I spent much of the 1990s in Tokyo and it was without a doubt the most vibrant place I have ever lived in. So watching the city empty out is very strange indeed. I have only one friend left in the city and his wife and child have already fled to Osaka. I hope they will be able to return soon. Obviously we look at the effect of the Japan crisis – from the equity market to the oil price – quite thoroughly in the current issue of MoneyWeek magazine. However, the first thing we should say is that we are approaching everything with caution.
The earthquake joins global food inflation, turmoil in the Middle East and north Africa, and the ongoing debt crisis in Portugal in creating a potentially explosive cocktail of global nasties. We have been relatively bullish on markets for the last year or so on the basis that while quantitative easing might not do much for American workers, it is very good at supporting stockmarkets. However, we have also been very wary of emerging markets and have recognised that, on long-term valuation measures, many Western markets look pricey too. So we are not discounting the possibility that the falls of the last few days could develop into a full-blown global bear market.
Note that Yale University’s Robert Shiller, who is pretty good at being right, claims that a collapse in investor confidence post-earthquake will bring about “a huge worldwide stockmarket drop”. Stocks price the indefinite future and right now that’s looking even more uncertain than usual. That said, I still feel that the Japanese market could offer investors a real opportunity. It was cheap before the tragic events of the last weeks. And – albeit for all the wrong reasons – it is even cheaper now. I’m hanging on to my own Japanese investment trusts. Those whose nerves can’t cope with investing directly in Japan could play the new wave of anti-nuclear feeling with renewable energy stocks instead.
However, nuclear energy can’t be dismissed entirely on the back of the nightmare in Japan, partly because we need it to keep the lights on in the West and partly because the largest nuclear programme in the world is under way in China – a place where the safety concerns of citizens aren’t always of paramount importance.
But it is going to be tough for any government near an election to get a new nuclear programme going. That should result in more business for clean energy companies. Stocks in this sector have, says Mizuho’s Jonathan Allum, performed “wretchedly in recent years”. That may now change. You can track it via the US-listed Powershares Wilderhill Clean Energy ETF (PBW), or look at the stocks tipped recently by my colleague James McKeigue. His safe bet would be Siemens, but for the “most exciting growth potential”, he really likes solar inverter manufacturer Satcon.