Back in late 2012, Shinzo Abe, then candidate for Japanese Prime Minister, promised a big and bold QE plan to beat two decades of deflation, and he had his hand selected candidate to run the BOJ, in waiting, to execute it. As you can see in the chart on stocks, that beganthe sharp rise in Japanese equities. And that trend too, still holds after the recent sell-off.
Seven years later, the Bank of Japan is now the lone global economic shock absorber (i.e. they are the last major central bank still easing and will be in QE mode for the foreseeable future). As part of their QE program, they continue to outright buy Japanese stocks. While U.S. stocks are 10% from the highs of last year, Japanese stocks would still need another 20% to regain the 2018 highs.
As for EM: If we consider where emerging market stocks were a year ago, and now introduce the possibility that China may be coming to the table later this month with a deal (at least on trade) that will include balancing trade with the U.S. over six years. How might EM economies look if the world’s leading exporter (China) no longer unfairly floods the world with its cheap products?
Here’s a look at the chart on emerging markets. You can see we’re getting a big trend-break this month of the ugly downtrend of the past year.