A view has emerged that the turning point will come from late October to early November, with tech earnings, Japan-U.S. MPMs and the U.S. midterm elections cited as factors driving the shift. Based on commentary from a Nomura Securities strategist, this report outlines the outlook for market conditions during that period.
A view has been presented that the turning point for Japanese equities will come from late October to early November. One factor cited is the sharp upward revision to the year-end 2026 Nikkei 225 forecast in the QUICK Monthly Equity Survey published on 13 October. While optimistic views had gained ground in some quarters, the survey also showed a tendency for TOPIX to weaken slightly afterward.
Given the current state of the Japanese equity market, which has repeatedly reversed direction, a modest correction from the recent peak of 6 October is expected. The rise in AI-related semiconductor stocks is showing signs of pausing, while markets are seen as likely to move sideways or fluctuate within a narrow range before the elections.
The scenarios for the period ahead include (1) Japan-U.S. tech earnings at the end of October exceeding expectations, (2) a more accommodative monetary policy stance at Japan-U.S. MPMs, and (3) no major policy impact emerging after the U.S. midterm elections. If these three conditions are met, stocks could resume their advance after a pause. In particular, scenario (3) assumes that moderates would take the lead even if the Democrats win.
In light of the recent reversal cycle and the midterm-election pattern, the market is seen as likely to complete a mild correction in late October to early November, with trading centered on energy and defensive stocks. A failure of bank and real estate stocks to narrow their underperformance is cited as a risk that could expose broader market vulnerability.