logo
  • Funds

    Fund Listing

    • Fund Explorer
    • Fund Distribution
    • Fund Documents

    Featured Funds

    • Income Fund
    • Multi Income Fund
    • Future Transition Multi-Asset Fund
    • Global Equity Solutions
    • China Income and Growth Solutions
    • Provident Funds
  • Insights

    Market Insights

    • Market Insights Overview
    • Guide to the Markets
    • Weekly Market Recap
    • On the Minds of Investors
    • Guide to China
    • Multimedia

    Retirement Insights

    • Retirement Insights Overview
    • Principles for a Successful Retirement
    • Building Better Retirement Portfolios
    • Are you letting volatility derail your retirement plan?
  • Investment Ideas
    • Managing Volatility
    • Growth Strategy
    • Income Strategy
    • Retirement and long-term investing
  • Personal Investing

    Knowing the Basics

    • Mutual Funds 101
    • Taking the First Step in Investing
    • Ways to Diversify Your Portfolio
    • Investing for Your Children’s Future
    • Retirement Planning

    Getting Started

    • Start Investing
    • Investment Ideas
    • Invest regularly: Monthly Fund Investment
    • eTrading Privileges
    • Open an Account Online with Ease
  • Retirement Services
    • ORSO Services
    • MPF Services
    • Retirement Fund Centre
  • Resources
    • About Us
    • Awards
    • Contact Us
    • Announcements
    • Forms & Literature
    • Investment Return Calculator
    • Insights App
    • JPM Bot
  • Library
Skip to main content
  • Language
    • English
    • 中文/ Chinese
  • Role
  • Country
  • eTrading Login
    Open an Account
    Search
    Search
    Menu
    1. What is the market impact from elections in Germany and Japan?

    • LinkedIn Twitter Facebook

    What is the market impact from elections in Germany and Japan?

    28/09/2021

    Tai Hui

    We believe the local economic and market backdrop would be more influential in delivering investment performance in both Europe and Japan, and active selection in companies and sectors is important.

    Tai Hui

    Global Market Strategist

    Listen now

    Germany held its federal election on 26 September and the Liberal Democratic Party (LDP) of Japan will vote for its president this week, who will lead the party into a general election by November. One key question is the potential market impact of these elections for the third and fourth largest economies in the world.

    The vote in Germany marks the end of Angela Merkel’s 16-year reign as chancellor. The center-left Social Democratic Party (SPD) have narrowly beaten Merkel’s Christian Democratic Union. For the first time in 60 years, Germany could have a three-party coalition instead of the usual two-party pact. However, forming a coalition could take months to complete with a range of possible outcomes and some tough horse-trading.

    One clear trend is that German voters are leaning to the left. SPD advocates for greater wealth re-distribution and social transfers. It proposed raising the top income tax rate to 45%, and introducing a financial transaction tax and a wealth tax. The Green Party also saw a rise in support, and it wants to spend more on climate-related investments with higher taxes on high income earners. But no three-party coalition is possible without the free market center-right Free Democratic Party, which is promoting more investment in technology, tax cuts and less red tape, which is likely mitigating the shift towards bigger government, higher taxes and more regulations.

    For Japan, the winner of the LDP presidential vote would assume the role of Prime Minister and lead the party into the next general election, which needs to be held by 28 November. The next LDP leader should enjoy some fresh momentum going into this vote and protect the party’s majority in the Lower House. Out of the four candidates, Taro Kono, minister in charge of the vaccination program and former foreign and defense minister, and Fumio Kishida, former foreign minister, are in prime position to win the leadership race. Sanae Takaichi, former internal affairs minister emerges as a dark horse candidate. These candidates are expected to announce their fiscal spending programs in the near future, even though they would have different opinions on fiscal consolidation in the long run. The Bank of Japan is expected to be allowed to run its monetary policy as needed. 

    EXHIBIT 1: GLOBAL AND ASIA EQUITY MARKET RETURNS
    Source: FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management.
    Returns are total returns based on MSCI indices, except the U.S., which is the S&P 500, and China A, which is the CSI 300 index in U.S. dollar terms. China return is based on the MSCI China index. 10-yr total (gross) return data is used to calculate annualized returns (Ann. Ret.) and annualized volatility (Ann. Vol.) and reflect the period 31/08/11 - 31/08/21. Past performance is not a reliable indicator of current and future results.
    Guide to the Markets – Asia. Data reflect most recently available as of 28/09/21.

    We believe the local economic and market backdrop would be more influential in delivering investment performance in both Europe and Japan, and active selection in companies and sectors is important. For Europe, the economic recovery has supported earnings improvement and the prospects of the European Central Bank maintaining supportive monetary policy should also help. In the near-term, supply-side bottlenecks could drag on the manufacturing sector, but impact on the services sector should be manageable.

