Hi everyone! Welcome back to "Any Guidepost."
The stock market in 2026 is making history right before our eyes. In an absolute rocket start, the Nikkei 225 has officially smashed through the unprecedented 70,000 yen milestone!
In fact, looking at the year-to-date performance, Japanese equities are clearly outperforming the S&P 500.
Lately, I’ve heard many fellow investors wondering, "Since the Japanese market is rallying this hard, is it actually pulling US futures up along with it?" It’s a very sharp perspective that only comes from watching this massive momentum of Japanese stocks in real time.
Today, looking at the jaw-dropping reality of the Nikkei 225's surge past 70,000, let’s break down the true power dynamics between Japanese and US stocks, and why we should still keep the S&P 500 as the core of our portfolio.
⚡ 1. "Speed" (Growth Rate) vs. "Strength" (Market Dominance) Are Two Different Things
When you see Japanese stocks rising faster than US stocks, it’s easy to think that Japan has taken the driver's seat in the global market. However, there is a hidden dynamic at play.
To put it simply:
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Nikkei 225 (Japanese Stocks): A lightweight, ultra-fast sprinter 🏃♂️
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S&P 500 (US Stocks): A heavyweight, overwhelmingly powerful giant 👑
Because the market capitalization (overall size) of the Japanese market is much smaller than that of the US, when foreign institutional capital floods in all at once, Japanese stocks shoot up like a compressed spring—often generating explosive returns that leave US stocks in the dust. This is the raw engine behind the Nikkei hitting 70,000.
Yet, no matter how fast the sprinter runs, they cannot match the sheer "strength" (market dominance) that comes with the giant's size.
Even if the Nikkei is looking up and yelling, "I can keep running!" if the giant next to it suddenly stumbles due to FOMC news or US economic data (causing US futures to drop), the Japanese market inevitably gets caught in the seismic shockwave and slows down.
This dynamic explains the complex reality: Japan might win on short-term growth rates, but the US market still ultimately dictates the global wind direction.
🏛️ 2. This is Exactly Why the "S&P 500" is Invaluable as a Core Asset
With Japanese stocks showing this much strength, it’s tempting to think, "Why not just put 100% of my money into Japan?"
But this is exactly where the strategy of keeping the S&P 500 as your core asset (defense) proves its worth.
While the Nikkei has incredible explosive power on the upside, it historically exhibits much higher volatility—meaning it tends to drop harder and faster than the heavy US market when a global storm hits.
Therefore, the ultimate portfolio framework remains:
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Satellite Allocation (Nikkei 225 / Tech Funds): Ride the explosive momentum of assets like the Nikkei 70k rally to boost returns within your risk tolerance.
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Core Allocation (S&P 500 + Cash): Lock down the foundation of your household wealth with the rock-solid, global-standard stability of the US giant.
By refusing to compromise your defense for short-term speed, you get to cheer on the sprinter’s historic run from the absolute best, stress-free seat in the house.
💡 Summary: Mastering the Market with Smart Contrast
We are living through a historic Nikkei 70,000 era. Enjoying this festival to the fullest while keeping the core of your portfolio unshakeable is the ultimate blueprint for surviving and thriving in long-term investing.
How are you adjusting your portfolio in the face of this historic Japanese stock boom? Let me know in the comments below!
See you in the next post!
