Here’s another classic from the EWI forecasting vault:
Back in March 1989, the Harvard Business Review published a 6,000-word article which assured us of “Japan’s Global Financial Dominance.” It began:
“Japan today sits on the largest cache of wealth ever assembled. It has the power to move markets anywhere in the world. Consider that.”
The article reflected the widespread sentiment of the moment, specifically that “Japan has replaced the United States as the world financial leader.” The Nikkei stock index was a very visible case in point, having climbed 450 percent in the preceding decade.
Our Elliott Wave Theorist offered a different perspective altogether.
The May 1989 issue showed subscribers that the Nikkei was in the final leg of a five-wave trend, via this chart and forecast:
The Nikkei Dow can be counted…in its fifth wave up from the November 1988 low, as you can see by the chart.
Then in November 1989, the Theorist forecast that a turn in the Nikkei’s trend was at hand:
The London market has been falling for weeks … Japan will be next.
The Nikkei’s peak high came near 39,000 on December 29, 1989. The downtrend began to unfold rapidly, yet the March 1990 Theorist anticipated far deeper losses to come:
The latest reports from Tokyo … are blaming the recent 10% decline in the Nikkei Dow on (guess what) program trading … Never mind that Japan has created the most overvalued stock market in 270 years …
The chart below shows what followed: a 13-year, 75 percent decline in Japan’s stock market, thru April 2003.
It was more than 34 years later – in February 2024 – before the Nikkei rose back above its 1989 peak.
Investors who read us THEN didn’t simply watch a “must-own” index implode.
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