Big Stocks Don't Cry, Dead Cats Don't Bounce, and the Sun Will Come Out Tomorrow for Investors in 2008

    Russell Investments' Chief Investment Strategist reveals 8 factors that
    investors should watch out for in the New Year.

    TORONTO, Dec. 20 /CNW/ - At a time when the credit crunch cycle has
caused much uncertainty for investors, Ernie Ankrim, Chief Investment
Strategist for Russell Investments, presents valuable economic and market
analysis in his "Eight for 2008" outlook piece. Ernie identifies eight key
factors likely to drive markets in 2008, factors that point to a year of two
halves but, overall a good year for markets.
    Subprime-related uncertainty is likely to persist in the early part of
the year in both Canada and the U.S., but Russell Investments sees positive
movement in markets later in the year as the outlook for the U.S. economy
brightens. Ernie expects oil and other commodities to stay high and foresees
continued declines in U.S. house prices, although homebuilder stocks
valuations could improve before the year end. Ernie's target valuation for the
Russell 1000 at the end of 2008 is 900, which translates to 1675 for the
S&P 500.

                  Factors Driving the Investing Environment

                                 8 for 2008

                By: Ernie Ankrim, Chief Investment Strategist

                             Russell Investments

    Recognizing perfect accuracy is an impossibility, here's what I expect to
see in 2008:

    1) From meltdown to liquidity - Continued uncertainty and subprime write
offs early in 2008 will likely give way to more transparency and finally
liquidity for structured investments. Some terrible pain aside, the markets
should celebrate this development and the removal of the uncertainty as we
head into the second half of the year.

    2) This "dead cat" doesn't bounce - U.S. housing prices continue to
decline through the first half of 2008. Although the size of declines
moderates heading into 2009, with few exceptions, home prices show no signs of

    3) "Big Stocks Don't Cry" (with apologies to the Four Seasons) - Large,
internationally diversified companies should continue to outperform their
smaller, domestically oriented siblings in the U.S. equity market for the
second year in a row.

    4) Uncle Sam "Cowboys Up" - Better trade numbers, continuing slower
domestic growth, international investment in-flows, and expected monetary and
fiscal restraint should put an end, for now, to U.S. dollar exchange rate

    5) "That kid down the street sure is growing" - Tighter monetary policies
begin to take their toll on developed economies (U.S. and non-U.S.). While
this global slowdown takes some steam out of developing economies - their
growth rates will likely slow only slightly.

    6) "High prices = no inflation???" - Commodity prices are likely to
remain high, but both commodity and broader price level inflation should
remain contained. Although some commodities show modest declines (e.g., oil
stays under US$100 for the year) few if any high costs are passed on through
to the retail level as global competition continues to limit firms' pricing

    7) "The sun'll come out, tomorrow" - Optimistic outlooks for the economy
in 2009 should cause earnings multiples on equities to rise ahead of the
anticipated positive developments. This would cause equity returns to approach
the mid-to-upper teens even while '08 earnings grow at a slow pace.

    8) "We make it up on volume" - While home prices remain weak, and despite
continuing financing problems in early '08, homebuilder stocks could bounce
back before the year is done. Declines in the price for land, material and
labor would allow the market to see the end of a three-year tunnel for this
group and valuations could improve dramatically by year-end.

                               By The Numbers

               2008                          Dec 31, 2008
    --------------------------        -------------------------

    US GDP Growth         1.8%        Russell 1000(R)      900

    CPI core inflation    2.5%        Russell 2000(R)      840

    S&P Earnings Growth   3.0%        S&P 500            1,675

    S&P FY '08 earnings   $98         10 year Gov rate     4.0%


    While calling the timing of the second-half turnaround is difficult, we
should start to see some positive movement heading toward the end of the year,
possibly even around U.S. election time, once uncertainty makes way for risk.
Ernie expects economic growth to be near zero early in the year, but believes
that the influential U.S. GDP will end the year 1.8% higher than 2007. More
positive economic outlooks and the anticipation of growing earnings for 2009
could cause multiples on existing earnings to widen, yielding 2008 equity
returns approaching the mid- to upper-teens.
    With continued volatility and uncertainty coming from the influential
U.S. markets, Canadian investors might have a difficult time stomaching the
first half of 2008. Somewhat like Rip Van Winkle, if you go to sleep on Jan. 1
and don't wake up until Dec. 31, 2008, you would be blissfully unaware of any
negative news that might spark nightmares or market jitters. And, if Ernie is
correct, you'd wake to what would have been a relatively good year for
investors. All the while, disciplined investors should think about sticking to
their long-term plan, staying diversified and looking past short-term market

    About Russell Investments

    Russell Investments is a global leader in multi-manager investing and one
of the world leaders in investment consulting. Russell Investments advises
institutional clients with total assets of over C$2.0 trillion and manages
approximately C$229 billion in its investment management business.
    Russell Investments supports its global operations by monitoring more
than 4,000 manager firms and their 8,600 products.
    Russell Investments serves institutional and individual investors with a
full range of investment services, including investment consulting, investment
funds which include private equity and hedge funds, transition management,
commission recapture and stock indexes. Founded in 1936, Russell Investments
has its headquarters in Tacoma, Washington, USA and has principal offices in
Toronto, New York, London, Paris, Sydney, Singapore, Auckland, and Tokyo.
Russell Investments Canada Limited is a wholly-owned subsidiary of
Frank Russell Company. For more information, please go to
    Russell Investment Group is a registered trade name of Frank Russell
Company, a Washington, USA corporation. It operates in Canada through its
subsidiary Russell Investments Canada Limited. Frank Russell Company is a
subsidiary of The Northwestern Mutual Life Insurance Company.

    Commissions, trailing commissions, management fees and expenses all may
be associated with mutual fund investments. Please read the prospectus before
investing. Mutual funds are not guaranteed, their values change frequently and
past performance may not be repeated.
    Nothing is 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 is a publication of
Russell Investments Canada Limited and has been prepared solely for
information purposes. It is made available on an "as is" basis. Russell
Investments Canada Limited does not make any warranty or representation
regarding the information.

    Copyright (C) Russell Investments Canada Limited 2007

For further information:

For further information: Jennifer Tice, (253) 439-2921; Thien Huynh,
(416) 992-2766

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