One of the world’s largest wealth managers said Japan is on the verge of ‘imminent take-off’ in 2022, with economic growth expected to match that of the United States and much less stock market multiples. Dear

  • Axa Investment Managers’ assets of 981 billion dollars make it one of the largest European investors.
  • The fund company has chosen Japan as a potential performer in 2022.
  • Axa also said he expects the global supply chain and inflationary pressures to ease.

Next year is likely to be the year of economic recovery, even as inflation has accelerated and the coronavirus threat is far from over. Axa Investment Managers, one of the world’s largest asset managers with $ 981 billion under his watch, is making Japan a market that is expected to rebound strongly in 2022.

While the U.S. economy and the stock market have experienced a meteoric resurgence since the pandemic crash of early 2020, stocks in the world’s third-largest economy are lagging behind.

In a contribution to Axa’s research brief on the outlook for 2022, Hugo Le Damany, an economist specializing in basic investments, pointed out that Japan has been held back by a slow roll-out of vaccination and a longer period of restrictions. than the United States and much of Europe.

The Nikkei has returned a paltry 4.78% in the past year, a figure beaten by the remarkable 24.83% of the S&P 500. As a result, the price-earnings ratio of stocks in the Japanese benchmark index does not. is only 15.98, compared to nearly 25 for the S&P 500, according to Bloomberg data.

However, this could be about to change, as the macroeconomic environment is set to improve significantly. An “imminent take-off” is the order of the day, according to Le Damany.

“About 80% of the population is now vaccinated and the government declared an end to the state of emergency at the end of September. Some restrictions persist, but these should be lifted quickly.”

“In other words, we are seeing more tailwinds than headwinds in the coming months and these should start to support growth from the fourth quarter with strong mechanical catching up.”

AXA expects Japan to move closer to the United States in economic growth next year, reaching an annual rate of 3.5%. This could be seen as a bold prediction, given Japan’s long struggle to generate growth long before the pandemic.

Le Damany said this recovery will continue into the new year as a rebound in consumer demand is far from complete and is supported by a large amount of personal savings across the population, with levels reaching 3. , 7% of GDP.

He also noted that the Japanese government has taken big fiscal measures to stimulate the economy which could bear fruit in 2022. These include cash distributions to people under the age of 18 of $ 890, vouchers purchases for holders of a “My Number” digital identity card and grants to small and medium-sized enterprises.

The degree to which an improving economic situation will be reflected in the Japanese stock market is uncertain, but it is clear that better economic conditions increase the chances of higher stock returns next year.

Japan’s flagship Nikkei 225 has been left in the dust by every other G7 benchmark, but the Asian nation looks set to at least regain some ground.

Nikkei vs. S&P
Google Finance Chart of Nikkei 225 vs S&P 500

AXA also set a positive tone for the global economy in its 2022 outlook note, as it expects inflation to drop in the new year.

Chief economist and researcher Gilles Moec said the fund manager believes the pressure on global supply chains will gradually ease, helping to slow inflation.

A slowdown in inflation would give central banks a hedge to delay rate hikes, potentially stalling the pandemic recovery.

“This would allow central banks to maintain a cautious approach to the pace of policy normalization,” noted the Moec.

Regarding the United States specifically, AXA expects the growth rate observed at the start of the recovery to slow, but remains quite optimistic.

“GDP growth is expected to continue at a strong pace, although it is likely to slow,” noted David Page, head of macro research. “We are forecasting growth of 5.5% in 2021, 3.5% in 2022 and 2.7% in 2023.”

Page added that the Federal Reserve does not appear ready to begin a significant tightening cycle until the end of 2022. He warned that any further doubts about the management of longer-term inflation could cause this to start earlier. situation.

The Bank of Japan, meanwhile, should largely hold the fire, maintaining an ultra-accommodative monetary policy, which should be a boon for the stock market.

“We believe that the Bank of Japan (BoJ) should maintain its accommodative monetary policy at least until
2024, while gradually reducing purchases of government bonds and risky assets. The bar is probably too high to tap off any faster, “said Le Damany.

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