As the U.S. Federal Reserve's rate-hiking cycle continues, attention is focused on whether Japanese stocks will exceed ¥70,000 by year-end. An analysis of past rate-hiking cycles and a strategy combining AI-related stocks with financial and value stocks were proposed.
Japanese stocks formed a range of ¥62,000 to ¥70,000 from August through September, but forecasts indicated that they would turn to an upward trend by year-end, supported by expanding corporate earnings. The market is gradually pricing in the start of the Fed's rate hikes without major disruption, while higher crude oil prices and rising long-term interest rates in Japan and the United States are weighing on the market in the short term.
This analysis examined the conditions under which share price gains were sustained during the past 10 rate-hiking cycles. It emphasised that the combination of economic growth and corporate earnings, as well as interest-rate trends, determines share price movements, and indicated that there is room for gains even in a tightening financial environment if earnings remain solid.
The proposed investment strategy focused on trends in AI-related stocks and a combination of financial and value stocks. The analysis assessed that expanding AI demand and improving business sentiment could support the market.
The market is considered to be pricing in around 2–3 rate hikes over the next 12 months, and views indicated that market trends at year-end will depend on the course of earnings announcements.