- Russell Investments remains cautious on investment outlook - Global equities slightly cheap, better value relative to Australian shares - Australian dollar remains overvalued - Reversal in commodity markets still expected

By Chris Shaw

As Russell Investments points out, the recovery in global share markets is now more than two years old. This means the cycle is at the point where equity valuations and economic trends are not always clear, so the group's chief investment strategist Asia Pacific, Andrew Pease, has updated his views on the current investment environment.

At the start of the year Pease had a modest bias towards global equities. This was based on the expectation of modest growth in developed economies and somewhat attractive equity market valuations delivering moderate returns over the course of 2011.

Over the past few months there have been some factors emerging to challenge this view, Pease including among them rising energy costs, the end of QE2, the withdrawal of fiscal stimulus around the world and policy tightening in China.

Pease also points to a number of issues he is less confident in, including the mining boom versus weakness in the rest of the Australian economy, the growth and inflation trade-off in China and various scenarios surrounding the Euro zone debt crisis.