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Market concerns over the impact of hard-to-resolve policy issues facing the US and Europe are likely to continue to act as a drag on the stock markets’ performance, according to Erik Ristuben, Russell Investments’ chief investment officer, client investment strategies.
Russell Investments has thus lowered its yearend S&P 500 target from 1372 to 1300. The index closed at 1204 on August 15 and has traded around 1300 for the six months ending July 2011.
The fund management company’s view is that US economic data will stabilize in the third quarter this year before modestly improving in the fourth quarter, with the stock market rallying as the recession scenario likely fades. The chance of a recession is significant and equities face an unusually wide range of yearend market outcome.
Much depends on policy choices going forward, the firm adds. In the event that slow and painful progress continues to be made, stocks could rally significantly as the market has priced in a heightened probability of the US slipping into recession in the near future, the fund manager notes.
