Home sales have slowed but prices remain stubbornly high
Pipeline capacity constraints remain a headwind
TORONTO, Oct. 30, 2013 /CNW/ - Russell Investments has released its latest quarterly outlook for the global capital
markets, predicting modest gains for equity markets and higher bond
yields in 2014 as the world's major economies continue to grow. The 4th Quarter Strategists' Outlook & Barometer offers in-depth analysis of key economic and market indicators from
Russell's global team of investment strategists, whose insights help to
guide the firm's multi-asset portfolios and services.
In the report, Shailesh Kshatriya, Associate Director, Client Investment
Strategies at Russell Investments Canada Limited, discusses the
prospects for the Canadian economy given the ongoing strength of the
housing market and the continued growth of household debt, as well as
the constraints posed by the limited pipeline capacity for Canadian oil
The most recent report also includes projections from Russell's team of
global strategists, who note that politicians and policy likely remain
the biggest threats to economic recovery, and they point to U.S.
monetary policy and political pressures worldwide that could impact the
2014 performance of various asset classes.
"As we look toward 2014 we're forecasting synchronized growth across the
U.S., Japan and Europe for the first time since 2010," said Andrew
Pease, global head of investment strategy at Russell. "We also see a
strengthening low-inflation recovery that favors equities over bonds,
despite relatively full equity market valuations."
QE has minimal impact on portfolio guidance
Quantitative Easing (QE) has had little influence on the portfolio
weighting guidance suggested by Russell's investment strategists. When
the winding down of QE eventually happens, they expect it to trigger
some market volatility; however, they do not believe the U.S. Federal
Reserve has significantly distorted asset prices. In fact, they see
little evidence that QE has pushed asset prices beyond levels that can
be justified by the current combination of stable economic growth, low
inflation and moderate corporate earnings growth.
Canadian equities trading at premium multiple
Canadian equities, which rallied strongly in the third quarter as gold
and oil prices rose on geopolitical tensions, are expected to pull back
slightly over the remainder of the year. Kshatriya notes that Canadian
equities are currently trading at a higher price-to-earnings ratio than
U.S. or Emerging Markets equities.
"We deem the premium multiple as unwarranted," Kshatriya said. Although
crude oil prices have moved higher, there is still significant
volatility in the spread between Western Canada Select (WCS) versus its
American counterpart West Texas Intermediate (WTI), which he expects to
continue until there is expanded pipeline capacity.
This includes "improving capacity within Canada's borders (i.e.,
west-east pipeline), extending capacity to the U.S., as well as
shipments offshore. The increased news flow regarding all three options
has been encouraging; however, concrete developments leading to actual
"ground breaking" has yet to materialize in a meaningful way," he
Russell's strategists also offer a look at key global asset class
pairings to determine which asset class in each pair currently signals
better return prospects. Their model currently signals a preference
towards International equities relative to Canadian equities, and
towards Canadian equities relative to fixed income.
For more information, please see the 4th Quarter Strategists' Outlook and Barometer or Perspectives du marché canadien.
About Russell Investments
Russell Investments (Russell) is a global asset manager and one of only
a few firms that offers actively managed multi-asset portfolios and
services that include advice, investments and implementation. Russell
stands with institutional investors, financial advisors and individuals
working with their advisors—using the firm's core capabilities that
extend across capital market insights, manager research, portfolio
construction, portfolio implementation and indexes to help each achieve
their desired investment outcomes.
Russell has more than C$253.7 billion* in assets under management (as of
9/30/2013) and works with over 2,500 institutional clients, independent
distribution partners and individual investors globally. As a
consultant to some of the largest pools of capital in the world,
Russell has US$2.4 trillion in assets under advisement (as of
6/30/2013). It has four decades of experience researching and selecting
investment managers and meets annually with more than 2,200 managers
around the world. Russell traded more than US$1.4 trillion in 2012
through its implementation services business. Approximately US$4.1
trillion in assets are benchmarked to the Russell Indexes.
Headquartered in Seattle, Washington, Russell operates globally,
including through its offices in Seattle, New York, London, Paris,
Amsterdam, Sydney, Melbourne, Auckland, Singapore, Seoul, Tokyo,
Beijing, Toronto, Chicago, San Diego, Milwaukee and Edinburgh. For more
information about how Russell helps to improve financial security for
people, visit http://www.russell.com/ca or follow @Russell_News.
*includes more than US$70 billion of derivative overlay assets under
management not included prior to June 30, 2013
Nothing in this publication 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. This
information is made available on an "as is" basis. Russell Investments
Canada Limited does not make any warranty or representation regarding
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SOURCE: Russell Investments Canada Limited
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