UK equities performed well in the second quarter 2014 and in July-to-date according to the Russell Global Indexes, although Russell Investments is cautious of the sustainability of the UK economic recovery.
The United Kingdom country constituent within the Russell Developed Europe Index returned 0.5% in July as of July 8, making it and Norway the two strongest performing developed Europe constituent markets this month, and leading the parent index which has lost (-0.5%). This performance follows a strong second quarter when the UK constituent returned +4.3%, outpacing the 3.9% return of the Russell Developed Europe Index.
Despite its recent strong performance versus its developed market peers in Europe, Russell believes the recovery that is driving this positive performance is potentially not as sustainable as recent economic data suggests.
Russell Investments Europe investment strategist Wouter Sturkenboom commented:
"Despite a certain level of optimism in recent months with respect to the strength of the UK economy, reflected in UK equity market performance as reflected by Russell Developed Europe Index country constituent returns, we believe investors should not get ahead of themselves in their expectations for UK growth going forward. Recent UK GDP growth has been driven by less substantial measures such as consumer spending out of savings and rising housing prices and is still trying to transition to fundamental factors such as spending out of wage growth and business investment."
Later this month, Sturkenboom and the team of global strategists at Russell will issue their latest quarterly outlook update, elaborating on Russell's market view for the remainder of 2014. For more information on the Russell Indexes, go to the Russell Indexes website.
Russell Index Returns
----------------------------------------------------------------------------
Russell Index/Index July Month-to- 2nd Quarter 1st Quarter 2014 YTD as
Country Constituent Date as of July 2014 2014 of July 8,
8, 2014 2014
----------------------------------------------------------------------------
Russell Developed -0.5% 3.9% 2.9% 6.3%
Europe Index
----------------------------------------------------------------------------
United Kingdom 0.5% 4.3% -0.5% 4.4%
----------------------------------------------------------------------------
Norway 0.5% 8.2% 2.7% 11.8%
----------------------------------------------------------------------------
Ireland 0.4% 9.0% 5.8% 15.8%
----------------------------------------------------------------------------
Switzerland 0.2% 3.3% 5.0% 8.8%
----------------------------------------------------------------------------
Luxembourg -0.4% 1.9% -0.4% 1.0%
----------------------------------------------------------------------------
Netherlands -0.7% 6.4% 2.3% 8.0%
----------------------------------------------------------------------------
Finland -0.7% 6.0% 3.5% 6.7%
----------------------------------------------------------------------------
Germany -0.7% 3.0% 0.3% 2.5%
----------------------------------------------------------------------------
Sweden -1.1% 0.9% 4.4% 4.2%
----------------------------------------------------------------------------
France -1.7% 3.1% 3.5% 4.9%
----------------------------------------------------------------------------
Spain -1.7% 7.9% 5.8% 12.2%
----------------------------------------------------------------------------
Italy -2.5% -1.1% 15.8% 11.7%
----------------------------------------------------------------------------
Portugal -4.0% -4.7% 16.4% 6.5%
----------------------------------------------------------------------------
Austria -4.7% 1.0% 0.7% -3.1%
----------------------------------------------------------------------------
Source: Russell Investments. Returns are total returns (reflect reinvestment of dividends and distributions) and are denominated in euros.
