The Charts Don’t Lie

For those of you who think you have it bad in North America, you only have to look to Japan to realize that stock markets here have performed exceptionally well in comparison.

 Japan’s economy and stock market had been in a slump that lasted for nearly 15 years. The Nikkei 225, a barometer of 225 of the largest companies in Japan, was trading at nearly 40,000 in late 1989, but then the major slide started, with the index falling to below 10,000 in 2003.

 Just take a look at the comparative price trends of the Nikkei 225 versus the major U.S. indices from 1985 to the present. During that 20-year timeframe, Japanese investors saw their wealth dwindle, as the Nikkei 225 is just about 22% higher now than where it was trading in 1985. That is a 22% gain over 20 years, folks! You might as well have left your money in a low interest bearing bank account.

 Now take a look at the U.S. indices during the same timeframe. I bet this will put a smile on your face. It has paid for many your cars, houses, vacations, and so on. While the Japanese have suffered financially during the last two decades, Americans have enjoyed the riches. The Dow, NASDAQ, and S&P 500 are up over 500% during the 20-year period. You should feel better now, especially given that the recent U.S. bear markets have been short.

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 But we have seen some hope in Japan over the last few years. The country’s economic trend has been improving, and this has spilled over to the stock markets.

 On Thursday, the Nikkei 225 surged to its highest level since August 7, 2001. The Japanese economy, asleep for the last decade or so, is finally beginning to wake up. The superlative economic growth in neighboring China has surely helped the Japanese economy. Also, Japan’s jobless rate, which, at one time, was near 0%, fell to a seven-year low of 4.2% in June. The export market has strengthened, driven by weakness in the U.S. dollar. All seems fine in Japan, but the price trend for the Nikkei 225 will only move higher if the hope for the economic renewal in Japan becomes reality. Otherwise, it could be more years of despair. For Americans, we’ve seen wonderful times for investors. Take a look. The charts don’t lie.