A parallel effort to sample Japanese investor attitudes has been undertaken since 1989 by Professor Yoshiro Tsutsui of Osaka University and Fumiko Kon-Ya of the Japan Securities Research Institute.
Comparing US and Japanese Confidence Indices
The stock market experiences in the US and Japan since 1989 could hardly be more different. The Japanese stock market, as measured by the Nikkei, reached its peak on the last day of 1989, fell by more than a half over the next two years, and since has stagnated at that low level. The US stock market was battered by a recession in 1990-91, a recession whose effects lingered on until 1993, and then, starting in 1994, had the most spectacular bull market in US stock market history, only to peak in early 2000 and then stagnate.
We do not expect to see any of our indexes track the level of the stock markets of their respective countries, but we do expect to see some changes related to their relative stock market performances. And, indeed we do. Let us compare the results for institutional investors in the US and Japan.
Crash Confidence Index
In Japan, among institutional investors, crash confidence was nearly 90% just before the peak of the market in 1989, and has fallen more than in half, and has remained in the 20%-40% range ever since. In other words, 90% of Japanese institutional investors were confident that there would be no crash just before the Japanese market crashed, and only about 30% are so confident since. In contrast the US crash confidence has stated level around 50%, plus or minus ten percent until the very latest observations, were it has risen to the 70% range, approaching levels in the Japanese market before their crash.
Valuation Confidence Index
In Japan, valuation confidence took a sudden dip right after the peak in the market in 1989, falling from 70% before the peak to 30% after, when the Nikkei had fallen somewhat. The valuation confidence in Japan recovered sharply in 1991, with the new lower levels of the Japanese market, and has stayed around where it was in 1989 ever since. In contrast, the US crash confidence has shown a general downtrend, moving opposite the rising US market, until the last two observations, in the second half of 2000 and the second half of 2001, where valuation has suddenly soared.
One-Year Confidence Index
One-Year Confidence has remained fairly steady in both countries over the entire sample, except that in the US the confidence has suddenly shot up with the latest two observations. The Japanese One-Year confidence has always been much higher than the US, until the latest data, where US confidence finally surpasses Japanese confidence for the first time.
Buy-On-Dips Confidence Index
Buy-On-Dips confidence has shown a slight uptrend among the institutional investors in the US over the sample, unmatched by any similar uptrend in the Japanese confidence. Recent data show Japanese Buy-on-Dips confidence dropping sharply.
Yale School of Management Stock Market Confidence Indexes™
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