Cash no longer king, turn to Japan

Cash is being dethroned as king, according to a new note from Russell Investments, and equity valuations look attractive.

The consultant’s latest Global Markets Outlook, issued January 19, tips Japan as a good investment opportunity for 2009, where valuations are at their lowest levels for decades. The firm notes that Japanese banks seem to have weathered the financial crisis better than their western counterparts.

“The crucial message for investors is this: there is risk ahead and opportunities present; make sure your portfolio is well diversified and consistent with your objectives. This should be a rewarding year,” the note says.

Russell is tipping that active managers will “find their mojo” as markets shift back to fundamental drivers rather than the fear, which has gripped them over the past few months.

The firm also believes that credit instruments will finally benefit from government market intervention through commercial paper and other asset purchase programs.

“We think that any unwinding of the extreme flight to safety into short Treasury bills will benefit credit-based securities, and we anticipate a tightening of spreads globally at some point in the coming year,” Russell says. “Overall the outlook is for the primary fixed income beneficiaries of a global economic recovery to be corporate credits.”