Market Quote: Outlook Outtakes (Japan Equities, Government Bonds, Carry Trades)
Author: The editor's desk
December 15, 2023
Members of AGF’s Investment Management Team weigh in on the week that was in global financial markets. In this edition, highlights from AGF’s Outlook 2024 publication.
Out of Control
…Japan has emerged from three decades of economic stagnation while seeing an acceleration in corporate reform, which could continue to support Japanese equities. However, the Bank of Japan will likely end yield curve control (YCC) at some point in 2024, which could put upward pressure on global bond yields as Japanese yields continue to rise. Encouragingly, we believe the Japanese government is trying to promote an equity culture in Japan to rectify decades of corporate inattention to shareholder returns. That will go hand in hand with policy normalization… (Looking Further Afield for Opportunities)
Head Start
…Irrespective of what happens in 2024, government bond yields at close to 20-year highs are giving investors a head start. Running yields are providing a competitive return, with the added benefit of a potential risk offset should growth really deteriorate. However, volatility may remain elevated on the ebb and flow of the growth-versus-inflation narrative, exacerbated by the higher cost of deficit funding that virtually all countries face. This lack of fiscal space is another reason why the growth picture overall could be more muted than markets might hope… (Is the Hurting Over)
Carry On
…Several high carry currencies, including the British pound and our Canadian dollar, have enjoyed relative outperformance in the developed market space in spite of a weak economic profile. Likewise, strong carry returns have been enjoyed in Emerging Markets, particularly in Latin America and Eastern Europe. Now, however, the fiscal and monetary landscape seems poised to change. Central banks are eager to get policy back to “normal,” and that is starting to weigh on the outlook for economic performance… (Time to Re-Focus)
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The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds, or investment strategies.
Commentary and data sourced from Bloomberg, Reuters and other news sources unless otherwise noted. The commentaries contained herein are provided as a general source of information based on information available as of December 5, 2023 and are not intended to be comprehensive investment advice applicable to the circumstances of the individual. Every effort has been made to ensure accuracy in these commentaries at the time of publication, however, accuracy cannot be guaranteed. Market conditions may change and AGF Investments accepts no responsibility for individual investment decisions arising from the use or reliance on the information contained here.
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