Page 14 - ISQ - April 2022

INVESTMENT STRATEGY QUARTERLY

policies. It has not been impossible to find interesting United States over recent months. It is not just that certain indi-
investments to make in the Japanese stock market over vidual sectors are more exciting than others, as a backdrop of
the last thirty years, the importance is to be very selective. slower domestic growth, an ageing population and more global
This has become more important in the European markets competition can have an impact anywhere.
over the last decade and increasingly important in the

Global Central Bank Policy Rates

Central Bank Real Central
Country Rate CPI YoY Last move Last move date
Rate (Today) Bank Rate
Switzerland Target Rate -0.75% 2.2% -3.0% Cut Jan-15

Denmark Deposit Rate -0.60% 4.8% -5.4% Cut Sep-21
Eurozone Deposit Rate -0.50% 5.9% -6.4% Cut Sep-19
Japan Policy Rate Bal -0.10% 0.9% -1.0% Cut Jan-16
Sweden Repo Rate 0.00% 4.3% -4.3% Hike Dec-19

Australia Cash Rate 0.10% 3.5% -3.4% Cut Nov-20
US Fed Funds 0.38% 7.9% -7.5% Hike Mar-22

Canada Overnight 0.50% 5.7% -5.2% Hike Mar-22
Thailand Policy Rate 0.50% 5.3% -4.8% Cut May-20
UK Bank Rate 0.75% 6.2% -5.5% Hike Mar-22

Source: Compound data (01/04/22)

Global investors are also changing. It is not just the eco- medium-term inflationary pressures are likely to be modest. This
nomic rise of the emerging markets - a number of which remains the possible difference between economies in the UK,
should already be reclassified - but that global investor Europe and the United States compared to Japan, something
allocation profiles will change too. It is not that every which will become more evident as the 2020s evolves. But for all
nation whose stock market transitorily becomes over 50% investors today there are lessons to be learnt: the investment
of the world index, will inevitably follow the example of the world is forever changing (as noted by Japanese investors over
Japanese market and move to a single-digit level within the last three decades).
three decades. However, even neutral allocations to
today’s emerging market countries will build over the
2020s and 2030s, driven by both the growth of allocations KEY TAKEAWAYS:
from their domestic investors as well as global investors • In the late 1980s the Japanese market was over
from other countries. 50% of the world index.
There is still one question remaining concerning the speed • Despite growth and innovation, this statistic is
of these shifts. Whilst rising interest rates and government now below 7%.
bond yield levels in a number of developed market coun- • The UK, European and American investors can
tries have caused fear for many investment markets, it learn some insights.
does show an appreciation of continued economic growth
too. A lack of central bank confidence in raising interest • Important to watch both stock market and central
rates and bringing an end to policy stimulus does also bank insights.
show a fear that forward economic growth numbers and

14