Multi-Asset Insights
Key Highlights:
- In a world marked by geopolitical tensions and economic shifts, we emphasise the need for granular asset allocation strategies that consider regional and structural differences.
- We evaluate differences across small-cap stock markets that support the argument for considering tactical small-cap allocations on a region-by-region basis, instead of globally.
- Japan’s economic resurgence, driven by structural changes, has brought it closer to the forefront of investor considerations. We analyse the drivers and consider the strategic importance of Japanese equities in global portfolios.
Nuances of small-cap investing
Small-cap stocks can support portfolio growth and diversification, but they also introduce unique risks. Factors such as regional dynamics, economic conditions and market cycles deeply influence their performance. Higher interest costs, lower liquidity and market concentration add differing complexities across countries, highlighting the importance of regional considerations and a multifactor approach when including small caps in portfolios. We explore the dynamics shaping small-cap investing to gain a deeper understanding of structural differences across markets, identifying how small caps can complement portfolios when approached regionally and on a tactical basis.
Are Japanese equities at an inflection point?
Japanese equities have faced distinct challenges over the years, shaped by prolonged economic stagnation and demographic challenges. However, significant shifts are underway, with various structural reforms redefining Japan’s economic narrative. These efforts have sparked renewed interest in Japanese equity markets, particularly in previously overlooked domestic sectors. Yet, global headwinds, geopolitical dynamics and Japan’s cyclical sensitivities add layers of complexity. We delve into the evolving dynamics of Japanese equities, exploring their resurgence and prospects amidst still relatively inexpensive valuations and sustainable earnings growth outlooks.