Deal or No Deal?
As it has for so many weeks now, negotiations about the fiscal cliff continue to dominate the trading landscape. Will there be a deal, or will there be no deal? At this point, the equity markets are betting that a deal will get done. I take that view because during the past week we’ve seen buyers return to equities, bidding stocks up nicely on Monday and Tuesday.
As of this writing, there are about 12 days before we go off the cliff. But practically speaking, a deal will probably have to be in place by this Friday. I suspect that the market will be pleased to have a deal in place, if we do get a deal done. However, the key going forward will be how the market reacts to the details of a deal.
Like the old adage goes, the devil is in the details, and this deal likely will be full of devils — particularly if you are among the most successful wage earners, or if you have a lot of capital gains and investment income.
Now, away from the politically charged markets here at home, there’s been a quiet yet very strong bull market taking shape in the Asian markets. Stocks in China continue to perform well, with the iShares FTSE China 25 Index (FXI) soaring since its September low.
This fund, which tracks the 25 largest stocks traded on the Shanghai Exchange, is up 12.7% during the past three months. That performance crushes that of the S&P 500, which is down about 1% in the same period.
In the "other" Asian country, Japan, there are big changes taking place.
On Sunday, the Japanese people overwhelmingly elected Shinzo Abe as the new prime minister. Abe campaigned on an economic policy that would have the Bank of Japan (BoJ) increase its inflation target to 2% or 3% from its current 1%. This move is designed essentially to devalue the yen, and to stimulate the economy similar to the way the Federal Reserve has done here in the United States.
A weaker yen would be good for Japanese exporters, and it likely will be good for the biggest companies traded on the Tokyo Stock Exchange. I think Japan is another Asian giant to watch in 2013. Along with China, both of these sectors could provide alpha-hungry investors a place to feast in the months ahead. If you’d like to find out more about how, and when, you can take advantage of this awakening Asian giant, I invite you to check out my Successful Investing advisory service today.
Jim Woods is a 30-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor.
His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. Read more about Jim Woods.
