The Q2 Strategists’ Outlook and Barometer features in-depth analysis of key trends and indicators, and forecasts global equity markets to outperform global fixed income over the longer term.
 
Russell’s strategists hold a positive view of U.S. equity markets for the coming 12 months, despite economic growth projections remaining between 2% and 2.5% in the near term. Their two year view is also positive, however U.S. equity prices are expected to rise less rapidly as profit margins flatten.
 
Contributing to the optimism in U.S, and global markets generally, were the U.S. housing recovery, the cyclical rebound in China and Japan’s favourable policy initiatives. However, Russell’s strategists cautioned this optimism would be offset by ongoing volatility in the Eurozone, fiscal tightening and moderate economic growth in the U.S. over the next 12 months.
 
In terms of emerging markets, Russell’s strategists believe that despite underperforming developed markets during the recent rally, emerging markets are undervalued and demonstrate potential for double digit earnings per share growth in 2013.
 
Graham Harman, Russell’s Senior Investment Strategist – Asia Pacific, said of the local region: “Despite expected ongoing global volatility the major economies of the region – China, Japan and Australia – all have a positive outlook for the remainder of the year.
 
“China stands to benefit from its government’s commitment to infrastructure and expanding consumption base; while we expect Japan to receive a boost from export growth and increased competitiveness in general. As the resources sector slows, Australia’s two-speed economy will begin a transition into a one-speed economy, exhibiting a more steady growth outlook.”

Local fund managers expect share market run to continue to end of the year
The latest Russell Investment Manager Outlook (IMO) survey, shows local investment managers are continuing to favour growth assets in the continued search for yield.
 
The twice yearly survey which captures the views and insights of approximately 30 Australian fund managers, found just over 60% of managers expect the current run in the local share market to continue through to the end of 2013. The majority of these managers expected the primary driver of future returns to come from improved price-to-earnings ratios, or from a combination of earnings growth and higher share market valuations.
 
The survey found 80% of investment managers believe the Australian share market to be fairly valued, double that of the previous survey. Despite this, managers in the survey were less bullish on the outlook for Australian and international equities for the rest of the year.
 
Russell Director of Client Investment Strategies, Scott Fletcher, said overall, Russell’s team of strategists agreed with the views expressed by local managers in the survey. Relative to their own history, shares are at the top of the valuation range for the last four years since the global financial crisis, but short of pre-crisis valuation norms.
 
“Managers are continuing to favour equities over more defensive assets, and we believe that relative to bonds, shares still compare well. However, with the local share markets beginning to push past fair value after the double digit returns of 2012, we expect more modest performance for the rest of the year,” Mr Fletcher said.
 
Continuing a trend from the September 2012 survey, more than 70% of managers were bearish on Australian bonds, with the remainder maintaining a neutral sentiment. Other asset classes out of favour with managers in this survey included A-REITs, cash, and the Australian dollar.
 
“The results of this survey indicate fund managers are seeing the greatest investment opportunities in equity markets both at home and overseas. The views expressed by Russell’s own strategists indicate there’s still a great deal of uncertainty in most markets, but it will be critical that portfolios are constructed with the flexibility to capture opportunities as they arise,” Mr Fletcher said.

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The hires bring AMP Capital’s credit markets team to 14 dedicated investment professionals and brings the total number of investment professionals in AMP Capital’s Chicago office to six.

AMP Capital’s Head of Fixed Income Mark Beardow says these appointments reflect the continued growth in the company’s global client base and recognises the increased demand for income.

“David and Patrick bring with them a wealth of experience and are skilled credit market investors. Their appointments expand our credit research and analysis capability and reflect the increased importance of the US as a key market for our clients,” Mr Beardow said.

David Strouse has over 24 years’ experience in senior investment management roles at UBS Global Asset Management in Chicago. He was responsible for analysing and rating the credit quality of corporate debt issuers in the electric power, natural gas/energy, infrastructure and transportation industries.

Patrick Wang has extensive experience in credit research in telecommunications, media and technology in high yield and investment grade across core fixed income portfolios, short duration high yield and loan portfolios. He has held roles at Seneca Capital Management and Bank of America Capital Management and joins AMP Capital from Aviva Investors in Iowa.

Mr Strouse will cover the utilities and pipelines sectors and Mr Wang will cover the telecommunications, media and technology sectors. They will commence in their roles in September 2012 and will report to AMP Capital’s Head of Credit Markets Jeff Brunton.

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