What Investors Should Know Now

The first three months of this year have seen disappointing data from Japan and the US - the two stock markets that stole the show in 2014. So what happens next?

J.P. Morgan Asset Management 3 April, 2014 | 11:31AM
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This article is part of Morningstar's "Perspectives" series, written by third-party contributors. Here, Tony Lanning manager of the fund of funds JP Morgan Fusion range explains what investors can expect in the next three months. 

A more difficult first quarter has cleared much of the froth out of the Japanese equity market and has allowed us to increase exposure at lower prices. Earnings growth is set to outpace other global markets, led not only by a weaker yen but also continued corporate restructuring and improvement on shareholder returns. Even after the blockbuster return in 2013, valuations are still attractive and offer one of the cheapest ways of benefiting from a synchronized acceleration in global growth.

Worries about a lack of progress on Abe’s third arrow of structural reform are largely irrelevant, as are fears over the impact of an imminent rise in the sales tax. Japan needs inflation and higher equity prices if it has any chance of addressing its debt mountain. Having historically been hamstrung by a chaotic political system, this is now something the current government has the time, legal power and desire to do. The easiest route to this outcome remains a weaker yen - expect further monetary stimulus on top of the already aggressive easing the Bank of Japan is pursuing. 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Aberforth UK Small Companies Acc31,644.16 GBP0.23Rating

About Author

J.P. Morgan Asset Management  is the investment arm of JPMorgan Chase & Co. and it is one of the largest active asset managers in the world.