Japan is the market to watch for 2018, according to Columbia Threadneedle. The asset manager has revealed that Japan stocks are its largest overweight relative to the benchmark among its global and multi-asset portfolios.

Chief investment officer Mark Burgess said that Japan offered political stability in a world of uncertainty and that the re-election this year of Prime Minister Shinzo Abe would be supportive for the stock market.

"Japan is our favourite market for 2018," said Burgess. "There is supportive policy regarding interest rates, the economy is growing, the government is buying equities and the corporate sector is finally getting capitalism."

"Companies are prioritising shareholders, focusing on return on capital employed, rising profits. Plus, valuations are low for Japanese stocks relative to other parts of the world."

Bullish on equities, even US stocks

Threadneedle is positive on equities in general and thinks talks of an imminent correction are overdone.

"All stock markets across the globe have performed very well this year, thanks to global economic growth and supportive central bank policies," said Burgess.

"We recognise there are political risks around, but we do not think they are sufficient to derail global growth or markets. If anything poses a risk to markets it's inflation--although we think this will stay pretty low."

Excluding the UK, which is being hampered by Brexit uncertainty, the global economy is experiencing synchronised growth, which alongside improving corporate profits will support this ageing bull market for some time yet.

Threadneedle global equities fund manager Neil Robson said that while returns would be less than shareholders had experienced since the global financial crisis--the S&P 500 has risen 390 per cent since 2008--the market would continue to rally.

"If the stock market keeps going for another six months this will be the longest bull run in history. But it does not feel like a dying market. You do not see bull markets end when fundamentals are accelerating," he said.

He pointed to technological innovation as the source of recent--and future--returns, saying that the broad competitive advantages the tech giants had built around their businesses made them almost impossible to topple or derail.

He predicted even greater share price growth for Google parent company Alphabet, Amazon and Facebook.

"Categorised by sector technology stocks make up 18 per cent of the market, but tech is the whole market. We are considering how it will change every single business sector and are looking for companies that embrace digitalisation and innovate. Take EOG Resources for example, a mining company. They use big data to ensure they drill in the right place for oil."

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Emma Wall is the senior editor for Morningstar.co.uk.

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