2023-08-04 Markets
Recent nervousness in the bond market and oscillating monetary policy expectations are beginning to bother equities. How long-lasting this effect will be is anyone’s guess; but while the focus is on earnings and especially quarterly results, it is useful to ponder what a more restrictive fiscal policy may mean for the direction of stock prices (see cover graph). — After the early 2000s, Japan is one of those countries we tend to forget about. In the 1980′ and 90s it was a different story: the country occupied the role that today we attribute to China, though on a different geo-political scale. However, since its stock market exploit in the late ’80s, followed by a cataclysmic fall in value, developments in Japan have come and gone absorbing limited time and attention on the part of most investors. We tend to forget that Japan is still one of the major marginal supplier of capital and this in turn means that when things change there they will change also in the rest of the world. That is the significance of the latest signals coming from the Bank of Japan: we probably haven’t seen their full impact.
[Cover: Morgan Stanley Research]
[Cover: Morgan Stanley Research]
