When will the stock market's rainy season end? [From Mr. Tomo Sugimura's e-newsletter]
From the investment newsletter “Sugimura Tomo Investment Salon” by Sugimura Tomo provided by GogoJungle, here is a small excerpt from what was distributed today.
Across Japan, the rainy season has largely ended nationwide and the scorching heat days have returned. It’s extremely hot. It’s a scorcher of an archipelago. Yet the stock market remains chilly as ever. It’s extremely quiet. Cold winds are blowing. When will the stock market’s rainy season end?
External factors such as the FOMC meeting (July 30–31) are indeed uncertain. But that’s not all. The nature of this market is a financial market. Not only the Federal Reserve and the ECB, but central banks around the world—including India, Turkey, Brazil, and China—are unveiling policies of monetary easing one after another.
Emerging markets have already begun cutting rates. This is in response to the economic slowdown accompanying the US-China trade war. In Europe, there are concerns about the management of major financial institution “D.”
By the way, looking at stock price performance (percentage change) since the beginning of the year, Italy’s MIB index rose 20.6%, the S&P 500 rose 19.5%, the Dow Jones Industrial Average rose 16.8%, and the Shanghai Composite Index rose 16.3%, while Japan’s TOPIX only rose 2.7%. This “bright/dark” difference may reflect the gap in monetary easing capacity.
In reality, the Bank of Japan has limited room for action. There is little space for further monetary easing. On the other hand, the Abe administration intends to push fiscal stimulus in response to the October consumption tax hike. That will likely materialize in September. Therefore, in late August, a unwind of a long & short strategy (buying US stocks and selling Japanese stocks) is anticipated.
In any case, for the near term, the focus will continue to be on individual stock picking. Let’s quietly wait for the rainy season to end.
『Sugimura Tomo Investment Salon』（Sugimura Tomo）as cited.
The Japanese stock market does not seem energetic even when compared using the performance of representative stock indices from various countries. According to Sugimura-sensei, we can expect a unwind of the long & short strategy in late August, so it might be good to selectively pick stocks and prepare for promising candidates. (Editorial Department)
