We think that the future is bright for Japanese equities

We think that the recent outperformance of the MSCI Japan Index relative to the MSCI USA Index will continue as the world slowly gets back to normal.
Simona Gambarini Markets Economist
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Global Markets Update

Fed tightening & the outlook for US corporate bonds

Our baseline forecast envisages that US corporate bond spreads rise only slightly as the Fed raises interest rates over the next couple of years. But we think the risks to this forecast are skewed to higher spreads.

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We think that China’s equities will continue to struggle

Even though we doubt that China’s equities will fare anywhere near as badly over the next couple of years as they did in 2021, we do not expect them to make strong gains from here either.

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Key financial market calls for 2022

We do not think the returns from many financial assets will be as good in 2022 as they were in 2021. For a start, we envisage a sell-off in government bonds in most places, reflecting the outlook for monetary policy. And, in general, we foresee an underwhelming performance from equities, including in the US and China. We expect this backdrop to be accompanied by a further broad-based rise in the US dollar. In view of the wider interest, this Global Markets Update is also available to clients of our Asset Allocation & FX Markets services.

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More from Simona Gambarini

Global Markets Update

We expect gradual increases in 10-year DM bond yields

We think most developed market (DM) central banks will look through temporary rises in inflation and leave rates unchanged until at least early 2023. Even so, we expect the yields of 10-year DM government bonds to rise in the next couple of years, although generally by more in the US than elsewhere.

3 June 2021

EM Markets Chart Book

We think EM equities will rise, not shine

We forecast that emerging market (EM) equities will make further gains between now and end-2022 as the global economy recovers further. However, they have lost a bit of ground to developed market (DM) equities recently and we doubt they will perform much better than them in the coming year and a half.

27 May 2021

Capital Daily

We think 10-year yields will rise gradually in most cases

While the RBNZ is gearing up to hiking rates next year, we think that most developed market (DM) central banks will look through temporary rises in inflation and leave rates unchanged until early 2023 at the earliest. This feeds into our forecast that the yields of 10-year DM government bonds will rise only gradually, in most cases, over the next couple of years.

26 May 2021
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