While the Bank of Japan's recognition that prices have reached the target is strengthening expectations of a December rate hike, November is packed with events including the US midterm elections, prompting individual investors to focus on cash ratios and rebalancing techniques to preserve their assets. The article explains approaches to using cash and rebalancing rules set in advance in response to market movements.
At its meeting at the end of October, the Bank of Japan judged that the underlying trend in prices had reached the 2% level. Although the policy rate was left unchanged, the recognition that the 2% target had been reached was emphasized. At the same time, the Bank decided to substantially increase the amount of ETFs it sells, creating a factor that could affect supply and demand in Japanese equities.
The US midterm elections, US employment figures and CPI data are scheduled for release in November, putting monetary policy developments in Japan and the United States among the market's simultaneous focal points. Meanwhile, market expectations are said to have priced in a rate hike in December, and caution is advised regarding unexpected developments.
Managing the cash ratio and rebalancing are considered important practical measures for protecting assets. One method introduced is to divide cash into an emergency fund for living expenses and reserve cash for investment, then diversify the reserve cash across cash balances in securities accounts, money reserve funds (MRFs) and government bonds.
Using GPIF's basic portfolio as an example, rebalancing is considered practical through three methods: setting deviation bands, rebalancing periodically and using cash flows. The article also explains practical considerations including how to restore the allocation between equities and cash or bonds, tax treatment and NISA, and the impact of foreign exchange movements.
Finally, the article presents plans for specific November events, key points for considering stocks in light of changes in the weighting of AI- and semiconductor-related investments, and a checklist, organizing the key elements of portfolio management during an event-heavy period.