Looking at equity market, one theme this year is that the U.S. has been outperforming global markets, both developed international and emerging markets. However, looking within the U.S., real estate has performed particularly well.
When investors buy Japanese equities, they don’t really buy a slice of that economy; they buy shares in corporations that operate both in Japan and around the world. “Japan, Inc.” (i.e., Japanese corporations) is showing a profit picture that differs dramatically from the country’s economic growth rate.
The recent bout of aggressive monetary policy easing by the Bank of Japan (BOJ), combined with the direct purchases of equities by the Japanese Government Pension Investment Fund (GPIF), has brought on a new period of positive sentiment toward Japanese equities.
Over the last year, U.S. equities rallied, and credit spread generally tightened. However, in recent months, this winning formula has started to diverge. Concerns about global growth, potential changes in monetary policy and uncertainty from geopolitical risk weighed on investor sentiment.