&lt;/span&gt;&lt;/li&gt; &lt;/ol&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;The bottom line&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Change is inevitable at all organizations&amp;mdash;which is why it&amp;rsquo;s critical to have an investment succession plan in place when managing financial assets. But that plan shouldn&amp;rsquo;t have to be hard to execute. Consider reaching out to a skilled OCIO provider so that when the inevitable does strike, the transition is seamless. &lt;/span&gt;&lt;/p&gt;Peter Corippo<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12701<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{95529746-F8FB-492C-A4A2-325435C92B5E}https://russellinvestments.com/us/blog/considerations-surging-markets-mwir<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>Equity markets hover near all-time highs in U.S., Canada, and Europe</span></li> <li><span>The latest on potential U.S. tariffs</span></li> <li><span>Bank of Canada likely to continue cutting rates</span></li> </ul>Fri, 14 Feb 2025 05:10:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;Equity markets are hovering near all-time highs in the U.S., Canada, and Europe&lt;/li&gt; &lt;li&gt;The U.S. announced plans for reciprocal tariffs&lt;/li&gt; &lt;li&gt;The Bank of Canada is likely to continue cutting rates&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Senior Investment Strategist and Head of Canadian Strategy, BeiChen Lin, discussed what investors should consider in light of recent equity-market strength. He also provided an update on the latest U.S. tariff announcements and assessed the outlook for rate cuts in Canada.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;As equity markets soar, what should investors think about?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Lin began by noting that several major equity benchmarks hovered close to or surpassed their record highs this week, including the S&amp;amp;P 500 Index, the S&amp;amp;P/TSX Composite Index, and the STOXX&amp;reg; Europe 600 Index. This has led some investors to wonder if now could be a good time to chase into the equity-market rally, he remarked.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;From our perspective at Russell Investments, we don&amp;rsquo;t think so. Instead, we believe investors would benefit from &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/europe-canada-us-rates-mwir&quot;&gt;staying disciplined and close to their strategic asset allocations&lt;/a&gt;&lt;/span&gt;&lt;span&gt;,&amp;rdquo; Lin stated. One of the key reasons why is because macroeconomic uncertainty remains elevated, he said. This is the case even in the U.S., where an economic &lt;em&gt;soft landing&lt;/em&gt; looks like the most likely outcome, Lin noted. &amp;ldquo;I believe recession risks in the U.S. are still somewhat above average,&amp;rdquo; he said. U.S. equity valuations also look somewhat stretched, Lin added. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He noted that equity valuations look closer to fair value in places outside the U.S.&amp;mdash;such as Canada and Europe&amp;mdash;but that these cheaper valuations are offset by higher cyclical risks. For instance, if the U.S. administration decides to move ahead with its &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/us-tariffs-potential-implications&quot;&gt;initial plan to tax Canadian imports at a 25% rate&lt;/a&gt;&lt;/span&gt;&lt;span&gt;, the Canadian economy could face an elevated risk of an economic slowdown, Lin observed.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;All told, Lin said that when today&amp;rsquo;s cycle and valuation factors are balanced together, he doesn&amp;rsquo;t see a compelling enough tactical case to overweight equities. Instead, by sticking close to their strategic asset allocations and potentially rebalancing, investors could lock in some of the gains they&amp;rsquo;ve made and still have the opportunity to participate in any potential future equity-market upside, Lin said.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;U.S. trade policy update&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Switching to U.S. trade policy, Lin noted that President Donald Trump held a press conference on Feb. 13 to discuss plans for reciprocal tariffs on key U.S. trading partners.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Of note, the president didn&amp;rsquo;t get into specifics about which countries would face these tariffs, what the tariff rates would be, and when some of the tariffs might go into effect, Lin said. Instead, the Trump administration will study the situation and make some recommendations by April 1, he noted, adding that this doesn&amp;rsquo;t necessarily mean the U.S. will implement new tariffs then. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;At Russell Investments, we think this is an important development, because it gives the U.S. administration a fair amount of flexibility. We believe these reciprocal tariffs might be more of a negotiating tool, but the situation requires careful monitoring,&amp;rdquo; Lin said. He finished by noting that if these or the other tariffs proposed by the administration are implemented, the U.S. would likely see a modest drag on growth and a &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/estimating-tariff-impacts&quot;&gt;modest one-time hit to prices&lt;/a&gt;&lt;/span&gt;&lt;span&gt;. Meanwhile, some of the country&amp;rsquo;s key trading partners, like Canada and Mexico, could &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/active-equity-managers-tariffs&quot;&gt;potentially be impacted to a much greater degree&lt;/a&gt;&lt;/span&gt;&lt;span&gt;, Lin said&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Growth vs. inflation: What&amp;rsquo;s a higher priority for the Bank of Canada?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Lin wrapped up with a look at the inflation backdrop in Canada, noting that the January numbers will be published by Statistics Canada on Feb. 18. He said that although the U.S. CPI (consumer price index) surprised to the upside in January, that doesn&amp;rsquo;t mean Canadian inflation data will necessarily come in hot as well. &amp;ldquo;Although the Canadian and American economies are very interconnected, they don&amp;rsquo;t always move in lockstep,&amp;rdquo; Lin remarked.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He said that even if Canada&amp;rsquo;s inflation report for January comes in slightly stronger than anticipated, the Bank of Canada (BoC) might look past it, treating it more like a one-time shock. The reason why is that the bank is likely to be more focused on boosting growth instead of taming inflation, Lin said. &amp;ldquo;Ultimately, &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/europe-canada-us-rates-mwir&quot;&gt;given the weakness in the Canadian economy&lt;/a&gt;&lt;/span&gt;&lt;span&gt;, we expect that the BoC will continue cutting rates in 2025,&amp;rdquo; he concluded. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/HZd0k9HGScA&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/16624143&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt;BeiChen Lin<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p><p> CORP-12708</p> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{D7326889-7FD0-4A79-AFBB-B0AEBBBA2C7F}https://russellinvestments.com/us/blog/estimating-tariff-impacts<span style="line-height: 115%;"></span><span style="line-height: 115%;">How could the proposed slate of U.S. tariffs affect cost structures for both U.S. and global businesses? See what our research suggests.</span><br />Thu, 13 Feb 2025 13:43:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;span&gt;Our research estimates that the proposed slate of U.S tariffs on key trading partners would result in a 60-to-80 basis-point (bps) increase in cost structures across most sectors of the global economy.&lt;/span&gt;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;During 2018-19, when the U.S. imposed tariffs on steel and aluminum products from most other countries&amp;mdash;in addition to a wider array of tariffs on Chinese products&amp;mdash;REITs and infrastructure were generally the strongest-performing asset classes.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;If the current proposed tariffs are implemented, our model indicates that the U.S. energy, materials, industrials, and consumer discretionary sectors are likely to be the most impacted&amp;mdash;and the U.S. financials and communications sectors the least impacted.&amp;nbsp;&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;U.S. trade policy remains highly fluid, with the &lt;a href=&quot;/us/blog/us-tariffs-potential-implications&quot;&gt;government announcing several tariff proposals&lt;/a&gt;&amp;nbsp;since President Donald Trump &lt;a href=&quot;/us/blog/takeaways-trump-administration-start-mwir&quot;&gt;took office last month&lt;/a&gt;. As of this writing, the Trump administration has implemented a 10% tariff on imports from China and announced plans to enact a 25% tariff on all imported steel and aluminum products in early March. In addition, the U.S. may move forward with an earlier plan&amp;mdash;which was put on pause last week&amp;mdash;to tax all Canadian (excluding energy) and Mexican imports at a 25% rate beginning next month.&amp;nbsp;&lt;span style=&quot;line-height: 115%;&quot;&gt;Finally, the U.S. administration is also reportedly looking at the imposition of reciprocal tariffs (i.e., imposing the same tariffs on imports that U.S. exports face) to all U.S. trading partners.&amp;nbsp;&lt;/span&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Amid uncertainty over the &lt;a href=&quot;/us/blog/active-equity-managers-tariffs&quot;&gt;potential market and economic impacts of these tariffs&lt;/a&gt;, our strategist team at Russell Investments has developed a model that allows us to input a wide range of different tariff scenarios&amp;mdash;for example, a 25% U.S. tariff on Canadian imports, or blanket U.S. tariffs on all steel imports&amp;mdash;to see what the potential impacts would be on cost structures for both U.S. and global businesses.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;How could today&amp;rsquo;s proposed tariffs impact the global economy?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;If the current slate of proposed U.S. tariffs is implemented, our model estimates a &lt;strong&gt;60-to-80 bps increase in cost structures&lt;/strong&gt; across most sectors of the global economy.&amp;nbsp; We also think it&amp;rsquo;s very likely that companies will pass on this increase to customers in full, as has been the case in previous tariff episodes. To this end, we anticipate that core U.S. consumer prices&amp;mdash;as measured by the PCE price index&amp;mdash;would rise by about 70-80 bps.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;These estimates are based on a number of inputs, as well as observations from how markets and economies reacted to the implementation of U.S. tariffs during the first Trump administration. Let&amp;rsquo;s take a deeper look.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Market impacts from U.S. tariffs during the first Trump administration&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;During President Trump&amp;rsquo;s first term in office, the U.S. implemented tariffs on steel and aluminum products from most other countries from 2018-19, as well as a wider array of tariffs on Chinese products. During this time, there was a notable decrease in correlations between different equity regions&amp;mdash;which makes sense, given that the economic impacts of the tariffs varied by country.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Of particular note, both REITs (real estate investment trusts) and infrastructure performed well during this period, primarily due to the lower tariff risk and some discount rate movements.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Trade policy uncertainty index&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;A good measure of the uncertainty around U.S. tariffs during the first Trump administration can be demonstrated by looking at the so-called Trade Policy Uncertainty Index. This index crawled online news articles for words that suggested uncertainty in trade policy during this time.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;As the chart shows, the index identified three main periods of elevated trade uncertainty from 2016-2020. The first was the period following Donald Trump&amp;rsquo;s initial presidential election victory, in November 2016, through his first few months in the White House in early 2017. During this time, worries over potential U.S. tariffs mounted, but no policy actions were taken.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/acfeb12_1.jpg&quot;&gt;&lt;img alt=&quot;Trade policy uncertainty index&quot; src=&quot;/-/media/images/global/blogs/images/acfeb12_1.jpg&quot; /&gt;&lt;/a&gt;&lt;/span&gt;&lt;/p&gt; &lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Source: policyuncertainty.com/trade_uncertainty, Petersen Institute&lt;/span&gt;&lt;/em&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;br /&gt; The second period, from roughly March through August 2018, is when the Trump administration finished its investigations into Chinese trade practices and announced a flurry of tariffs, with many targeting Chinese goods. The third period occurred the following year, in 2019, when the U.S. administration implemented another round of tariffs on key trading partners. Of these three periods, the second and third are the most important from an economic perspective, since that&amp;rsquo;s when the tariffs were actually implemented.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;So, how did asset classes perform during both times? &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;In the image below, the chart on the left shows how equities, real assets, bonds, foreign exchange, and government bonds performed from Feb. 28 to Aug. 1, 2018.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/acfeb12_2.jpg&quot;&gt;&lt;img alt=&quot;2018 tariffs&quot; src=&quot;/-/media/images/global/blogs/images/acfeb12_2.jpg&quot; /&gt;&lt;/a&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;One of the main things that jumps out is the struggles of emerging-market equities, which is understandable given that China makes up roughly a quarter of the MSCI Emerging Markets Index. On the flip side, the Russell 2000 Index of small cap stocks surged by over 10% during this time frame, with REITs also gaining by nearly as much.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The righthand side of the chart shows the performance of the same asset classes during the peak drawdown of the U.S. equity market in 2018&amp;mdash;from March 9 to April 2&amp;mdash;as measured by the S&amp;amp;P 500 Index. Once again, REITs and, to a lesser extent, infrastructure experienced far less of a decline than other assets during this timeframe.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;What about in 2019? This time, there was more of a classic &lt;em&gt;risk-off&lt;/em&gt; tone, with equity markets declining while perceived safe-havens like U.S. Treasuries and the Japanese yen did well. Yet again, REITs and infrastructure performed strongly.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/acfeb12_3.jpg&quot;&gt;&lt;img alt=&quot;2019 tariffs&quot; src=&quot;/-/media/images/global/blogs/images/acfeb12_3.jpg&quot; /&gt;&lt;/a&gt;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Estimating the input costs of tariffs&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Next, let&amp;rsquo;s look at how we constructed our model for tariff input costs. We use data from the U.S. Bureau of Economic Analysis to see what inputs are used for each sector in the economy. The second step is to then look at the import reliance of each of these inputs. With these two steps, we then can apply tariff assumptions by country and, if necessary, product line. Product line is an important ability in cases like Canada, where the Trump administration carved out a lower tariff rate on energy resources. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The result is the below chart, which estimates the increase in input costs across U.S. equity sectors. There&amp;rsquo;s an average overall increase of roughly 80 bps for U.S. sectors, with energy, materials, industrials, and consumer discretionary impacted the most. On the other side of the coin, the financials and communications sectors are estimated to be the least impacted. If we drill down further, motor vehicles, electrical equipment, and transportation in particular are the most impacted.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%; font-size: 18px;&quot;&gt;&lt;strong&gt;&lt;em&gt;Chart: Estimated i&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;ncrease in input costs across U.S. equity sectors&lt;/span&gt;&lt;/em&gt;&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/acfeb12_6rev.jpg&quot;&gt;&lt;img alt=&quot;Cost increases&quot; src=&quot;/-/media/images/global/blogs/images/acfeb12_6rev.jpg&quot; /&gt;&lt;/a&gt;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The bottom line&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Our research indicates that the latest proposed slate of U.S. tariffs are likely to result in a modest increase &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;in cost structure for global organizations. As U.S. trade policy continues to evolve, we&amp;rsquo;ll monitor the latest developments and share updates from our model accordingly.&lt;/span&gt;&lt;/p&gt;Alexander Cousley<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12707<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{0014D07D-F93B-408A-81B7-78603978C62E}https://russellinvestments.com/us/blog/china-outlook-2025Our senior investment strategist for the Asia-Pacific region assesses the outlook for China's economy and markets this year.Tue, 11 Feb 2025 13:43:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;span&gt;There are some tentative signs of improvement in China&amp;rsquo;s beleaguered property market, but consumer confidence remains very low.&lt;/span&gt;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;We estimate that the 10% tariff the U.S. recently implemented on Chinese imports could create a 0.3-percentage-point drag on China&amp;rsquo;s GDP growth.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Our outlook for Chinese equities in 2025 is marginally positive.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Consumer behavior and the evolution of China&amp;rsquo;s trading relationship with the U.S. are likely to be the main forces that shape how the year unfolds.&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; line-height: 115%;&quot;&gt;2025 is beginning in much the same manner as 2024, with investors focused on whether the Chinese government is going to implement new stimulus measures. This year, however, there are two new developments: the &lt;/span&gt;&lt;a rel=&quot;noopener noreferrer&quot; href=&quot;https://www.linkedin.com/posts/russell-investments_ai-investing-finance-ugcPost-7289789358310604800-1ntV/?utm_source=share&amp;amp;utm_medium=member_desktop&quot; style=&quot;letter-spacing: -0.035em;&quot; target=&quot;_blank&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;release of the DeepSeek AI (artificial intelligence) model&lt;/span&gt;&lt;/a&gt;&lt;span style=&quot;letter-spacing: -0.035em; line-height: 115%;&quot;&gt; and the &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/us-tariffs-potential-implications&quot;&gt;initiation of U.S. tariffs on Chinese exports&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em; line-height: 115%;&quot;&gt;. Amid this backdrop, we believe investors should focus on consumer behavior, the government&amp;rsquo;s reaction to economic conditions, and the evolution of the U.S.-China relationship.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Property transactions tentatively improving&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The property sector remains the key drag on China&amp;rsquo;s economy&amp;mdash;developers are still under pressure, while consumers are cautious on buying property. However, we are seeing &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/us-core-inflation-slows-mwir&quot;&gt;tentative green shoots&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; in recent transaction data for secondary homes, suggesting that all the &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7bE9D46FBD-3E70-4450-8B9B-E4A0BF3747C2%7d%40en&quot;&gt;supportive measures put in place through 2024&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; might be starting to bear some fruit. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;However, it is important to highlight that it is not all improvement on the consumer front. Consumer confidence is still very depressed and is close to the lows of the last four years. Additionally, the economy continues to flirt with deflation, which could become a significant headwind if deflation expectations become entrenched. This would lead to consumers delaying the purchase of major goods due to anticipated further price declines.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/cousley27_1.jpg&quot;&gt;&lt;img alt=&quot;Consumer confidence in China&quot; src=&quot;/-/media/images/global/blogs/images/cousley27_1.jpg&quot; /&gt;&lt;/a&gt;&lt;br /&gt; Source: LSEG Datastream, Jan. 31, 2025&lt;/span&gt;&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Policy reaction to tariffs remains unclear&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;As we head further into the year, the focus will be on the National People&amp;rsquo;s Congress meeting in March, where the government will announce its economic growth target for the year as well as any new policy measures. In our view, if an economic growth target of around 4.5% is announced, it will likely have to be accompanied by a more meaningful stimulus measure.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Another key watchpoint for Chinese policy will be the reaction to the &lt;a href=&quot;/us/blog/active-equity-managers-tariffs&quot;&gt;10% tariff rate&lt;/a&gt;&amp;nbsp;put in place by the U.S. on Feb. 4. So far, China has responded by placing tariffs on $14 billion of U.S. imports, included coal, crude oil, liquified natural gas (LNG), and farm machinery. These tariffs went into effect on Feb. 10.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;It&amp;rsquo;s important to note that while the 10% U.S. tariff rate on Chinese products is lower than many had feared, we estimate it will still create a &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/us-tariffs-potential-implications&quot;&gt;drag on GDP (gross domestic product) growth of around 0.3 percentage points&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;. The U.S. is set to complete its &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/takeaways-trump-administration-start-mwir&quot;&gt;trade policy review&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; by April 1, and we expect that China will be quite constrained in retaliation before that period is released. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;AI advances have been impressive, but chips likely remain a constraint&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;There has been a lot of focus on AI developments in China, with Chinese startup DeepSeek reporting that it has achieved significant gains at a small cost. In the same week that DeepSeek made its announcement, there were three announcements from other companies in the country (Bytedance, Moonshot and Alibaba), all of which illustrated impressive improvements. This reflects the high level of competition that occurs in China&amp;mdash;as proof, one can simply look at the rapid innovation and reduction in costs that Chinese electric vehicles have seen over the last four years. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Moving forward, we are likely to see more focus on efficiency from Chinese AI developers. However, further improvements to both capabilities and scale will likely prove challenging, given the export embargoes that the U.S. has put on major chip manufacturers. Reflecting these concerns, the founder of DeepSeek recently noted in an interview that the main challenge for the company is not funding but securing the necessary computing power (i.e., chips).&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;What are the potential market implications? &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;At Russell Investments, we use a cycle, valuation, and sentiment framework to guide our investment decision-making process. Using this framework, our outlook for Chinese equities is marginally positive. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%; font-size: 16px;&quot;&gt; Starting with the business cycle, whilst there is quite a bit of uncertainty around the economic outlook, Chinese companies have continued improving their return on equity (as shown in the chart below). Analysts are looking for about 9% EPS (earnings-per-share) growth through 2025, which seems achievable if the economy can achieve GDP growth of around 4.5% and corporates see some margin expansion.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/cousley27_2.jpg&quot;&gt;&lt;img alt=&quot;China return on equity&quot; src=&quot;/-/media/images/global/blogs/images/cousley27_2.jpg&quot; /&gt;&lt;/a&gt;&lt;br /&gt; Source: LSEG Datastream, Dec. 31, 2024&lt;/span&gt;&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;From our vantage point, valuations for Chinese equities continue to look reasonable, both on an absolute basis and relative to other emerging markets. Forward multiples are at an undemanding 10 times, while the so-called PEG ratio (or price-to-earnings-to-growth ratio&amp;mdash;i.e., the earnings multiple divided by the long-term growth estimate) is at the 15&lt;sup&gt;th&lt;/sup&gt; percentile relative to history. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Our sentiment measure is currently very neutral right now, after having been overbought in the second half of 2024 on expectations of further stimulus. This will be a key watchpoint through this year, especially as the market digests geopolitical and policy developments.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/cousley27_3.jpg&quot;&gt;&lt;img alt=&quot;China composite&quot; src=&quot;/-/media/images/global/blogs/images/cousley27_3.jpg&quot; /&gt;&lt;/a&gt;&lt;br /&gt; Source: LSEG Datastream, Bloomberg, Russell Investments, Jan. 24, 2025&lt;/span&gt;&lt;/em&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Finally, it is worth touching on the Chinese yuan. Given the potential headwinds of tariffs, we think it is likely that we might see a bit more downward pressure on the yuan through this year. Conceptually, this has two benefits for China&amp;mdash;the first being that it helps with alleviating some of the hit to competitiveness. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The second, and less obvious, benefit is that it could provide some upward pressure to imported prices&amp;mdash;which could potentially help push the economy away from deflation. However, this pressure is likely to be limited and controlled, given China is also in the process of trying to &lt;em&gt;internationalize&lt;/em&gt; the yuan&amp;mdash;and therefore does not desire big swings in currencies.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The bottom line&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The Year of the Snake is shaping up to be an interesting year for China. Market expectations are fairly subdued at this point, which presents some potential asymmetry&amp;mdash;especially if chatter around the potential for additional stimulus picks up again. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Ultimately, we expect that consumer behavior and the evolution of the U.S.-China trading environment will be the main forces that drive how 2025 unfolds. We will continue to keep you updated as the year progresses.&lt;/span&gt;&lt;/p&gt;Alexander Cousley<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12700<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{528390CC-24F0-4814-BA41-B2C981CE3E9B}https://russellinvestments.com/us/blog/active-equity-managers-tariffs<p><span style="line-height: 115%;">Drawing on our unique access to underlying managers, we assess how active equity managers are reacting to tariff announcements from the new U.S. administration. </span></p>Mon, 10 Feb 2025 13:43:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;U.S. import tariff policy remains highly fluid, with announcements of new levies against imports from Canada, Mexico, and China swiftly followed by delays in implementation. The U.S. is also expected to announce new tariffs on steel and aluminum soon.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Active equity managers are broadly taking a wait-and-see approach given the uncertainty around tariffs, and are not materially shifting portfolio positioning until more concrete details around policy emerge.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Managers are cognizant of potential risks to portfolios, identifying dominant Chinese component manufacturers, North American automotive supply chains, and smaller cap industrial cyclicals as market segments worth monitoring.&amp;nbsp;&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;h2&gt;&lt;strong style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Background&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;As &lt;a href=&quot;/us/blog/us-tariffs-potential-implications&quot;&gt;detailed recently&lt;/a&gt;&amp;nbsp;by our Senior Investment Strategist, BeiChen Lin, over the first weekend in February, U.S. President Donald Trump announced the imposition of an additional 25% tariff on Canadian and Mexican imports into the US and a further 10% tariff on Chinese imports. On the following Monday, it was announced in separate statements that the implementation of tariffs against both Canadian and Mexican imports &lt;a rel=&quot;noopener noreferrer&quot; href=&quot;https://www.linkedin.com/feed/update/urn:li:activity:7292306897909497856&quot; target=&quot;_blank&quot;&gt;would be delayed for a period of 30 days&lt;/a&gt;, while tariffs on Chinese imports would be maintained. In apparent retaliation, China announced its own set of targeted tariffs against U.S. imports and select technology companies.&amp;nbsp;In the latest development, the U.S. is also expected to announce 25% tariffs on steel and aluminum imports.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Why does this matter? Since the North American Free Trade Agreement (NAFTA) went into effect in 1994, the economies of the U.S., Canada, and Mexico have become ever more intertwined. Today, production facilities and supply chains are sprawled across borders and are reliant on the lack of tariffs and taxes between the countries to enable a highly optimized production and logistics effort. China joining the World Trade Organization (WTO) in 2001 wrought a similar, larger effect globally, with multinationals investing heavily in the country in subsequent years and now boasting supply chains highly dependent on continued unfettered access to Chinese production and assembly.