Okay, if you’re in the U.S. like I am, the stock market trends you’re probably following are those that are here. Perhaps you’re tracking the Dow, and even the S&P 500. When you hear how the market performed for a day, you’re thinking domestically. Japan’s stock market probably doesn’t come to mind right away.
That being said, if you agree with me that rate of return is important, you might there has been something quite impressive happening with Japanese stocks. The Nikkei has gone up significantly over the last year, and has given investors a fantastic return on their investments. On May 9, 2012, the Nikkei 225 closed at 9,045.06. Just one year later, on May 9, 2013, it closed at 14,191.48. That’s a whopping 57% increase!
Of course, the S&P 500 has gone up too. The increase over the same time period has been 20%, which is pretty impressive in its own right. But still, despite the attention the U.S. markets have gotten with surging prices, what happened with the Japanese market is really worth recognizing. Wouldn’t you like to get a 57% increase in the value of your stock investments? I sure would, and wish I had paid closer attention and invested in that market!
Recent Monthly Returns
It actually gets even better. In the last 3 months, the Japanese market has gone up 27%. If one annualized that, it’s more than doubling your money. Can you imagine an investment that successful? If you took a $1,000 investment, and doubled it each year, you’d have over $1,000,000 after 10 years!
Okay, I know that this isn’t going to be happening, and we all know that. However, I’m just trying to put into perspective how impressive such short-term returns are. A lesson here is to pay attention to markets outside our own, and be open minded to different opportunities!
Historical Monthly Returns
If we look at patterns of stock returns for Japan’s stocks, there are trends that emerge. You might recall an analysis I did of historical stock market returns, specifically of monthly performance of the S&P 500. There, it was clear that over a 40 year time period (1971 – 2010), that some months have been better than others for stocks. Here is a summary of the average monthly returns of the S&P 500:
A couple of things that emerge there are the concepts of Sell in May and Stay Away, and The September Effect. Meaning, after May stocks don’t perform as well in the Summer months, culminating with September being a historically poor month on average. Given the recent strong performance of the S&P 500 in reaching historic levels, is the long-term trend of a slumbering summer market something to think about now? Is the market on the verge of a pullback?
In terms of the Japanese stocks, there are also monthly trends that emerge. Here is the average monthly performance for the Nikkei 225:
As can be seen, there are clearly some months that the Japanese market does well, and others when it doesn’t. Can you see the similarities between the S&P 500 and the Nikkei?
Now, this data above for Japan was pulled for 29 years – from 1984 to 2012. A slightly different time period, but most years overlap and the findings are still similar. The party starts to end in May, and things aren’t too exciting all summer. September is the worst month for both markets across the pacific from one another. Apparently, Santa visits investors in both markets 🙂
What to Make of This
Well, first of all, the recent amazing returns in Japan make it clear that we should be looking beyond our own borders for great investment opportunities. This is something we know anyway, but to me it’s really more evident when looking at actual returns such as that 27% increase over 3 months.
Beyond that, this analysis shows that monthly stock return trends may have more to them that meets the eye. If this happens over the long-term, and in 2 different markets, maybe there is something to this concept.
Perhaps, being at least somewhat active as an investor and paying attention to 1) different markets, and 2) historical trends, might have legitimate benefits!
My Questions for You
Do you look outside your home country for investment opportunities?
Have you been noticing the incredible returns in Japan?
What do you think of the concept of some months being better than others for investing, based on similar data for these 2 markets?