SOURCE: Russell Investments

Russell Investments

September 27, 2013 10:03 ET

Taper Surprise: Investors Become More Defensive on European Equities After FOMC Postponed Policy Shift Dialogue on Sept. 18, According to Russell Indexes

SEATTLE, WA--(Marketwired - Sep 27, 2013) - Defensive-oriented stocks in Europe have bounced back since Federal Reserve Chairman Ben Bernanke recently announced the decision to continue its historic bond buying program. After gravitating toward more dynamic-oriented stocks and moving away from defensive-oriented stocks when Bernanke first discussed tapering on May 22, in the past week investors appear to have moved back into defensive-oriented European stocks and sectors, as illustrated by the Russell Indexes.

  • After underperforming the Russell Developed Europe Dynamic Index by more than 6% between May 22 and September 17, the Russell Developed Europe Defensive Index outperformed its Dynamic counterpart by 0.3% between September 18 and September 24.
     
  • The Russell Developed Europe Index Healthcare sector, after losing (-3.3%) between May 22 and September 17, has gained 0.7% between September 18 and September 24. The Russell Developed Europe Index Consumer Staples sector, after losing (-3.4%) between May 22 and September 17, has gained 0.3% between September 18 and September 24.

"The FOMC 'no taper' decision surprised the market and suggests that the Fed's assessment is that U.S. economic and inflation data are softer than they had previously let on," said Stephen Wood, Chief Market Strategist at Russell Investments. "Given the yield implications of the Fed's non-move, and the expectation of another acrimonious debt-ceiling negotiation in Washington, index data suggest that European investors appear to have taken a more defensive stance, gravitating toward higher quality defensive stocks and defensive sectors." 

Index Jan 1, 2013 - May 21, 2013   May 22, 2013 - Sept 17, 2013   Sept 18, 2013 - Sept 24, 2013  
Russell Developed Europe Index 13.5 % 1.7 % 0.4 %
Russell Developed Europe Defensive Index 14.6 % -0.8 % 0.5 %
Russell Developed Europe Dynamic Index 12.4 % 5.3 % 0.2 %
Russell Developed Europe Index Sector            
Technology 15.7 % 6.3 % 0.6 %
Utilities 12.1 % 5.1 % 0.5 %
Producer Durables 13.1 % 5.8 % 0.8 %
Consumer Discretionary 17.4 % 7.0 % 0.2 %
Energy 6.8 % -2.0 % 0.3 %
Materials & Processing 1.8 % 2.0 % -0.3 %
Consumer Staples 14.8 % -3.4 % 0.3 %
Health Care 22.4 % -3.3 % 0.7 %
Financial Services 15.7 % 2.0 % 0.2 %

Source: Russell Investments.

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. 

Past performance does not guarantee future performance. This material is not an offer, solicitation or recommendation to purchase any security. Returns cited are euro-denominated.

Opinions expressed by Mr. Wood reflect market performance and observations as of September 24, 2013 and are subject to change at any time based on market or other conditions without notice. 

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.