Top strategist Kenneth Fisher says that he is keen on European stocks because of “false fears” in the region, while he is down on Japanese stocks because of “false hopes” there.
In his latest column for the UK’s Interactive investor, Fisher says that “deflation-obsessed lost-decade-ophobes are depressed for no reason. The Conference Board’s Leading Economic Index (LEI) for Europe is high and keeps rising – has been throughout deflation doom-mongering. LEI, as usual, was right. Eurozone GDP rose seven straight quarters, and first-quarter indicators look growthy.” He adds that the media “rarely reports and never believes LEI. They predict and report based more on gloomy lagging secular phenomena. For years it was the debt crisis and potential splintering of the euro. Now it’s the deflation bogeyman. If low oil prices keep CPI negative, they’ll warn quantitative easing (QE) isn’t working. They’ll probably say it’s inflating a stock bubble and nothing else, just like they said in America. It will be wrong, but it does you a favor – media-hyped false fears keep sentiment down, extending the wall of worry.”
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As for Japan, Fisher says predictions of a rebound are based on hope, not reality, and that is a bad recipe for investing success. “Those betting on a turnaround now are betting on hot air, like QE – in reality a yield-curve-flattening disaster, just like it was in 2001-2006,” he says. “Optimists love the weak yen, but it boosted export values only – export volumes are shrinking. No stimulus there! They think Prime Minister Shinzo Abe is a Thatcheresque economic reformer – wrong! He’s all talk, no action, and would rather spend his dwindling political capital on removing the constitution’s anti-war clause. They think more stock-buying from the central bank and national pension fund will push prices higher – also wrong! For every buyer, there is a seller, and those stock-buying plans have been widely known for eons. They’re priced in.”
Fisher also says that investors should continue to invest in US stocks, even though they lagged European equities in the first quarter. He’s particularly high on larger US stocks.