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/banse_imports210.jpg&quot;&gt;&lt;img alt=&quot;U.S. imports&quot; src=&quot;/-/media/images/global/blogs/images/banse_imports210.jpg&quot; /&gt;&lt;/a&gt;&lt;br /&gt; Source: Capital Economics&lt;/span&gt;&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The chart above shows the share of U.S. imports across a range of industries broken down by origin. It can be readily observed that Canada, Mexico, China, and the EU (which has also been threatened with import tariffs) make up a significant&amp;mdash;often a majority&amp;mdash;share of U.S. imports across a wide portion of the economy. The introduction of tariffs, which are taxes, will increase costs across supply chains, leading to higher prices paid at each border-crossing step of the production and distribution processes. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;In the short-run, companies that are ill-prepared for increased tariffs could see significant input cost increases, potentially leading to shortages of finished goods, which will further exacerbate price rises to end consumers. In the longer-term, if higher tariff rates persist, companies could face stark investment choices regarding reorienting production toward higher-cost geographies, which would likely contribute to a &lt;em&gt;locking-in &lt;/em&gt;of the higher level of consumer prices.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Implications for manager positioning &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;At a high level, active equity managers are &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/february-2025-active-management-insights&quot;&gt;trying not to overreact&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; one way or another to what has been characterized by one manager as a &lt;em&gt;headline soup&lt;/em&gt; of competing and at times contradictory headlines, policies, and announcements. In our recent calls with managers, multiple portfolio managers were quick to note the measured, more industry-specific approach to tariffs sought by Treasury Secretary Scott Bessent, while also acknowledging the possibility of an across-the-board country-based approach sought by other personalities within (and outside) the administration.&amp;nbsp; &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;As &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/us-tariffs-potential-implications&quot;&gt;noted&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; by our strategists, the tariff situation is expected to remain fluid over the coming weeks, months, and potentially years. Managers for the most part are avoiding large shifts in their portfolio positioning until more concrete details around tariff policy and its likely duration take shape. That said, managers are highly cognizant of the potential risks associated with increased tariffs being levied against the major trading partners of the U.S. and have worked to inoculate portfolios against possible downside risks. While not an exhaustive list by any means, we detail a few of the risks identified by managers below and note how they have adjusted portfolios accordingly.&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Large cap growth managers&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; pointed to (at least) two major risks associated with China: 1) the country&amp;rsquo;s dominance of the global battery supply chain; and 2) a high degree of contract manufacturing for re-export, particularly within consumer electronics. EV-dependent automakers like Tesla could be at risk if battery components are subject to retaliatory tariffs. Likewise, large consumer electronics companies like Apple, whose iPhones are largely assembled in China, could see a hit to both demand and profitability. Consequently, managers have sought to trim holdings with large Chinese exposure.&lt;br /&gt; &lt;br /&gt; &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Large cap value managers&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; spoke to risks within the highly connected North American automotive supply chain, where components are regularly manufactured in Canada, shipped to Mexico for final assembly, and then sold onto end consumers within the U.S. Tariffs on Canadian and Mexican imports would stymie the free flow of components and lead to both higher end prices and reduced profitability for automakers. Companies reliant on facilitating trade, like railroads and truckers, would also be harmed by any slowdown in trade. As a result, managers reduced their exposure to the space during the fourth quarter.&lt;br /&gt; &lt;br /&gt; &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Small cap managers&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, while acknowledging the potentially more insulated nature of domestic production and demand across certain verticals, nonetheless expressed caution given the high degree of uncertainty around the timing, magnitude, and duration of any tariffs. While higher-cost domestic production could stand to benefit from the imposition of tariffs in certain industries, the uncertainty around their duration and ultimate purpose gives many companies pause. Smaller cap companies in general are reluctant to build out new capacity if a reversal in tariff policy could render that incremental capital investment unprofitable and potentially lead to a stranded asset base. Smaller cap managers have tended to add to cyclicals primarily expected to benefit from reduced regulation, such as financials, rather than more industrial cyclicals.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The bottom line&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The recent tariff policy of the U.S. remains highly fluid. Active equity managers, while conscious of the associated risks, are reluctant to materially shift portfolio positioning given the potential for dramatic policy shifts or even short-term reversals. At Russell Investments, we continue to think investors would benefit from staying disciplined and taking a long-term view. Over time, we believe skilled active managers can consistently add value above their benchmarks, particularly during times of elevated uncertainty where the dispersion of potential outcomes is wide. &lt;/span&gt;&lt;/p&gt;Chris Banse<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12699<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{814401CF-FAFB-408D-AE63-01F01AC69FA3}https://russellinvestments.com/us/blog/themes-q4-2024-earnings-mwir<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>U.S. Q4 earnings growth broadens beyond tech</span></li> <li><span>U.S. trade-policy uncertainty remains </span></li> <li><span>Bank of England announces 25-bps rate cut</span></li> </ul>Fri, 07 Feb 2025 05:10:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;U.S. Q4 earnings growth is broadening out beyond the tech sector&lt;/li&gt; &lt;li&gt;Uncertainty remains around U.S. trade policy&lt;/li&gt; &lt;li&gt;The Bank of England announced a 25-bps rate cut&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Senior Director and Chief Investment Strategist for North America, Paul Eitelman, discussed the main themes from U.S. fourth-quarter earnings season. He also provided an update on U.S. trade policy and recent announcements from global central banks.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Is U.S. earnings growth broadening out to other sectors?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Eitelman began with a look at how U.S. fourth-quarter earnings season is shaping up now that over half of S&amp;amp;P 500 companies have reported results. &amp;ldquo;So far, it&amp;rsquo;s been a &lt;a href=&quot;/us/blog/us-core-inflation-slows-mwir&quot;&gt;season of strength&lt;/a&gt;, with a continued robust performance from the corporate sector,&amp;rdquo; he said. Of arguably even more importance is the fact that earnings growth is starting to broaden out beyond mega cap technology companies, Eitelman added. As evidence, he noted that both the Russell 2000 Index of small cap stocks and the so-called S&amp;amp;P 493&amp;mdash;which excludes the Magnificent Seven group of tech stocks&amp;mdash;have transitioned back to positive earnings growth for the fourth quarter.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Eitelman said that if earnings growth remains resilient and continues to expand to other sectors, this could support a broadening out in equity-market performance over the course of 2025. &amp;ldquo;This will be a key watchpoint for investors to pay attention to next quarter,&amp;rdquo; he remarked. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;U.S. implements tariffs on China, pauses plan to tax Canadian and Mexican imports &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Shifting to U.S. trade policy, Eitelman noted that the first few days of February were marked by uncertainty in markets due to the &lt;a href=&quot;/us/blog/us-tariffs-potential-implications&quot;&gt;Trump administration&amp;rsquo;s proposal to implement tariffs&lt;/a&gt;&amp;nbsp;on the country&amp;rsquo;s three largest trading partners&amp;mdash;Canada, Mexico, and China. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Markets traded higher on Feb. 3 after U.S. President Donald Trump announced a 30-day delay in imposing tariffs on Canada and Mexico in order for negotiations to continue, Eitelman said. The U.S. did proceed with imposing a 10% tariff on Chinese imports the next day, he added. However, Eitelman said he expects these tariffs to only have very modest effects on U.S. growth and inflation moving forward.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He noted that a level of uncertainty remains around U.S. trade policy, as it&amp;rsquo;s unclear if the U.S. will implement tariffs on Mexico and Canada after the 30-day pause ends. In addition, it&amp;rsquo;s also possible that the new U.S. administration could pursue tariffs against the European Union, Eitelman said. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;Ultimately, I expect this theme of trade-policy uncertainty to continue to linger moving forward, both for investors and for the U.S. corporate sector,&amp;rdquo; he remarked. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Rate-cutting cycle continues for key central banks&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Eitelman finished with a review of the latest rate decisions from global central banks. He noted that on Feb. 6, the &lt;a href=&quot;/us/blog/boe-rate-cut-easy-decision&quot;&gt;Bank of England (BoE)&lt;/a&gt;&amp;nbsp;became the latest developed-market central bank to announce a 25-basis-point (bps) rate cut, joining the &lt;a href=&quot;/us/blog/europe-canada-us-rates-mwir&quot;&gt;European Central Bank and the Bank of Canada&lt;/a&gt;, which each slashed rates by a quarter-percentage-point last week. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;The BoE&amp;rsquo;s decision is reflective of the broader rate-cutting trend that is still continuing in most developed markets,&amp;rdquo; Eitelman stated, noting that some central banks are moving at different paces. This includes the U.S. Federal Reserve (Fed), he said, which opted to skip a rate cut at its January meeting after lowering rates by a cumulative 100 bps in the final months of 2024. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Eitelman explained that the Fed is &lt;a href=&quot;/us/blog/takeaways-trump-administration-start-mwir&quot;&gt;easing at a slower rate&lt;/a&gt;&amp;nbsp;due to the strength of the U.S. business cycle, while the ECB is lowering rates somewhat faster due to a weaker economy. The Bank of England, meanwhile, is confronting both an uptick in inflation and a weakening jobs market, he said. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 16px;&quot;&gt; Because of this, Eitelman expects the BoE to continue cutting rates&amp;mdash;potentially even a little more than current market pricing suggests. &amp;ldquo;On the back of this view, we do see some good value in UK government bonds,&amp;rdquo; he concluded.&amp;nbsp;&lt;/span&gt;&lt;span&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/u_qwD0Dzo9w&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/16582739&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt;Paul Eitelman<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p><p> CORP-12695</p> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{F251A633-04E1-40F8-BB09-993260397A9D}https://russellinvestments.com/us/blog/universities-higher-returns-private-markets<p><span style="line-height: 115%;">As funding declines, many smaller colleges will likely need higher returns from their endowments. Can an increased allocation to private markets help?</span></p>Thu, 06 Feb 2025 13:43:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Enrollment is projected to continue decreasing at many small universities, leading to a decline in funding. To offset this loss, many smaller colleges will likely need to seek higher returns from their endowments.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;We believe one way to achieve this is by increasing the allocation to private markets. We think endowments should consider increasing their exposure to private equity, private credit, private real estate, and hedge funds. Doing this allows for greater diversification, enabling smaller universities to enhance their returns in a meaningful way while being mindful of risk.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;By working with a skilled investment solutions provider, endowments can ensure that they maintain a tolerable level of risk and that these diversified private market strategies, which are often complex, are implemented efficiently.&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;With enrollment on the decline at many small universities, some are considering aiming for higher returns from their endowments as they prepare for the so-called &lt;/span&gt;&lt;em style=&quot;letter-spacing: -0.035em;&quot;&gt;enrollment cliff&lt;/em&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;. The enrollment cliff is the expectation that due to demographic trends, the annual number of students that graduate from high school will decline by 13%&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;1&lt;/span&gt;&lt;/sup&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&amp;nbsp;by 2041.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Simply put, fewer high school graduates means fewer college enrollees. This is on top of a 15% decline in enrollment that already happened between 2010 and 2021.&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;2&lt;/span&gt;&lt;/sup&gt; Falling enrollment means fewer tuition dollars to fund operating budgets. And that&amp;rsquo;s a problem, because universities with smaller endowments have historically funded a smaller proportion of their operating budget from their endowment than those with large endowments.&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;3&lt;/span&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;&amp;nbsp;&lt;/span&gt;&lt;/sup&gt;&lt;span style=&quot;font-size: 16px;&quot;&gt;The issue is clearly top-of-mind for many universities, as shown in the 2024 NACUBO-Commonfund Study of Endowments, where student enrollment was ranked as the number-one concern among a host of issues. This overall result was driven by smaller endowments ranking it as a top concern, while it seems like less of a concern for those with large endowments.&lt;/span&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;&lt;/span&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;So, what can small colleges do? Along with looking to increase their spending rate to allow greater contributions to the operating budget, they might also decide to enhance scholarships and financial-aid packages to attract more students. The NACUBO survey indicates many are weighing this option, with the topic of increases in student aid ranking as the third-highest concern among universities (and second among private institutions).&amp;nbsp;Doing this, however, would further drive up the required spending rate from the endowment. Because we do not expect endowments to give up on one of their key objectives&amp;mdash; maintaining purchasing power in perpetuity&amp;mdash;this would likely result in a need for overall higher returns. Is there a way to achieve this while maintaining a tolerable level of risk?&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Private markets to the rescue? &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Data from the NACUBO (National Association of College and University Business Officers) shows that the typical smaller endowment generates most of its returns from public equities, with a bias to U.S. equities. Portfolios with high allocations to public U.S. equities have done extremely well over the past few years. However, as they&amp;rsquo;re re-positioned for higher growth going forward, we think it would be a good idea to take advantage of the growth opportunities in private markets by increasing exposure to private investments.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;What might such an allocation look like? We see private equity as playing a key role, but also believe that allocations to private credit, private real assets, and hedge funds make sense in order to achieve greater diversification. Diversifying the sources of return and gaining access to illiquidity premia can allow smaller universities to enhance their returns in a meaningful way, while being mindful of the risk they take. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The below exhibit demonstrates this by showing: &lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The expected return and volatility for the average allocations of the three smallest NACUBO endowment categories (green, light blue, and dark blue squares)&lt;/span&gt;&lt;/li&gt; &lt;li&gt;What happens if these endowments try to increase returns&amp;mdash;while maintaining their current composition of assets&amp;mdash;by merely reducing their proportional allocation to investment grade fixed income and cash (green, light blue, and dark blue circles), and reallocating that to their existing growth assets (public and private equity, real assets, hedge funds, and private credit)&lt;/li&gt; &lt;li&gt;A sample portfolio with a higher allocation to growth assets vs. the three NACUBO universe subsets is represented by the orange diamond. This &amp;ldquo;enhanced&amp;rdquo; return portfolio is comprised of 47% public equities, 20% private equity, 1% public real assets, 4% private real assets, 8% private credit, 10% hedge funds, and 10% investment grade fixed income&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;&lt;em&gt;Exhibit #1&lt;br /&gt; &lt;br /&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/latofeb6_3.jpg&quot;&gt;&lt;img alt=&quot;Endowment volatility&quot; src=&quot;/-/media/images/global/blogs/images/latofeb6_3.jpg&quot; /&gt;&lt;/a&gt;&lt;/em&gt;&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;div&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The analysis demonstrates that without reconsidering the composition of the portfolio, any increase in expected returns will likely be accompanied by an increase in volatility, which may not be tolerable as the need to rely on the endowment for annual spending increases. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The value of working with a skilled investment solutions partner&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;As smaller endowments target higher returns, we believe that rethinking the asset allocation and including higher allocations to private investments and hedge funds will be essential to ensuring that the portfolio risk remains tolerable. From our vantage point, working with a skilled investment solutions partner that has the right systems to measure the risk and illiquidity of the potential changes is crucial. Importantly, the answer won&amp;rsquo;t be exactly the same for every endowment. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;It&#39;s also important to understand that for these universities, updating their portfolio&amp;rsquo;s asset allocation to target improved returns and diversification is only one step. This is because as a portfolio expands more broadly beyond traditional asset classes, ensuring robust implementation becomes increasingly important. Why? Because there is a &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/fof-private-markets-approach&quot;&gt;wider distribution of returns across managers in alternative investments&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; than in traditional asset classes. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;It&#39;s also important to note that larger endowments have relatively consistently outperformed smaller endowments within private equity.&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;4&lt;/span&gt;&lt;/sup&gt; This shows that it typically isn&amp;rsquo;t enough for smaller universities to just increase their allocation to private investments in order to boost returns. These organizations also need to work with partners that can identify and access top-quartile managers. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Private investments also create additional cashflow needs in managing capital calls and distributions. Endowments that don&amp;rsquo;t have large internal teams will need to ensure that they have partners to efficiently manage those capital calls and distributions on their behalf. From our vantage point, managing this internally without sufficient resources typically leads to a bias to hold excess cash to reduce cashflow risk. This, in turn, can create a drag on total portfolio returns and undo the other changes that have been made to bolster returns. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The bottom line&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Universities preparing for declining enrollment face many challenges ahead. Enhancing portfolio returns to allow for greater spending from the endowment is one important piece to solving the funding puzzle. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;For endowments that have historically held more traditional portfolios, we think it&amp;rsquo;s essential to work with a partner that has deep knowledge of the impacts on risk and illiquidity of different asset allocation changes. In addition, we believe it&amp;rsquo;s table-stakes to work with a partner that not only has access to high-quality managers but is also able to efficiently implement these more diversified and complex strategies.&lt;/span&gt;&lt;/p&gt; &lt;hr align=&quot;left&quot; size=&quot;1&quot; width=&quot;33%&quot; /&gt; &lt;div id=&quot;ftn1&quot;&gt; &lt;/div&gt; &lt;/div&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;sup&gt;1&lt;/sup&gt; Based on a report from the Western Interstate Commission for Higher Education.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;sup&gt;2&lt;/sup&gt; Based on data from the National Center for Education Statistics.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;sup&gt;3&lt;/sup&gt; Based on the 2023 Nacubo Commonfund Study of Endowments.&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.56px; font-size: 13px;&quot;&gt;&lt;sup&gt;4&lt;/sup&gt; Based on the annual NACUBO surveys from 2012-2023 there was only one year in which any of the three smallest endowment categories outperformed either of the two largest endowment categories for annual returns within private equity.&lt;/span&gt;&lt;/p&gt;Mary Beth Lato<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12698<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{8B8E0145-8FF6-4CD0-AA65-F1B4E9BCA20D}https://russellinvestments.com/us/blog/boe-rate-cut-easy-decisionCan the Bank of England balance inflation control with economic recovery as future rate decisions become more complex?Thu, 06 Feb 2025 00:00:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;The Bank of England (BoE) cut its key interest rate from 4.75% to 4.50% in a 7-2 decision. The decision was unanimously expected by economists and traders, but Catherine Mann&amp;rsquo;s joining the dovish camp was a shock.&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;Greater challenges await in future meetings when the BoE will be balancing the need to support an ailing economy without reigniting inflationary pressures.&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;We think that the BoE could reduce rates more this year than the additional 65 basis points currently priced in money markets.&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;Higher gilt yields are a challenge for the government but may be used by some pension funds to lower their risk by narrowing the range of possible funding ratio outcomes.&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;Today, the BoE&amp;rsquo;s Monetary Policy Committee (MPC) lowered the bank rate from 4.75% to 4.50%. The decision was not a surprise&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;1&lt;/span&gt;&lt;/sup&gt;, but the vote was.&amp;nbsp;&lt;/p&gt; &lt;p&gt;A majority of 7 to 2 committee members opted for the 25 basis point move. The two dissenting members, Swati Dhingra and Catherine Mann, preferred a 50 basis point cut.&amp;nbsp;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Economists polled by Reuters had expected an 8 to 1 vote.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The switch of Catherine Mann to the dovish camp was a shock since she long had been considered the most hawkish MPC member. At the previous meeting in December, the MPC had voted 6 to 3 to hold rates steady, with Mann among those voting to keep rates unchanged.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;After the vote shock, traders were anxiously waiting for the press conference and the forward guidance given by Governor Andrew Bailey. The MPC is sticking to a gradual approach in its rate policy, given the two-sided risks to inflation. The committee is choosing flexibility over pre-commitment, relying on incoming data to assess whether sticky inflation or flagging growth is the greater risk.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;strong&gt;&lt;/strong&gt;&lt;/span&gt;&lt;strong&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Inflation outlook is clouded by regulated prices and tax changes&lt;/span&gt;&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Several regulated price adjustments and tax changes kick in over the coming months, affecting households and businesses and clouding the inflation outlook for the BoE. The energy price cap, which sets the maximum gas and electricity rates that utilities can charge consumers, is projected to rise by 3% to 6% from April 2025, bringing the average annual bill for a typical household to between &amp;pound;1,796 and &amp;pound;1,848&lt;sup&gt;&lt;span style=&quot;font-size: 10px;&quot;&gt;2&lt;/span&gt;&lt;/sup&gt;.&lt;/span&gt;&lt;/p&gt; &lt;p&gt; For businesses, the cost of labor will also rise from April 2025, due to an increase in the national living wage (NLW) from &amp;pound;11.44 to &amp;pound;12.21 per hour. Additionally, national insurance contributions (NIC) paid by employers are set to rise by 1.2 percentage points.&amp;nbsp;&lt;/p&gt; &lt;p&gt;The 6.7% hike in the NLW is a welcome boost to the earnings of low-income workers, but together with the NIC increase, could impart a near-term inflationary impulse if businesses try to pass on their higher input costs to consumer prices. Over time, NLW and NIC increases will likely dampen companies&amp;rsquo; demand for labor, reducing employment and wage growth.&amp;nbsp;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Making rate policy for &amp;ldquo;stagflation nation&amp;rdquo;&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;Like in other countries, GDP in the UK slumped during the Covid pandemic of 2020. While GDP reclaimed its pre-pandemic level swiftly in 2021, as we see in the chart below, UK growth has largely flatlined since 2022.&amp;nbsp; Sluggish business investment and the drag from international trade are the main culprits. Britain faced structural headwinds that other nations did not have to contend with; for example, the trade disruptions from Brexit, which added to the Covid and energy price shocks following Russia&amp;rsquo;s invasion of Ukraine. Despite stagnating growth, the BoE embarked on an aggressive hiking cycle in 2021-23 to contain surging inflation.&amp;nbsp;&lt;/p&gt; &lt;div&gt;&amp;nbsp;&lt;strong&gt;&lt;span style=&quot;font-size: 18px;&quot;&gt;UK cumulative GDP growth since 2020&lt;/span&gt;&lt;/strong&gt;&lt;img alt=&quot;&quot; src=&quot;/-/media/images/emea/uk-distributions-to-gdp.png&quot; /&gt;&lt;/div&gt; &lt;div&gt;&amp;nbsp;&lt;/div&gt; &lt;p&gt;Making policy in a &amp;ldquo;stagflation&amp;rdquo; environment with high inflation and lackluster growth is a formidable challenge. Unlike the Federal Reserve, which can take its time with rate cuts given a resilient U.S. economy, or the European Central Bank, which is slated to plough ahead with its easing cycle amid falling inflation and growth weakness, the BoE is on difficult middle ground. Tax hikes and rises in administered prices will at least temporarily increase price pressures. The balance between the inflationary impulse and a slackening jobs market will determine the pace of further rate cuts in 2025.&amp;nbsp;&lt;/p&gt; &lt;p&gt;A taste of stagflation came through in the BoE&amp;rsquo;s revised economic projections relative to the November monetary policy report. Significant upward revisions to the unemployment rate across the forecast horizon combined with a near-term pick-up in inflation make for a discouraging backdrop, but we expect that disinflationary pressures will dominate toward the end of the 3-year forecast period. We think that the BoE could reduce rates more this year than the additional 65 basis points currently priced in money markets.&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;&lt;strong&gt;Market reaction&lt;/strong&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;With the vote showing an unexpected dovish shift in the MPC, the gilt curve steepened. Immediately after the decision, 2-year yields dropped by 7 basis points and 10-year yields fell by 4 basis points but have since rebounded. In foreign exchange markets, the pound sterling (GBP) slumped by around 1% vis-&amp;agrave;-vis the U.S. dollar.