Does the experience of Japan foreshadow where Europe is headed? So far, it looks pretty spot on, according to SocGen:
After the bursting of the bubble, the Japanese equity market became highly cyclical. This contrasts with the 1980s, when it was impervious to swings in the cycle. We believe this change in market behaviour is a result of deleveraging in the Japanese economy. The same pattern has been observable in the European market since the Lehman bankruptcy in 2008 (see next chart).
Given the increasingly uncertain political situation in Europe and consensus building around necessary policy measures going forward, it looks like perhaps the ECB could be just in time to step in and send those equities on their next leg upward.
Here’s a look at the Euro Stoxx 600 and Japan’s Nikkei:
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