Early August Market Volatility: Signs of More to Come?

Recent global market events, particularly the turbulence in early August, have been marked by significant fluctuations. Although equity indices have quickly rebounded to all-time highs, the foreign exchange and government bond markets remain close to their crisis extremes, indicating ongoing underlying instability. As an example, an analyst I talked to reported the current asset allocation strategy at his firm, reflecting a cautious approach in response to the volatile market conditions:

• Equities: Allocation ranges from 30% to 80%, with a neutral weight of 60%.
• Bonds: Allocation ranges from 20% to 50%, with a neutral weight of 35%.
• Cash: Allocation ranges from 0% to 30%, with a neutral weight of 5%.

Japan’s Economic Developments and Global Impact