&lt;/p&gt; &lt;p&gt;Stepping back from today&amp;rsquo;s price action, long-term interest rates in the UK have risen sharply along with global bond yields since the U.S. election in November 2024 (see chart below). In mid-January, nominal 20-year gilt yields rose above 5.4%, a 27-year high. Real 20-year gilt yields derived from inflation-linked bonds briefly touched 2%, a level not seen for the last 20 years and exceeding the spike during 2022 mini-budget crisis. Our own valuation models show that UK government bonds are attractively valued, and UK yields have room to fall. As we wrote in a&lt;a href=&quot;/us/blog/rising-gilt-yields-uk&quot;&gt; previous article&lt;/a&gt;, higher gilt yields are a challenge for the government, but may be used by some pension funds to lower their risk by narrowing the range of possible funding ratio outcomes.&lt;/p&gt; &lt;p&gt;&lt;img alt=&quot;&quot; src=&quot;/-/media/images/emea/nominal-and-real-20year-gilt-yields.png&quot; /&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;The bottom line&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;The BoE cut its key interest rate from 4.75% to 4.50% today in a 7-2 decision. The decision was unanimously expected by economists and traders, but Catherine Mann&amp;rsquo;s joining of the dovish camp was a shock. Greater challenges await in future meetings when the BoE will be balancing the need to support an ailing economy without reigniting inflationary pressures. Increases in taxes and regulated prices in the spring will make it difficult to separate signal from noise.&amp;nbsp;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;If rate cuts prove too shallow or too slow, economic stagnation could persist. However, the bank is still wary of undoing its hard-won credibility in fighting inflation if it lowers rates too quickly.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;Today&amp;rsquo;s decision was easy, future meetings will be a lot trickier. Catherine Mann&amp;rsquo;s transformation from hawk to dove today was a precursor of that.&lt;/p&gt; &lt;hr align=&quot;left&quot; size=&quot;1&quot; width=&quot;33%&quot; /&gt; &lt;div id=&quot;edn1&quot;&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;sup&gt;1&lt;/sup&gt; All 65 economists surveyed by Reuters had predicted the cut and money market traders had been almost 100% confident of the move&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;sup&gt;2&lt;/sup&gt;&amp;nbsp;&amp;nbsp;https://www.moneysavingexpert.com/utilities/energy-price-cap-prediction/&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;/div&gt;Van Luu<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12696<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{3A1A221A-1F30-42AB-92BD-AE7E83025030}https://russellinvestments.com/us/blog/concentrated-stock-positionsHolding a highly concentrated stock portfolio is a lot like placing all your chips on a single square in roulette. You can win big, but you can also lose big. We show you a better way.Thu, 06 Feb 2025 00:00:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Many investors believe that holding &lt;em&gt;the next big thing &lt;/em&gt;is the route to outsized gains in the stock market &lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;But the risks may be high, and knowing when to divest is key as market leadership does tend to change&amp;mdash;sometimes suddenly&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Help your clients avoid&amp;nbsp;&lt;em&gt;single-stock risk&lt;/em&gt; through diversification.&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;The recent &lt;a href=&quot;/404 error page?item=web%3a%7b5A2925F9-EA62-43F1-98CB-849991E4F8F3%7d%40en&quot;&gt;dominance of the Magnificent 7 technology names&lt;/a&gt; may help fuel the common belief that a single stock portfolio is the best way to deliver extraordinary returns. But looking back over a longer-term horizon, a &lt;a href=&quot;/us/blog/concentrated-stock-portfolio&quot;&gt;concentrated stock portfolio&lt;/a&gt; has often led to greater volatility and potential losses. While holding a big chunk of a portfolio in one specific name can offer the potential for outsized gains, it can also expose investors to significant risks.&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Active investing vs. overconcentration&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;a href=&quot;/us/blog/concentrated-stock-portfolio&quot;&gt;A concentrated stock position&lt;/a&gt; is generally defined as holding more than 10% of a portfolio in a single stock. Having a large position in a single stock might seem a good way to achieve benchmark-beating returns, but is it the best approach to active investing? At its core, active investing intentionally deviates from an index with the goal of outperforming it. This approach involves deliberate positioning decisions, ongoing portfolio monitoring, and adjusting strategies based on market conditions and expectations of what areas of the market might perform well in the future. By contrast, many people with concentrated stock positions arrive there passively: through an inheritance, employee stock options or stock purchase plans, or simply because the stock&amp;rsquo;s value grew significantly over time.&lt;/p&gt; &lt;p&gt;Professional active investors, such as fund managers, may bet heavily on specific stocks or sectors, but still attempt to diversify across other investments and actively manage risk. In contrast, an individual investor with a concentrated stock position often relies on hope that the individual name will continue to be a winner. There can be an emotional element as well: if the stock was inherited or is related to the company where they are a long-time employee, or was purchased many years prior, the investor may be reluctant to divest. This increases &lt;em&gt;single-stock risk&lt;/em&gt;, meaning that investor&amp;rsquo;s financial future becomes tied to the performance of just one company.&lt;/p&gt; &lt;p&gt;The dangers of over-concentration are well-documented, and there could be additional industry-specific risk if the stock is related to the investor&amp;rsquo;s employment. In a worst-case scenario an employee could lose their income stream at the same time as the stock they received as part of their compensation is dropping in the market. Intel is a recent example with mass layoffs occurring while the stock price dropped. Enron employees experienced something similar in the early 2000s, losing both their jobs and life savings because they held significant portions of their portfolios in company stock.&lt;/p&gt; &lt;p&gt;During the dot-com bubble at the turn of the century, many tech stocks that seemed unstoppable ultimately collapsed. &lt;a href=&quot;/404 error page?item=web%3a%7b445BA865-5ADB-4300-89CB-63D2DAC93334%7d%40en&quot;&gt;The Magnificent 7 are not immune&lt;/a&gt; either. The chart below shows that the drawdown for these companies can be significant, and the climb back can take a while. For example, Tesla (TSLA) experienced its peak value on Nov. 5, 2021. Following this, the stock declined by 68%, reaching its lowest point on Jan. 3, 2023. This marked Tesla&#39;s maximum drawdown over the five-year period, representing the greatest loss for investors during this time. But then it experienced a dramatic rally, regaining all of its lost value by Dec. 11, 2024. Other companies, such as Intel (INTC), are still recovering from their maximum drawdown of the past five years.&lt;/p&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/chart-1-concentrated-stock-portfolio.webp&quot;&gt;&lt;img alt=&quot;he number of periods of the trough to peak incline during a specific period of an investment or fund&quot; src=&quot;/-/media/images/global/blogs/images/chart-1-concentrated-stock-portfolio.webp&quot; /&gt;&lt;/a&gt;&lt;br /&gt; &lt;p class=&quot;deci&quot;&gt;&lt;em&gt;Source: Morningstar, Russell Investments. Any stock commentary is for illustrative purposes only and not a recommendation to purchase or sell any security. Max Drawdown definition (Morningstar): The peak to trough decline during a specific record period of an investment or fund. It is usually quoted as the percentage between the peak to the trough. Months to Recovery (Morningstar): The number of periods of the trough to peak incline during a specific period of an investment or fund.&lt;/em&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;Even for stock market &lt;em&gt;darlings&lt;/em&gt;, there can be challenging periods and a long road to recovery.&lt;/strong&gt; Most recently, semiconductor designer Nvidia (NVDA), which has been riding a wave of enthusiasm over artificial intelligence (AI) recorded the biggest single-day loss of value for any public company in history on news of &lt;a href=&quot;/404 error page?item=web%3a%7b7B95D000-53A9-416A-9E8D-E196965BFCD3%7d%40en&quot;&gt;potential Chinese competition&lt;/a&gt;. While it has recovered slightly since then, Nvidia stock is still around 20% lower than it was at the start of 2025. This recent downturn is another example of the magnitude of swings that can be experienced in a relatively short time and can take a while to recover from. The lesson is clear: no company is immune to challenges, and &lt;a href=&quot;/us/blog/diversification-a-potential-cure-for-emotional-investor-behavior&quot;&gt;diversification remains essential to protecting long-term financial health&lt;/a&gt;. Investors can hope to regain the loss in a single stock&amp;mdash;with the caveat that it could take some time, or may never happen. Or they can diversify to minimize the chance of those losses in the first place.&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Diversification and changing trends&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;One thing to always remember: stocks can achieve theoretically unlimited upside but have a maximum downside of -100%. Owning a diversified portfolio allows an investor to benefit from the potentially unlimited upside of multiple securities, while reducing the likelihood of extreme losses due to the poor performance of just a single company.&lt;/p&gt; &lt;p&gt;While a concentrated position may produce dramatic highs and lows, a diversified portfolio allows participation in broader market upswings while providing the likelihood of a much smoother ride along the way. Even though we know &lt;a href=&quot;/404 error page?item=web%3a%7bFA24286C-9B5D-4A55-8160-7B3F7AF28FCD%7d%40en&quot;&gt;diversification is key&lt;/a&gt;, it&amp;rsquo;s tempting to look at stocks like Nvidia and wish we had put all our eggs in that basket. Even after its recent rout, its price is still more than 750% ahead of where it was at the end of 2022.&lt;/p&gt; &lt;p&gt;Many investors secretly hope to find the next big winner. They may look at the superstars in the market and decide to jump on for the ride. This is known as herd behavior. Well, let&amp;rsquo;s look at the risks that strategy can hold.&lt;/p&gt; &lt;p&gt;Should an investor pick &lt;a href=&quot;/404 error page?item=web%3a%7bF71519CA-E0C3-4696-A97D-A7FD65673958%7d%40en&quot;&gt;the current winners and hope they continue upwards&lt;/a&gt;? The two graphs below, one backward-looking (choosing today&amp;rsquo;s best stocks five years ago), and one forward-looking (choosing the best stocks from five years ago, five years ago) show why today&amp;rsquo;s winners may not provide the most certain returns in the future.&lt;/p&gt; &lt;p&gt;Looking at the top 25 stocks in the S&amp;amp;P 500 as of Dec. 31, 2024, it&amp;rsquo;s easy to imagine getting rich with a few strategic bets. U.S. market returns have indeed been driven by a small number of securities over the last five years, and 18 of the top 25 holdings currently in the S&amp;amp;P 500 outperformed the index over this period, as shown in the chart below:&lt;/p&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/chart-2-concentrated-stock-portfolio.webp&quot;&gt;&lt;img alt=&quot;Growth of 100 dollar 5 years investment in the 25 highest-weighted stocks on 12/31/2019&quot; src=&quot;/-/media/images/global/blogs/images/chart-2-concentrated-stock-portfolio.webp&quot; /&gt;&lt;/a&gt;&lt;br /&gt; &lt;p class=&quot;deci&quot;&gt;&lt;em&gt;Source: Morningstar, Russell Investments. As of December 31, 2024. Indexes are unmanaged and cannot be invested in directly. Past performance is not indicative of future results. NVDA=Nvidia, TSLA=Tesla, JNJ=Johnson &amp;amp; Johnson. Any stock commentary is for illustrative purposes only and not a recommendation to purchase or sell any security.&lt;/em&gt;&lt;/p&gt; &lt;p&gt;The reason these 25 names dominate the index today is precisely because they have performed so well over the past five years. But as we all know: past performance is no guarantee of future performance. So what are the chances they will continue on the same trajectory?&lt;/p&gt; &lt;p&gt;If we step back and put ourselves in the shoes of an investor from five years ago, the picture changes. Of the top 25 stocks in the S&amp;amp;P 500 as of Dec. 31, 2019, less than half&amp;mdash;only nine&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;&amp;mdash;&lt;/span&gt;outperformed the index over the following five years, as shown in the graph below. While holding Apple (AAPL) may have made you a winner, owning Pfizer (PFE), Disney (DIS), or Intel (INTC) could have resulted in a negative five-year return and lost you money during a period when the index as a whole nearly doubled, delivering a cumulative return of 97%.&lt;/p&gt; &lt;p&gt;Notably, Tesla and Nvidia were not yet among the top 25 holdings of the S&amp;amp;P 500 at the end of December 2019. Clearly, &lt;a href=&quot;/404 error page?item=web%3a%7b77F89146-04A3-4D0E-AABA-257B9E4B21B1%7d%40en&quot;&gt;market leadership can change dramatically&lt;/a&gt;.&lt;/p&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/chart-3-concentrated-stock-portfolio.webp&quot;&gt;&lt;img alt=&quot;Growth of 100 dollar 5 years investment in the 25 highest-weighted stocks on 12/31/2019&quot; src=&quot;/-/media/images/global/blogs/images/chart-3-concentrated-stock-portfolio.webp&quot; /&gt;&lt;/a&gt;&lt;br /&gt; &lt;p class=&quot;deci&quot;&gt;&lt;em&gt;Source: Morningstar, Russell Investments. As of December 31, 2024. Indexes are unmanaged and cannot be invested in directly. Past performance is not indicative of future results. AAPL=Apple, INTC=Intel. Any stock commentary is for illustrative purposes only and not a recommendation to purchase or sell any security.&lt;/em&gt;&lt;/p&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;The bottom line&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;The best way for an investor to experience investment growth that helps them meet their financial goals would be to maintain a diversified portfolio over a relatively long time horizon. While a certain level of concentration can be acceptable for those seeking to actively outperform a benchmark, this approach requires a holistic view of the portfolio, factoring in risk tolerance, the ability to hold concentrated positions for an extended period, and a clear strategy for divesting when necessary. Overweighting and underweighting securities is fundamental to outperforming a benchmark, but the risk of holding just one or a few single stocks at extreme concentration levels can be high.&lt;/p&gt;Jenna Snittjer<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p> <p>This material is not an offer, solicitation or recommendation to purchase any security.</p> <p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p> <p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p> <p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p> <p>The information, analysis and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual entity.</p> <p>Russell Investments' ownership is composed of a majority stake held by funds managed by TA Associates Management L.P., with a significant minority stake held by funds managed by Reverence Capital Partners L.P.. Certain of Russell Investments' employees and Hamilton Lane Advisors, LLC also hold minority, non-controlling, ownership stakes.</p> <p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the “FTSE RUSSELL” brand.</p> <p>The Russell logo is a trademark and service mark of Russell Investments.</p> <p>Copyright © 2025 Russell Investments Group, LLC. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an “as is” basis without warranty.</p> <p><strong>Russell Investments Financial Services, LLC, member FINRA (www.finra.org), part of Russell Investments.</strong></p> <p>RIFIS-26420</p><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{9966A66A-0754-4B5D-A55D-77FF5BF2851A}https://russellinvestments.com/us/blog/rate-environment-webinar-2025Learn the highlights from our recent discussion on rates, correlations, and currencies, and discover some actionable strategies we've seen investors take to hedge against rates and credit spreads while also capturing opportunities.Wed, 05 Feb 2025 13:43:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;2024 was a tough year for fixed income, with bond yields rising due to inflation normalization and fiscal policy concerns. We expect the Fed to gradually cut rates in 2025. Meanwhile, we believe global bond markets are presenting new opportunities, particularly in the UK.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Investors are increasing hedge ratios and duration exposure as rates normalize. The U.S. dollar remains strong but could weaken, while the Japanese yen appears undervalued. Credit spreads are tight, leading investors to explore securitized assets and credit derivatives for potentially better returns.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Bonds remain a key diversifier, despite their recent challenges. Trend-following strategies can also be utilized as an alternative diversifier to bonds.&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;On Jan. 28, Russell Investments hosted a webinar on the outlook for interest rates, foreign exchange (FX), and credit markets in 2025. The discussion featured insights from three Russell Investments experts: Paul Eitelman, chief investment strategist for North America; Van Luu, director and global head of solutions strategy for fixed income and foreign exchange markets; and Thomas Boyd, portfolio manager for customized portfolio solutions.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Below is a summary of their conversation.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;2024: A rough year for fixed income&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Luu began by noting that 2024 was a year of inflation normalization following the shock caused by the COVID-19 pandemic. The resilience of the U.S. economy last year allowed the U.S. Federal Reserve (Fed) to begin a rate-cutting cycle in September, he said. Despite this, U.S. Treasuries remained in a bear market during the year, with long-term yields rising significantly due to election outcomes and fiscal policy concerns, Luu said. On the positive side, he noted that credit benefited from robust growth, with credit spreads tightening to new cycle lows.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&amp;ldquo;Overall, 2024 was a painful year for bonds, especially U.S. Treasuries, as markets adjusted to the end of low interest rates and the onset of quantitative easing. Looking forward, I think much of what happens this year depends on what the Fed does,&amp;rdquo; he stated.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Fed policy and the bond market outlook&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Next, Eitelman provided insights into the Fed&amp;rsquo;s potential future path for rates. Although some market participants are speculating that the U.S. central bank could halt rate cuts or even revert back to rate hikes at some point this year, he stressed that he still expects the Fed to &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/europe-canada-us-rates-mwir&quot;&gt;gradually cut through 2025&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;. &amp;ldquo;I think the Fed will lower rates two to three times this year, and I anticipate a &lt;em&gt;new normal&lt;/em&gt; target rate of around 3.25% over the next one to two years,&amp;rdquo; he stated.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Eitelman noted that &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/health-check-global-economy-mwir&quot;&gt;even though the U.S. economy remains strong&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, inflation is gradually declining. &amp;ldquo;Continued cooling in the labor market and stable inflation expectations suggest a path for inflation to return to 2%,&amp;rdquo; he said. However, Eitelman stressed that uncertainty remains regarding &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/investor-watchpoints-trump-administration&quot;&gt;fiscal policies under the new administration of U.S. President Donald Trump&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, which could lead to potential market volatility.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;From a strategic positioning perspective, he explained that Russell Investments has been adjusting portfolios based on market overshoots. Last August and September, when bond yields were falling due to recession fears, the firm reduced duration risk, Eitelman said. More recently, &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/yield-spike&quot;&gt;with rates rising&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, he said that bonds are again looking attractive. &amp;ldquo;This could particularly be the case if the U.S. 10-year Treasury yield moves to around 4.8%-4.9%,&amp;rdquo; Eitelman remarked. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Global sovereign bond markets&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Luu noted that global bonds are becoming more attractive following the recent selloff. In the UK, he said that &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/us/blog/rising-gilt-yields-uk&quot;&gt;gilt yields have reached a 27-year high&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, making them particularly compelling given the country&amp;rsquo;s weaker economy. Conversely, he said that Japanese bonds appear less attractive due to the Bank of Japan&amp;rsquo;s unique monetary policy stance of raising rates while other central banks are cutting.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Institutional strategies in fixed income hedging&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Next, Boyd discussed how institutional investors are positioning themselves in rates markets. Clients are increasingly considering whether to introduce fixed income beta into liquidity pools, he said. Previously, cash reserves earned attractive money-market yields with an inverted yield curve, making longer-duration investments less appealing, Boyd explained. However, with rates normalizing, there is renewed interest in duration exposure, he said.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&amp;ldquo;Today, some institutional investors are actively extending duration or increasing their hedge ratios to lock in attractive yields. Pensions with improved funding status due to rising rates are also exploring de-risking strategies by increasing their duration exposure,&amp;rdquo; Boyd stated.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Foreign exchange market trends&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Pivoting to currencies, Luu noted the &lt;/span&gt;&lt;a href=&quot;https://russellinvestments.com/us/blog/qtr-q4-2024&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;U.S. dollar&amp;rsquo;s recent strength&lt;/span&gt;&lt;/a&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, which he said has been largely been driven by U.S. economic exceptionalism, technology leadership, and the potential for tariffs. However, with positioning becoming stretched and valuations extended, a reversal in dollar strength is possible, Luu stated.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;One standout opportunity Luu sees in FX markets is the Japanese yen, which he said appears significantly undervalued. &amp;ldquo;Japan is undergoing a different monetary cycle, raising rates while other central banks are cutting. If the right catalyst emerges, we think the yen could experience substantial appreciation,&amp;rdquo; he remarked.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Institutional FX hedging strategies&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Focusing in on FX hedging strategies, Boyd explained that institutions with non-dollar assets are evaluating their hedging strategies, particularly in light of the U.S. dollar&amp;rsquo;s strength. &amp;ldquo;We&amp;rsquo;ve seen many investors consider increasing their hedge ratios on foreign-denominated assets as a risk-off hedge in case of a global economic slowdown,&amp;rdquo; he said.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Credit market overview&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The conversation shifted to credit spreads, with Luu and Eitelman noting how spreads today are at historically tight levels, reflecting strong corporate balance sheets and earnings growth. In short, this means that investors are not being adequately compensated for taking on credit risk in their portfolios, Eitelman said.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Amid this backdrop, Russell Investments is looking at the securitized market, including agency mortgage-backed securities, asset-backed securities, and collateralized loan obligations (CLOs), which can offer better value and more attractive spreads than traditional investment-grade and high-yield corporate bonds, he explained.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Institutional credit positioning&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Boyd noted that some clients with significant credit exposure are considering hedging strategies using index credit derivatives. This allows them to manage credit beta without disrupting allocations to active managers, he remarked.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Conversely, Boyd said that clients with lower credit allocations are exploring whether to increase exposure, particularly in investment-grade credit, which still offers decent yield potential even if spreads widen slightly. Institutions are using overlays to tactically adjust their credit exposure rather than making wholesale changes to underlying manager allocations, he noted.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The diversification role of bonds&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Eitelman, Luu, and Boyd wrapped up the webinar by answering questions from the audience. A key question addressed was whether the team still sees bonds as a diversifier to risk assets. Luu stressed that while bonds failed to provide strong diversification in 2022 due to a supply-driven inflation shock, they remain a valuable hedge in many scenarios. He said that in times when bonds underperform, trend-following strategies can be an additional diversification tool. &amp;ldquo;Ultimately, I&amp;rsquo;d say don&amp;rsquo;t give up on bonds&amp;mdash;but also consider other diversifiers,&amp;rdquo; he said.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;U.S. fiscal trajectory and long-term risks&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Another question from viewers dealt with concerns over the growing U.S. fiscal deficit. Eitelman noted that today&amp;rsquo;s deficit-to-GDP ratio is high at around 6%--and expected to rise further. He said that while long-term challenges exist, the near-term risk of a fiscal crisis appears low due to sustained economic growth and the demand for safe assets from pension funds. However, Eitelman stressed that long-term entitlement spending issues will need to be addressed within the next decade.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Liability immunization for pension plans&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The webinar concluded with a final question about how pension plans can protect themselves from fluctuating interest rates. Boyd said that in the context of liability-driven investing, increasing hedge ratios aligns with immunization strategies for pension plans. &amp;ldquo;Given current market conditions, moving toward higher interest-rate hedge ratios makes sense as part of a de-risking approach,&amp;rdquo; he stated.&lt;/span&gt;&lt;/p&gt;Paul EitelmanVan LuuThomas Boyd<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. 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Check out the latest insights from specialist managers from key equity and geographic regions around the globe.<br /> <style> </style>Tue, 04 Feb 2025 00:00:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;Managers see U.S. banks and financials as likely to benefit from the new U.S. administration&amp;rsquo;s expected looser regulatory stance, which they believe will lead to an uptick in mergers and acquisitions. There is much greater uncertainty among managers on how potential U.S. tariffs could impact various sectors and regions.&amp;nbsp;&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;The ongoing demand for AI and the need for infrastructure to support it is causing managers to add to opportunities in the utilities sector. Interest in the energy sector is also on the rise.&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;Managers see mixed opportunities in emerging markets and a broadening opportunity set for small caps across global markets.&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Broad global trends&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;strong style=&quot;letter-spacing: -0.035em;&quot;&gt;U.S. election impact: Sorting through the noise and information flow&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;There is general agreement among investors that financial deregulation and decreased antitrust intervention will boost M&amp;amp;A (merger and acquisition) activity. U.S. banks and financials are expected to benefit, as well as smaller cap stocks that are likely to be acquisition targets. &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Managers also anticipate that the second Trump administration will extend tax cuts and reduce corporate taxes, expecting these changes to support greater consumer spending and business activity. That said, investors are less certain about the &lt;a href=&quot;/us/blog/us-tariffs-potential-implications&quot;&gt;magnitude and impact of tariffs&lt;/a&gt;. While most expect a more protectionist trade stance, there continues to be a great deal of uncertainty regarding the magnitude of tariffs applied across industries and trading partners. Globally, managers are favoring companies that benefit from U.S. onshoring and reducing exposure to exporters to the U.S., while being mindful of over-responding to rhetoric.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;In addition to tariffs, tighter immigration policy is contributing to concern about a resurgence in inflation, as a reduction in the low-cost workforce has the potential to drive labor costs higher. &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Mixed opportunities across emerging markets (EM)&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;The Chinese government&amp;rsquo;s &lt;a href=&quot;/us/blog/us-core-inflation-slows-mwir&quot;&gt;support of the property sector&lt;/a&gt;&amp;nbsp;has helped to stabilize prices and bolster consumer confidence. Managers are seeking opportunities in the Consumer sector and domestically oriented companies that do not have U.S. tariff exposure, while broader investor sentiment is mixed. &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;The decline of the Indian equity market in Q4 has provided a buying opportunity for investors who continue to see positive long-term growth. Investors are focusing on opportunities in infrastructure, energy, and the energy transition space.