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Defensive-oriented stocks have outperformed dynamic-oriented stocks in Europe during the second quarter as of 6th May amid uncertainty over the European Central Bank's (ECB) monetary policy decisions and increasing tensions in the Ukraine.
The Russell Developed Europe Defensive Index(TM) outperformed the Russell Developed Europe Dynamic Index(TM) in the second quarter (+1.9% vs. +0.4%) as of 6th May 2014. However, the Defensive Index (+3.9%) has underperformed its Dynamic counterpart (+4.4%) in 2014 year-to-date as of 6th May.
A similar shift has occurred for the Russell Eurozone Index. While the Russell Eurozone Defensive Index(TM) (+3.5%) underperformed the Russell Eurozone Dynamic Index(TM) (+4.8%) YTD, the Defensive Index has outperformed its Dynamic counterpart thus far in the second quarter (+1.9% vs. -0.7%) as of 6th May.
Russell Investments Europe investment strategist Wouter Sturkenboom: "Uncertainty over future ECB monetary decisions and the ongoing unrest in the Ukraine seemed to give investors cause for concern which is reflected so far in the second quarter performance of defensive-oriented stocks. European investors are looking to this week's ECB meeting for a clear signal from Mario Draghi that monetary policy in Europe will remain accommodative."
The Russell Defensive and Dynamic indices, collectively known as the Russell Stability Indexes(TM), help investors assess how different types of companies performed in different market environments by measuring total company risk as a combination of earnings variability, return on assets, leverage and volatility. Defensive-oriented companies are generally viewed as less 'risky' by Russell while Dynamic-oriented companies are associated with higher risk.
In addition to its comprehensive global family of market capitalization-weighted equity indices, Russell offers a full suite of alternative, or "smart beta" indices for investors. New strategy or thematic indices launched by Russell in recent years include equal weighted, fundamentally weighted, high dividend yield, geographic exposure, high efficiency defensive, volatility control and conscious currency.
Russell's recently published global institutional market survey, entitled Smart Beta: A Deeper Look at Asset Owner Perceptions, found that global adoption of smart beta strategies among institutional investors is strong and growing, with Europe leading North American. The survey also confirms that asset owners in North America and Europe are actively using smart beta indices in strategic and tactical ways.
Russell defines "smart beta" indices as transparent, rules-based indexes designed to provide exposure to factors, market segments or investment strategies.
The Russell Global Index measures the performance of the global equity market based on all investable equity securities, and is constructed to provide a comprehensive and unbiased barometer for the global segment, The Index includes more than 10,000 securities in 47 countries, and covers 98% of the investable global market. All securities in the Russell Global Index are classified according to size, region, country and sector; as a result the index can be segmented into more than 300 distinct benchmarks.
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 as of May 6, 2014 and are subject to change at any time based on market or other conditions without notice. Past performance does not guarantee future performance.
This material is not an offer, solicitation or recommendation to purchase any security.
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