11/24/2021 - David Rosenberg on Inflation, Japan, Gold

“According to our models, valuations are much more compelling in Asia than they are in the United States. Thus, I like Asia over the U.S., particularly in the case of Japan. Japan is one of the most inexpensive stock markets in the world. And, with the recent victory of the Liberal Democratic Party, the political outlook has eliminated a source of uncertainty. What’s more, in the past few months, Japan has done a stellar job in getting their COVID case count down and their vaccination rates up. And of course, the recent cheapening of the Yen is a boon for their large cap exporters.

It is still very difficult to get a pulse of the Japanese consumer, but the business sector seems to be in very good shape. I think the industrials will perform well, especially with the upcoming fiscal stimulus and the weakening of the Yen. So large cap exporters will probably benefit the most.

If you’re looking for a hard asset that is unloved and underowned, gold and gold mining stocks will be a very good place to be. Very recently, gold has been firming despite a strong U.S. dollar. If I’m right with my forecast and the dollar depreciates next year and real interest rates stay negative, this will be a very important tailwind for gold. There’s also the prospect that China continues to embark on its regulatory crackdown on crypto currencies, which should also be a positive for gold. Finally, you see it on a technical basis: Gold has been breaking out.”

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