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The Canadian economy, the performance of which also influences the performance of the banks, has some clouds hanging over it as well.

Russell Investments said Wednesday that the Canadian economy is “clearly vulnerable to downside shocks” for the first half of 2019, and noted that Canadian equities had already delivered returns in the first two months of the year equal to what the firm had been expecting for the entire year.

“This pace is not sustainable, and we welcome a healthy pause,” the firm’s Canadian outlook stated.

Shailesh Kshatriya, director of investment strategies at Russell Investments Canada, said the banks are “part of that story,” albeit with some caveats.

Russell is currently underweight on the lenders, he said, citing “structural headwinds” they see coming from real estate.

“We’re not bank bulls by any means,” Kshatriya noted in a phone interview with the Financial Post.

However, that underweighting has been toned down some given attractive valuations to start the year following a sell-off to end 2018 and the recent dovish pivot by central banks. Falling bond yields could also take some pressure off the housing market, he noted.

“We believe that makes sense given the backdrop,” Kshatriya said. “I can sympathize with the view of being cautious towards the Canadian banks — we kind of share in that view — but we may not be overtly bearish given what’s transpired over the last several weeks.”

• Email: gzochodne@nationalpost.com | Twitter: GeoffZochodne