To 1,500 and beyond?

On January 30 (January 31 in Asia Pacific), Russell Investments’ Global Head of Investment Strategy Andrew Pease wrote a new blog post titled, “To 1,500 and beyond?” on the market’s recent run and the factors that could cause a reversal.

January 31, 2013

By Andrew Pease, Global Head of Investment Strategy

“It’s only the end of January and the market has already broken through our year-end S 500® Index target of 1,500. This doesn’t make us bearish, but it does make us cautious. We still expect equities to outperform bonds over the medium term, but shorter-term, it’s worth remembering that markets move in cycles of optimism and pessimism,” writes Russell’s Global Head of Investment Strategy Andrew Pease.

He continues, “As investors have pursued their real goals, they have been riding in a risk-on/risk-off yoyo for the past couple of years where some of the biggest mistakes may have been buying on optimism and selling on pessimism. And although we don’t think there are indicators on investors’ dashboards currently flashing ’SELL’ there are warning signs reminding us that the near-term fundamentals look fully priced into current equity market levels.”

Pease outlines 5 key factors in the market’s strong run so far in 2013, as well as four significant factors that could cause a reversal.

Ultimately, Pease writes that, “Our bottom line is that we think equity markets are fully valued and a lot of the upside risks have now been priced in. Markets move in cycles and there are enough warning signs to suggest investors are becoming overly optimistic. Longer-term, we expect equities to outperform bonds, but for now we are cautious about chasing the current rally. We want to avoid the traps of buying and selling on market sentiment in an ongoing risk-on/risk-off environment.”

To see the entire blog post, visit: http://conversation.russell.com/. Andrew Pease and Russell’s team of investment strategists are also available for interviews to provide more color around these perspectives.

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Manufacturing Purchasing Managers’ Index (PMI) is used to measure the level of diffusion based on surveyed purchasing managers in the manufacturing industry.

VIX is a trademarked ticker symbol for the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S 500 Index options. It represents one measure of the market's expectation of stock market volatility over the next 30 day period.

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Corp- 8236 First Used: January 2013

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To 1,500 and beyond?

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