Time to root around in the Bargain Bin


  • Japan is a cyclical value stock market that remains under most investors’ radar. But it is breaking out to new 20-year highs, as cyclical value comes back in style
  • The UK is a second cyclical value market that has been clearly out of fashion since 2016, for obvious geopolitical reasons. But we could see a catalyst finally this coming week
  • Precious metals have given back some gains, but have still outperformed global stock handsomely this year. Watch platinum, whose time may be coming now

What a week for Value

Value-oriented investors have been painfully aware that value investing has been very difficult since the Great Financial Crisis in 2007-09, with momentum/growth investing being a much more rewarding approach for investors, especially over the last year or so.

The month of November has seen an almighty rally for the Value style, with “dog” sectors such as Banks and Oil & Gas leading the sector performance rankings over the month.

Banks and Oil & Gas rally hard over November


Source: tradingview.com

But the question now on investors’ minds is: Was November just a “dead cat bounce” temporary rally in these beaten-down, unloved sectors, or is this month marking a more sustained change in trend?

We have seen temporary value rallies before, notably between mid-August 2019 and the end of 2019 - however, then both the Banks and Oil & gas sectors subsequently dropped back to record fresh lows in March 2020… Is it really different this time?

Well I am sorry to disappoint you, but the short answer is: I simply don’t know. But that doesn’t mean that there aren’t areas of value in stock markets to invest in, right now...

Japan as an under-the-radar cyclical value market

Japan strikes me as a stock market that is (a) very cyclical in nature, composed of industrial, auto and electronics companies and which is (b) seeing strong price momentum, with the Nikkei 225 indeed at fresh 20+ year highs.

Japan inc. is more exposed to the growth in the Chinese economy than most stock markets - which should be good in 2021, with Japan and China both dealing much better with COVID than the US or Europe, it would seem.

Nikkei 225 at 20+ year highs, 1990 all-time high next target?

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