On September 29, Dr. Raghuram Rajan, governor of the Reserve Bank of India, surprised everyone by again reincarnating as “Rate-Cut Raghu.” We had been anticipating a rate cut in September, but the magnitude surprised us.
Last week I chatted with Jesper Koll, CEO of WisdomTree Japan, who has spent over 30 years in Japan leading investment strategy at various firms. The discussion was particularly timely following his appearance at the Japan Finance Forum hosted by Bloomberg on September 29.
The third quarter of 2015 was difficult for equities—we saw the VIX cross 40 toward the end of August, indicating significant uncertainty. What caused this? Put simply, China and the Federal Reserve.
We expect added Bank of Japan action. A move as early as this week is possible—the BOJ policy board meets Oct 7, but I personally think that a move at the next meeting, on October 30, is more likely.
One of the most important themes impacting the global markets has been the strengthening U.S. dollar, a trend that WisdomTree expects to continue for some time. One consequence in terms of investor positioning has been a surge in flows and interest in currency-hedged international investment strategies. But this also has put pressure on the U.S. economy, revenue of American companies as well as corporate profits.