Investors in Bull Markets and Bear Markets … What Is the Current Market Stance? Free release of the 2020/12/16 published content
In market adage, "Borrow your wife to buy stocks" — the opposite of this saying is "Sell off the useless husband." From the low of 22,948 yen on October 30 of this year to the high of 26,889 yen on December 2, the price rose by about 3,900 yen in roughly a month. In hindsight, it was a moment where one could have bought even with eyes closed.
However, this was not a genuine bull market; it moved in tandem with the rise of the U.S. Dow Jones, and focused on stocks that influence the Nikkei Stock Average index (SoftBank, Tokyo Electron, Fast Retailing).
A true bull market would generally rise in a variety of sectors, but this time there were many that did not rise. This is not a market situation where you should “buy by mortgaging your wife.”
Now we are in a COVID-19 market, with a strong upward trend driven by supply and demand, and a large correction could occur somewhere soon. In the future I will provide five stocks every weekend, but for now, more than deciding what to buy, it is a time to consider whether to invest at all and to wait for a correction while keeping cash on hand. Even though the exchange rate is trending toward a stronger yen, export-related stocks have risen, which can be said to be largely due to supply and demand. Regarding the exchange rate, nations are bound by near-zero interest rate policies and cannot lower real interest rates, so they have no choice but to induce a lower real exchange rate in an easy and low-cost manner, guiding toward a depreciation of their own currencies.
President-elect Biden in the United States may allow the dollar to weaken and the yen to strengthen, and Japan would find it difficult to prevent a stronger yen. Currency-weakening measures involve monetary easing, but with the current zero-interest-rate environment, there is no method to induce yen depreciation, so if the yen strengthens further, Japan’s economy next year could become harsh, and the stock market may become unsettled. For now, it is better not to become bullish (there is a possibility that 27,000 yen could mark a peak) and to adopt a stance of preparing for the next market by waiting for a correction.