The 'Flat Earth Society' Controls the Macro Narrative

Equity markets look past mediocre six-month GDP growth…

Highlights

• Equity markets look past mediocre six-month GDP growth…

• …with double-digit earnings growth priced in, well above the historical norm

• Long-duration bond yields are at attractive entry points

• Japan’s upper house election leaves government weak amid tariff fight

Key Takeaways

• Japan’s Ruling Party Weakened at a Crucial Moment: As expected, the ruling LDP coalition lost its majority in yesterday’s upper house parliamentary election, the second major blow to Japan’s dominant party — leaving the government in a weakened state during the trade/tariff talks with the United States (especially since this was at least in part a populist message as the new right-wing party, Sanseitō, with its “Japanese First” label, emerged as a big winner).