Japanese equities are taking a beating this week. Its earnings season over the next few weeks appears particularly gloomy. Over the last 12 months, the global growth slowdown has been especially troublesome for Japanese equities, which have steadily unperformed DM equities. The underperformance has also been a common theme in the 12-months leading up to U.S. recessions (see: “Japan and the slowdown playbook”, January 29th). Despite the relative value in Japanese equity valuations, speculators have extended their short bets to account for more than half of all trades on the Tokyo Stock Exchange! Without some earnings surprises to the upside, it remains difficult to build the tactical case in favor of growth-sensitive Value stocks, including Japanese equities.
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