Uncertainty surrounding Trump policy has reached new highs with global trade wars back on. Steel and aluminium tariff exemptions have been allowed to lapse for Canada, Mexico and Europe, and USD 50 billion in new technology-focused tariffs against China will be detailed by mid-June and imposed shortly thereafter.
Considering the unique profile of the market and how much China influences the global economy, a decision about China could be the most important call an investor can make at this time.
The MSCI AC Asia ex Japan (AxJ) Index closed -1.3% in USD terms as markets turned more risk averse amidst macro uncertainties, trade tensions and higher oil prices.
In May, US Treasury (UST) yields ended lower. A solid US jobs report supported the bearish bias in UST yields that prevailed.
The ECB recently celebrated its 20-year anniversary and instead of a birthday cake, DB research released a compelling chart about how different asset classes have performed over this time period.
Despite uninspiring global equity performance in the last three months, at least for USD-based investors, Nikko AM’s Global Investment Committee continues to be positive on global equities on a one-year view, particularly those in Japan, Europe and the Asia Pacific, but remain unenthusiastic on global bonds.
Global growth is becoming increasingly less synchronized, with the Eurozone, Japan and UK showing some moderation in growth, whilst the US remains relatively robust.
The Japanese equity market declined in May, with the TOPIX (w/dividends) dropping 1.67% on-month and the Nikkei 225 (w/dividends) falling 1.18%.
Japan’s corporate governance reforms have progressed slowly but surely and the recent revision of the code will add momentum for the unwinding of cross-shareholdings.
Japanese profit margins continued roughly flat in the 1Q, but at a high plateau due to improved corporate governance over the past years. With global economic growth pushing up the top line, profits should continue to rise significantly in the quarters ahead.
John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com