The View

9 lessons for investors in new era of stock market record highs

To better understand the current conditions driving record stock prices across the globe, investors would do well to learn the lessons of history and look back at the situation in Germany after the fall of the Berlin Wall

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A visitor takes photos of an electronic screen displaying Japan’s Nikkei share average, which surged past an all-time record high set in December 1989, inside a building in Tokyo on February 22. Photo: Reuters

Richard has pioneered Asian investment management at senior levels for companies such as JP Morgan, Citi, BNY Mellon and several start-ups.

Published: 3:15pm, 29 Feb 2024Updated: 4:14pm, 29 Feb 2024

One day last week, my screen of daily global stock market price indices was a sea of green as every price was up. India touched an all-time high a month ago, earlier this month it was Australia and last week the EuroStoxx 600, the US S&P 500, Taiwan and Japan all breached all-time highs.

I remember Japan’s last high in 1989, when shares and the yen both doubled in four years. A pizza in Roppongi cost more than US$50.

Lesson One of investment is that what goes up in a surge of narrative often comes down sharply as the strands of the narrative mutate into more realistic assessments of the events. The Nikkei index plummeted 56 per cent in the next four years and only levelled off 20 years later, more than 80 per cent below the high.

Lesson Two for global investors is that currency is like the paper on which a great master’s work is painted – it is fundamental to valuations. Unsurprisingly, the recently soaring Japanese stock market has been helped by the significant fall in the yen.