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Elsewhere in EM, investors are optimistic about Argentina after the country has curbed inflation. Views on Brazil are mixed with inexpensive valuations but also fiscal and monetary challenges. Similarly, sentiment on South Korea is unclear, as it&amp;rsquo;s critical to AI (artificial intelligence) infrastructure but under pressure due to political instability. &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Global interest in utilities &amp;amp; energy&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Investors are selectively seeking opportunity in utilities, looking for companies that will benefit from the build-out of AI infrastructure and increased demand. Many utilities offer greater growth potential than they have historically. &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Globally, there is burgeoning interest in energy stocks with a rollback of U.S. green subsidies and valuation support.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Global opportunities for small caps&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Investors in multiple geographies are pursuing opportunities in small caps&amp;mdash;including Europe, Japan, and the U.S. While specific drivers vary across markets, small cap versus large cap valuation spreads are attractive versus history, and small caps tend to be less dependent on global trade.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Global equities&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;&amp;ldquo;America First&amp;rdquo; on investors&#39; minds&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Managers believe that onshoring policies will benefit&amp;nbsp;segments of U.S. manufacturing, particularly leading franchises within industrial automation and transportation&amp;nbsp;with reduced&amp;nbsp;import competition.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Selective opportunities among U.S. financials&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;Managers think that U.S. President Donald Trump&#39;s inferred deregulatory stance, coupled with&amp;nbsp; slight eases in interest rates, will lead to a revival in M&amp;amp;A activity that had been delayed. Beneficiaries of this would include corporate finance providers and private equity owners.&lt;/li&gt; &lt;li&gt;&lt;span&gt;Conversely, global Value investors are wary of traditional bank lenders where potential credit shocks hurt earnings and high valuations.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Oil majors pick up the slack from renewables backtrack&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Tighter energy markets and the rollback of U.S. green subsidies will benefit higher spot prices and energy companies.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Bottom-fishing in weak cycles&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Value managers are taking advantage of the depressed consumer cycle within staples and hunting for strong global franchises.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Both&amp;nbsp;Value and Growth investors added to innovative GLP-1 drug producers, which had previously lagged owing to efficacy concerns that have since abated.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Alternative avenues and margin of safety&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Value investors are adding to European cash-yielding opportunities such as banks and autos as a diversifier to potential momentum unwinds. These businesses offer attractive dividends for downside support at depressed valuation levels and exhibit growth potential.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Managers are also adding to stable emerging markets banks and insurance companies that enjoy above-average growth by increasing their footprint across unpenetrated markets.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Non-AI innovation&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Managers are bullish on continued growth in digital payments that demonstrate resilient earnings and higher return on capital.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;U.S. equities&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;The second Trump administration: Themes and market Implications&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Active equity managers across the board are seeking to digest what one manager called a &amp;lsquo;headline soup&amp;rsquo; of floated regulatory and tax policies by the new administration and its affiliates to separate rhetoric from real intention and likely actions in office. &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;On&lt;strong&gt; taxes and tariffs&lt;/strong&gt;, managers expect expiring income tax cuts to be extended and corporate taxes to be cut, which should support consumer spending, corporate profits, and the broader market. New tariffs are expected to be enacted on an industry-by-industry basis, with most managers biding their time until there is a more complete picture of the relative competitive landscape.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;&lt;span&gt;Regulation&lt;/span&gt;&lt;/strong&gt;&lt;span&gt; is expected to be reduced across multiple industries, with banks and other financials seen by managers as the most immediate beneficiaries. A reduction in net &lt;strong&gt;immigration&lt;/strong&gt; is seen as more of a headwind, resulting in lower aggregate demand growth and higher wages, which could hit corporate profitability. &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Following four years of active intervention under the prior administration, &lt;strong&gt;antitrust policy&lt;/strong&gt; is expected to be far more accommodating, leading to an increase in corporate M&amp;amp;A activity, particularly among smaller-cap companies.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Though not evident in recent relative performance, &lt;strong&gt;healthcare&lt;/strong&gt; companies are widely seen as beneficiaries under the new administration. Growth managers believe a lighter-touch FDA (Federal Drug Administration) bodes well for emerging biotech names, while value managers think the sector is the cheapest in the market.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;strong&gt;&lt;span&gt;Energy&lt;/span&gt;&lt;/strong&gt;&lt;span&gt; policy is expected to encourage higher oil &amp;amp; gas production in the U.S. In combination with weakening demand growth from China (which is rapidly moving to hybrids/EVs) and the potential return of currently-sanctioned supply, the medium-term outlook for the oil price and consequently energy stocks is seen as broadly negative.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Emerging markets equities&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Consumer opportunities in China&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Investor sentiment remains mixed in China, but the government is demonstrating commitment to supporting the property sector and reviving consumer confidence. While uncertainty remains as to the adequacy of policy measures to stabilize prices and demand within the property market, investors are turning their attention to opportunities within the consumer sector.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Domestically oriented companies are gaining attention amid rising geopolitical risks and uncertainty over potential U.S. tariffs.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Long-term optimism in India remains intact&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Slowing economic growth and weaker earnings led to a sharp market decline in Q4 2024. However, long-term optimism for the Indian market remains intact. While caution persists around valuations, some managers are taking advantage of the recent correction to explore opportunities within infrastructure, energy, and energy transition.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Potential for positive policy shifts in Brazil&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Within Brazil, investors prefer high-quality, defensive companies or businesses with less reliance on the domestic market, given fiscal and monetary challenges.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Contrarian managers view valuations as highly attractive, with limited downside from current levels. Positive policy shifts could act as a catalyst for improvement, with President Lula da Silva&amp;rsquo;s intent to seek reelection in 2026 increasing the likelihood of such changes.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Political instability in South Korea &lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;South Korea remains critical to the AI supply chain. The market correction caused by political instability in December provided managers an opportunity to invest in semiconductor companies and secondary AI beneficiaries across the market cap spectrum.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Argentina to remain a bright spot &lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Fiscal discipline has curbed inflation and fueled investor optimism that managers view as likely to be sustained. Investors see significant opportunities across banks and energy. &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong style=&quot;letter-spacing: -1.32px;&quot;&gt;&lt;span style=&quot;font-size: 24px;&quot;&gt;Long/short equity&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Persistent preference for defensives over cyclicals&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Defensive tilt continues: Hedge funds maintained a preference for defensive sectors in Q4, with continued buying in real estate, consumer staples, and healthcare, while trimming exposure to discretionary and energy.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Sector adjustments: Increased allocations to utilities and health Care, while industrials and consumer discretionary saw reduced exposure.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Technology and momentum rotation&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Tech positioning stabilization: Net exposure to technology remains below historical averages despite a modest Q4 recovery.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;AI and cloud strength: Renewed interest in AI and cloud segments drove selective buying in high-growth areas.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Momentum shift: Funds moved from high-beta plays to value-oriented strategies towards year-end.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Regional trends&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Europe overweight: U.S.-based hedge funds continued their overweight stance in Europe, driven by attractive valuations and easing inflation.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;China re-engagement: Renewed buying in Chinese equities, focusing on technology and consumer names following policy support.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Japan outflows: Hedge funds turned net sellers of Japanese equities in December, capitalizing on earlier gains.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Europe and UK equities&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;A turn in the road for small caps?&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;European small cap valuations have derated relative to large caps to levels lower than seen during the GFC (Global Financial Crisis), on the back of growth struggles and political instability across Europe&amp;rsquo;s main economies. A falling yield environment tends to be positive for small cap stocks, while improved political stability can be a forerunner to an improved growth outlook. which depressed valuations do not currently price in.&lt;br /&gt; &lt;br /&gt; &lt;/span&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/wb22_1.jpg&quot;&gt;&lt;img alt=&quot;MSCI&quot; src=&quot;/-/media/images/global/blogs/images/wb22_1.jpg&quot; /&gt;&lt;/a&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;UK utilities offer opportunity&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;While regulated utilities in the UK have suffered in the face of rising yields given their perception as bond proxies, this can provide an opportunity to benefit in the long term from the sector&amp;rsquo;s attractive fundamentals. These companies offer attractive real yields and are well-positioned for growth given the opportunities provided by the UK&amp;rsquo;s investment needs in the areas of water or sewage. Meanwhile, the electrification required by the country&amp;rsquo;s stated objective of hitting net zero by 2050 will also demand considerable investment in copper-based infrastructure.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Japan equities&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Is the market&amp;rsquo;s narrow focus coming to an end?&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Many managers are gradually reducing their exposure to top-cap value stocks in anticipation of greater market breadth. These stocks have achieved large gains over the past four years, driven by earnings recoveries, a weaker yen, and governance reforms.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;More managers are now reallocating proceeds into more diverse opportunities. These include:&lt;/span&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Laggards within the same sectors, often smaller-sized companies.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Growth stocks that significantly underperformed with valuations that have become relatively more attractive.&lt;/span&gt;&lt;/li&gt; &lt;li style=&quot;text-align: left;&quot;&gt;&lt;span&gt;Defensive stocks that underperformed in the past market rally.&lt;/span&gt;&lt;br /&gt; &lt;br /&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/wb22_2.jpg&quot;&gt;&lt;img alt=&quot;Performance size v style&quot; src=&quot;/-/media/images/global/blogs/images/wb22_2.jpg&quot; /&gt;&lt;/a&gt;&lt;/li&gt; &lt;/ul&gt; &lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Japan&amp;rsquo;s inflation expectations are continuously rising&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;The persistent inflationary environment with solid wage growth is expected to benefit domestic demand-driven industries.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;&lt;/span&gt;Despite reducing holdings in financials due to past outperformance, many managers retain some exposure, anticipating a rise in interest rates to support these stocks further&lt;/li&gt; &lt;/ul&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/tw_japanbanks.jpg&quot;&gt;&lt;/a&gt;&lt;/p&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Canadian equities&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Inflation expectations and defensive positioning&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;While the soft-landing narrative remains intact in Canada, inflation concerns are rising among investors. Nominal wage growth, combined with concerns over U.S.-Canada trade tariffs, could pose inflationary threats.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Managers are adopting a more defensive stance and, at the margin, adding exposure to the utilities sector, particularly to companies with combined utility and energy infrastructure assets. Increasing power demand from data centers provides an additional tailwind for some power producers.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Tariff-driven opportunities&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;On the other hand, managers are exploring niche opportunities that could benefit in the event tariff threats materialize, such as logistics software.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Opportunities in communication services&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Telecommunication stocks lagged significantly in Q4 2024. Value-oriented managers are selectively adding to the defensive telecom names offering high dividend yields, viewing their valuations to be highly attractive. &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Positive copper outlook&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Despite short-term volatility, the long-term outlook on copper remains strong, driven by supply constraints and demand from various industries, including EVs and renewable energy. Potential M&amp;amp;A activity within copper names could be a further tailwind. &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Renewed optimism in banks&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Managers are turning more positive on banks as key drivers&amp;mdash;loan volumes, margins, credit, and capital&amp;mdash;are showing signs of improvement.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Cyclicals: Airlines and railways are attractive &lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Valuation gaps between Canadian and U.S. airline stocks, despite comparable fundamentals, are attracting investor interest.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;The freight recession appears to be bottoming out, with pricing power and potential volume growth acting as key tailwinds.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;Australian equities&lt;/strong&gt;&lt;/p&gt; &lt;p style=&quot;line-height: normal;&quot;&gt;&lt;strong&gt;&lt;span&gt;Banks: Underweight to be less of a drag in 2025 &lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Active managers are maintaining their banks underweight, even while the underweight expanded due to Q4 outperformance. They note that the earnings outlook for the banks, while stable, offers lower growth than other sectors. Managers also consider that the underweight to the sector is unlikely to hurt as much in 2025 as it did last year, due to P/E (price-to-earnings) multiples being at all-time highs and higher than their global peers.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p style=&quot;line-height: normal;&quot;&gt;&lt;strong&gt;&lt;span&gt;Keeping up the energy&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Many value-biased managers are overweight energy, which was a drag on relative performance in calendar 2024. Managers consider these holdings a source of future outperformance, noting that the sector is trading at historically low forward P/E ratios.From a bottom-up perspective, managers believe that capital expenditure for large projects has weighed on the share price for some companies and expect it to become a tailwind as the projects near completion and become revenue earning. They also expect the positive attitude that the Trump administration has toward fossil-fuels will be favorable for Australian-listed energy companies. &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p style=&quot;line-height: normal;&quot;&gt;&lt;strong&gt;&lt;span&gt;Preference for U.S.-exposed businesses&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Managers are preferring stocks where a major part of the revenue is from U.S.-based consumers and companies. Due to the Reserve Bank of Australia not yet starting the interest-rate easing cycle, coupled with the high cost of living for Australian consumers, they are wary of businesses reliant on the Australian consumer. The U.S. is seen as a better exposure, with interest rate cuts having started and the Trump administration expected to be more business-friendly.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;h2&gt;&lt;span&gt;&lt;strong&gt;Real assets&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Listed vs. non-listed: New cycle brings new opportunities&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Private real estate valuations have moved back in line with historical values and liquidity. With returns improving, this provides a favorable backdrop as we enter a new real estate cycle.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Increased volatility and a wider dispersion in asset and sector returns are expected moving forward, increasing the importance of finding high-quality assets.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Aside from the office sector, occupancy levels are strong and growth is expected to be positive across sectors.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Returns are expected to become more income-driven after benefitting from yield compression in the previous cycle.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Real estate: Fundamentals remain strong in tough environment&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;The slowdown in rate cuts has dampened positive sentiment, but fundamentals remain strong, and market volatility presents compelling opportunities for active managers.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Data centers continue to see strong demand, driven by AI and hyperscale projects, but remain constrained by power supply.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Managers are bullish on senior housing, driven by an aging population and supply growth that&amp;rsquo;s near record lows.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Slowing population growth in Canada, combined with potential tariffs could create a difficult environment for Canadian REITs (real estate investment trusts).&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Infrastructure: Piping in the energy&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Managers expect that favorable regulatory shifts and increased U.S. production volumes are positioning the energy midstream sector for sustained growth. &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;If the new U.S. administration accelerates energy infrastructure projects, it will be positive for the pipeline and LNG (liquified natural gas) storage names.However, state and local opposition may limit implementation.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Infrastructure: Wary of interest-rate-sensitive sectors&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Managers are tempering their exposure to interest-rate sensitive sectors, including cell towers and U.S. utilities, due to the risk of higher-for-longer interest rates.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt;Tom Warburton<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. 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We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{EB1A6DDF-4054-4038-829D-21839B0D7D53}https://russellinvestments.com/us/blog/us-tariffs-potential-implicationsOur investment strategist assesses how the Trump administration’s recently announced tariffs could impact economic growth in Canada, Mexico, China, and the United States.Sun, 02 Feb 2025 13:43:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong style=&quot;letter-spacing: -0.035em; font-size: 16px;&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;UPDATE AS OF FEB. 3 AT 5:00 PM EASTERN TIME&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The tariff situation remains fluid. Initially during the trading day, we saw a noticeable risk-off reaction across North American equity markets, with both the benchmark S&amp;amp;P 500 Index and the S&amp;amp;P/TSX Composite Index down 2% at one point. In addition, we saw government bond yields move lower, with the Canadian 10-year government bond yield falling by nearly 20 basis points and reaching a yield of around 2.9%, a level last seen in September 2024.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;However, markets partially reversed some of these moves as U.S. President Donald Trump announced that he and Mexican President Claudia Sheinbaum have reached a deal to delay the imposition of these tariffs for 30 days.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;And in the afternoon, President Trump announced that he was also delaying the imposition of tariffs on Canadian goods for 30 days.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; Macroeconomic uncertainty will likely continue to remain elevated in the near-term, and it remains to be seen whether the tariffs get scrapped after the 30-day period. In addition, it remains to be seen what President Trump opts to do with the proposed tariff on Chinese goods. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;If the tariffs still get implemented, we believe that they could have a modest one-time increase in price levels for U.S. consumers. This could push out slightly when inflation will return to the 2% target, but we continue to think in our base-case scenario that the U.S. Federal Reserve (Fed) will succeed in returning inflation to 2%. From a growth perspective, we expect the tariffs to create a modest drag on U.S. economic activity, but believe that the U.S. economy will likely avoid a recession.&lt;br /&gt; &lt;br /&gt; Meanwhile, we expect the impact of these tariffs (and the impact of retaliatory actions) to weigh more heavily on the Canadian economy. After all, nearly one-fifth of Canadian gross domestic product is attributable to exports to the U.S., and if literal 25% tariffs are still implemented on Canadian imports to the U.S., the risk of a Canadian recession could rise substantially. Thankfully, we think that given the progress the Bank of Canada has made so far in taming inflation, it has the latitude to be able to respond forcefully if needed with policy support should an economic slowdown materialize. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;In these challenging times, we continue to think investors would benefit from staying disciplined and sticking close to their strategic asset allocation.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Our original article from Feb. 2 is below.&lt;/span&gt;&lt;/p&gt; &lt;hr /&gt; &lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;U.S. President Donald Trump looks set to impose additional tariffs of 25% on Canadian and Mexican imports (with Canadian fuel imports subject to a preferential rate of 10%), and Chinese imports are set to see an additional tariff of 10%&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Canada, Mexico, and China have signaled intentions to retaliate&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;The imposition of tariffs could create a modest one-time boost to prices and a modest drag on growth in the U.S. Meanwhile, Mexico and Canada could see elevated recession risk arising from the tariffs&lt;/li&gt; &lt;/ul&gt; &lt;p style=&quot;margin-bottom: 10px;&quot;&gt;&lt;span style=&quot;font-size: 18px;&quot;&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The bottom line:&lt;/span&gt;&lt;/strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; We expect that the tariff situation will continue to be fluid. During these times of uncertainty, it&amp;rsquo;s important for investors to stay disciplined.&amp;nbsp;&lt;/span&gt;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;***&lt;br /&gt; Overview&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Over the weekend, many people in North America watched to see whether the legendary groundhog Punxsutawaney Phil saw his shadow. But investors are on the lookout for a different shadow: the potential economic and market impact of the new tariffs imposed by the United States. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Our team of global experts at Russell Investments have been carefully monitoring and analyzing the potential for policy changes in President Trump&amp;rsquo;s second term in office. For instance, in December 2024, our North American Chief Investment Strategist highlighted &lt;a href=&quot;/404 error page?item=web%3a%7bCA85FC2C-FADB-4066-A71E-3D8BC53C86A7%7d%40en&quot;&gt;four important areas of focus&lt;/a&gt;: (1) tariffs, (2) immigration, (3) fiscal policy, and (4) deregulation. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;A key question for investors has been whether the positive impacts of potential tax cuts and deregulation would outweigh any adverse effects from potentially higher tariffs and more restrictive immigration policies. Up until now, U.S. equity investors appeared to believe this would be the case. The benchmark S&amp;amp;P 500 Index has rallied an additional 5% between election day and January 31, 2025, setting new all-time highs in the process. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Many investors had hoped that President Trump would be more measured in his approach to tariffs than his campaign promises. After all, in his first term in office, President Trump&amp;rsquo;s tariff increases were significantly lower than what he had discussed while campaigning. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;However, those hopes were somewhat dashed, as President Trump formally signed an executive order over the weekend that would impose new tariffs on Canadian Mexican, and Chinese imports, effective February 4, 2025. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Now that these tariff plans have been formally unveiled, we provide some updated analysis in this article on the impact of these tariffs to the U.S. In addition, we broaden our commentary to include insights into how the economies and markets of the targeted U.S. trading partners might be affected. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The latest U.S. tariff announcement &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Over the weekend, President Trump announced new tariffs on goods imported from Canada, Mexico, and China. Goods from Canada and Mexico face a 25% tariff (with the exception of Canadian fuel imports, which are subject to a 10% tariff), whereas goods from China face a 10% tariff. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Based on our analysis of U.S. import data through November 2024, these tariffs would cover roughly 42% of all U.S. imports, and would raise the effective tariff rate by 7.7%.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/ustrade22.jpg&quot;&gt;&lt;/a&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/tradepolicy25.jpg&quot;&gt;&lt;img alt=&quot;Trade policy&quot; src=&quot;/-/media/images/global/blogs/images/tradepolicy25.jpg&quot; /&gt;&lt;/a&gt;&lt;br /&gt; &lt;/span&gt;&lt;span style=&quot;font-size: small; letter-spacing: -0.035em;&quot;&gt;Source: Russell Investments, U.S. Bureau of Economic Analysis, Tax Foundation. Updated January 2025. &amp;ldquo;High end&amp;rdquo; reflects the effective tariff rate if a universal 20% tariff would be applied to all U.S. imports. &amp;ldquo;CH+CN+MX&amp;rdquo; shows the effective tariff rate if the tariffs on China, Canada, and Mexico are all implemented. &amp;ldquo;Low end&amp;rdquo; shows what the effective tariff rate might be if only a minimal amount of new tariffs are implemented&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Prior to the imposition of these new tariffs, the vast majority of U.S. imports from Canada and Mexico could enter the U.S. duty-free, thanks to the US-Mexico-Canada Agreement. Therefore, products that could see the highest increase in effective tariff rates include Canadian lumber, Mexican auto parts, and groceries. