Russell Investments today released its 2016 Global Market Outlook – Q4 Update

Russell Investments’ strategists anticipate volatility in the final quarter of 2016, as markets absorb the U.S. election results, the Italian referendum and likely U.S. Federal funds rate tightening. The strategists’ outlook for lackluster global economic growth remains intact from the previous quarter. The team expects global bond yields to rise modestly as inflation pressures in the U.S. are offset by deflation in other developed markets. In currency markets, the U.S. dollar looks set to test previous highs, while the British pound remains at risk as investors focus on the full implications of Brexit.

“Asset markets are precariously priced and vulnerable to shocks, but market setbacks could provide opportunities to take on more risk in multi-asset portfolios," said Andrew Pease, Russell Investments’ global head of investment strategy. "The ability to dynamically allocate between asset classes is becoming increasingly important.”

In the U.S., the team continues to expect an interest rate hike from the Federal Reserve in December, as well as two hikes in 2017 supported by modest economic growth and a gradual firming in inflation. The U.S. labor market remains healthy, and the strategists do not see signs of imbalances in business investment. However, the team does see warning signs stemming from the corporate sector, including a troubling rise in corporate leverage.

“U.S. corporate earnings appear to have bottomed, but earnings growth is going to be tepid,” said Paul Eitelman, multi-asset investment strategist for North America at Russell Investments. “While we still have an underweight U.S. equities view, our modeling shows only a modest risk of recession, and we continue with our ‘buy-the-dips and sell-the-rallies’ investment strategy.”

For more information on the global report, which also focuses on the strategists’ latest views on Europe, Asia-Pacific and currencies, please see the 2016 Global Market Outlook: Q4 Update.

About Russell Investments

Russell Investments, a global asset manager, is one of only a few firms that offers actively managed multi-asset portfolios and services which include advice, investments and implementation. Russell Investments 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, asset allocation, portfolio implementation and factor exposures to help each achieve their desired investment outcomes.