SOURCE: Russell Investments

Russell Investments

August 14, 2012 13:20 ET

Russell Indexes: Global Equity Markets Go for Gold During the Olympic Games

SEATTLE, WA--(Marketwire - Aug 14, 2012) - As the torch is extinguished at the London Olympics, Russell Investments' Chief Market Strategist Steve Wood offers perspective on the progress of the global equity markets in recent months and during the games.

While much of the world's attention was drawn to the Olympics the past two weeks, the global equity markets, as reflected by the Russell Indexes, showed significant gains, continuing a very strong performance run since the beginning of June:

Russell Global Indexes - Olympic Games Performance (August 10th)

Russell Index
June 1st - July 27th
 
July 30th - August 10th
Russell Global Index 5.85%   1.91%
Russell 1000 Index 5.61%   1.32%
Russell Developed Europe Index 8.51%   3.09%
Russell Asia Pacific Index 3.14%   2.30%

Source: Russell Investments

Given this recent surge in the global markets, many investors are uncertain about the reasons behind this performance and whether it is sustainable.

"Those are good questions," said Steve Wood of Russell Investments. "The jury is still out."

Wood believes that, while there isn't great reason to believe that the global economy has changed dramatically in the last two months, the mixed nature of financial reports and conflicting economic signals have pulled investors between extreme caution and cautious optimism.

"While GDP and corporate revenues continue to weaken in the United States, corporate earnings have been arguably more resilient and a better than expected July jobs report may have propped up investor sentiment for now," according to Wood. "Why have European equity markets been positive in recent weeks? While Europe's fundamental issues remain very far from being solved, the possibility of a Pan-European resolution to the Spanish bank problem combined with the pledge from the European Central Bank that it will do 'whatever it takes' to address the European debt crisis have offered some limited support to a region in desperate need of structural and fiscal reform."

And while some may be tempted to apply an "Olympics effect" to the strength of the global equity markets in recent weeks, Wood cautions against it. Russell Indexes examined performance for global markets, sectors and companies during the last four Summer Olympic Games, including London 2012, to try to determine if the Olympics had a direct impact on market performance, but could not find any meaningful connections.

"If investors expect the Olympics to generate a major effect on the equity markets of the host country (or the world markets) around the time of the games, we don't see a significant, lasting relationship as reflected in the Russell Indexes," continues Wood. "We believe investors should focus on more fundamental economic and market factors, rather than the Olympics, when planning their global, multi-asset investment strategy."

The Russell Global Index includes more than 10,000 securities in 48 countries and covers 98% of the investable global market. All securities in the index are classified according to size, region, country and sector. Daily Returns for the main components are available here: http://www.russell.com/indexes/data/daily_total_returns_global.asp

Disclaimer: http://www.russell.com/indexes/about/index_alerts.asp#disclaimer

Opinions expressed by Dr. Wood reflect market performance and observations as of August 10, 2012 and are subject to change at anytime based on market or other conditions without notice. Please remember that 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 Olympics" is a registered trademark of the International Olympics Committee.

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.