Nikko AM still bullish on global equities
As has been the case for virtually the entire period since the Global Financial Crisis (GFC), Nikko Asset Management said it continues to be bullish on global equities, with “mildly” rising interest rates not expected to curtail valuations by much.
According to Nikko AM chief global strategist, John Vail, the asset manager’s house view is that the G-3 and Chinese economies will rebound through June 2019, about in line with consensus expectations, after the global first-quarter deceleration.
Nikko AM also expected central banks to reduce their accommodation similarly to consensus expectations, Vail said.
“With such a backdrop, we expect bond yields to rise mildly, the USD to be relatively flat and equity markets to rise quite a bit further, especially as we forecast that geopolitical risks will remain under control,” he said.
“Aggregating our national forecasts from our base date of 8 June, we forecast that the MSCI World Total Return Index will increase 2.5 per cent (unannualised) through September in USD terms, 5.2 per cent through December and 6.8 per cent through March 2019.
“Clearly, this suggests a positive stance on global equities for USD-based (and Yen-based investors, as well).”
Vail said that while there is no doubt that geopolitical tail risks remain quite large, Nikko AM’s Global Investment Committee remains upbeat because the net impulses for global economic growth and corporate profits continue to improve.
“Thus, similar to our meetings of the last year, this justifies a positive stance on global equities, particularly in Japan, Europe and the Asia Pacific,” he said.
“Meanwhile, global bond yields should rise somewhat, so we maintain an unenthusiastic stance on global bond returns.”
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