The Investing Opportunity Ken Fisher Sees in Japan
Ken Fisher explains his bullish outlook on Japan's stock market, attributing strong recent performance to Japan being a value-focused market during a period when value stocks are outperforming growth stocks. He anticipates this outperformance trend to continue as long as banks maintain aggressive lending, which supports value-based companies.
Summary
Ken Fisher discusses Japan's investment opportunity, noting that Japanese stocks have outperformed both the US market and global markets this year. He frames his enthusiasm for Japan within the context of a broader market trend: value stocks outperforming growth stocks in 2024. Fisher explains that this represents a shift from the preceding decade-plus period when growth stocks consistently outperformed value stocks.
Fisher emphasizes that Japan is fundamentally a value-focused market rather than a growth-oriented one, which explains why it underperformed during the years when growth dominated (averaging only 7% annual returns over the last decade according to the MSCI Japan Index). However, the recent two-year period has seen Japan playing catch-up, with strong performance that Fisher expects to continue.
The speaker provides an important mechanism for understanding this dynamic: banks' lending behavior directly impacts value stock performance. When banks lend more aggressively, value-based companies become more aggressive in funding their own growth, effectively becoming more growth-like in behavior. Fisher notes that this functional relationship explains why value stocks should continue outperforming growth stocks during periods of aggressive bank lending. He acknowledges that some segments of growth stocks are performing well, but overall value stocks maintain the advantage. Fisher concludes that as long as this value-over-growth environment persists, Japan should continue its strong market performance.
Key Insights
- Japan is a value-based stock universe rather than a growth-oriented market, which caused it to underperform during the decade-plus period when growth stocks outperformed value stocks
- The MSCI Japan Index averaged only 7% annual returns over the last decade, with the majority of gains concentrated in the last two years as Japan catches up
- Value stock outperformance is mechanically linked to aggressive bank lending, because banks' aggressive lending enables value-based companies to fund growth and become more growth-like in behavior
- Fisher predicted value would outperform growth in 2024, and while the spread is not as strong as in 2023, value stocks have maintained outperformance through the year
- Japan's recent strong performance represents a catch-up period that should continue as long as value stocks outperform growth stocks, reversing its subnormal performance during the growth-dominant years
Topics
Transcript
[0:05] So, Japan's been doing pretty well this year. It's been doing better than the US stock market, better than the world as a whole. And so, whenever that happens, of course, people get more enthusiastic about "the thing." And the question becomes, "Am I enthusiastic about Japan?" The answer is, "Yes," and I'll tell you why. I'm enthusiastic about Japan because this is a year where I've believed, and if you've listened to my videos before, you've heard this, that overall value does better than growth. Now, most years over the last ten, 15 years, [0:38] most years, growth has done better than value. Growth stocks have done better than value stocks. Last year, value stocks did better than…
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