Russell Investments has released its mid-year 2020 global market outlook, offering insights from the firm’s investment strategists as economies reopen from coronavirus-imposed lockdowns and markets watch for a possible second wave of infections.
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Russell Investments strategists shift outlook to neutral amid ‘The Great Reopening’ of global markets
Following the second-quarter market rebound, the team no longer believes valuations are compelling for global equities or credit. While the business-cycle outlook has improved amid vast fiscal and monetary stimulus and economic re-openings, sentiment is no longer seen as supportive and the team’s composite indicator is displaying a neutral signal. This means the support from oversold conditions is waning and markets are at greater risk of pulling back on negative news.
“The market rebound has been helped by oversold investor sentiment, but with sentiment back to neutral, so too is our market outlook,” said Andrew Pease, global head of investment strategy at Russell Investments. “We have a broadly neutral weighting on global equities, while over the medium-term we expect the supportive cycle outlook should allow equities to outperform bonds.”
Pease added that the U.S. fiscal stimulus packages passed since March provide the nation’s economy with its most significant fiscal thrust since World War II. With the potential for more stimulus on the way, the team is positive on the U.S. economic outlook. The team believes the recovery from the recession will lead to a long period of low-inflationary growth, supported by monetary and fiscal stimulus.
While geopolitical risks are rising between the U.S. and China, the team doesn’t believe the increased rhetoric will lead to a dissolution of the phase one trade deal signed earlier this year. Regarding China, the strategists expect the Chinese economy is well-positioned for a strong rebound through the second half of 2020 and into 2021 as stimulus kicks in and the global economy recovers.
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