With US long-term interest rates nearing 5%, the Nikkei Average is expected to remain under correction, and an investment strategy focused on undervalued small- and mid-cap stocks with strong earnings has been proposed.
The Nikkei Average fell ¥1,009 last week to ¥64,011, and caution is spreading amid concerns over a prolonged crisis in the Middle East, oil market trends and further interest rate hikes in the United States.
With US long-term interest rates nearing 5% and the Bank of Japan Monetary Policy Meeting scheduled for 17–18 September, interest rate trends have become the market’s focus.
Oil prices have at times exceeded $100 per barrel, prompting a growing market view that the likelihood of additional Federal Reserve rate hikes is increasing.
The author expects large-cap stocks to face limited upside in this environment and believes it is time to shift funds into undervalued small- and mid-cap stocks with strong earnings.