Market reacting to negative headlines - Russell

The collapse in equities markets over the past few days has been more about reacting to negative headlines than about a global economic collapse, according to Russell Investments chief investment officer – client investment strategies, Erik Ristuben.

Commenting on the move by ratings house Standard & Poor’s to downgrade US Treasury debt, Ristuben said that the company’s analysis was that while the US economy had been weakened, a double dip recession still remained unlikely.

“We’ve been watching reactions to the downgrade through the weekend, and we don’t think the bond market is looking to Standard & Poor’s to determine what US Treasuries are worth,” he said. “In fact, last week’s drop in Treasury yield – which reflected a flight to safety – gives us a good indication that there is no significant concern about America’s ability to service and repay its debt,” Ristuben said.

Ristuben said Russell’s current thinking was that the bond market reaction to Standard & Poor’s would be muted.