Global Perspective: JapanSubmitted by Fulcrum Wealth Advisors on March 16th, 2018
By Jonathan V. Bever
Having recently joined Fulcrum Wealth Advisors (FWA), I have settled into my role as research analyst and portfolio manager quite well. As part of FWA’s on-going commitment to providing our clients with the best ideas from around the world, our travel schedule has been filled.
Since recently arriving from Seattle, it feels like Spring has sprung here in Japan. The sun is shining and the Cherry trees have begun their annual budding, indicating their famous bloom. The feeling of Spring is apparent as an optimistic tone is being set economically, as the trains are full of people on the way to work or off to Ginza and Shibuya shopping districts. Popular restaurants are brimming with people and the scent is delicious.
In 2020 Tokyo will have the hard-won honor to host the Summer Olympics. Japan is experiencing robust demand considering the accommodations and realizations of this up-coming memorable event. This event of a lifetime will long be felt and remembered as a positive, dynamic opportunity which will be felt for years afterward. A definite boost for Japan and tourist alike.
A year ago, the Nikkei had an outstanding period. That said, low interest rates, strong earnings growth potential, and an accommodating Central bank, with an established economic-friendly political policy may garner another great year.
Please keep in mind the Bank of Japan is the process of appointing a new BOJ Governor. The hope here is that whomever is appointed will have the experience and wisdom to continue the forward momentum established by the current BOJ Governor.
Along with the U.S. market, Japan's Nikkei has also seen market volatility. Some analysts consider that the U.S. market volatility may signal that the U.S. Bull market is coming to an end, which may equally signal the same for the Japanese stock market.
"Risk Assets,” have a certain potential for volatility in the investment arena, and is typically defined by their price variant. The flux of volatility within the low volatile environment is a type of norm to be expected, and is considered by experts as "healthy", as it moderates greed, establishing a balance.
With positive earnings growth for the Nikkei, it will likely return to its recent high as the world digests the newly proposed tariffs in the U.S., rising U.S. rates, and a return of global stock market fluctuation. A normalization effect will ensue for a period. However, during this period, given the increase in risk, the Investor will demand more return, to stomach the sleepless nights. This is where choosing higher quality stocks, will likely lead to out-performance over passive investing in Japan and in the U.S.
The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change with or without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. Additional risks are associated with international investing, such as currency fluctuations, political and economic stability, and
differences in accounting standards.