Is anywhere safe?
[ad#Google Adsense 336×280-IA]Did any investment on the planet survive the carnage in the markets over the last two weeks?
The table below tells the story…
As you can see, gold was clobbered.
China was, too.
U.S. stocks and bonds both lost money.
But one country’s stock market jumped 6% in the last two weeks.
Take a look:
I think we can use what has happened in Japan as a bit of a guide to what could happen here… a bit of foreshadowing.
Let me explain…
Here in the U.S., stock prices are down. And the interest rate on the 10-year U.S. government bond has soared over the last month – from 2.1% to 2.5%.
Japan saw something similar: From May 22 to June 14, Japanese stocks lost an astounding 20% of their value. While Japan’s stock prices were falling, interest rates on government bonds in Japan went up a lot.
But importantly, the interest rate on Japan’s 10-year government bonds has fallen from 0.93% a month ago down to 0.85% [Monday]. And stock prices have gained 6% in the last two weeks.
In short, long-term interest rates in Japan stopped going up… And stock prices started going up again.
I draw two conclusions from this…
1. I want to keep owning Japanese stocks.
Japanese stocks have held up the best in the world in the last two weeks. They’ve been the strongest. As I’ve explained before, they’re cheap. The government is committed to stimulating the economy. And long-term interest rates in Japan have stopped going up, for now.
2. Japan may be a mini-model of what could happen over the next few weeks in the U.S. in stocks and bonds.
If the U.S. markets follow in the footsteps of the Japanese markets, U.S. interest rates will come down, and U.S. stocks will start going up again.
In sum, right now, I like owning both Japanese stocks and U.S. stocks (particularly if U.S. interest rates have peaked in the near term).
I think both markets should have a good run higher from here.