On Investors’ Minds - APAC Edition Developed market fiscal tightropes: UK & Japan
10 snips
Nov 25, 2025 Tai Hui dives into the importance of discipline in asset allocation for 2026, emphasizing the need for diversification amid high valuations. He discusses the fiscal sustainability challenges faced by the UK and Japan, highlighting their respective budget deficits and potential tax measures. Japan's massive stimulus package and concerns over rising bond yields also feature prominently. The conversation touches on broader fiscal risks across developed markets, reinforcing the idea that strategic planning is essential for investors navigating these complex landscapes.
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Practice Allocation Discipline
- Be disciplined in asset allocation and account for diversification and high valuations.
- Apply discipline to both portfolio construction and selection of assets with stretched prices.
Markets Punish Fiscal Indiscipline
- Fiscal sustainability can be rewarded and punished by markets.
- Lack of fiscal discipline has been punished in the past, notably in the UK in 2022.
UK 2022 Market Reaction Example
- The UK experienced market turmoil under the Liz Truss government after a budget pushing for more borrowing.
- That episode shaped the Chancellor's insistence that fiscal discipline is non-negotiable for the upcoming budget.