Buying Japan Today Is Like Buying the U.S. in 1984
While Yusko is worried about the opportunities in the U.S., he believes that Japan’s future is bright. Yusko expects the U.S. market to lag Japan’s significantly over the next eight years—by as much as two to three times the relative return potential.
Yusko also believes the key to achieving this return is to hedge the yen. He thinks the yen-per-dollar currency pair could reach close to 130 by the end of 2015, rise closer to 140 to 150 in 2016 and reach 175 to 200 on the yen over the next four to five years. For perspective, Yusko recalls how the yen used to trade at levels closer to 350.
Japan has excessive debt, and Yusko believes Japan has no other way out but to devalue its currency. He is further encouraged by GDP prints that look positive and inflation trending closer to 2%. Yusko believes buying Japan today is like buying the U.S. in 1984.
Emerging Markets Quite Attractive
Looking more globally, Yusko believes Japan beats Europe, Europe beats the U.S. and emerging markets (EM) beat them all in the coming years!
In EM, he is optimistic on service economies such as South Korea, Taiwan, China and India that are beneficiaries of lower oil prices. Commodity countries such as Russia and Brazil, on the other hand, have a harder time and should struggle with lower oil prices.
Yet, one of Yusko’s top 10 surprises coming into the year was that Russia would be one of the best performing markets after very disappointing performance. He believes we are just getting started with Russia, and we may see up to triple-digit returns from the country.
I want to thank Yusko for another great conversation on his outlook for the markets, and we look forward to keeping in touch on his major themes.
Read the Conversations with Professor Siegel Series here.
Important Risks Related to this Article
Investments in emerging, offshore or frontier markets are generally less liquid and less efficient than investments in developed markets and are subject to additional risks, such as risks of adverse governmental regulation and intervention or political developments.
Investments focused in Japan increase the impact of events and developments associated with the region, which can adversely affect performance.
WisdomTree and Foreside Fund Services, LLC. is not affiliated with Morgan Creek Capital.