WisdomTree Japan Hedged SmallCap Equity Fund (DXJS)

At the recent Midyear Market Outlook Symposium, TMX VettaFi Investment Strategist Cinthia Murphy led a timely discussion on the shifting global investment landscape. With uncertainty building in U.S. markets and international equities outperforming in 2025, investors are increasingly asking whether this trend has staying power.

As the global private equity industry took tentative steps toward recovery in 2024, Japan raced ahead. The value of private equity investment in Japan jumped nearly 41% over the prior-year total in 2024, far outpacing the 25% year-over-year gain in global private equity deal value, according to S&P Global Market Intelligence data.

The “real” policy rate is massively negative, with the new policy rate of 0.25% far below Core CPI of 2.6%. When QT reaches about ¥3 trillion per month in 2026, it would represent a reduction of its JGB holdings of about 0.5% per month.

In March, the Bank of Japan abolished its 8-year-old negative interest rate policy, hiking rates for the first time in 17 years by raising its benchmark rate to 0-0.1%. To combat inflation while also avoiding an excessive surge in interest payments, the BOJ is considering passive quantitative tightening.

We'd rather downplay the weaker-than-expected manufacturing data and focus on a solid recovery in retail sales and a reacceleration in inflation, which will be welcomed by the Bank of Japan. Inflation has been quite choppy due to various government programmes and utility prices.

By end-April 2024, Japanese equities had outperformed the FTSE All-World index over 12 months and in the year to date. Japan has undertaken significant structural corporate reforms in recent years.

A weak yen is unlikely to end the positive momentum in Japanese equities. The drivers of the recent rally remain, so we stay overweight Japanese stocks.

Many global investors opting to participate in the Japanese stock rally are leaning into large-caps and related ETFs. They've been rewarded for that faith, as highlighted by the WisdomTree Japan Hedged Equity ETF (DXJ) returning 20.2% YTD.

Japan's equity benchmark, the Nikkei 225 Index, has been on a tear in 2024, eclipsing its previous high set back in 1989. As of early April, the index is hovering near 40,000. Solid economic growth, a revamp in the country's tax-free stock investment program and corporate governance reform have helped propel Japanese equities to record highs.

By Jeff Weniger, CFA, Head of Equity Strategy Key Takeaways The Nikkei 225 index reaching new all-time highs, surpassing the previous record set in 1989, is a significant psychological achievement for Japan. Despite Japan's current recession, the long-term effects of Abenomics, particularly corporate governance reform, are influencing market sentiment and investment in Japanese stocks.

Investors appear increasingly optimistic regarding equity performance in the second half. However, frothy markets continue to create challenges this quarter and advisors looking to find opportunities within equities this year don't want to miss the recent 2024 Equity Symposium hosted by VettaFi.

Japanese stocks have been on the hottest ride over the past several months, with the Nikkei 225 Index now breaching the 40,000 milestone for the first time.

With the Nikkei Index in Japan soaring to record highs even as the country slips into a recession, there are concerns that Japanese stocks are getting ahead of themselves. The MSCI Japan Index is higher by 3.78% over the past month.

While the China macro story of ongoing transition is a headwind to the rest of Asia, there is more to the region's economic health than this.

Japan's Private Sector Returns To Growth At Start Of 2024, While Price Pressures Ease

The Bank of Japan stood pat on monetary policy today as widely expected. But the market is now paying attention to a more positive tone on the wage and inflation outlook, as well as an upgrade to the FY2024 inflation outlook which lays the groundwork for policy normalisation.