Stock Market Turmoil: Expert Analysis on Tokyo Market Concerns for the Year Ahead

-The Tokyo market is in turmoil, and several negative factors are starting to become a concern towards the end of the year-

2024 from the beginning of the yearNikkei stock average rateThe price rose rapidly, and on February 22, it hit a new all-time high of 38,915 yen, set during the bubble period of late 1989. After that, the stock made some changes in early March, but was repurchased, and on March 22, it reached a closing price of 40,888 yen, an increase of nearly 7,700 yen since the beginning of the year. However, with the start of the new fiscal year in April, when expectations were high, the balance of the Tokyo stock market was ironically thrown off balance. As expectations of early interest rate cuts in the United States waned and geopolitical risks in the Middle East spoke up, the Nikkei average quickly fell by more than 4,000 yen, and there were moments when investment sentiment suddenly turned upside down. bearish. Will the market be able to fully recover from this level, or is it possible that the great rally will come to an end? We asked Tomoichiro Kubota from Matsui Securities, who is renowned for his analysis and ability to predict the future of the market in the second half of the year, and who is very familiar with investor trends respectively, to give his opinion.

(Interviewer: Junichi Nakamura)

“If the risk position is activated, we can push deeper.”

Mr. Tomoichiro Kubota (Senior Market Analyst, Head of Investment Media Department, Matsui Securities)

Although the stock market was hit by turbulence at the start of the new fiscal year in April, we believe that it will basically be able to rebalance and maintain its weight in the second half of the year, but some factors uncertain and the danger. If this comes to light, there are concerns that it will fall in early autumn. To start with the decision, the main line for the Nikkei 225 average at the end of this year is expected to be around 41,000 yen, but if it leads to a negative position, there is a possibility that it will be pushed down to large to approx. 32,000 yen.

Firstly, with regard to the situation in the Middle East, which was the cause of the recent market turmoil, although concerns have subsided recently, there are still flashpoints in the medium term, and need to be cautious as they are likely to affect oil prices. In particular. An increase in crude oil prices due to geopolitical risks will lead to an increase in long-term US interest rates. Inflationary pressures from rising energy prices could further hamper the US Federal Reserve’s efforts to lower interest rates.

● US interest rate cuts are receding like rain

Currently, the possibility of an interest rate cut at the US Federal Open Market Committee (FOMC) meeting in June has become much slimmer, and the conditions for an interest rate cut in July are also shrinking. As initial expectations have been pushed back, the current dominant position is that there will be no interest rate cut within this year, and the consensus is that the first interest rate cut will in January next year. It is not known to what extent the market has taken this in.

With the presidential election just around the corner in September, it may be difficult for the Federal Reserve to make any moves, and the possibility of zero interest rate cuts before the end of the year must be considered. In that case, there is a great chance that the US stock market will definitely experience turmoil. Naturally, it will be difficult for the Japanese stock market to follow the upward trend. Expectations of US interest rate cuts are fadingforex marketThis is a factor that leads to a stronger dollar and a weaker yen, but even if the yen is weak, if the US stock market becomes more volatile, risk aversion is expected to strengthen.

The presidential election is also uncertain. President Biden has announced plans to tighten wealth taxes, which could have a negative impact on the stock market. On the other hand, if former President Trump were to return to power, his plans for immediate tax cuts and other measures would likely be popular, but another rise in interest rates could follow. to the overheating of the economy.

– Stopping US consumer spending and commercial real estate is a powder keg

The current situation where the US policy interest rate remains at a high level of 5.25% to 5.5% is a cause for concern as it could have a negative impact on the real economic situation. One of these is the rising rate of credit card delinquencies, and if this trend continues, there is a great chance that personal spending will slow. In addition, non-performing commercial real estate loans are likely to be an issue that cannot be ignored. If the recent no-landing theory for the US economy blows away and concerns about a sudden landing suddenly arise, we should expect a pattern in will accelerate the reduction in risk assets.NY DowIf things go well, the price will reach a new high of $39,807 and reach $40,000, but if there are concerns about an economic slowdown, the stock could be sold again and could ‘ price drop to around $37,000 by the end of the year is also.

Meanwhile, at home, the Bank of Japan’s monetary policy stance is the key. The market has priced in the possibility of more interest rate hikes sooner or later, but how this will be reflected in the dollar/yen market will need to be closely watched. The recent depreciation of the yen appears to be due to the government and BOJ authorities moving to intervene in the exchange rate without Bank of Japan Governor Ueda showing any intention to raise interest rates though- however, if there is a change in the policy of the Bank of Japan in the future, the yen could move quickly towards appreciation.

● Focus on positive situations instead of being completely pessimistic

In terms of corporate performance, the fiscal year ending March 2024 was generally strong, but the growth potential for the fiscal year ending March 2025 is not as great as the previous fiscal year, and because Japanese companies tend to give conservative forecasts by nature, are current financial results There is a feeling that we cannot expect much from cases where buying interest increases after the release comes to end However, from the other side, leaving the possibility of upward revisions in that period could be a factor for stock prices later.

In fact, there are some positive aspects when looking at the stock market in the second half of the year. First, the delay in expectations for interest rate cuts in the United States is frustrating, but the fact that the environment in which there is no need to cut interest rates is still a reflection of the strength of the US economy. Even if interest rates remain high, if corporate performance is strong, stock prices may maintain an upward trend during this time. In addition, inflation concerns are reignited due to high crude oil prices and persistently high service prices.Artificial Intelligence (AI)This increase in productivity could reduce the upward pressure on wages, and if this were to happen, we could envision a situation where US interest rates would gradually decrease. In this case, the relative value of stock will be reduced, and a large change in the total stock price will be avoided.

On the other hand, in Japan, there are concerns that stocks are no longer responding well to the recent depreciation of the yen. This is because the government and Bank of Japan authorities cannot ignore the disadvantages of the continued depreciation of the yen, there are limits to small foreign exchange intervention, and the view that Bank of Japan interest rate hike dampens investment sentiment. However, if the high US interest rates that have underpinned the dollar buying are resolved and begin to move down, concerns about a too weak yen will be undermined, and the Bank of Japan’s tightening bias could be is reduced as a result. If these headwinds in the external environment subside, we believe there is a good chance that the Nikkei stock average will return to the 40,000 yen level by the end of the year.

When considering investment targets in the stock market from now on, the most likely candidate is Mitsubishi UFJ Financial Group.8306> [東証Ｐ]and Sumitomo Mitsui Financial Group8316> [東証Ｐ]such asmega bankamong thembank stocks.Furthermore, against a backdrop of commodity prices driven by crude oil, Mitsui & Co.8031> [東証Ｐ]and Mitsubishi Corporation8058> [東証Ｐ]etc.general trading companyand INPEX1605> [東証Ｐ]etc.Resources related sourcesI want to hold on to it.Also, although the outlook is different, defensive stocks that include activists have the ability to show strength even when the overall market price is volatile. , and from that perspective, Kao4452> [東証Ｐ]I would like to keep an eye on things like that.

(Tomichiro Kubota)
After joining Matsui Securities, he assumed his current position after building a website, leading self-sales, and doing customer marketing work. He has been tracking market prices, mostly stocks, since the early days of online securities trading, and is also familiar with the buying and selling trends of individual investors. In addition to daily market reporting, we have developed unique investment indicators that have never existed before, such as the “Growth Market Credit Rating Profit and Loss Ratio” and the “Day Trade Suitability Rating.” ‘ In addition, as an investment media director, he operates a YouTube channel and media owned “Money Satellite.”

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