S&P500 Catalysts: Japan Outweighs US-Iran Conflict

Japan’s inflation and BOJ rate hikes could have outsized impacts on US equities, notably the tech-dominated S&P 500 and NASDAQ 100. BOJ is likely to raise rates toward 2% to end negative real rates soon, narrowing the Japan-US yield spread significantly. A shrinking yield spread threatens the profitability of the Yen-carry trade, risking a global liquidity drain. Investors should consider Japanese financial, insurance, and trading house stocks (like those similar to or liked by BRK) as they can outperform if Japan hikes rates more.

Looking past mid-east conflicts News headlines these days are dominated by the geopolitics in the mid-east, and for good reasons. As oil prices push back to the triple-digits, the uncertainties facing the Strait of Hormuz are indeed a key market risk worth monitoring.