Slow motion market recovery ahead, says Russell chief investment strategist

  • Warns investors on over-optimism
  • Predicting high single to low double digit global returns

Russell Investments is expecting a slow motion market recovery, according to its March 2011 market commentary. Andrew Pease, chief investment strategist, tells investors to be optimistic but not too optimistic:

  • Russell is moderately bullish on global equities, expecting returns to be in the high single to low double digit range. This is below some analyst predictions of 20%, but Pease urges investors to learn lessons from the past. “Only last August everyone was concerned about a potential double dip, but they’ve been quick to upgrade their forecasts for share market returns. Just as they were too pessimistic then, investors should be optimistic but not too optimistic now,” he said.
  • The motto for Australian equities in 2010 was “less pain means less gain” and this proved true with the ASX 200 eking out a 2% return compared to 13% for the MSCI world index. Russell is slightly less cautious this year, pointing out it would be difficult to argue for a second year of underperformance compared to the rest of the world. But Australian equities will still face headwinds of the high Australian dollar, sluggish economy outside of mining and the potential for more RBA tightening.
  • There is going to be continuing market volatility particularly with geopolitical tensions in the Middle East and North Africa. Pease reminds investors Europe could still be in for some flare-ups due to many European policy makers having a reactive rather than proactive policy.
  • Rising oil prices could cap Russell’s forecast at the lower end of the range, but Pease says oil would have to sit over $130 per barrel for a sustained period before he revised his forecast.

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