The market isn't overheating even though the Nikkei stock average touched the 20,000 level, nor do we believe that overseas markets are overheating right now.
Due to the developments described in this article, there is ample room for growth at Japanese firms and much opportunity for investment success.
Given the significant proportion of real estate investment as a percentage of GDP, as well as the proportion of local government revenue generated from land sales, the property market remains a crucial driver of the Chinese economy.
In sum, there certainly are some worrisome issues, as always, but we find none of them convincing enough to prevent moderate increases in equity prices.
Much as we expected, China's economy has continued to slow faster than consensus, but does not appear to be in a hard landing.
Central Banks: Despite firm economic growth, we believe that a negative YoY CPI through September will steady the Fed's hand.
Coupled with our expectation for global bond yields to rise moderately, we maintain our overweight view on global equities vs. bonds.
John Vail updates his long-standing theme: Japan's Successful “Show Me the Money” Corporate Governance.
Through 2014, one of the largest asset classes in the world was virtually unnoticed as an indicator that Europe is not pushing the global economy into widespread deflation.
There are several credible reasons to expect that QE will boost corporate earnings in Europe, though by not as much as in the US. However the risk of disappointment relative to inflated expectations remains high.
The disappointing economic data should not worry investors in Japanese risk assets very much at all.
We expect the next phase of the global evolution to be driven by a growing global population, rapid urbanisation and for most of it to happen in emerging markets with increasing focus on "green" development.
ECB's QE: The major question is, will this program work given the European model of debt creation is via the banking system and not the bond markets?
The steel industry and its underlying iron ore industry are witnessing excess production and deflationary forces that are similar to the global energy markets.
The QE announcement was a major step forward for Eurozone. It is not without dangers and questions about implementation, however, so markets should not get over-enthusiastic about it.
Now that oil prices have declined, if a central bank targets its overall CPI at 2.0% for 2015, it would likely be labeled as being overly aggressive and perhaps attempting to unfairly weaken its currency.
As the Fed continues to unwind its stimulus, even amidst threats of global deflation, there are hopes that China will accelerate the liberalization of its capital account and take over the Fed's role as the global supplier of liquidity.
We expect oil prices to rebound and for the time being, we will stick with our call for Brent to rebound to $72 by end-June 2015, although $65 is a more plausible goal.
Brazil can no longer continue as “business as usual” and it is at an important crossroads as to whether it can exit the well-known “middle income country trap.” Domestic issues aside, EMs will continue to encounter major headwinds as an asset class in early 2015 due to negative stories from large countries, such as Brazil and Russia.
The investment world is changing quickly and 2015 should prove to be a very interesting year, but we see no reason to change our long-held positive view on global equities.