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;How are Canada, Mexico, and China responding?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Among the three trading partners, Canada has publicly taken the most vocal stance, with both the incumbent Prime Minister (Justin Trudeau), as well as several premiers of Canada&amp;rsquo;s provinces, emphasizing the need for a forceful response. After President Trump officially signed an executive order to implement the new tariffs, Prime Minister Trudeau announced that Canada would be imposing a 25% retaliatory tariff on roughly $155 billion CAD (Canadian Dollars) of U.S. imports. This amounts to roughly 1/3 of Canadian imports from the U.S. The retaliatory tariff would take a phased-in approach, with tariffs initially imposed on $25 billion CAD of imports from the U.S., and the remaining tariffs to become effective in 21 days. I&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;n addition, multiple provinces across Canada, including Ontario and British Columbia (which comprise more than half of Canada&amp;rsquo;s population), have announced plans to halt the sale of U.S. liquor. &lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Mexican President Claudia Sheinbaum has announced that Mexico will implement &amp;ldquo;Plan B,&amp;rdquo; a plan that entails both tariff and nontariff forms of retaliation. Details of this plan are expected to be made public on Monday morning.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;China has announced it will file a WTO (World Trade Organization) lawsuit in response to the U.S. tariffs, and may also take &amp;ldquo;corresponding countermeasures&amp;rdquo; to &amp;ldquo;safeguard its rights and interests.&amp;rdquo;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;strong&gt;How are markets reacting?&lt;/strong&gt;&lt;/span&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;As of around 5:00 p.m. Pacific Time on Sunday, Feb. 2, markets appear to be having a modest risk-off reaction:&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Futures on the benchmark S&amp;amp;P 500 index are down roughly 1.7%&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The yield on U.S. 10 year Treasuries moved down 4 basis points to 4.525%&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The yield on the Canadian 10-year government bond moved down by 6 basis points to 3.065%&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The U.S. dollar index rose by 1.28% to 109.75. The Canadian dollar fell to 67.8 cents against the U.S. dollar, dropping below its 2016 low. &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;What&amp;rsquo;s the potential impact on the U.S? &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;While tariffs can impact the global economy through multiple transmission mechanisms, we find it helpful to frame the analysis by looking at two key areas: inflation and growth. First, let&amp;rsquo;s start with the inflation angle. We&amp;rsquo;ve estimated in the past that every 1 percentage point increase in the effective tariff rate can result in a 0.1% increase in the prices paid. Thus, these tariffs may add a moderate 0.77% increase one-time increases onto prices. While this may slightly push out when core inflation will return to the Fed&amp;rsquo;s target, it&amp;rsquo;s important to remember that tariffs generally represent a one-time boost to price levels, whereas inflation measures a rate of change in prices. Therefore, the inflationary impulse from tariffs might be short-lived.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;From an economic growth perspective, the tariffs are likely to weigh on economic activity, but the magnitude of the impact may hinge on the extent to which tariff proceeds are funneled towards other pro-growth policies and the extent to which U.S. trading partners retaliate. For instance, think tanks like the Tax Foundation estimated a 0.4% hit to U.S. GDP (gross domestic product) in a no-retaliation scenario, whereas other economists estimated a 1 percentage point hit to GDP in a more full-throated retaliation scenario. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;In December 2024, the industry consensus had been baselining 2025 GDP growth of roughly 2.1% for the U.S (pre-tariff). Factoring in the potential hit from tariffs based on the recent announcements, we conclude that the U.S. economy would likely see meaningfully slower growth, albeit still avoid a recession. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;From an earnings perspective, we believe that 2025 earnings growth for the S&amp;amp;P 500 could take a mild hit of around 2.5 percentage points. With the I/B/E/S consensus expecting 13% of earnings growth for S&amp;amp;P 500 in 2025 prior to the tariff announcement, this could mean that earnings growth will end up being closer to 10% year-over-year. That being said, 10% year-over-year would still be a robust pace of earnings growth.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;In the near-term, tariffs could potentially cause a mild increase in the U.S. Dollar, but the upward movement could be somewhat limited given that the U.S. dollar had already increased by 5% between the election and Jan. 31, 2025, and given that medium-term valuation measures suggest that the U.S. dollar might be somewhat overvalued compared to other major currencies. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;What&amp;rsquo;s the potential impact onto U.S. trading partners? &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Canada is likely to be heavily impacted by the new tariffs. According to Statistics Canada, exports to the U.S. represented nearly 18% of Canadian gross domestic product (GDP). With the U.S. imposing new tariffs on Canadian products, it&amp;rsquo;s almost certain that Canada&amp;rsquo;s economy would get hit hard. The hypothetical scenario outlined in the Bank of Canada (BoC)&amp;rsquo;s latest Monetary Policy Report is somewhat more punitive than the current tariff plans (it assumes the U.S. imposes a 25% tariff on all trading partners/products), but nevertheless gives a useful guide to the pain that might be inflicted on the Canadian economy. The BoC estimates that GDP could see a 2.5% hit relative to the no-tariff status quo. This would mean that if the tariffs are sustained instead of transitory, the Canadian economy faces a substantial risk of slipping into a recession, that comes on the heels of an already challenging macroeconomic backdrop. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Similarly, the Mexican economy may also face substantial headwinds as a result of these new tariffs. Based on data from the U.S. Bureau of Economic Analysis and the International Monetary Fund, Mexican exports to the U.S. is expected to be more than a quarter of Mexican GDP in 2024. With the International Monetary Fund&amp;rsquo;s pre-tariff projection of only 1.3% real GDP growth for Mexico in 2025, Mexico too runs the risk of having GDP contract as a result of the tariffs. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Meanwhile, China could face less of a direct impact from the tariffs. Not only is the additional levy on Chinese imports less than the rate being applied to Mexican and Canadian goods, but also China has a more diversified economy relative to Mexico and Canada. Based on the U.S. Bureau of Economic Analysis and International Monetary Fund data, Chinese exports to the U.S. only account for around 2.5% of its GDP.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;How might central banks and governments respond?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Bank of Canada Governor Tiff Macklem pointed out the dilemma that the central banks will face as a result of these tariffs: counteracting a drag in economic growth requires loosening monetary policy, while counteracting higher prices necessitates holding monetary policy restrictive for longer. Central banks must carefully balance these competing forces. From our perspective at Russell Investments, we believe that central banks are likely to focus more on the potential growth damage, as the drag to growth could be more prolonged relative to the likely one-time hit in prices. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Each central bank will also need to take into account the &amp;ldquo;starting point&amp;rdquo; of existing macroeconomic conditions in determining how it might wish to proceed.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;For the U.S., the economy has generally remained resilient in the lead-up to the tariff announcement. U.S. GDP growth in Q4 2024 was slightly above-trend (at 2.3% Seasonally Adjusted Annualized Rate), and the unemployment rate still remains relatively measured at 4.1%. Chair Powell had indicated at the January meeting that the Federal Reserve was in &amp;ldquo;no hurry to cut rates,&amp;rdquo; and that he wanted to see either more progress on the inflation fight or a weakening of the labor market before making the next rate cut. Given that we believe the impacts of the tariff standoff onto the U.S. economy would be somewhat measured, we believe that Chair Powell could adopt a &amp;ldquo;wait and see&amp;rdquo; approach when it comes to the path of monetary policy. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;In contrast, the Bank of Canada might be willing to respond more dovishly. The Canadian economy has already been under pressure, with a sharper rise in the unemployment rate compared to the U.S. in the run-up to the tariff announcement. While the current Bank of Canada preferred measure of core inflation is still slightly above the 2% midpoint of its 1% to 3% control band, other measures of core inflation have already fallen below 2% in Canada. Consequently, we believe that the Bank of Canada has the latitude to respond aggressively should economic growth deteriorate further. As of Sunday, Feb. 2,&amp;nbsp;markets anticipate that the Bank of Canada might bring interest rates down to 2.4% by the end of 2025, a touch below the midpoint of the Bank of Canada&amp;rsquo;s estimated neutral rate of interest. &lt;/span&gt;&lt;/p&gt; &lt;p&gt; &lt;span style=&quot;line-height: 115%;&quot;&gt;We continue to believe that the markets are underappreciating the magnitude of interest rate cuts that might be necessary in Canada to prop up the economy. Although the Bank of Canada only cut interest rates by 25 basis points &lt;a href=&quot;/us/blog/europe-canada-us-rates-mwir&quot;&gt;at its recent January meeting&lt;/a&gt;, we believe that a deeper economic slowdown could bring about the return of outsized interest rate cuts. And if a recession were to materialize, interest rates would likely need to fall well below 2%.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Governments in impacted regions may also respond with fiscal stimulus too, in an effort to counteract the pain felt by consumers and businesses from the tariffs. This also remains an important watchpoint. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Why does uncertainty remain elevated? &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Even with the formal tariff declaration, macroeconomic uncertainty still remains elevated. For instance, investors should not discount the possibility of further tariff hikes. President Trump has recently warned that he may impose additional tariffs on both specific classes of goods (e.g. semiconductors, pharmaceutical products, and steel), and on specific trading partners (e.g. he has been contemplating additional levies on European imports). Moreover, he has also indicated the potential to scale up tariffs in response to the retaliatory actions of the key trading partners. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;On the other hand, we continue to believe that President Trump may be using the tariff announcements as a negotiating tool to extract concessions from trading partners. For instance, commerce secretary Howard Lutnick and some U.S. lawmakers have been pointing to a desire to get Canada to increase its defense spending. And Canadian lawmakers indicated that the U.S. has advised them that there could be a &amp;ldquo;window&amp;rdquo; to revisit the imposition of these tariffs in March. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Our North American Chief Investment Strategist previously observed that &amp;ldquo;Trump championed the strength of the economy and stock market during his first term, and an aggressive trade war that risked both would conflict with some of his past priorities.&amp;rdquo; We continue to believe that this is an important observation. Although these tariffs have now been implemented against key U.S. trading partners, it&amp;rsquo;s possible that if the damage inflicted on the U.S. economy becomes more noticeable, President Trump could try to find an off-ramp.&amp;nbsp;This sentiment could potentially limit the duration of the tariff standoff.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Another layer of uncertainty stems from how businesses and consumers respond to the tariff increases. We&amp;rsquo;ve assumed that businesses would pass on 100% of the cost of tariffs to consumers. But if businesses anticipate that further tariffs may be forthcoming, it&amp;rsquo;s possible they &amp;ldquo;take out insurance&amp;rdquo; in the form of passing on more than 100% of the cost. Conversely, given that some consumers (particularly at the lower end of the income spectrum) have already been balking at high prices, it&amp;rsquo;s possible that businesses may need to absorb part of the tariff increases in the form of reduced profit margins.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;What should investors consider when positioning their portfolios? &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;At Russell Investments, we believe that in times of uncertainty, investors would benefit from staying disciplined. Although the tariffs could adversely impact economic growth, particularly in Mexico and Canada, there&amp;rsquo;s also the potential for central banks and governments to step in with support to offset the tariff impacts. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;We will continue to carefully apply our Cycle-Valuation-Sentiment (CVS) framework to monitor the global investment landscape for opportunities and risks. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;In our investment portfolios, we&amp;rsquo;ve generally been maintaining a slightly defensive posture in light of the macroeconomic uncertainty. Although we have not yet re-initiated a tactical overweight to duration, we do believe that U.S. and Canadian government bonds can still play a key defensive role. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Meanwhile, although we believe that non-U.S. equities may be more prone to cyclical risks, we also view non-U.S. equities to be closer to fair value than U.S. equities. Consequently, we believe in the continued importance of regional diversification.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;In addition, we continue to believe that active management and careful security selection can help drive better portfolio outcomes as policy changes create more dispersion in the market.&lt;/span&gt;&lt;/p&gt;BeiChen Lin<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12689<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{110497E7-A967-4DFB-8602-48D29964607A}https://russellinvestments.com/us/blog/europe-canada-us-rates-mwir<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>European Central Bank, Bank of Canada announce 25-bps rate cuts</span></li> <li><span>Fed holds rates steady amid ongoing economic resilience </span></li> <li><span>The importance of staying calm during times of uncertainty</span></li> </ul>Fri, 31 Jan 2025 05:10:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;&lt;span&gt;The European Central Bank and the Bank of Canada both slashed rates by 25 bps&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;The Fed held rates steady amid ongoing economic resilience&amp;nbsp;&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;The importance of staying calm and disciplined during times of uncertainty&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Investment Strategist BeiChen Lin recapped the latest rate decisions from the U.S. Federal Reserve (Fed), the Bank of Canada (BoC), and the European Central Bank (ECB). He also shared key takeaways for navigating market volatility and uncertainty, speaking in Mandarin during the final portion of the segment in honor of the Lunar New Year.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Assessing the latest rate decisions from key central banks&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Lin began by noting that the Fed, the BoC, and the ECB all held policy meetings this week, with the outcomes from each meeting broadly in line with market expectations. &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/takeaways-trump-administration-start-mwir&quot;&gt;As expected&lt;/a&gt;&lt;/span&gt;&lt;span&gt;, the Fed opted to leave rates unchanged at 4.25%-4.50% during its Jan. 28-29 meeting, he said, noting that the pause came after the U.S. central bank delivered a cumulative 100 basis points (bps) of rate cuts during the last few months of 2024. Meanwhile, both the ECB and the BoC lowered rates by 25 bps at their respective meetings,&amp;nbsp;bringing their cumulative rate cuts for this cycle to 125 bps and 200 bps respectively, Lin remarked.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Broadly speaking, the reason the Fed stayed on hold while its European and Canadian counterparts delivered additional cuts is because of the &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/health-check-global-economy-mwir&quot;&gt;continued resilience of the U.S. economy&lt;/a&gt;&lt;/span&gt;&lt;span&gt;, Lin said. For instance, he noted that U.S. GDP (gross domestic product) grew at a 2.3% annualized pace during the fourth quarter, while &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/us/blog/us-core-inflation-slows-mwir&quot;&gt;fourth-quarter earnings growth&lt;/a&gt;&lt;/span&gt;&lt;span&gt; among S&amp;amp;P 500 companies is tracking near 11% on a year-over-year basis. When combined with a relatively low U.S. unemployment rate of 4.1%, this has made for a pretty robust economic backdrop, he noted.&amp;nbsp; &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;In Canada and Europe, however, the story is a bit different, Lin said. &amp;ldquo;In Canada, for instance, even though overall GDP has been growing, the per-capita measures of GDP growth have actually been contracting in recent months. In addition, Canada&amp;rsquo;s unemployment rate has risen by 1.7 percentage points from its 2023 low,&amp;rdquo; he remarked. Meanwhile, in Europe, fourth-quarter GDP growth was only around 1% on an annualized basis&amp;mdash;roughly half the pace of GDP growth seen in the U.S., Lin noted. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;&amp;ldquo;This divergence in economic fundamentals between the U.S. and other countries is one of the reasons why I think the Fed has generally been cutting rates at a slower pace. In addition, Fed Chair Jerome Powell also stated at this week&amp;rsquo;s press conference that he wants to see more progress made on the inflation front before lowering rates again,&amp;rdquo; he remarked. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Going forward, Lin said he expects that U.S. inflation will continue to moderate as the year progresses, likely putting the Fed in a position to be able to &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b0A5FF4E4-FC0E-4F23-85B2-A324CF864F16%7d%40en&quot;&gt;cut rates twice in 2025&lt;/a&gt;&lt;/span&gt;&lt;span&gt;. However, due to the potential for continued U.S. economic outperformance, the Fed will probably lower rates at a more gradual pace than its peers, he concluded. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;The Year of the Snake: A metaphor for the twists and turns that may lie ahead?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;As 2025 hits its stride, investors &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b746B61D4-FFE8-4E90-9C71-67A68FE04A19%7d%40en&quot;&gt;might be faced with different forms of volatility and uncertainty&lt;/a&gt;&lt;/span&gt;&lt;span&gt;, Lin said. Chief among these could be the potential imposition of tariffs on key U.S. trading partners as well as surprises in economic data, he noted. &amp;ldquo;For example, while we think that inflation will generally decline, it might not do so in a linear manner,&amp;rdquo; Lin said. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Perhaps fittingly, he noted that 2025 is the Year of the Snake, which he said could be a powerful metaphor for the months ahead. &amp;ldquo;Snakes are curvy in shape, and we think the economic and market backdrop could look similar in the months ahead, with many twists and turns possible,&amp;rdquo; Lin remarked. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Finishing the segment in Mandarin in honor of the Lunar New Year, he stressed that when investors are faced with an uncertain economic environment, it&#39;s important to remain calm and disciplined. &amp;ldquo;We think investors need to be able to objectively look at the latest macroeconomic data and company earnings in order to make better investment decisions. Staying calm is critical to achieving this,&amp;rdquo; Lin concluded. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/MkEqFpnuOXI&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/16497696&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt;BeiChen Lin<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p><p> CORP-12688</p> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{3FCC7975-1CF1-4C7C-B6EF-A45702E19562}https://russellinvestments.com/us/blog/qtr-q4-2024<p>How did equities, fixed income, foreign exchange, and derivatives fare during the final quarter of 2024? Our latest report recaps the performance of the four largest asset classes we trade. </p>Wed, 29 Jan 2025 10:29:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary: &lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;The fourth quarter was particularly volatile in fixed income markets, with U.S. government bond yields surging on worries over the rising fiscal deficit and the potential for inflation to reaccelerate. At the end of the quarter, the rise in yields began to pressure equity markets.&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;The U.S. dollar climbed by over 7% in Q4 on the back of rising Treasury yields and Donald Trump&#39;s presidential election victory.&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;Derivatives markets also experienced volatility during Q4, with U.S. equity index futures trading at historic premiums to fair value into the quarterly roll cycle before falling by 100 basis points as December came to an end.&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; color: #111111;&quot;&gt;U.S. equities finished a strong year on a solid note in the fourth quarter, with the S&amp;amp;P 500 Index gaining 2% in the quarter and closing above 6,000 for the first time ever in early December. However, as the quarter wound to a close, rising bond yields began to pressure equity markets&amp;mdash;a trend that has &lt;/span&gt;&lt;a href=&quot;/us/blog/yield-spike&quot;&gt;continued through much of January&lt;/a&gt;&lt;span style=&quot;letter-spacing: -0.035em; color: #111111;&quot;&gt;.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;color: #111111;&quot;&gt;The uptick in government bond yields unleashed a round of volatility in fixed income markets as bond investors grew concerned over the rising fiscal deficit and the potential for inflation to reaccelerate, which could mean fewer Federal Reserve (Fed) rate cuts than expected.&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;line-height: 115%;&quot;&gt;&lt;span&gt;The foreign exchange (FX) market in Q4 was driven by rising U.S. Treasury yields and Donald Trump&amp;rsquo;s presidential election victory. The U.S. Dollar Index rallied 7.7%, while Trump&amp;rsquo;s proposed tariffs pressured a basket of currencies. Investor flows shifted decisively toward long U.S. dollar (USD) positions, with &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/404 error page?item=web%3a%7bCA85FC2C-FADB-4066-A71E-3D8BC53C86A7%7d%40en&quot;&gt;market uncertainty around the new administration&amp;rsquo;s trade policies&lt;/a&gt;&lt;/span&gt;&lt;span&gt; expected to influence FX movements going forward.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;color: #111111;&quot;&gt;Volatility also returned to derivatives markets, where U.S. equity index futures traded at historic premiums to fair value into the quarterly roll cycle, only to decline by 100 basis points (bps) as December came to an end. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;color: #111111;&quot;&gt;At Russell Investments, our 87 years of experience executing trades for a broad range of institutional clients gives us unique and valuable insights into the latest market trends and insights. Each year, we facilitate approximately $2.2 trillion in trades through our multi-venue trading platform and operate a 24-hour global trading desk, providing access to over 100 countries and all asset classes. Below, we share our key observations from the fourth quarter of 2024 and our outlook for the months ahead.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;color: #111111;&quot;&gt;EQUITIES&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The end of the fourth quarter capped an extraordinary year for markets, with the S&amp;amp;P 500 Index setting 57 new highs during 2024&amp;mdash;about 23% of the trading days.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;The Russell Investments trading desk saw very strong equity flows throughout the year that continued during the final quarter. Trading activity from institutional investors was driven by asset reallocations, rotating global exposure, and changing investment strategies, all of which played a part in the robust trading.&lt;/p&gt; &lt;p&gt;U.S. exceptionalism was on the top of investors&amp;rsquo; minds during 2024, with the S&amp;amp;P 500 Index up 23% and the Nasdaq 100 Index up 28%, respectively, making for the best two-year period of index returns since 1997-98. Dissecting the returns even further, the Magnificent Seven group of stocks (Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla) was up an impressive 67% last year.&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;em&gt;Equity returns in 2024 by index&lt;/em&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;em&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/q424quarterlytradingcharts101.jpg&quot;&gt;&lt;img alt=&quot;Equity returns by index&quot; src=&quot;/-/media/images/global/blogs/images/q424quarterlytradingcharts101.jpg&quot; /&gt;&lt;/a&gt;&amp;nbsp;&lt;/em&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Source: S&amp;amp;P 500 Index, Nasdaq Composite Index, MSCI ACWI ex-U.S. Index, Bloomberg Magnificent 7 Total Return Index&lt;/span&gt;&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;In Asia, Taiwan was the best-performing major market, with a yearly gain of 28%, driven by semiconductor, artificial intelligence (AI), and robot-themed companies.&lt;/p&gt; &lt;p&gt;In Europe, the Euro Stoxx 50 Index closed the year with a more modest 8% return, reflecting steady but slower growth compared to the U.S. and Asia.&lt;/p&gt; &lt;p&gt;Looking at Q4 trading data in the U.S., it was the most active quarter based on average daily volume of shares (13.4 billion) and average daily turnover ($600.9 billion). The U.S. market also saw an uptick in auction closing volumes, hitting a yearly high of 16% in December due to quarter- and year-end passive allocations. &lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 107%; color: #111111;&quot;&gt; As we move deeper into 2025, market participants are closely watching for potential trends and opportunities. While the strong performance in 2024 set a positive tone, investors will need to remain vigilant about macroeconomic factors, geopolitical developments, and sector-specific dynamics. We stand ready to trade in whatever investment environment might prevail.&lt;/span&gt;&lt;span style=&quot;color: #111111;&quot;&gt;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 107%;&quot;&gt;FIXED INCOME&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The U.S. elections were undoubtedly the main event for fixed income markets during the fourth quarter of 2024. Markets and risk tone grinded higher into the election, with the &lt;/span&gt;&lt;em style=&quot;letter-spacing: -0.035em;&quot;&gt;Trump Trade 2.0&lt;/em&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt; helping lift equity&amp;nbsp;markets to all-time highs. In U.S. Treasuries, positioning whipsawed from max short in October to net long in early November (just prior to the elections), only to claw back slightly into year-end.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;The U.S. Treasury yield curve started off the quarter on the wrong foot, with the 10-year yield peaking at 4.45% in mid-November due to the inflation narrative, a more hawkish Fed, and a murky growth outlook coming into play. Treasuries then rallied on the nomination of Scott Bessent, a Wall Street veteran, for Treasury Secretary. However, the bounce was ultimately short-lived, with the looming fiscal debt level posing uncertainty for the road ahead. The MOVE Index (a measure of bond market volatility) peaked in November&amp;mdash;coinciding with the elections&amp;mdash;then quickly reverted to the year&amp;rsquo;s average and a level consistent with years past. &lt;/p&gt; &lt;p&gt;Anecdotally, the Fed released its Financial Accounts (Z.1) report, highlighting that foreign investors posted their strongest quarter of buying on record in Q3, representing $252 billion of demand (almost double that of historical numbers). &lt;span&gt;&lt;/span&gt;&lt;/p&gt; &lt;p&gt;U.S. money market funds also broke a new record in November, surpassing $7 trillion in assets under management. While rates backed up in unison from the start, Treasury yield curve trades oscillated by 32 bps in the spread between the 2-year yield and the 10-year yield (2s/10s) and 36 bps in the spread between the 2-year yield and the 30-year yield (2s/30s), reflecting an overall steepening bias.