The Investing Opportunity Ken Fisher Sees in Japan
Ken Fisher expresses enthusiasm about investing in Japan, citing its outperformance this year and its positioning as a value-heavy market that benefits when value stocks outperform growth stocks. He explains that Japanese banks' aggressive lending supports value companies' expansion, making them perform more like growth companies during periods when value leads.
Summary
Ken Fisher discusses Japan's recent investment performance and explains why he is optimistic about the market. He notes that Japan has outperformed both the US stock market and global markets this year. Fisher observes a macro trend where value stocks are outperforming growth stocks both this year and last year, with this year's spread being less pronounced but still favorable to value. He characterizes Japan as fundamentally a value-based stock market rather than a growth-oriented one, contrasting this with the preceding 10-15 years when growth stocks generally outperformed. Fisher cites the MSEI Japan index, which he identifies as the best single cap-weighted index of Japanese stocks, as having averaged approximately 7% returns over the last decade. He then explains the mechanism behind Japan's current strength: when banks lend more aggressively, value-based companies—which are dependent on loans to fund growth—become more aggressive in their expansion and thus behave more like growth companies. Fisher emphasizes this is a straightforward economic principle that most investors overlook. He concludes that this dynamic should support Japan's continued strong performance as long as value stocks remain favored over growth stocks and banks maintain aggressive lending practices.
Key Insights
- Fisher claims Japan has outperformed both the US stock market and the world market this year, and he expresses enthusiasm about the market's prospects.
- Fisher asserts that Japan is fundamentally a value-based stock universe rather than a growth stock country, distinguishing it from the prior 10-15 years when growth stocks generally outperformed.
- The MSEI Japan index, characterized as the best single cap-weighted index of Japanese stocks, has averaged approximately 7% returns over the last decade.
- Fisher argues that when banks lend more aggressively, value-based companies—which are loan-dependent for growth—become more aggressive and behave more like growth companies, creating a self-reinforcing cycle.
- Fisher contends that most investors fail to understand the connection between bank lending practices and value company behavior, despite it being a relatively straightforward economic function.
Topics
Transcript
[0:00] Japan's been doing pretty well this year. It's been doing better than the uh US stock market, better than the world as a whole. And uh the question becomes, am I enthusiastic about Japan? The answer is yes. And I'll tell you why. Last year, value stocks did better than growth stocks, as I had indicated last year that they should. And this year, I've said value stocks should do better than growth stocks. This year, the spread is not as strong as last year, but this year on balance over the course of the year, value stocks are doing better than growth stocks. And Japan is a particularly value sensitive market. [0:31] It's a valuebased universe of stocks.…
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