The recent correction in the Nikkei 225 Stock Average represents a welcome breather after the furious rally that began in November 2012. Investor sentiment remains bullish, by and large. We expect Japan’s equity market to perform well as long as the government's 10-year bonds move higher in anticipation of strong GDP growth. Investors looking to add exposure to this story should focus on sectors that will benefit from the government’s current economic initiatives.
No stock is a buy at any price. Although this caveat doesn’t apply to momentum-chasing traders who buy what’s rising and sell what’s falling, valuation is a critical component of the investment strategy underpinning our Lifelong Income Portfolio.
Investors preference for low-beta names and dividend payers has pushed valuations of consumer staples and other safety-first fare to frothy levels. Our favorite cyclical sectors, on the other hand, sport favorable valuations and solid upside potential.
Yield-hungry investors have bid up shares of US-listed real estate investment trusts to stratospheric levels, while many Canadian names continue to trade at reasonable valuations and pay monthly dividends.
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