&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;em&gt;Implied U.S. Federal Reserve rate cuts&lt;/em&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;em&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/q424quarterlytradingcharts201.jpg&quot;&gt;&lt;img alt=&quot;Implied Fed rate cuts&quot; src=&quot;/-/media/images/global/blogs/images/q424quarterlytradingcharts201.jpg&quot; /&gt;&lt;/a&gt;&lt;/em&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Source: LSEG Eikon&lt;/span&gt;&lt;/em&gt;&lt;/p&gt; &lt;p&gt;With the Fed implementing &lt;a href=&quot;/404 error page?item=web%3a%7b0A5FF4E4-FC0E-4F23-85B2-A324CF864F16%7d%40en&quot;&gt;one last cut at its December meeting&lt;/a&gt;, questions surrounding future cuts came more into focus, with markets no longer pricing in a potential cut until March. Auctions held up reasonably well during the fourth quarter, tracking in line with historical averages (the most recent 30-year auction in December tailed ~1 bp and had a somewhat muted bid/cover of 2.39). These numbers aren&amp;rsquo;t alarming by historical means, but nonetheless signal that investors are wary to add duration at this stage. In credit, volumes averaged just north of $1 trillion per month over the quarter, with the peak volume of the year hitting in October.&lt;/p&gt; &lt;p&gt;Liquidity conditions improved, with bid/ask spreads tightening 2 bps in investment grade credit and 3 bps in high yield versus the year-to-date average, prior to widening back out in December as the holiday season kicked off. Credit spreads remained firmly contained, as yield buyers remained supportive, keeping spreads rangebound in an 75-80 bps option-adjusted spread (OAS) range in investment grade. 2024 capped off a busy year on the supply front, coming in at $1.5 trillion (second only to 2020 at $1.8 trillion). Bonds issued in Q4 tightened an average ~10 bps and were well covered at 3.6x, reflecting the strong demand backdrop that remained a theme throughout the year. &lt;/p&gt; &lt;p&gt;Elsewhere in the world, France&amp;rsquo;s political instability reached a boiling point in early December after &lt;a href=&quot;/404 error page?item=web%3a%7bCDDF204D-164B-4D9E-82EA-18F2DE1587D9%7d%40en&quot;&gt;Prime Minister Michel Barnier was ousted in a no-confidence vote&lt;/a&gt;, significantly widening the spread of 10-year OATs-Bunds (a measure of the risk premium of French government debt over German government debt) to 88 bps. In spite of the election drama, European corporates finished the year strong, tightening 16 bps to end the year at an OAS of 100 bps. &lt;/p&gt; &lt;h2&gt;&lt;strong&gt;FOREIGN EXCHANGE&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The divergence between U.S. monetary policy and Treasury yields, along with the U.S. presidential election, were key drivers of the FX market in the fourth quarter.&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;line-height: 115%;&quot;&gt;&lt;span&gt;Late in Q3, U.S. Treasury yields unexpectedly surged on the same day the Federal Open Market Committee (FOMC) delivered a surprise 50-bps rate cut at its September meeting. This trend extended into Q4, as the FOMC delivered two additional quarter-point rate cuts in November and December, even as Treasury yields continued to rise. This steady increase in yields fueled a 7.7% rally in the U.S. Dollar Index (DXY), which climbed from 100.70 to 108.48 during the quarter.&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;line-height: 115%;&quot;&gt;&lt;span&gt;The widening interest rate differential between U.S. 10-year yields and foreign equivalents also had a significant impact on currency pairs like USD/JPY (U.S. dollar to Japanese yen). After marking its lows at the start of Q4, the USD/JPY rallied approximately 9.5% by year-end.&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;line-height: 115%;&quot;&gt;&lt;span&gt;Donald Trump&amp;rsquo;s &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b2571AC5E-1A29-4B09-AF18-295C25659BAB%7d%40en&quot;&gt;victory in the November presidential election&lt;/a&gt;&lt;/span&gt;&lt;span&gt; further bolstered the dollar. Markets priced in expectations of a stronger dollar, driven by the new administration&amp;rsquo;s proposed tariffs, a larger U.S. fiscal deficit, higher inflation, and a potentially elevated terminal interest rate. The EUR/USD (euro to U.S. dollar) exchange rate, which had traded within a 1.05&amp;ndash;1.12 range for most of 2023 and 2024, broke below its lower bound in Q4, declining from 1.1135 to 1.0335. Similarly, the GBP/USD (British pound to U.S. dollar) exchange rate fell 6.4%, from 1.3375 to 1.2476.&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;line-height: 115%;&quot;&gt;&lt;span style=&quot;letter-spacing: -0.56px;&quot;&gt;[promobox]&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;line-height: 115%;&quot;&gt;&lt;span&gt;In the wake of President Trump&amp;rsquo;s election victory, the potential for tariffs on Canada and Mexico over cross-border drug flows impacted their respective currencies. The USD/CAD (U.S. dollar to Canadian dollar) exchange rate surged above 1.40, nearing March 2020 highs, while the USD/MXN (U.S. dollar to Mexican peso) extended its Q4 rally by 6.5%. Additionally, the suggestion of a 10% tariff increase on Chinese imports pushed the USD/CNH (U.S. dollar to Chinese yuan) to retest its 2022&amp;ndash;2023 highs.&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;line-height: 115%;&quot;&gt;&lt;span&gt;Looking ahead, FX flows suggest a significant shift toward long USD positioning with the Trump administration now in office, with elevated levels sustained through year-end. The heightened uncertainty surrounding the new administration&amp;rsquo;s tariff policies, which are expected to become clearer in the coming months, is likely to remain a major driver of FX market movements.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;DERIVATIVES TRADING&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Near the end of December, Congress passed a law to keep the government funded until mid-March 2025. This capped a quarter filled with anticipation and expectations surrounding the U.S. presidential election and FOMC decisions in November and December. Derivatives provide a way to express views or hedge such announcements and activity.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;There was no shortage of activity as the CME Group reported record annual average daily trading volume in 2024, and record Q4 activity in the U.S. Treasury futures complex. Rates may very well be rangebound as we move deeper into the first half of 2025. &lt;/p&gt; &lt;p&gt;As the U.S. elections approached, the U.S. equity volatility risk premium traded rich as investors utilized options to hedge political uncertainty. This premium collapsed quickly after the elections. Downside skew has remained elevated even at lower levels of implied volatility. This suggests that there is continued demand for far-downside protection. &lt;/p&gt; &lt;p&gt;The premiums in U.S. equity index futures in the first three quarters of 2024 were driven by strong demand for long exposure by asset managers and limited ability by dealers to provide supply to the market due to ongoing regulatory constraints. This imbalance continued through much of the fourth quarter but was exacerbated by the strong rally in U.S. equities after the November elections. This caused equity index futures to trade at historic premiums to fair value. &lt;/p&gt; &lt;p&gt;That premium in S&amp;amp;P 500 futures moved lower as the December futures expiration arrived and the March 2025 contract continued to cheapen aggressively over the remaining days of 2024. By Dec. 31, S&amp;amp;P 500 futures were trading at a 75-bps premium to fair value, which was a decline of 100 bps in just under two weeks. The same factors that drove mispricing higher contributed to this collapse in funding costs at the end of the year. &lt;/p&gt; &lt;p&gt;In Europe, equity returns since the September futures expiration were mixed, with Germany&amp;rsquo;s DAX Index up 6.5%, while the UK FTSE 100 Index, the French CAC Index, and the Euro Stoxx 50 Index were all flat to lower. Futures premiums were elevated, but not to the same extreme as seen in the U.S. Meanwhile, Japan&amp;rsquo;s Topix equity benchmark resumed its richening trend after trading closer to fair value in the previous quarter. &amp;nbsp;&amp;nbsp;&amp;nbsp;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;The bottom line&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The ups and downs witnessed throughout the fourth quarter of 2024 may be a precursor of what lies ahead for much of 2025. As the year unfolds, we anticipate the potential for more volatility as &lt;/span&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b746B61D4-FFE8-4E90-9C71-67A68FE04A19%7d%40en&quot;&gt;markets balance expected economic growth against U.S. policy uncertainty&lt;/a&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;. Amid this backdrop, we believe partnering with an experienced and agile investment solutions provider that can manage risk and move money expeditiously will be critical to achieving investment success.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;At Russell Investments, our 87 years of experience in trading makes us well equipped to do both, no matter the market environment. We combat low volume with significant market depth through 400+ dealers to assist our clients with improved performance and minimal impact. Please reach out if you have any questions.&lt;/p&gt; &lt;p&gt;&lt;a href=&quot;/-/media/files/us/insights/institutions/implementation/q42024-quarterly-trading-report.pdf&quot; class=&quot;btn-solid-blue&quot; target=&quot;_blank&quot;&gt;Download the report&lt;/a&gt;&lt;/p&gt;Jason Lenzo<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. 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It is delivered on an "as is" basis without warranty.</p>CORP-12668 <style> </style><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{E65E463F-795B-47B9-A12F-C60BD66EF476}https://russellinvestments.com/us/blog/q4-2024-economic-and-market-reviewWe look at some of the key events of the fourth quarter of 2024 and what we might expect as 2025 begins. As always, we find that investors who hold a balanced portfolio were rewarded.Tue, 28 Jan 2025 02:18:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;Geopolitical tensions and an uncertain inflation outlook rattled markets in the fourth quarter but U.S. stocks still managed to move higher&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;While other equities lagged and bonds remained flat, investors who held a balanced portfolio once again did well&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;As a new year and a new U.S. administration begins, it&amp;rsquo;s a good time to review client portfolios and prepare to navigate the road ahead&lt;/li&gt; &lt;li class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt;Global diversification will become even more important as U.S. large cap valuations and dominance increase&lt;/li&gt; &lt;/ul&gt; &lt;hr align=&quot;left&quot; size=&quot;1&quot; width=&quot;33%&quot; /&gt; &lt;p&gt;You&amp;rsquo;ve likely heard the saying &amp;ldquo;when the going gets tough, the tough get going.&amp;rdquo; A similar principle can apply to investing: &amp;ldquo;when the going gets tough, stay in the market.&amp;rdquo;&lt;/p&gt; &lt;p&gt;It&amp;rsquo;s not a stretch to say that the going was pretty tough in the fourth quarter of 2024. Financial markets were volatile, and for good reason. There was a U.S. presidential election, won by Republican candidate Donald Trump, followed by &lt;a href=&quot;/us/blog/investor-watchpoints-trump-administration&quot;&gt;U.S. policy uncertainty&lt;/a&gt;. There was the brief but worrisome threat of a government shutdown. The U.S. Federal Reserve &lt;a href=&quot;/404 error page?item=web%3a%7b58753E11-F09E-4DDD-A423-08593E841803%7d%40en&quot;&gt;cut rates as expected&lt;/a&gt; but then said it will be more cautious about further reductions, rattling the markets.&lt;/p&gt; &lt;p&gt;Despite this, the S&amp;amp;P 500 Index managed to deliver strong returns over the quarter, supported mainly by the big tech names that have outperformed over the past few years. But unlike the third quarter when every asset class rose, U.S. large cap stocks were the only winners in the period. &lt;/p&gt; &lt;p&gt;And since we all are aware that past performance doesn&amp;rsquo;t necessarily indicate future performance, that means anything can happen in the upcoming quarter &amp;ndash; especially with so much geopolitical uncertainty.&lt;/p&gt; &lt;p&gt;Your clients may be excited or worried about the changes a new administration may bring, and they may want to alter their portfolio to reflect their outlook. But now, more than ever, it&amp;rsquo;s crucial to hold a long-term perspective and ensure your clients are diversified. Let&amp;rsquo;s look at where we are and what could come next.&lt;/p&gt; &lt;p&gt;As the past few quarters have shown, just buying what has worked recently doesn&amp;rsquo;t necessarily give a better return than a diversified portfolio. The chart below, which we used to introduce our &lt;a href=&quot;/404 error page?item=web%3a%7b1304F19E-42FA-4473-BB5A-1DC191AAFB16%7d%40en&quot;&gt;Q4 Economic and Market Review&lt;/a&gt;, shows that a traditional 60% equity/40% fixed income balanced portfolio has served clients well over the years.&lt;/p&gt; &lt;p&gt;Since 1980 there have only been seven years in which a diversified portfolio didn&amp;rsquo;t deliver a positive return, and only two of those years have had negative returns greater than 10%. The only years where a diversified portfolio did poorly were 2008 as the Great Recession began and 2022, the worst year for bonds in history. I think we can all agree they are outliers.&lt;/p&gt; &lt;p&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Click image to enlarge&lt;br /&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/chart-1-q4-emr.webp&quot; target=&quot;_blank&quot;&gt;&lt;img alt=&quot;Marginal income tax rates&quot; src=&quot;/-/media/images/global/blogs/images/chart-1-q4-emr.webp&quot; /&gt;&lt;/a&gt;&lt;br /&gt; &lt;/span&gt;&lt;/em&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;em&gt;Index portfolio of 40% Russell 3000 Index, 20% MSCI EAFE Index, and 40% Bloomberg US Gov/Corporate Bond Index. Index returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. Indexes are unmanaged and cannot be invested in directly. &lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Why we believe global diversification matters&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;The continued dominance of those big U.S. technology names also shows the importance of diversification, especially global diversification. As you can see from the chart below, U.S. equity is commanding a bigger piece of world equities, with only FOUR names now representing one-fifth of the global stock market pie. Any single one of the big tech stocks &amp;ndash; Apple, Nvidia, Amazon and Microsoft &amp;ndash; have a higher market capitalization than Japan, the UK, France or Canada. To put this in perspective, those countries are members of the G-7 &amp;ndash; the world&amp;rsquo;s most prominent developed economies. Apple has the same market capitalization as Japan, the world&amp;rsquo;s third-largest economy.&lt;/p&gt; &lt;p&gt;This U.S dominance and more importantly, concentration in only a handful of stocks, means that investors who aren&amp;rsquo;t globally diversified are vulnerable to any sudden or significant downturn in the outlook for technology stocks. A quick look back at what happened in 2022 may serve as a reminder.&lt;/p&gt; &lt;p&gt;From what I can see, the risk of a downturn isn&amp;rsquo;t zero. Let&amp;rsquo;s look at the price-to-earnings ratio shown at the bottom of the slide. It&amp;rsquo;s pretty evident how expensive those tech names are getting. In addition to cheaper valuations, non-U.S. stocks tend to provide larger dividends and serve as a currency hedge in the case of a weaker U.S. dollar. All I can say is: the rubber band is getting stretched.&lt;/p&gt; &lt;p&gt;What concerns me and I think should concern you is that when money starts to go out of the market, it&amp;rsquo;s most likely going to go out of those big technology names.&lt;/p&gt; &lt;p&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Click image to enlarge&lt;br /&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/chart-2-q4-emr.webp&quot; target=&quot;_blank&quot;&gt;&lt;img alt=&quot;Marginal income tax rates&quot; src=&quot;/-/media/images/global/blogs/images/chart-2-q4-emr.webp&quot; /&gt;&lt;/a&gt;&lt;br /&gt; &lt;/span&gt;&lt;/em&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;em&gt;iSource: Morningstar, Russell Investments and MSCI. Global Stock Weights represented by MSCI ACWI Index. Data as of each year end. Countries represent MSCI Indexes. P/E indicates Forward P/E ratio. Index returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment.&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;Bonds are back better!&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;Now let&amp;rsquo;s look at the flip side of equities: bonds. Fixed income has been trying hard to regain its reputation as a balanced portfolio&amp;rsquo;s kinder and gentler member after a dismal 2022.&lt;/p&gt; &lt;p&gt;Bonds were relatively flat in 2024. With the 10-year U.S. Treasury yield at 4.9% at the end of last year, &lt;a href=&quot;/us/blog/yield-spike&quot;&gt;the most likely direction for yields is to go down&lt;/a&gt;. While bonds have underperformed in recent months, as the new year goes on and the U.S. Federal Reserve likely lower rates in the back half of 2025, the environment for fixed income returns will likely improve. If so, bonds could provide the equity offset that has traditionally been their role. In the meantime, if interest rates do increase, as the chart below shows, the yield an investor receives serves as an offset to the price decline from the rising rates.&lt;/p&gt; &lt;p&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Click image to enlarge&lt;br /&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/chart-3-q4-emr.webp&quot; target=&quot;_blank&quot;&gt;&lt;img alt=&quot;Marginal income tax rates&quot; src=&quot;/-/media/images/global/blogs/images/chart-3-q4-emr.webp&quot; /&gt;&lt;/a&gt;&lt;br /&gt; &lt;/span&gt;&lt;/em&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;em&gt;Source: Morningstar, Barclays Live and St. Louis Fed. U.S. Aggregate Bond Index represents Bloomberg U.S. Aggregate Bond Index. Index returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment.&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;What comes next?&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;We are on the cusp of a new era in U.S. politics and the potential for change is great. The new administration of President Donald Trump has a majority in both Congress and the Senate and the likelihood of pushing through its main policies is strong. But which policies they will focus on are still to be determined and how they are implemented may lead to different consequences.&lt;/p&gt; &lt;p&gt;As we transition from politicking to policy-making, the ultimate outcomes on the &lt;a href=&quot;/404 error page?item=web%3a%7bCA85FC2C-FADB-4066-A71E-3D8BC53C86A7%7d%40en&quot;&gt;four policy watchpoints&lt;/a&gt; below will be key drivers of the market&amp;rsquo;s direction in 2025 and their impact on such areas as inflation and corporate earnings.&lt;/p&gt; &lt;p&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Click image to enlarge&lt;br /&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/chart-4-q4-emr.webp&quot; target=&quot;_blank&quot;&gt;&lt;img alt=&quot;Marginal income tax rates&quot; src=&quot;/-/media/images/global/blogs/images/chart-4-q4-emr.webp&quot; /&gt;&lt;/a&gt;&lt;br /&gt; &lt;/span&gt;&lt;/em&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;&lt;em&gt;Source: Russell Investments, December 2024 and The St. Louis Federal Reserve (FRED)&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;The bottom line&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;It&amp;rsquo;s the start of a new year and a new U.S. administration so it&amp;rsquo;s a perfect time to review your clients&amp;rsquo; portfolios. &lt;/p&gt; &lt;p&gt;Markets in 2025 will continue to focus on inflation, the labor market, earnings and overall valuation levels while digesting the outcomes of political policy decisions both in the U.S. and abroad. Maintaining a long-term perspective and broad diversification will be key to navigating the road ahead.&lt;/p&gt;Mark Eibel<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p> <p>This material is not an offer, solicitation or recommendation to purchase any security.</p> <p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p> <p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p> <p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p> <p>The information, analysis and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual entity.</p> <p><strong>Bloomberg U.S. Aggregate Bond Index: </strong>An index, with income reinvested, generally representative of intermediate-term government bonds, investment grade corporate debt securities, and mortgage-backed securities. (specifically: the Government/Corporate Bond Index, the Asset-Backed Securities Index, and the Mortgage-Backed Securities Index).</p> <p><strong>Russell 3000® Index: </strong>Measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market.</p> <p><strong>MSCI EAFE (Europe, Australasia, Far East) Index: </strong>A free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada.</p> <p><strong>The MSCI AC (All Country) World Index: </strong>Captures large and mid-cap representation across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries. With 2,791 constituents, the index covers approximately 85% of the global investable equity opportunity set.</p> <p>Russell Investments' ownership is composed of a majority stake held by funds managed by TA Associates Management L.P., with a significant minority stake held by funds managed by Reverence Capital Partners L.P.. Certain of Russell Investments' employees and Hamilton Lane Advisors, LLC also hold minority, non-controlling, ownership stakes.</p> <p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the “FTSE RUSSELL” brand.</p> <p>The Russell logo is a trademark and service mark of Russell Investments.</p> <p>Copyright © 2025 Russell Investments Group, LLC. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an “as is” basis without warranty.</p> <p><strong>Russell Investments Financial Services, LLC, member FINRA (www.finra.org), part of Russell Investments</strong></p> <p>RIFIS-26406</p><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{98AF1F91-F152-45AC-AE96-3E052695BAE1}https://russellinvestments.com/us/blog/q4-2024-active-management-review<p style="line-height: normal;"><span>How did active management perform during the fourth quarter of 2024? Which markets beat their respective benchmarks? Which style factors outperformed? Our quarterly Active Management Review assesses performance for the October-through-December period.<br /> </span></p> <style> </style>Mon, 27 Jan 2025 14:05:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary&lt;/strong&gt;:&lt;/p&gt; &lt;ul class=&quot;delta&quot; style=&quot;margin-bottom: 10px;&quot;&gt; &lt;li&gt;The financials sector performed strongly in global markets during Q4, largely due to a combination of monetary easing and dovish commentary from key central banks. Buoyed by AI opportunities, the tech sector also did well.&lt;/li&gt; &lt;li&gt;The fourth quarter was a more favorable environment for active managers in Emerging Markets, International, U.S. Small Cap, Australia, Long/Short and Global Real Estate, while being more challenging for Global, U.S. Large Cap, Europe, the UK, Canada, Japan, and Listed Infrastructure managers.&lt;/li&gt; &lt;li&gt;&lt;span&gt;The Momentum factor performed well across most global markets outside of the U.S., while the Growth factor also outperformed in all markets besides Europe and Japan.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;During a rocky fourth quarter, strength in the financials sector was a unifying theme across global markets. The sector performed well on the back of &lt;/span&gt;&lt;a href=&quot;/404 error page?item=web%3a%7bDFCA3BEC-6FD9-459B-8C73-58065A696580%7d%40en&quot;&gt;monetary easing and more dovish rhetoric from central banks&lt;/a&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt; in key regions around the globe. Case-in-point: the U.S. Federal Reserve (Fed), the Bank of England (BoE), and the European Central Bank (ECB) all reduced policy rates during the quarter, while the Bank of Japan (BoJ) and Chinese authorities offered relatively more dovish commentary about future policy.&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;line-height: normal;&quot;&gt;&lt;span&gt;The tech sector also performed well across global markets, as investors continue to pursue AI-related tech plays. On the flip side, materials had a poor quarter globally, wrapping up a disastrous year for the sector. &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;line-height: normal;&quot;&gt;&lt;span&gt;The Momentum factor was a consistently strong performer across most global markets except in the U.S., where it underperformed slightly. Momentum closed the year with the best factor returns of any factor in the global equity market. Growth also saw a strong quarter globally, outperforming in all markets except Europe and Japan. In the U.S., Australia, and Canada, Growth was the top performer. Meanwhile, Low Volatility and High Dividend stocks were the best performers in emerging markets (EM), while the Value factor did well in Japan, Europe, and the UK.&amp;nbsp; &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;line-height: normal;&quot;&gt;&lt;span&gt;Overall, equity investors lacked enthusiasm during what proved to be a volatile quarter, with most global markets posting flat to negative returns by the end of December. Japan and Canada were the two exceptions, with each charting modest single-digit returns for the quarter. The U.S. election drove high levels of volatility across global equity markets, with investors uncertain about the &lt;a href=&quot;/404 error page?item=web%3a%7bCA85FC2C-FADB-4066-A71E-3D8BC53C86A7%7d%40en&quot;&gt;impacts of potential changes in U.S. trade policy and tariffs&lt;/a&gt;. Equity managers were also concerned about the potential return of high inflation, tempering expectations for further interest rate cuts.&amp;nbsp; &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;line-height: normal;&quot;&gt;&lt;span&gt;Local currency returns for most markets were considerably better than U.S. dollar (USD)- denominated returns. The dollar continued to strengthen in the wake of President Donald Trump&amp;rsquo;s election victory, with markets speculating on the impact of potential U.S. tariffs on inflation and central-bank rate policy. &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;line-height: normal;&quot;&gt;&lt;span&gt;U.S. mega cap stocks dominated the U.S. and global developed indices. These included AI-related tech plays and U.S. consumer giants Amazon and Tesla. Positive sentiment toward the AI theme also supported strong tech stock returns in EM and Canadian equities.&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;line-height: normal;&quot;&gt;&lt;span&gt;On balance, the fourth quarter was a more favorable environment for active managers in Emerging Markets, International, U.S. Small Cap, Australia, Long/Short and Global Real Estate, while being more challenging for Global, U.S. Large Cap, Europe, the UK, Canada, Japan, and Listed Infrastructure managers. Sector dispersion remained wide across most markets, with narrow market leadership impeding managers&amp;rsquo; relative returns. &amp;nbsp;&amp;nbsp;&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;line-height: normal;&quot;&gt;&lt;span&gt;The U.S. election results caused significant volatility throughout the fourth quarter and are likely to remain a key driver going forward. Investors &lt;a href=&quot;/404 error page?item=web%3a%7b2571AC5E-1A29-4B09-AF18-295C25659BAB%7d%40en&quot;&gt;appear to be primarily concerned&lt;/a&gt;&amp;nbsp;with U.S. trade policy, with the possibility of increasing tariffs and inflation impacting export-related sectors. These worries led materials to be among the worst performing sector in Global equities, Emerging Markets, Europe, Japan, and Australia. Other cyclical sectors also struggled across global markets. In addition to U.S. trade and tariff policy, geopolitical tensions also continue to be a key risk, causing uncertainty for investors and potential volatility in markets going forward.&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;line-height: normal;&quot;&gt;&lt;span&gt;At Russell Investments, our unique relationship with underlying managers affords us special access into the latest active management insights. Here are the key takeaways in fourth-quarter active management performance from our manager research team.&lt;/span&gt;&lt;/p&gt; &lt;div&gt; &lt;hr /&gt; &lt;div id=&quot;ftn1&quot;&gt; &lt;/div&gt; &lt;/div&gt; &lt;h2&gt;&lt;strong&gt;Global equities&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The fourth quarter was a challenging environment for active Global equity and moderately positive for International strategies, with around 25% and 50% of products outperforming respective benchmarks.&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;The quarter saw Large Cap Growth and Momentum reassert market dominance while Value and Small Caps struggled.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt; &lt;/p&gt; &lt;h2&gt;&lt;strong&gt;U.S. equities&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The fourth quarter was a challenging environment for active Large Cap managers and moderately positive for Small Cap investors, with around 30% and 50% of products outperforming their respective benchmarks.&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Growth and Momentum outperformed in the quarter, continuing the trend from the first half of 2024.Value and Low Volatility underperformed in the risk-on rally.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Higher growth sectors like technology and early cyclicals like financials were the best sectors as investors bet on rising growth. Energy and defensive sectors were underperformers.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Market leadership narrowed during the quarter, as Q3&amp;rsquo;s winners again gave way to the Magnificent Seven and lower-quality names, which worked against the relative positioning of active managers.&lt;br /&gt; &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;color: #000000;&quot;&gt;Emerging Markets equities&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The fourth quarter was a favorable environment for active Emerging Markets managers, with around 65% of products outperforming the EM index.&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;The U.S. election outcome drove uncertainty and volatility in EM, with currency weakness being a key driver of negative returns.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;High Dividend, Momentum, and Minimum Volatility outperformed.