The stock market closed the week on a strong note, with the S&P 500 finishing at a fresh record high, boosted by a rally in semiconductor stocks and other big tech names on optimism as the University of Michigan’s survey showed consumer sentiment improved in January to its strongest level since summer 2021. For the week, the Dow Jones gained 0.7%, the S&P added 1.2% and the Nasdaq Composite climbed 2.3%, lifting all three major stock market averages into positive territory for the year.

The news for China stocks was less pleasant. They just capped another dismal week, with a gauge of mainland firms listed in Hong Kong languishing at the bottom of global equity index rankings. Tokyo has overtaken Shanghai as Asia’s biggest equity market while India’s valuation premium over China hit a record. Locally, a meltdown in Chinese shares is wreaking havoc on the nation’s asset management industry. 

Does the US remain the only place to invest?

Future Wealth’s View

There is no doubt that China is imploding. India and other emerging markets are too risky. But, Japan offers an opportunity for investors after its years ( I mean, decades) of malaise. If, in fact, the country is coming out of hibernation, there are certainly several Japanese companies that are trading at book value and single digit P/E that could be very attractive.

But, while the US remains the most attractive place to invest, there are still some lingering issues that could hold back the bull from running ahead. Investors want an interest rate cut. The Federal Reserve isn’t so sure the economy needs one yet. And now traders are throwing a tantrum. US December retail sales beat expectations across the board on Wednesday, showing that the consumer remains resilient, and knocked down the probability of a March rate cut to that of a coin toss.

The Fed is still controlling the narrative while we would like to see the companies earnings become the bellwether for the market. That has not happened yet. Like we often tell our kids – “Patience is a virtue”.