GAM's Active Thinking 08 November 2024
If we look back to the initial phase of Covid, growth stocks in Japan outperformed as companies expected to have good levels of earnings performed well. Then as we moved into the middle of the Covid period, market discussions shifted towards an inflationary period and interest rate hikes by the Federal Reserve (Fed) and other central banks; although not Japan's. This shift led to a preference for value stocks in Japan ahead of their growth counterparts, correlating with rising US Treasury yields. As yields increased, the discounting factor applied to growth stocks weighed on their P/E ratios, leading to a preference for value stocks.
Having faced two-year-long headwinds of rising government bond yields from late 2021, European credit markets have been thriving in more favourable conditions ever since, boosted by solid corporate earnings, especially from financials, and confidence that the European Central Bank (ECB) had finally got to grips with inflation.
Latest blog post from the Multi-Asset Team:
As Donald Trump secured victory in the US election and Republicans took the Senate and also looked set to potentially take the House, it is important to remember that political passions and culture wars do not translate well to markets, and indeed rarely have done in the past.
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