Is the S&P 500 Following the Nikkei Stock Playbook?
Politicians like to compare America to Greece, but in reality the Nikkei (NYSE:EWJ), with its long, deflationary slog is our best historical analogy.
A chart we’ve run before, but which seems particularly relevant, is the below chart from Morgan Stanley, which shows the Nikkei — post bubble — responding to various stimuli and counter-stimuli.
The basic lesson: throughout the long bear market, stocks always popped after fiscal and monetary stimulus, and worsened when policy makers did the opposite.
Given how this market has coincided with a move towards de-stimulus (the debt ceiling/fiscal consolidation deal) we can’t help but think this is playing out again here.
(Image: Morgan Stanley)
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