Japan

More 'realistic valuations'

Underperformed other developed markets

Few individual stocks have generated as much excitement this year as the US FANGs: Facebook, Amazon, Netflix, and Google (now Alphabet).

Usage reaching a tipping point

Increased cash weightings

So far this year, we have seen Japan's equity market rising on the back of a supportive global backdrop, a relatively stable currency and healthy corporate earnings growth.

Better outlook for inflation

With many asset classes having been pumped up to high valuations by central bank stimulus, we are concerned that investors are no longer receiving particularly generous rewards for taking market risk.

Japan (Topix) is doing well this year in US dollar terms, up 12% compared to 11% for the S&P 500 and 13% for the MSCI World index.

Three macro trends should shape the Japanese economy over the next couple of years.