EWJ Overview

Election Victory: Japanese Prime Minister Sanae Takaichi led her Liberal Democratic Party to its largest election victory, securing a two-thirds majority in the Lower House of parliament.

Constitutional Amendments: This majority enables the party to override Upper House vetoes and pursue amendments to Japan's pacifist constitution.

Voter Concerns: U.S. voters are increasingly frustrated with issues related to affordability, reflecting broader economic anxieties.

Global Context: The sentiment regarding affordability is not limited to the U.S.; it resonates with voters in other countries as well.

Types of Market Crashes: Stock market bubbles can lead to two distinct types of crashes when they burst: sector-specific crashes and systemic crashes.

Sector-Specific Crashes: An example of a sector-specific crash is the dot-com collapse that occurred between 2000 and 2002, which primarily affected technology stocks.

Systemic Crashes: In contrast, systemic crashes impact the entire market, as seen during the financial crisis of 2008-09, where widespread declines occurred across various sectors.

Uniqueness of Bubbles: Each stock market bubble is unique, much like snowflakes, indicating that the circumstances and outcomes of each bubble's burst can vary significantly.

International Stock Performance: In 2025, international stocks, particularly in export-driven countries like Korea and China, experienced strong gains, surpassing the performance of the S&P 500 despite high U.S. tariffs.

Future Market Outlook: There is potential for further rallies in non-U.S. markets in 2026, driven by decreasing interest rates and increasing corporate earnings.