SOURCE: Russell Investments

Russell Investments

April 04, 2013 09:00 ET

Cautious Europe: European Equity Markets Look Decidedly Defensive in the First Quarter as Reflected by Russell Indexes

SEATTLE, WA--(Marketwired - Apr 4, 2013) - Developed European equity markets returned 6.0% in the first quarter as reflected by the Russell Developed Europe Index. And the smaller subset of Eurozone markets were also positive for the quarter, returning 2.6% as reflected by the Russell Eurozone Index.

Yet a closer look at the returns indicates a decidedly defensive posture by European investors as reflected by the Russell Stability Indexes™, with defensive-oriented stocks delivering the strongest performance year-to-date as of March 29th. The Russell Stability Indexes are style-based benchmarks, created from existing Russell Indexes, which identify stocks based on sensitivity to economic cycles, credit cycles and market volatility, referred to as stability. The more stable half of the market is called Defensive and the less stable half of the market is called Dynamic.

The Russell Developed Europe Defensive Index, which identifies and measures more defensive-oriented stocks within the Russell Developed Europe Index, outperformed both its Dynamic counterpart and the Russell Developed Europe Index for the first quarter. In addition, the Russell Eurozone Defensive Index, which identifies and measures more stable defensive-oriented stocks within the Russell Eurozone Index, outperformed its Dynamic counterpart and the Russell Eurozone Index for the same time period.

"The significant divergence in first quarter performance between the defensive and dynamic indexes is a source of concern to us and certainly indicates a rising sense of caution in the European equity markets on the part of investors," said Wouter Sturkenboom, investment strategist at Russell Investments Europe. "We share this sense of caution. For the immediate future, unless we see a major change in fundamentals, we believe it will continue to be a cautious market and one that may favor individual security selection and a multi-asset approach."

Russell Index First Quarter Returns

Index First Quarter 2013 Return
Russell Developed Europe Index 6.0%
Russell Developed Europe Defensive Index 8.9%
Russell Developed Europe Dynamic Index 3.0%
Russell Eurozone Index 2.6%
Russell Eurozone Defensive Index 5.6%
Russell Eurozone Dynamic Index 0.1%

Source: Russell Investments. Returns are denominated in euros.

Please note: Indexes are unmanaged and cannot be invested in directly. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. Russell's publication of the Indexes or Index constituents in no way suggests or implies a representation or opinion by Russell as to the attractiveness of investing in a particular security. Inclusion of a security in an Index is not a promotion, sponsorship or endorsement of a security by Russell and Russell makes no representation, warranty or guarantee with respect to the performance of any security included in a Russell Index. 

Opinions expressed by Mr. Sturkenboom reflect market performance and observations as of March 29th, 2013 and are subject to change at any time based on market or other conditions without notice. Past performance does not guarantee future performance

Nothing contained in this material 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. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional. The information, analysis and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual entity.

Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company.