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Is Japanese stock promising in 2024, or is US stock better? - Judging relative strength with 4 indicators
- Writing language: Korean
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Base country: Japan
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- Economy
0000-00-00 00:00:00
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Summarized by durumis AI
- On February 22nd, the Japanese stock index hit an all-time high, attracting attention as an investment target along with the US, but it is necessary to compare and analyze relative strength through various indicators such as the ND ratio.
- Currently, the ND ratio is exceeding 1, indicating that Japanese stocks are performing relatively better than US stocks, but the ST ratio shows the strength of US stocks, making a comprehensive analysis necessary.
- For investment decisions, it is essential to consider macroeconomic factors such as economic growth prospects, interest rates, and monetary policy, along with the growth potential of individual companies and investor risk preferences to build an investment portfolio.
On February 22, the Nikkei 225, Japan's stock index, hit an all-time high of 39,098 yen. This is the highest level since 1989, when the index reached its peak of 38,915 yen during the bubble period, breaking the record after 34 years. On the same day, the Dow Jones Industrial Average in the United States also surpassed 39,000 dollars for the first time in history. As both Japan and the United States see their stock indexes reach new highs simultaneously, it is necessary to assess the relative strength of each country in terms of future stock investment targets.
Indicators such as the ND ratio, ST ratio, and NT ratio are helpful in making this assessment. These indicators can be used to compare the relative strength of Japanese and US stocks.
First, the ND ratio represents the ratio between the Nikkei 225 and the Dow Jones Industrial Average, indicating the relative strength of the Japanese and US stock markets. It is calculated by dividing the Nikkei 225 by the Dow Jones index. A value greater than 1 implies that Japanese stocks are relatively stronger, while a value less than 1 suggests that US stocks are stronger.
On February 22, as the Nikkei 225 reached an all-time high, the ND ratio also exceeded 1. This was the first time since April 2016, signaling that Japanese stocks are relatively stronger than US stocks again.
On the other hand, the ST ratio is calculated by dividing the S&P 500 index by the Nikkei TOPIX index, providing another means of comparing the relative strength of the two countries' stock markets. As of March 2024, the ST ratio stands at approximately 2.0, indicating that US stocks are still stronger than Japanese stocks.
Another indicator, the NT ratio, is derived by dividing the Nikkei 225 by the TOPIX index. This ratio helps assess the relative strength between large-cap and small-cap stocks within the Japanese stock market. As of March 2024, the NT ratio stands at 0.7, suggesting that small-cap stocks are stronger than large-cap stocks.
Various ratio indicators can be utilized to assess the relative strength of Japanese and US stocks. The all-time high reached by the Nikkei 225 and the rise in the ND ratio suggest that Japan might offer a more favorable investment destination compared to the US, but other indicators should also be considered comprehensively.
To determine investment targets, macroeconomic factors such as economic growth prospects, interest rate policies, and monetary policy should be considered alongside individual company growth potential, investor risk appetite, and investment duration. US stocks generally offer higher growth potential but also greater volatility, while Japanese stocks tend to be more stable.
Therefore, investors should consider their investment goals and risk tolerance to construct a portfolio with appropriate diversification between Japanese and US stocks. A thorough review of factors such as stock indexes, ratio indicators, company performance, valuations, and macroeconomic environment is essential to achieve stable long-term investment returns.
