Looking Beyond Big Tech: A Closer Look at Japan

# Looking Beyond Big Tech: A Closer Look at Japan

Investors have long relied on big tech companies, such as Apple, Microsoft, and Alphabet, to drive substantial gains in the US stock market. However, according to Karniol-Tambour, it may be time for investors to consider a portfolio rebalancing strategy, as the US stock market becomes more vulnerable.

So where else can investors turn for opportunities? Karniol-Tambour suggests taking a closer look at Japan. While some may view this suggestion as outdated, she argues that Japan's market has been overlooked for so long that it presents unique opportunities. As a result of neglect from investors, Japanese companies have not prioritized returning money to shareholders. Nevertheless, this situation is starting to change.

The past lack of investor interest in Japan has led to undervalued assets. These assets offer attractive valuations due to their success not already being priced into the market. Karniol-Tambour believes this historical context provides a compelling reason to consider investing in Japan.

Despite the potential in Japan's market, Karniol-Tambour also acknowledges that the US economy remains remarkably strong. Several factors are offsetting the Federal Reserve's tightening efforts, which contribute to this strong economic performance. However, she predicts that the US economy will gradually weaken over time.

While many anticipate that the Federal Reserve will intervene and stimulate the economy during an economic downturn, Karniol-Tambour argues that inflation will likely remain stubbornly high. This persistent inflation will limit the Federal Reserve's ability to implement aggressive easing measures. In other words, they won't have strong enough grounds to significantly ease monetary policy.

Karniol-Tambour suggests that without a substantial economic slowdown, it is challenging to envision a scenario where the Federal Reserve eases significantly. Consequently, the realistic possibility of a US recession in the near future prompts serious consideration. According to Karniol-Tambour, the odds of a recession are reasonable, and the Federal Reserve will face difficulty responding in the accustomed manner. The familiar pattern of immediate reversal in response to any economic slowdown may no longer be applicable. The inability to ease monetary policy fundamentally alters the game.