And how did the depreciation of the yen and rupee affect US dollar investors in Japanese and Indian stocks?
Wolf Street by Wolf Richter:
The S&P 500 rose 24% in 2024 and 53% in 2023 and 2024 combined. That's a huge two-year gain, reminiscent of the dot-com bubble of the late 1990s, when the S&P 500 spent the next 13 years in the stock market. It's an endless roller coaster ride with 50% of crashes occurring twice (purple box in graph below).
But printing money solved everything. The S&P 500 has soared 253% since May 2013, when the S&P 500 finally consistently surpassed its March 2000 high (index data below). Y chart).
Since the Federal Reserve began flooding the market with liquidity through quantitative easing in 2009, other central banks have followed suit, and the S&P 500 has become globally prominent among major foreign markets. But the Fed switched to QT and has so far provided $2.1 trillion in funding. Other central banks, including the ECB, have similarly switched to QT, unloading €2.48 trillion in funds.
Foreign stock market.
Stock markets are valued in local currencies. For Americans investing U.S. dollars overseas, exchange rates are part of the gamble. So, we will also look at the impact of the US dollar exchange rate on US dollar investors in Japanese and Indian stocks.
Japanese and Indian stocks have soared in local currencies since 2010, but the currencies have suffered massive depreciation against the US dollar over the years, hurting returns for Americans (data below) (all via) Investing.com).
Japan's Nikkei stock average ended the year 2.5% above its 1989 peak.:
- 2024 ends at 39,895
- Profit in 2024: 19%
- Profit in 2023: +28%
- Increase rate since 2012 when Abenomics started: 372%
- Increase since December 1989: +2.5%.
Returning the index to its 1989 bubble highs required massive money printing, including the purchase of stock ETFs by the Bank of Japan, which began in 2012 under the principles of Abenomics.
Inflation is now returning to Japan. The Bank of Japan ended QE in the first half of 2024 and started QT in the second half of 2024. And the yen plummeted against the dollar.
At the beginning of 2012, when large-scale banknote printing began, the exchange rate between the Japanese yen and the US dollar was 90 yen to the dollar. Currently, 1 dollar = 158 yen. In other words, over the past 12 years, the value of the yen against the dollar has plummeted by 43%. A significant portion of that collapse occurred in the past three years.
For US dollar-based Japanese stock investors, the 372% gain in yen terms since the beginning of 2012 has narrowed to a 130% gain in US dollar terms.
This is the Nikkei 225 Index since 2010 expressed in US dollars. For ease of comparison, it is placed on the same time axis as the chart above. Note that the yen's collapse over the past three years has left USD-based investors below December 2020 levels (each Nikkei 225 stock average is adjusted for exchange rates at the time).
China's Shanghai Stock Exchange (SSE) down 45% from 2007 high:
- Closing in 2024 at 3,351
- YoY: +12.6%
- From record high in October 2007: -45%
- Returned to original location in April 2007
Hong Kong's Hang Seng Index (HSI) down 34% from 2007 high:
- Ends in 2024 at 20,059
- YoY: +21.3%
- From all-time high in January 2018: -39%
- From all-time high in 2007: -34%
- We returned to our original location in December 2006.
India’s BSE Sensex Index, +348% since 2010. But the rupee crashed.
- 2024 ends at 78,169
- YoY: +8.2%
- Since all-time high in September 2024: -9.1%
- Since 2010: +348%
However, since 2010, the Indian rupee has lost nearly half its value against the US dollar.
Expressed in USD, the BSE Sensex has gained 138% since 2010 for USD-based investors..
- YoY: +5.1%
- Since record high in September 2024: -10.7%
- Since 2010: +138%
UK FTSE 100 Index (FTSE), +18% since 1999.
- Ends in 2024 at 8,173
- YoY: +5.7%
- From December 1999 high of 6,930: +18%
France's CAC 40 index rises 9% in 24 years.
- 2024 ends at 7,380
- YoY: -2.2%
- From all-time high in May 2024: -11.2%
- From September 2000 high: +5.7%
Germany's DAX Price Index (DAXK), +23% since 2000.
DAX, the most widely cited German stock market index, is a “total return index” that includes dividends and therefore cannot be compared with “price indexes” such as the S&P 500 index or all other indices. Dividends are not included.
However, the DAX Kursindex (DAXK) is a price index, does not include dividends, and is comparable to the S&P 500 index and all other indexes.
- Ended the year with 7,649
- YoY: +16.5%
- From record high in March 2000: +23%%
Spanish IBEX 35 Index (IBEX), 27% from 2007 (to 1999):
- Ended the year with 11,595
- YoY: +14.8%
- From December 2007 all-time high: -27%
- Returned to original location in December 1999
Italy's FTSE MIB index -32% compared to March 2000.
- Sales for the year ended at 34,186
- YoY: +12.3%
- From all-time high in March 2000: -32%
- Return to original location in 1998
Canada's TSX Composite Index: +64% since 2008 high:
- Ended the year with 24,728
- YoY: +18%
- From March 2008 high: +64%
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