Late post for May performance +2.62%
Major contributors :
Long FTSEMIB and Nikkei early in the month + short AUD against USD
Decreased risk significantly in second part of the month.
June MTD : looking to add to Nikkei positions amid market turmoil - this is costing the portfolio some performance MTD in June (-1.32% as of 12th of June evening close). I remain structurally bullish on Japanese equities, bearish on Yen, AUD, Australian and Brazilian equities.
Overall, I think that - unless we get much better macro news in the US - this is not the time to be long risk aggressively as the two main "liquidity pool" are drying - as growth is slow globally, financial conditions evolution are THE key risk factor - : 10yr up to 2.2% (up 70bps in 1 month, and UYDJPY down 15% from high). Investors probably need to adapt to recent movement in financial conditions, rationalize (even at 2.2% US 10Y are very low...) and - unless macro data improve sharply in the US in the very short term - investors will require cheaper assets prices to deploy capital aggressively.
I will soon publish a small post comparing Takahashi (1932-1936) to Abe - we can find similarities in both the economic context and fiscal/monetary response :
Context :
1.) significant aggregated demand shock 1929 crisis / 2008 crisis + 15 years of deflation
2.) gold standard / historical high for USDJPY in late 2012
Political responses :
1.) exit of gold standard / current depreciation of Yen
2.) huge gov stimulus : 20% of GDP under Takahashi and 26% under Abe
3.) Quantitative easing in both case
The really interesting part is the results of Takahashi policy - it will be presented in the next post. Stay tuned.