    For Japan, its equity market has underperformed the U.S. since the pandemic began. This underperformance has also led to less demanding valuations relative to the U.S. Yet, the improvement in the pandemic situation should allow the economy to reopen as we approach the Christmas season. The government is also expected to keep the foot on the fiscal stimulus gas pedal, especially around the time of the Lower House general elections. Most importantly, the global recovery should support the expansion of the global corporate capex cycle, which traditionally has a strong correlation with Japanese corporate earnings. 

    Investment implications

    Since the start of the year, we have suggested investors be more globally diversified to better capture the benefits of the global recovery, as well as the staggered stages of rebound. While investors are more familiar with the U.S. and Asian markets, we believe there are opportunities in Europe and Japan. The latest political changes should not fundamentally change the investment case of these markets, since many companies operate globally and are leaders in their respective fields. The key would be to actively select sectors and companies. These companies, especially European ones, have placed more emphasis on addressing environmental, social and governance (ESG) factors. This could be a good component to build a more ESG-compliant portfolio. 

    09y0212809025002

    FEATURED FUNDS

    Asian Total Return Bond Fund

    READ MORE

    The Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment decision-making, the program explores the implications of current economic data and changing market conditions. 

    For the purposes of MiFID II, the JPM Market Insights and Portfolio Insights programs are marketing communications and are not in scope for any MiFID II / MiFIR requirements specifically related to investment research. Furthermore, the J.P. Morgan Asset Management Market Insights and Portfolio Insights programs, as non-independent research, have not been prepared in accordance with legal requirements designed to promote the independence of investment research, nor are they subject to any prohibition on dealing ahead of the dissemination of investment research.

    This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professional, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

    J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide.

    To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our privacy policies at https://am.jpmorgan.com/global/privacy.

    This communication is issued by the following entities:

    In the United States, by J.P. Morgan Investment Management Inc. or J.P. Morgan Alternative Asset Management, Inc., both regulated by the Securities and Exchange Commission; in Latin America, for intended recipients’ use only, by local J.P. Morgan entities, as the case may be. In Canada, for institutional clients’ use only, by JPMorgan Asset Management (Canada) Inc., which is a registered Portfolio Manager and Exempt Market Dealer in all Canadian provinces and territories except the Yukon and is also registered as an Investment Fund Manager in British Columbia, Ontario, Quebec and Newfoundland and Labrador. In the United Kingdom, by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other European jurisdictions, by JPMorgan Asset Management (Europe) S.à r.l. In Asia Pacific (“APAC”), by the following issuing entities and in the respective jurisdictions in which they are primarily regulated: JPMorgan Asset Management (Asia Pacific) Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited, each of which is regulated by the Securities and Futures Commission of Hong Kong; JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K), this advertisement or publication has not been reviewed by the Monetary Authority of Singapore; JPMorgan Asset Management (Taiwan) Limited; JPMorgan Asset Management (Japan) Limited, which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Australia, to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Commonwealth), by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919). For all other markets in APAC, to intended recipients only.

    For U.S. only: If you are a person with a disability and need additional support in viewing the material, please call us at 1-800-343-1113 for assistance.

    Copyright 2022 JPMorgan Chase & Co. All rights reserved.

    J.P. Morgan Asset Management

    • Terms of Use
    • Privacy Statement
    • Cookies Policy
    • Investment Stewardship
    • Fund Notes
    • Offering Document(s)
    • Forms & Literature
    • Guide to Using This Website
    • Sitemap
    J.P. Morgan

    • J.P. Morgan
    • JPMorgan Chase
    • Chase

    The information contained herein is intended only for use by Hong Kong residents. By using this information, you are representing and warranting that you are either residing in Hong Kong or the applicable laws and regulations of your jurisdiction allow you to access the information, and you confirm that you accept the Terms of Use as set out in https://am.jpmorgan.com/hk/. Investment involves risk. Past performance is not indicative of future performance. In particular, funds which are invested in emerging markets and smaller companies may involve a higher degree of risk and are usually more sensitive to price movements. Investors should carefully read and consider the fund offering document(s), which contain details on investment objectives, risk factors, charges and expenses of the fund, before making any investment decisions. Investors should read carefully the fund notes before making any investment decisions. Information in this website does not constitute investment advice, or an offer to sell, or a solicitation of an offer to buy any security, investment product or service, nor a distribution of information for any such purpose. Opinions and statements of financial market trends set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. Investors should conduct their own verification. The views and strategies described may not be suitable for all investors. This website and the advertisements contained herein are issued by JPMorgan Funds (Asia) Limited. This website has not been reviewed by the Securities and Futures Commission of Hong Kong ("SFC"), with the exception of material relating to the JPMorgan Provident Plan that the SFC has pre-approved (however such pre-approval does not imply official recommendation by the SFC).

    Copyright 2022 JPMorgan Funds (Asia) Limited. All rights reserved.