With investment banks again, after a 12 month enforced break, trying to outdo themselves with their bullish forecasts for the S&P, a wise old friend of mine has suggested that we should look to the recent history of the Nikkei for clues as to what lies ahead for other international equity markets.
In 1988, the Nikkei was trading at 28,000. Then Japan went into a prolonged recession and a deflationary spiral. This resulted in the Nikkei falling to 7,000, recovering to 17,000 at the height of the Wall Street bubble and then falling back again to 7,000. It has now ‘rallied’ 30% to 10,000.
If history is going to repeat itself, don’t be getting to bulled up on some self-serving investment bank analysis.
