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| title: "House Oversight: Estate Documents (Nov 12) (HOUSE_OVERSIGHT_014400)" |
| source: "House Oversight: Estate Documents (Nov 12)" |
| sourceUrl: "https://www.justice.gov/epstein" |
| date: "2026-01-01" |
| category: "House Oversight" |
| eftaNumber: "HOUSE_OVERSIGHT_014400" |
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| parseTier: "external-legacy" |
| engine: "engine undisclosed (ep-nov-12.greg.technology mirror)" |
| externalSource: "greg-ep-nov-12" |
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| externalUrl: "https://ep-nov-12.greg.technology" |
| --- |
| |
| 1) Upturn in inventory cycle: Defensives Cyclicals |
| We expect cyclicals to outperform defensives, premised on our end-2017 $/* estimate of *120, and this is |
| supported by our above-consensus economic growth outlook. Our Japan economist sees a shift to fiscal |
| easing, firms countering the tight labor market by increasing capex, and estimates industrial production to grow |
| 3.5% and 3.6% in 2017 and 2018, respectively. With the inventory cycle exiting a "contraction" phase and |
| entering a "recovery" phase, conditions are likely to remain conducive to cyclicals outperforming defensives |
| (Chart 1, Exhibit 3). |
| 2) Higher inflation, rates: Deflation stocks→Inflation stocks |
| Up to 1H16, the Japan equity market saw continued preference for deflationary stocks as domestic inflation |
| remained subdued and the JGB curve underwent excessive bull flattening. Defensives outperformed cyclicals |
| (Chart 1), growth outperformed value (Chart 2), and stocks that benefit from a low-yield environment (REITs) |
| outperformed the converse (banks, insurance; Chart 3). However, we expect conditions to reverse into 2017. |
| We see US Treasury yields rising and Japanese core CP| inflation recovering to + 1.4% yoy by 2018 and core- |
| core to +1.1% yoy. Stronger inflation and higher foreign yields should steepen the JGB yield curve above10yr, |
| while below 10yr should escape from downward pressure as BoJ rate cut expectations recede. Against this |
| backdrop, we expect to see a rotation from deflation to inflation stocks, which in addition to cyclicals means |
| banks and insurance should outperform REITs within the financial sector (Chart 3). This is also in line with the |
| global rotation expected by Michael Hartnett (The Flow Show: The Inflation Era Begins 10 November 2016). |
| 3) Nikkei winner of steeper UST and strong macro |
| In a scenario of strong external demand and US rate hikes (particularly with curve steepening), Japan equities |
| tend to be the winner on a local currency basis, led by cyclicals, banks and insurance stocks (Exhibit 4). |
| Resurgence in the "Japan macro trade" of short yen / buy equities is also a possibility. |
| Our Buy-rated stocks in bank, insurance and cyclical sectors are listed in Table 1. |
| Shusuke Yamada, CFA M |
| FX/Equity Strategist |
| Merrill Lunch (Japan) |
| lobal Research |
| Bankof America T |
| Merrill Lynch |
| HOUSE_OVERSIGHT_014400 |
| |
