Expert: New quake won’t impact market

The 7.4 magnitude earthquake that hit Japan today will likely not have a major, lasting impact on the markets, says Tom Goggins, senior manager of the Manulife Strategic Income Fund.

“It doesn’t look like it’s having as big an impact as just the overall buying and selling of the market. The ECB’s rate increase of 25 basis points is probably more impactful on the markets,” Goggins says. “The tsunami warnings were rescinded so it looks like it was kind of a non-event, if you can call a 7.4 magnitude quake a non-event.”

Goggins expects the yen to depreciate relative to other major currencies. “We think the yen is going to get cheaper vis-à-vis where it is today, especially versus such a strong currency as the Canadian dollar—we much prefer Canadian currency versus the yen,” he says.

“Our view on the weakening of the yen came after the first earthquake. If you take a look at the charts of the yen, it initially appreciated pretty dramatically. We thought it was overdone because what they need to do is get the economy going again. They need to cheapen the yen up so their exporters can sell their widgets cheaper on a global scale and not have an expensive currency to do business with,” Goggins explains.

From a fixed income standpoint, Goggins says Japan doesn’t offer a lot of value. “They’re going to have to issue a lot of bonds, and you have a currency that’s working against you. So it’s an area we don’t have a lot of exposure to, other than being negative on the yen,” he says.

“We never had any positions in Japanese fixed income prior to the quake, and after the quake we would probably be even more adamant about not having a position.”