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Global Macro: Japanese Equities Remain Attractive

The chart above is of MAXIS Nikkei 225 Index ETF (NKY) over Vanguard Total World Stock Index ETF (VT) . The pair shows the relative strength of the Japanese equity market compared to world equity markets. The Japanese market alongside U.S. equities, remain the most attractive investable assets across the globe. Both have long term uptrends and show little sign of overhead resistance. Until investors begin showing irrational exuberance, pushing prices to unjustified levels quickly, both markets should continue with steady inclines.

Source: Stockcharts.com

Warren Buffett came out Monday exclaiming that our low interest rate environment makes fixed income a poor investment. Although equities are very attractive, the lack of domestic and worldwide inflation concerns make high yield bonds appealing. With interest rate risk low, and a stabilizing economy, high yield credit is a viable option.

The chart above is of SPDR Barclays Capital High Yield Bond (JNK) over Pimco Investment Grade Corporate Bond Index Fund (CORP) . This pair highlights the strength of yield seekers in the market. The pair recently broke out of a resistance range, following equities to new highs. Further improvement of the risk environment and tampered risk of rising interest rates should propel this pair even higher.

Source: Stockcharts.com


The last pair is of iShares Dow Jones Transportation Average Index Fund (IYT) over SPDR Dow Jones Industrial Average (DIA) . This indicator has been used by analysts for a long time to determine the strength of rallies. The story goes that if the transport index outperforms industrials, then companies are shipping out product, which should show up in the earnings. Although factory output has been unimpressive, this pair looks to have found a near term bottom. A rise in the indicator should give further strength to the equity rally we are immersed in.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Andrew Sachais' focus is on analyzing markets with global macro-based strategies. Sachais is a chief investment strategist and portfolio manager at the start-up fund, Satch Kapital Investments. The fund uses ETF's traded on the U.S. stock market to gain exposure to both domestic and foreign assets. His strategy takes into consideration global equity, commodity, currency and debt markets. Sachais is a senior at Georgetown University earning a degree in Economics.
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