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Information technology (IT) continued to dominate and was the only sector with positive absolute returns. This resulted in a positive month for Taiwan. &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Brazil underperformed due to intensifying fiscal concerns, while South Korea saw a sharp pullback amid political instability and a presidential impeachment. Frontier markets performed well.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;color: #000000;&quot;&gt;UK and European equities&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The fourth quarter was a moderately challenging environment for active Europe and UK equity managers, with around 45% and 40% of products outperforming their respective benchmarks.&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Cyclically exposed areas of the market, such as real estate and materials, struggled on concerns over the economic slowdown in Europe and the UK.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;The UK outperformed continental Europe, helped by the performance of UK banks on expectations of higher-for-longer rates. UK stocks also benefitted from their more insulated position on potential U.S. tariffs, which negatively impacted European automakers in particular.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;h2&gt;&lt;strong&gt;Japan equities&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The fourth quarter was a moderately challenging environment for active Japan equity managers, with around 45% of products outperforming the Tokyo Stock Price Index (TOPIX).&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Value, Momentum and Large Cap outperformed, while Quality, Low Volatility, and Small Cap underperformed.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;The financials and consumer discretionary sectors rose, supported by a weaker yen. The persistent inflationary environment led to increased expectations for the normalization of Japan&amp;rsquo;s policy rates, boosting the performance of the financials sector.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Conversely, the utilities sector underperformed due to Kansai Electric Power&amp;rsquo;s surprising announcement of equity financing.&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;color: #000000;&quot;&gt; Australian equities&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The fourth quarter was a moderately positive environment for active Australian equity managers, with around 50% of products outperforming the ASX 300 Index.&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Banks continued their strong rally, returning 6.5% in the quarter and an average return of 33% over calendar 2024. The Commonwealth Bank of Australia (CBA) is now more than 10% of the ASX 300 Index, with a price-to-earnings (P/E) ratio of 25.6. Most active managers are underweight banks on valuation grounds, and it has been a significant detractor in 2024. &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Quantitative strategies again outperformed, where breadth in signals and holdings&amp;mdash;combined with tighter benchmark-relative sector weights&amp;mdash;contributed to positive results. &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;color: #000000;&quot;&gt;Canadian equities&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The fourth quarter was a challenging environment for active Canadian Large Cap equity managers, with around 30% of the universe outperforming the S&amp;amp;P/TSX Index.&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Growth and Momentum outperformed while Low Volatility lagged.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;IT was the best performing sector in the quarter with constituents like Shopify driving the outperformance. Financials, particularly banks, and energy sectors were also ahead.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Communication services was the worst performing sector as the largest telecommunications names continued to struggle due to high debt levels, increased price competition, and regulatory pressures.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Despite the Bank of Canada (BoC) cutting interest rates by 50 bps in Q4, real estate struggled following a more hawkish outlook from the central bank, which tempered rate cut expectations for 2025. &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;color: #000000;&quot;&gt; Long/Short equity&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The fourth quarter was a favorable period for long/short stock selection, with the HFRI Equity Hedge Index advancing 1.7%. The HFRI Equity Market Neutral Index outperformed slightly, advancing 2.1%. Both indexes significantly outpaced the MSCI World Index&#39;s -0.2% quarterly decline.&lt;/span&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;The strong alpha performance was driven by a favorable stock selection environment across most major regions despite market volatility. Macro concerns around central bank policy, Middle East tensions, and U.S. election uncertainty drove the increased volatility. &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;color: #000000;&quot;&gt;Real estate and infrastructure&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;The fourth quarter was favorable for Global listed real estate managers, with 60% of active managers outperforming. It was an extremely challenging quarter for Global listed infrastructure, with only 10% of managers outperforming.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Real estate&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;U.S. healthcare outperformed the benchmark, which was additive to excess returns for managers, driven by overweights in senior housing companies, Welltower and Ventas.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Most managers are overweight the UK, where broad equity weakness and overweights to Big Yellow hurt excess returns.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;U.S. industrial was among the worst performing sectors. Most managers benefitted from underweights to the sector. &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;p&gt;&lt;strong&gt;&lt;span&gt;Infrastructure&lt;/span&gt;&lt;/strong&gt;&lt;/p&gt; &lt;ul style=&quot;list-style-type: disc;&quot;&gt; &lt;li&gt;&lt;span&gt;Holdings in communication infrastructure, which were down 19% and are not in the S&amp;amp;P Global Infrastructure Index, were a significant detractor for most strategies.&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Most managers are underweight energy midstream companies, which rallied due to expected improvement in business conditions under the Trump administration. &lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;style&gt; &lt;/style&gt;Tom Warburton<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12674 <style> </style><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{5D1C525D-A1FC-47DB-AAAA-7F7821183F1B}https://russellinvestments.com/us/blog/non-profit-investors-deriskingAs tempting as it might be, we believe non-profit investors shouldn’t de-risk just because yields have increased. Here’s why.<br />Mon, 27 Jan 2025 13:43:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;High expected fixed income returns imply many non-profit investors could de-risk while still expecting to achieve their stated return objective&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;For those focusing on minimizing volatility it is likely attractive, but for others it is more nuanced&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Investors should consider the context around their return objective and the potential opportunity cost before adjusting their portfolios&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;Non-profit investors often distill their objectives into a return target. It seems obvious that higher expected returns from fixed income imply that investors should de-risk from equity to fixed income and reduce portfolio risk for a given return target. Although this may be appropriate for some, it is an oversimplification of investment strategy, and it would not result in an appropriate asset allocation for many investors. Non-profit investors should first consider these factors:&lt;/span&gt;&lt;/p&gt; &lt;ol&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;How was the return objective and strategic asset allocation set? &lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Has the portfolio achieved its return target historically?&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;What is the opportunity cost of underweighting equity?&lt;/span&gt;&lt;/li&gt; &lt;/ol&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;How was the return objective and asset allocation set?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The stated return objective can mean different things to different non-profit investors. For some it is an aspirational target and for others it is a minimum objective that they would like to surpass, while for others it was the calculation at one point in time of a reasonable return estimate for the portfolio that most aligned with their risk tolerance. In none of these cases is the portfolio built with the expectation that in all market environments the return target will be exactly met. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The strategic asset allocation is designed with uncertainty around the return target and investor preferences in mind. This results in a range of differently constructed, yet appropriate, portfolios for the same stated return target, depending on how the investor prefers to balance risk potential with growth opportunities. Therefore an investor with a lower risk appetite is more likely to consider increasing the allocation to fixed income than an investor focused first and foremost on maximizing growth. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;For healthcare systems that factor in the cost of borrowing when setting the return objective, there&amp;rsquo;s also another factor to consider: whether rising borrowing costs will require a higher return objective. Other non-profit investors that care about real returns and real spending should also consider if changing inflation expectations require a higher nominal return objective.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;[promobox]&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Has the portfolio achieved its return target historically?&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Significant losses often create attractive valuations and high forward-looking returns. This is currently the case with fixed income. Although the main losses for fixed income occurred over two years ago, for many non-profit investors those losses&amp;mdash;combined with high inflation and strong, but volatile, equity markets&amp;mdash;mean that their total-portfolio returns may have fallen short of meeting their objectives in the past three to five years. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Due to the wide variety of returns over this time period, the answer will vary from investor to investor. Ultimately, though, before considering de-risking, all investors should review their historical performance while determining their return objective for the next five to 10 years. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The opportunity cost of underweighting equity&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Even if an investor expresses confidence that fixed income returns will be elevated down the line, this should not necessarily equate to a tactical preference for fixed income over equity. In addition, it&amp;rsquo;s important for a typical non-profit investor with a capital constrained portfolio to understand that any increase in allocation to fixed income will come with a corresponding reduction in the allocation to equities. In other words, both the tactical and long-term expectations of equity returns relative to fixed income returns still matter&amp;mdash;and may not have changed just because fixed income yields are up.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Crucially, since equity returns often come in waves to compensate for the years in which they are low and/or negative, it is important to not miss out on those strongly positive years. For instance, an investor that saw relatively high fixed income yields in October 2022 or October 2023 and correspondingly de-risked out of equity and into fixed income would likely regret that decision&amp;mdash;unless it was based on an organizational need to reduce total portfolio risk. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;This is not to say we expect the same returns out of equity in 2025 that we experienced in 2023 or 2024. But we are mindful that it is a possibility, and without strong conviction otherwise, are hesitant to underweight equities. If there is not an organizational need to reduce risk, non-profit investors should consider asking: &lt;em&gt;If I reduced my allocation to equities because of high fixed income yields, but then equities outperformed core fixed income 25% to 6%, how would I feel?&lt;/em&gt;&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The bottom line&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;A seemingly simple proposal&amp;mdash;taking advantage of higher expected fixed income returns by increasing &amp;nbsp;allocations to the asset class, in order to achieve return objectives with less risk&amp;mdash;is not so simple. That&amp;rsquo;s not to say that doing so shouldn&amp;rsquo;t be considered, as there are many valid reasons why adding to fixed income could be appropriate, including an organizational desire to minimize volatility and drawdowns. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Ultimately, the main takeaway is that non-profit investors shouldn&amp;rsquo;t de-risk &lt;em&gt;just because&lt;/em&gt; yields have increased&amp;mdash;as tempting as that may be.&lt;/span&gt;&lt;/p&gt;Mary Beth Lato<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12662<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{A2C0EC55-9709-4315-A7E6-1A6AAEF7F3F5}https://russellinvestments.com/us/blog/takeaways-trump-administration-start-mwir<p><strong><span>In the latest video update:</span></strong></p> <ul style="list-style-type: disc;"> <li><span>U.S. could impose tariffs on China, Mexico, and Canada next month</span></li> <li><span>Fed expected to hold rates steady at upcoming meeting</span></li> <li><span>Big Tech earnings season kicks off soon</span></li> </ul>Fri, 24 Jan 2025 05:10:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li&gt;&lt;span&gt;The U.S. could impose tariffs on China, Mexico, and Canada starting next month&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;The Fed is widely expected to hold rates steady at its upcoming meeting&lt;/span&gt;&lt;/li&gt; &lt;li&gt;&lt;span&gt;Big Tech earnings season, which kicks off next week, will be a key focus for markets&lt;/span&gt;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; font-size: 18px;&quot;&gt;On the latest edition of Market Week in Review, Director and Senior Investment Strategist Alex Cousley discussed the headlines from U.S. President Donald Trump&amp;rsquo;s first days back in the White House. He also shared some of the main investor watchpoints for the week ahead, including corporate earnings and the U.S. monetary policy outlook.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Tariffs a big focus of new U.S. administration &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;The big story of the week for markets was the beginning of the second Trump administration, Cousley said, noting that Donald Trump was sworn in as the 47th president of the United States on Jan. 20. He reminded viewers that the Russell Investments strategist team sees &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/404 error page?item=web%3a%7bCA85FC2C-FADB-4066-A71E-3D8BC53C86A7%7d%40en&quot;&gt;four main watchpoints for investors during Trump&amp;rsquo;s second term&lt;/a&gt;&lt;/span&gt;&lt;span&gt;: tariffs, deregulation, taxes, and immigration.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;During its first few days, the Trump administration announced details on immigration policies and a few changes on the deregulation front, but hasn&amp;rsquo;t provided much detail on potential changes to tax laws yet, Cousley remarked. He said the main focus so far has been centered around trade and tariffs, with the new administration directing federal agencies to review China&amp;rsquo;s trade practices. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;President Trump also announced that the U.S. might impose a 10% tariff on Chinese imports as soon as Feb. 1, Cousley noted. &amp;ldquo;A 10% tariff rate on goods from China is probably a bit lower than what markets have been worrying about,&amp;rdquo; he said. The president also said that the U.S. might impose a 25% tariff on imports from Canada and Mexico at the beginning of next month, Cousley added. &amp;ldquo;By contrast, that rate is a bit higher than markets have been anticipating,&amp;rdquo; he remarked.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Cousley noted that so far, there hasn&amp;rsquo;t been much of a response from Chinese policymakers about potential U.S. tariffs. However, a government official did recently remark that perhaps China needs to start importing more, Cousley said. &amp;ldquo;Going back to the big picture, China has a very low consumption rate as a percentage of GDP (gross domestic product) when compared to most developed markets. China does need to increase its consumption rate&amp;mdash;and these remarks were in line with this thinking,&amp;rdquo; Cousley stated.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;He closed by noting that overall, there are some early signs China might be attempting to strike a little more of a conciliatory tone with the second Trump administration than with the first one, but that an escalating trade war between the U.S. and China remains a very big risk that will have to be carefully monitored. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span&gt;Fed expected to skip rate cut at first meeting of 2025&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span&gt;Cousley characterized the upcoming final week of January as a very important one for markets for two main reasons: the U.S. Federal Reserve (Fed) meeting on Jan. 28-29 and earnings reports from big tech names.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;After cutting interest rates by 100 basis points (bps) in the final months of 2024, the U.S. central bank is widely expected to forgo another rate cut, leaving the overnight rate unchanged at 4.25%-4.5%, Cousley said. Of much greater interest to markets will be the Fed&amp;rsquo;s outlook for rates in the months ahead, he said, noting that the strategist team &lt;/span&gt;&lt;span&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b0A5FF4E4-FC0E-4F23-85B2-A324CF864F16%7d%40en&quot;&gt;expects two cuts&lt;/a&gt;&lt;/span&gt;&lt;span&gt; in 2025. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span&gt;Several big tech companies are also due to report fourth-quarter earnings the week of Jan. 27, including Apple, Microsoft, and Meta, Cousley said. He noted that artificial intelligence (AI) continues to be a big theme these days, with the Trump administration recently announcing a significant AI funding project. Amid this backdrop, markets are likely to focus on the capital expenditure plans from big tech companies in addition to their quarterly earnings, Cousley concluded. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a rel=&quot;noopener noreferrer&quot; class=&quot;btn-solid-blue&quot; href=&quot;https://youtu.be/MkEqFpnuOXI&quot; target=&quot;_blank&quot;&gt;Watch the video&lt;/a&gt;&lt;a class=&quot;btn-solid-blue&quot; href=&quot;https://www.buzzsprout.com/552559/episodes/16497696&quot;&gt;Listen to the podcast&lt;/a&gt;&lt;/p&gt;Alexander Cousley<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p><p> CORP-12682</p> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style> <style> </style><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{8793A929-B091-41E3-9C3B-2B71C1152955}https://russellinvestments.com/us/blog/futures-etfs-physicalsWhich implementation instrument is best for you? It depends on what you're trying to accomplish. We assess the pros and cons of the three main ones: futures, ETFs, and physicals.Wed, 22 Jan 2025 13:43:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;The cost to roll futures has risen significantly over the past two years due to strong market performance and supply/demand.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;We see futures as a valuable tool when used for the right purposes&amp;mdash;such as in a liquidity overlay capacity and when capital efficiency is needed, such as in an unfunded exposure. However, we believe that investors looking to maintain asset-class exposures for longer periods of time might want to consider using ETFs or physicals instead.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Some of the advantages of ETFs include minimal tracking error to an index, strong liquidity, advantageous tax implications, and cheaper rolling costs than futures when held for longer periods of time.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Some of the advantages of physicals include low holding costs and customizability. While they tend to be the most expensive to trade in the short-term, the low holding costs quickly make up for the initial transaction cost. Physicals are typically a great option for investors that expect to hold a position for several months (or more) with modest levels of turnover.&amp;nbsp; &amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;In mid-2023, the estimated costs to roll S&amp;amp;P 500 futures on a quarterly cycle was roughly 0.40%, or 40 basis points (bps) annualized&amp;mdash;a fairly justifiable expense for most investors considering the benefits of the instrument.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Fast forward two years later to early 2025, and now the 1-year average roll cost has steadily increased to an estimated +95 bps on an annualized basis. This means the &amp;ldquo;cost&amp;rdquo; to hold long exposure has more than doubled in the past two years. It&amp;rsquo;s important to note that these roll costs are not an explicit transaction cost like a commission, but rather can be considered the implied cost of financing. The implied financing costs are always present and baked into futures pricing, but only explicitly measurable during the roll periods.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;For some investors looking to gain market exposure through various instruments, the increases in futures costs have caused them to consider alternative solutions. So, what should they do? Move to ETFs (exchange-traded funds)? Pivot to physicals?&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The answer, like so much in investing, strongly hinges on what the investor is trying to accomplish.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;With this in mind, let&amp;rsquo;s dig into the pros and cons of using the three main implementation instruments&amp;mdash;futures, ETFs, and physicals&amp;mdash;to gain market exposure. &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Futures: Highly liquid, but can be costly to roll in strong markets&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Derivatives tend to be one of the more common instrument options used by investors to gain market exposure&amp;mdash;specifically, listed futures contracts, such as S&amp;amp;P 500 futures. And the reasons are plenty: they&amp;rsquo;re the cheapest to trade, they&amp;rsquo;re capital-efficient, they have trading flexibility (they can be traded after-hours), and they&amp;rsquo;re the most liquid. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The dramatic cost increase in rolling futures over the past two years, however, has put a significant damper on their appeal. &amp;nbsp;Roll costs for major equity indexes across the globe have risen quite substantially over the last two years, with many of the experiencing roll costs 2-3x that of their 3-year average. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/saucierjan16_rollchart.jpg&quot;&gt;&lt;img alt=&quot;Roll costs&quot; src=&quot;/-/media/images/global/blogs/images/saucierjan16_rollchart.jpg&quot; /&gt;&lt;/a&gt;&lt;/p&gt; &lt;p&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Equity roll costs by region, December 2024-March 2025&lt;/span&gt;&lt;/em&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;What&amp;rsquo;s fueling the sharp increase? Broadly speaking, the rise can be attributed to two factors: robust market performance and supply/demand. Simply put, when markets are strong, demand for long exposure tends to increase and futures costs go up, as dealers only have so much balance-sheet capacity. When markets sell off, demand drops, and brokers in turn have more capacity on their balance sheets, which translates to lower roll costs on futures contracts.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;[promobox]&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;It&amp;rsquo;s also important to note that historically, roll costs between December and March tend to be at a premium due to year-end balance-sheet constraints. This is consistent with the December 2024/March 2025 roll period being by far the most expensive measurement period of last year.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Now, this isn&amp;rsquo;t to say we think investors should shy away from using futures because of their increased roll costs. We see futures as a valuable tool when used for the right purposes&amp;mdash;such as in a liquidity overlay capacity and when capital efficiency is needed, such as in an unfunded exposure. However, we believe that investors looking to maintain asset-class exposures for longer periods of time would be well-served to consider using ETFs or physicals instead. Let&amp;rsquo;s dig in and see why.&lt;/span&gt;&lt;/p&gt; &lt;h2 style=&quot;padding: 0in; border: none;&quot;&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;ETFs: Minimal tracking error and cheaper to roll than futures&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p style=&quot;padding: 0in; border: none;&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;For some investors, ETFs can be a better alternative to futures. Some of their advantages include minimal tracking error to an index, strong liquidity, advantageous tax implications, and cheaper transaction costs than futures when held for longer periods of time. Because of this, using ETFs to gain exposure can result in substantial savings costs for investors&amp;mdash;particularly the longer they&amp;rsquo;re held.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;a href=&quot;/-/media/images/global/blogs/images/sauicerjan16_futures.jpg&quot;&gt;&lt;img alt=&quot;Futures&quot; src=&quot;/-/media/images/global/blogs/images/sauicerjan16_futures.jpg&quot; /&gt;&lt;/a&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;em&gt;&lt;span style=&quot;font-size: 13px;&quot;&gt;Source: Russell Investments. Data as of October 2024. For illustrative purposes.&lt;/span&gt;&lt;/em&gt;&lt;br /&gt; &lt;br /&gt; The chart above helps demonstrate this by comparing the holding costs of exposure to the MSCI All-Country World Index across futures, ETFs, and physicals. As shown, futures are cheapest for short-term liquidity needs such as a daily cash equitization overlay, or to offset exposures in a transition management (TM) event. However, as the holding period lengthens, futures become the least appropriate tool, with ETFs and physicals more cost-effective.&lt;/span&gt;&lt;/p&gt; &lt;h2 style=&quot;padding: 0in; border: none;&quot;&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Physicals: Cheap to hold, customizable&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p style=&quot;padding: 0in; border: none;&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;As the chart shows, while physicals tend to be the most expensive in the short-term to trade (out of the three options), the low holding costs quickly make up for that initial transaction cost, making it the winner over the medium and long term. &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;padding: 0in; border: none;&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Physicals have other advantages as well, including the fact that they can be customized across factor, sector, and stock-level risks, helping clients tailor exposures to meet their objectives. In addition, client-specific exclusions (security restrictions, industry screens, etc.) can be removed in the construction of the portfolio. The customizability and low holdings costs typically make physicals a great option for clients that expect to hold the position for several months (or more) with modest levels of turnover.&amp;nbsp; &lt;/span&gt;&lt;/p&gt; &lt;h2 style=&quot;padding: 0in; border: none;&quot;&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Which implementation instrument is right for you? It depends on your objectives&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p style=&quot;padding: 0in; border: none;&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Since each implementation instrument comes with its own unique set of advantages and challenges, how can an investor realistically gauge which one will work best? To circle back to our earlier point, the best way to ascertain this is to unpack what your specific exposure goals are.&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;padding: 0in; border: none;&quot;&gt;&lt;strong&gt;&lt;em&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Completion instrument considerations&lt;/span&gt;&lt;/em&gt;&lt;/strong&gt;&lt;/p&gt; &lt;a href=&quot;/-/media/images/global/blogs/images/saucierjan23_edit.jpg&quot;&gt;&lt;img alt=&quot;Instrument considerations&quot; src=&quot;/-/media/images/global/blogs/images/saucierjan23_edit.jpg&quot; /&gt;&lt;/a&gt;&amp;nbsp; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em;&quot;&gt;For instance, are you looking for short-term exposure to an asset? Long-term? What are your liquidity needs? How cost-conscious are you? Futures, ETFs, and physicals are all important tools when used for certain purposes&amp;mdash;but that purpose must be defined first.&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;padding: 0in; border: none;&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;While questions like these warrant serious consideration, they&amp;rsquo;re not necessarily the type that are top-of-mind for large institutional investors. After all, most have a very full plate to begin with. This is where working with the right implementation partner can be highly advantageous.&lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;padding: 0in; border: none;&quot;&gt;&lt;strong&gt;&lt;em&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Instrument options for gaining market exposure&lt;/span&gt;&lt;/em&gt;&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;&lt;img alt=&quot;Benefits&quot; src=&quot;/-/media/images/global/blogs/images/saucierjan16_2.jpg&quot; /&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong style=&quot;letter-spacing: -0.035em;&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The value of working with a skilled implementation partner to manage your exposures&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p style=&quot;padding: 0in; border: none;&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;It&amp;rsquo;s no secret that managing portfolio exposures is a complex process that can lead to unnecessary expenses if best practices aren&amp;rsquo;t followed. But keeping roll costs and holding costs at bay isn&amp;rsquo;t something many organizations have the time or resources to do. That&amp;rsquo;s why we believe it&amp;rsquo;s best, in most instances, for these companies to lean on a trusted consultative implementation services partner to handle these types of tasks. &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;padding: 0in; border: none;&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The right partner will manage all aspects of your portfolio&amp;rsquo;s exposures, including keeping a vigilant watch on expenses like roll costs and implementation costs. What&amp;rsquo;s more, they&amp;rsquo;ll proactively bring these issues to your attention well before they become problematic. They&amp;rsquo;ll sit down with you to discuss alternatives, because they&amp;rsquo;ll understand that defaulting to one instrument type can lead to unintended costs and limitations. &lt;/span&gt;&lt;/p&gt; &lt;p style=&quot;padding: 0in; border: none;&quot;&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Ultimately, we believe having access to a broader implementation platform that allows for the use of multiple instruments to gain market exposure is critical to attaining investment success. Consider partnering with a skilled implementation provider that offers as much.&lt;/span&gt;&lt;/p&gt;Philip SaucierAustin Kishi<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12676<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{41DCD44B-7CA7-42C7-9C38-153999B42CC3}https://russellinvestments.com/us/blog/top-issues-institutional-investors-20252025 is likely to offer more than the typical share of big changes for institutional investors. Learn the key issues we think institutional investors should consider as the year gets underway.Tue, 21 Jan 2025 13:43:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Institutional investors may want to consider increasing their allocation to U.S. small caps and leaning further into private markets.&amp;nbsp;&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Large institutional investors that don&amp;rsquo;t already use an OCIO provider should consider having a transition management partner in place.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Non-profits should ensure that their investment strategy is in alignment with the goals of the enterprise.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;DB plan sponsors may want to consider increasing their contribution rates if financially feasible.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;DC plan sponsors should consider adopting a multi-manager structure.&amp;nbsp;&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;&lt;span style=&quot;letter-spacing: -0.035em; line-height: 115%;&quot;&gt;While every new year arrives with its own unique set of opportunities and challenges for institutional investors, we believe 2025 could offer more than the typical share. Why? For starters, big changes are already afoot as the year opens, with the new administration of President Donald Trump already pursuing sweeping adjustments in areas like &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7bCA85FC2C-FADB-4066-A71E-3D8BC53C86A7%7d%40en&quot;&gt;trade, immigration, fiscal policy, and deregulation&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em; line-height: 115%;&quot;&gt;. Changes in these areas may result in notable impacts to investor portfolios, as illustrated in our &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b746B61D4-FFE8-4E90-9C71-67A68FE04A19%7d%40en&quot;&gt;2025 Global Market Outlook&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;letter-spacing: -0.035em; line-height: 115%;&quot;&gt;. In addition, we expect that the ongoing shift toward private markets will continue to present institutional investors with increased access to compelling investment opportunities.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Meanwhile, further clarity around the Federal Reserve&amp;rsquo;s (Fed) monetary easing stance has the potential to make the year another &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b9CDECAB1-7A36-47D3-B7D1-6C4916411E43%7d%40en&quot;&gt;strong one for portfolio transitions&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;. By a similar token, the recent robust performance in U.S. equity markets could make 2025 an appropriate time for defined benefit (DB) plan sponsors to consider increasing their contribution rates if financially feasible. Last but not least, the current environment also presents new opportunities for defined contribution (DC) plan sponsors and non-profits&amp;mdash;including endowments, foundations, and healthcare systems&amp;mdash;to consider.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;This article, categorized by market segment, shares some of the key issues we think institutional investors should consider as 2025 gets underway.&amp;nbsp; &lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;1. All institutional investors: Consider increasing your allocation to U.S. small caps and integrating private markets into your portfolio.&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;We think U.S. small caps could play an increasingly important role in investor portfolios as the year gets underway. This is largely due to the expected pro economic and business growth policies we plan to see unveiled from the new administration. &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b810BBF37-3053-447D-8CE8-D82D7AE42DB4%7d%40en&quot;&gt;U.S. small cap names stand to be a beneficiary if these types of policies come to fruition&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;, particularly companies in high-growth areas like finance and software. In addition, the attractive valuations of U.S. small cap stocks in comparison to their large cap counterparts, coupled with an improving earnings outlook for 2025, suggests ample opportunities in this space.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;We also believe the environment this year may prove to be more favorable for private markets investors, due to a combination of expected looser regulations, stabilizing interest rates, and a potential rise in mergers and acquisitions. In addition, the ongoing shift away from public markets continues to accelerate. Case-in-point: &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b746B61D4-FFE8-4E90-9C71-67A68FE04A19%7d%40en&quot;&gt;Venture capital investments now make up 27% of deals and 41% of capital raised&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;. From our vantage point, investors who capitalize on this trend by leaning further into private markets may be well-served in 2025. However, we&amp;rsquo;d stress that a multi-manager approach is, in our opinion, a crucial component to achieving success in this new landscape. By diversifying across specialized managers, particularly in real assets, we believe investors can access a broader range of opportunities that blend both public and private market investments.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;2. All large institutional investors: Consider having a transition management partner in place&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;As &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b9CDECAB1-7A36-47D3-B7D1-6C4916411E43%7d%40en&quot;&gt;we recently noted&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;,&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; our customized portfolio solutions (CPS) team has seen a marked uptick in portfolio transition events over the past six months. While every institutional investor has their own specific reasons for transitioning assets, we believe some of this increase was due to investors wanting to make changes ahead of the recent U.S. elections due to potential volatility concerns, and some due to the additional clarity from the Fed on the path forward for rates. Notably, we expect this trend to continue in 2025 even with political uncertainty and wavering Fed policy.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;When looking to move assets, we believe most investors that don&amp;rsquo;t already use &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b72A9A9BE-17A1-4C12-BA7F-C7B232FAA2C5%7d%40en&quot;&gt;an OCIO provider&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; are best served by partnering with a qualified and experienced transition manager rather than attempting to handle the transition on their own. Why? Put simply, the process of &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b24139515-DD7E-4432-B069-BCA34BF47C85%7d%40en&quot;&gt;transitioning assets is often highly complex&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; and risky. Factors such as country domiciles, the regulatory environment, currency considerations, and the liquidity associated with the old and new managers must all be considered. For an organization without the right capabilities, the process can lead to inefficiencies, unnecessary trading, tax drag, and loss of market exposure.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Because the need for a portfolio transition can materialize quickly, we believe it&amp;rsquo;s crucial for institutional investors to have a transition manager lined up well in advance of any potential transitions. However, finding the right transition manager to work with&amp;mdash;one with a blend of deep expertise and specialist skills&amp;mdash;takes time and research. Yet we all know markets don&amp;rsquo;t work on a similar timescale. Recent years have demonstrated all too well how they can quickly turn on a dime, making the need to have a transition manager in place before moving money all the more vital in order to avoid unnecessary exposures and risks. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The key takeaway here? Consider conducting your due diligence on transition managers and securing a partner (or multiple partners) soon, before any potentially rough seas surface. Otherwise, it might be too late, and the results could be costly.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;[promobox]&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;3.&lt;/span&gt;&lt;/strong&gt;&amp;nbsp;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Non-profits, including endowments &amp;amp; foundations and healthcare systems: Make sure your investment objectives are aligned with the goals of the organization.&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The post-pandemic environment of high inflation and high interest rates has been a double whammy for many non-profits, which have seen their costs rise while the cost to finance debt has become more and more expensive. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;When setting the investment strategy to align with enterprise needs, we believe non-profits should consider their risk tolerance and return objectives. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;For healthcare systems, &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b9453BA0E-E484-4348-B992-747433DD0748%7d%40en&quot;&gt;ensuring alignment with the enterprise needs&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; will likely depend on operations and financing conditions. Organizations with strong operations and financing capacity typically will be able to take on a higher level of risk. Conversely, those with stressed operational and financing capacity will usually have a lower tolerance for risk, even if they have the stronger desire for income from the investment portfolio. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Endowments and foundations, meanwhile, should carefully consider how any changes in strategy could impact their ability and need to support the communities they serve, and if they&amp;rsquo;re &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7bAC0DB8C4-0779-4C68-944A-B2E240F9A359%7d%40en&quot;&gt;more likely to be affected&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; by rising costs and inflation or economic stress. These considerations should influence how their portfolios are positioned to withstand different potential economic shocks.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Ultimately, there is no&lt;em&gt; one-sized-fits-all&lt;/em&gt; answer given the unique needs of every non-profit. However, we believe that a holistic framework that incorporates the needs and concerns of the enterprise is an essential starting point for all organizations. Consider developing or refining yours this year.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;4. DB plan sponsors: Review your plan&amp;rsquo;s funded status in the context of the corporate balance sheet and right-size the contribution policy&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Our recently released &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b8FB10455-3852-4E91-9295-87A23C246F45%7d%40en&quot;&gt;annual Prudent Pension Funding Report&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt; demonstrated that although most defined-benefit plans are still on track to achieving full funding by contributing a small percentage of their cashflow from operations, slight changes in interest rates or a company&amp;rsquo;s financial situation can have outsized impacts on their funding goals and the burden the pension plan presents. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Consider, for instance, that in 2022, 5% of companies in the Russell 1000 Index were contributing anywhere from 2% to 3% of their corporate cashflow to their pension plans on an annual basis. At the time, this would have resulted in their plans achieving fully funded status in eight to 13 years&amp;mdash;an attainable timeline. One year later, however, the timeline for full funding for this subset of companies ballooned to over 100 years&amp;mdash;turning what was once a solvable problem into a perpetual, seemingly infinite problem. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;In our opinion, this dramatic shift shows why it&amp;rsquo;s important for these companies in healthy pension funding situations with plans whose deficits are levered relative to the balance sheet to increase their contribution rates if financially feasible. Our research show that just a small increase in contribution rates can significantly improve the stability of their corporate plan&amp;mdash;significantly reducing the risk of permanently jeopardizing their funding goals. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;With this mind, we encourage companies that have seen an increase in corporate cashflows to consider increasing contributions in the short-term. At the end of the day, paying now instead of paying later often makes for a more comfortable experience, and ensures greater stability for a plan.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;5. DC plan sponsors: Consider adopting a multi-manager structure&amp;nbsp; &lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Most defined-contribution (DC) plan sponsors have read countless studies that show how having too many investment options typically leads to poor investment decisions by participants. If a committee&amp;rsquo;s objective is to successfully lead participants to well-funded retirements, then we believe its primary duty is to provide limited choices&amp;mdash;all of which create a high likelihood of a successful outcome.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Importantly, though, collapsing and consolidating options doesn&amp;rsquo;t mean you need to remove diversification. As a plan fiduciary, you may like the large cap growth, core and value funds in your plan, and participants would certainly benefit from both the opportunity to diversify and access to quality managers with different investment styles. But how? Enter a multi-manager approach.&lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;In DC plans, a multi-manager structure allows for a limited set of investment options stocked with high quality and diverse strategies. &lt;/span&gt;&lt;/p&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;While most investment committees for large defined contribution plans have embraced multi-manager structures for years, we &lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;&lt;a href=&quot;/404 error page?item=web%3a%7b82528BA1-778E-4F7D-A7BB-B2D46A026772%7d%40en&quot;&gt;believe plans of all sizes should evaluate this as an alternative to single manager portfolios&lt;/a&gt;&lt;/span&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;. Part of the rationale for this interest is that managers focus on different areas of the market, and diversifying among managers within one solution can provide a smoother ride for plan participants. Exposing participants to the idiosyncratic risk of a single manager is best avoided by building a multi-manager fund. We encourage DC plan sponsors that haven&amp;rsquo;t explored this alternative structure to consider doing so in 2025.&lt;/span&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;The bottom line&lt;/span&gt;&lt;/strong&gt;&lt;/h2&gt; &lt;p&gt;&lt;span style=&quot;line-height: 115%;&quot;&gt;Unfolding amid an uncertain backdrop, 2025 has the potential to be a year rife with change. We believe the months ahead may present a myriad of opportunities and challenges for investors&amp;mdash;and that those who are better prepared are more likely to progress toward their investment goals. Consider reaching out to your trusted investment partner and discussing some of the issues detailed above.&lt;/span&gt;&lt;/p&gt;Lisa Schneider<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p><p>This material is not an offer, solicitation or recommendation to purchase any security.</p><p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p><p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p><p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p><p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p><p class="footnote">The Russell logo is a trademark and service mark of Russell Investments.</p><p>This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p>CORP-12661<p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>{6FE5DD0E-B644-4316-851F-4D6DB6C19EFF}https://russellinvestments.com/us/blog/importance-of-personalizationNow that coffee, television service, and travel preferences can be customized to someone's specific desires, shouldn't wealth management be too? Here are four ways to offer personalization in your practice and help build client satisfaction, confidence and loyalty.Tue, 21 Jan 2025 07:01:00 -0800&lt;p class=&quot;delta&quot;&gt;&lt;strong&gt;Executive summary:&lt;/strong&gt;&lt;/p&gt; &lt;ul class=&quot;delta&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;We demand and require personalized service in many areas of our lives &amp;ndash; from choosing our favorite seats on an airplane to explicit coffee orders&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Personalization is important in wealth management too as clients want to feel their advisors see them as a unique individual with specific needs and goals&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Personalization has become key for building client satisfaction, confidence and loyalty&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;To make your practice more personalized, consider the four aspects of personalization: service, education, appreciation and investment recommendations&lt;/li&gt; &lt;/ul&gt; &lt;hr /&gt; &lt;p&gt;Is customization and personalization really that important to clients? The other night at dinner, my husband Eric and I were talking about how much people crave tailored experiences these days. I hear about the need for personalization all the time, but I wanted to dig deeper into what it truly means for financial professionals as we engage with clients every day. How do we differentiate ourselves from the competition?&lt;/p&gt; &lt;p&gt;Eric jokingly called me high maintenance during our conversation. Naturally, I disagreed, claiming that I&#39;m patient, laid back, and don&#39;t require much special treatment. He challenged me, saying, &quot;Think about your life and how much you demand others to personalize based on your needs and desires. I bet you&#39;ll find that you demand a lot from everyone around you.&quot; Determined to prove him wrong, I decided to track my own demands over the past week in both my work and personal life.&lt;/p&gt; &lt;p&gt;Let&#39;s start with my travels this week. I always choose my exact seat on flights, sometimes even paying extra for the perfect spot. Southwest was the exception, but they&#39;re now giving in to customer demands by allowing seat assignments soon. I pick flights based on the shortest travel time, often avoiding those with connections. At the airport, I swing by Starbucks to order a nine-ingredient coffee that costs a pretty penny. I don&#39;t buy Starbucks often, but when I do, it must be just right.&lt;/p&gt; &lt;p&gt;When I arrive at my destination, I check into my hotel and request a room near the elevator, fully expecting an upgrade based on my status. For dinner, I browse the menu and place an order with three special requests, modifying the dish to my liking.&lt;/p&gt; &lt;p&gt;As the week went on, I started to realize that maybe I&#39;m not as easygoing as I thought. To Eric&#39;s delight, I admitted that I do, indeed, expect a lot. Just like our clients, I demand and expect personalized service. Embracing this reality and meeting these expectations is what will help set us apart from the competition.&lt;/p&gt; &lt;p&gt;Soon after, during a regular meeting with my colleague Jack, we started discussing advisor-client relationships and the importance of personalization and customization. Clients no longer want a cookie-cutter approach; they want to feel confident that you see them as unique individuals with their own specific priorities. As their advisor, it&#39;s crucial to show that you are laser-focused on these priorities.&lt;/p&gt; &lt;p&gt;Indeed, our annual &lt;a href=&quot;https://russellinvestments.com/us/resources/financial-professionals/value-of-advisor&quot;&gt;Value of an Advisor study&lt;/a&gt; has invariably found that providing a customized wealth management experience holds significant value for investors. Personalization of engagement in the context of service, education, appreciation, and investment recommendations is &lt;a href=&quot;/404 error page?item=web%3a%7b3F32B2AA-54D0-48E8-921D-028039A12573%7d%40en&quot;&gt;critical for the future success of advisors&lt;/a&gt; because it allows for a more holistic and client-centered approach. Here&#39;s how it ties into each aspect:&lt;/p&gt; &lt;p&gt;&lt;img alt=&quot;Equity chart&quot; src=&quot;/-/media/images/global/blogs/images/image-for-personalization-service.webp&quot; /&gt;&lt;/p&gt; &lt;h2&gt;&lt;strong&gt;1. Personalization of service:&lt;/strong&gt;&lt;/h2&gt; &lt;ul&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;strong&gt;Tailored communication:&lt;/strong&gt; Personalized service means &lt;a href=&quot;/404 error page?item=web%3a%7bCCB788FE-7B93-4E06-8A72-EB2D55C83408%7d%40en&quot;&gt;understanding how each client prefers to communicate&lt;/a&gt;, whether through emails, phone calls, or in-person meetings. This ensures that clients feel comfortable and valued.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;strong&gt;Customized service commitment:&lt;/strong&gt; Advisors can offer services that match the specific needs and circumstances of each client. For example, comprehensive financial planning may be needed for higher net worth clients, but a more simplistic, easy-to-understand plan may be appropriate for others.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;strong&gt;Proactive engagement:&lt;/strong&gt; Anticipating clients&#39; needs and &lt;a href=&quot;/404 error page?item=web%3a%7b96AAF5F0-B27F-4056-89F5-59E8CE6B0F2A%7d%40en&quot;&gt;reaching out with relevant information or services&lt;/a&gt; can &lt;a href=&quot;/404 error page?item=web%3a%7bC42AA89B-576E-4F4F-A210-CAD0F87CAF1D%7d%40en&quot;&gt;enhance the client experience and satisfaction&lt;/a&gt;.&lt;/li&gt; &lt;/ul&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;2. Personalization of education:&lt;/strong&gt;&lt;/p&gt; &lt;ul&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;strong&gt;Relevant content:&lt;/strong&gt; Providing &lt;a href=&quot;/us/insights&quot;&gt;educational resources&lt;/a&gt; that are tailored to the client&#39;s financial knowledge, life stage and priorities can make learning more effective and engaging. For example, offering beginner investment education to new investors and advanced strategies to more experienced clients.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;strong&gt;Learning preferences:&lt;/strong&gt; Understanding whether a client prefers reading articles, watching videos, or attending seminars can help deliver educational content in the most impactful way.&lt;/li&gt; &lt;/ul&gt; &lt;h2&gt;&lt;strong&gt;3. Personalization of appreciation:&lt;/strong&gt;&lt;/h2&gt; &lt;ul&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;strong&gt;Recognition of milestones:&lt;/strong&gt; Acknowledging important personal and financial milestones, such as birthdays, anniversaries, promotions, family milestones, reaching a savings goal, and finally reaching retirement, &lt;a href=&quot;/404 error page?item=web%3a%7bC42AA89B-576E-4F4F-A210-CAD0F87CAF1D%7d%40en&quot;&gt;shows clients that their advisor pays attention to their lives and achievements&lt;/a&gt;.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;strong&gt;Personalized gifts or rewards:&lt;/strong&gt; Sending personalized gifts or rewards based on clients&#39; interests and preferences can foster goodwill and strengthen the advisor-client relationship.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;strong&gt;Customized appreciation events:&lt;/strong&gt; Hosting events or gatherings that align with clients&#39; interests and preferences can create a sense of community and loyalty.&lt;/li&gt; &lt;/ul&gt; &lt;h2&gt;&lt;strong&gt;4. Personalization of investment recommendations:&lt;/strong&gt;&lt;/h2&gt; &lt;ul&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;strong&gt;Risk tolerance and goals:&lt;/strong&gt; Tailoring investment recommendations to match each client&#39;s risk tolerance, financial goals, and time horizon ensures that the advice is relevant and suitable and is table stakes in planning today.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;strong&gt;Ongoing adjustments:&lt;/strong&gt; &lt;a href=&quot;/404 error page?item=web%3a%7bE1AC0034-3C59-4B61-9F94-EBE585CBE120%7d%40en&quot;&gt;Regularly reviewing and adjusting investment strategies&lt;/a&gt; based on changes in the client&#39;s life circumstances, market conditions, or goals ensures the portfolio remains aligned with their needs through active management or a blend of active and passive investments. (Addressing things like risk mitigation, allocation and location of assets, distribution strategies and active tax management.&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;strong&gt;Identifying level of customization needed:&lt;/strong&gt; Gaining expertise in certain client demographics or groups. (Business owners, women, landowners, and so on.) &lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;&lt;strong&gt;Portfolio customization:&lt;/strong&gt; &lt;a href=&quot;/404 error page?item=web%3a%7b0B9899A7-B23F-46B1-BD8C-E1DE712713CB%7d%40en&quot;&gt;Creating investment portfolios that reflect the client&#39;s values and life concerns&lt;/a&gt; gives the client confidence that the advisor can offer solutions that address the complexity of their lives. Many times, this requires the advisor to evolve their investment philosophy, discipline and inventory management to address client needs. Evolution decisions include:&lt;/li&gt; &lt;/ul&gt; &lt;ol style=&quot;margin-left: 40px;&quot;&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;The ability to address industry exclusions based on client values&lt;/li&gt; &lt;li style=&quot;margin-bottom: 10px;&quot;&gt;Proactively addressing tax concerns and challenges brought on by &lt;a href=&quot;/us/blog/concentrated-stock-position&quot;&gt;concentrated positions&lt;/a&gt;, large, deferred comp payouts, &lt;a href=&quot;/404 error page?item=web%3a%7bF87316F2-3201-47F5-876F-88185F154903%7d%40en&quot;&gt;future property liquidation and inheritances&lt;/a&gt;.&lt;/li&gt; &lt;/ol&gt; &lt;p class=&quot;gamma&quot;&gt;&lt;strong&gt;The bottom line&lt;/strong&gt;&lt;/p&gt; &lt;p&gt;With wealth comes complexity and that makes personalization more important for client satisfaction, confidence and loyalty. It can also enhance the overall effectiveness of the advisor&#39;s practice. This comprehensive approach can help ensure that clients receive the most relevant and valuable advice, fostering long-term relationships and success.&lt;/p&gt;Tina Downing<p>These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.</p> <p>This material is not an offer, solicitation or recommendation to purchase any security.</p> <p>Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.</p> <p>Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.</p> <p>Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.</p> <p>The information, analysis and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual entity.</p> <p>Russell Investments' ownership is composed of a majority stake held by funds managed by TA Associates Management L.P., with a significant minority stake held by funds managed by Reverence Capital Partners L.P.. Certain of Russell Investments' employees and Hamilton Lane Advisors, LLC also hold minority, non-controlling, ownership stakes.</p> <p>Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.</p> <p>The Russell logo is a trademark and service mark of Russell Investments.</p> <p>Copyright &copy; 2025 Russell Investments Group, LLC. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.<span style="letter-spacing: -0.035em;">&nbsp;</span></p> <p>RIM-03671</p><p><strong>Important Disclosures</strong></p> <p>© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.</p> <p>Products and services described on this website are intended for <strong>United States residents only</strong>. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.</p> <p>Securities products and services offered through Russell Investments Implementation Services, LLC, part of Russell Investments, a SEC Registered investment adviser and broker-dealer, member FINRA, SIPC.</p> <p>Russell Investments Implementation Services, LLC is a wholly owned subsidiary of Russell Investments US Institutional HoldCo.</p><p>Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.</p>