Much have debated over the US job data for March and whether the growth momentum can be sustained. Analysts have predicted a pull back of up to 10 percent before markets rebound.
John Vail, chief global strategist and head of asset allocation of Nikko Asset Management in Tokyo thinks US job growth is robust and one weak month doesn’t indicate a trend reversal. Also, there has been a big seasonal adjustment in the job market, affecting March data. The weather, especially the unusually warm recent months, played a big role in slowing down the job growth.
The important development is that the US stock market boomed in the first quarter of 2012, precisely the same time when people were talking of the Eurozone breaking up. The situation in Europe has flared up again, as Spain failed to meet its budget deficit targets.
However, for equities, Vail remains overweight on Japan and underweight on Australia.
Strong corporate earnings and a rebounding economy will drive Japan’s valuation going forward. Vail doesn’t anticipate another Tsunami or a strong Yen, and foresees a strong valuation bounce-back in the quarter starting April since stock prices are extremely low now. You can watch the video here.
While that is just one man’s opinion, I believe that we have come too far too fast and, while the US market may show continued upward momentum, disruptive events from Europe can easily affect the domestic major indexes negatively. We are all joined at the hip; to me, the decoupling theory will not hold up over time.
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