Nomura are calling for 2011 to be a great year for U.S. and Japanese equities according to their new global strategy outlook.There view of the year ahead breaks up into three trends:
- Inflation in emerging markets will limit returns on equities there
- Accommodative monetary policy in the U.S. and Japan will support equities in those economies
Nomura’s call is based on rising earnings and declining bond yields, which will force investors to take more risks and head into equities.
Global trade is not back to pre-crisis levels, but it is making a V-shaped recovery, based on emerging market demand.
The global return on equity is rising again, and according to Nomura, will head further above its average.
And the result of emerging markets growth and investment is inflation, which will force governments to enact tightening measures.
But earnings per share are set to continue their rise, so equities on a global scale will make more sense.
Japan and the U.S. have underperformed emerging markets and developed Asia, but that may change with new tightening policies.
Japanese equities too have underperformed. Nomura believe this will change because U.S. investors are moving out of bonds. The spread between U.S. bonds and Japanese bonds has been determining the exchange rate for the yen, according to Nomura, and that spread will now widen weakening the yen (good for Japanese stocks).
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