Ken Fisher Answers Questions on Inflation, When to Buy and Emerging Markets Opportunities Beyond China – Apr 2024

Transcript:

Naj Srinivas

Hello and welcome to the Fisher Investments Market Insights podcast, where we discuss our firm's latest thinking on global capital markets and current events.

I’m Naj Srinivas, senior vice president of corporate communications here at the firm. Today, we’ll hear from founder, Executive Chairman and Co-Chief Investment Officer of Fisher Investments, Ken Fisher.

In this episode of Market Insights, Ken answers some common listener questions to help them better understand the world of finance and investing.

Before we dive in, I'd like to ask you to rate and recommend our podcast wherever you listen to it. In just a few minutes, you can help make this valuable information available to even more people. Thanks so much for your help, in advance.

With that, let's dig in with this month’s Ken Fisher mailbag. Enjoy.

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Ken Fisher

So every month I get these questions that people send in and I'm always delighted to answer them. I try to do this pretty quickly. Not belabor them too much. So I got a few here from this month.

This one says, what do you think about inflation rates going forward? Consensus seems at risk of being too low to me. Well, it may seem at risk of being too low to you, but of course, out in the outer world, you got people that think they'll be lower and people that think they'll be higher. And that's what makes the world. But, I'm just going to tell you that for the most part, the age old saying that inflation comes from creating too much money relative to the amount of goods produced is true. When we create money, such that the total amount of money is growing faster than the amount of goods and services that we produce. The value of the money shrinks, and that's inflation.

On a global basis and in fact, in America both, but not every single country, the quantity of money, which stupidly was increased hugely during the Covid lockdowns and in the aftermath of the Covid lockdowns, because central banks almost always do the wrong thing, in recent months has been shrinking. And it's slightly net negative growth, offsetting some of what happened earlier. We don't in our culture revert prior inflation, but we do try to stop inflation from continuing moving forward into the future. And as the inflation rate has come down, the rate, not the prices, as the inflation rate has come down, central banks, the main central banks, have gotten closer to their objective of returning to 2% inflation rates. That's an irregular path, which may be why you think the concern is bigger. But as long as we have a near 0, or 0, or net negative growth rate in the quantity of money, domestically and globally, there isn't the fuel for long-term inflation increases. And the inflation war will be won. It's just a matter of how quickly is that dawned on all of us so that it finally translates into prices. But inflation is too much money chasing too few goods. And as the economy grows but at a low rate and the money, quantity of money, money supply grows even slower, you don't have the fuel for the inflation and inflation will go away.

Someone writes, I missed the chance to buy great stocks half price six months ago— half price six months ago, I didn't know they were up 100% in the last six months. What's the best strategy now? Wait for another opportunity or accept the high prices? Well, I don't know what you're looking at buying specifically, but the bull market began in October of 2022 globally, some countries a little bit earlier, some countries a little bit late—in America, October 2022. And so it's been going on a lot longer than six months. But the reality of this question is the only reason to think about the past is to understand what it's telling us about where we are now. Otherwise, we should always be thinking about the future and what's been missed has been missed. We can't make up today for 1956. As soon as I say that to you, intuitively, you get that concept. So I don't know why you think you can make up for six months ago. Or a year ago. You always have to look forward.

My views are articulated in things like my New York Post column, which at the beginning of the year, or Canadian Globe and Mail at the beginning of the year. Very clearly state, I expect this year to be another bull market year. Moderate double-digit growth, what most people would perceive as a good to great year, but not as robust maybe as last year. And therefore, if that's something you want to own into, well, then you ought to do it. If that's not something you want to own into, that's about your personal circumstances. And I can't really speak to that. But it's always about the future. It's never about what you missed six months ago.

What are your current thoughts on the current commodity bear market? The current commodity bear market is basically because global GDP growth is very moderate. It's there, it's real, it's positive, but it's moderate. And a lot of the parts that are based on this, a lot of the production as opposed to the services side is lagging. And so commodities should be in a bear market. In the period as we started the Ukraine war—when I say we started the Ukraine war, when Putin started the tragic war in Ukraine— there was a general perception of shortage coming off of the very robust 2021 GDP growth, which globally was about 7%. People don't get this. GDP plummeted with the lockdowns and then started bouncing back. But in 2021, GDP growth globally—the United States is a little bit lower at 6.7% I think the United States' GDP number was—was super gangbusters. And that set off, you know, a sense that commodity prices, commodities were scarce and in short supply. And the Ukraine war exacerbated that. And since then, as we have been in a moderate GDP growth, that's pretty low but still positive. The high prices before caused from that perception of shortage have led to the bear market, and that'll go on for some period of time until GDP growth accelerates more.

Finally, are there emerging market opportunities outside of China that are interesting to you? For example, India is now the world's most populous country. Well, first, you know, I did a New York Post column just recently on why I think China is a quagmire continuing to happen for a long time. And so when the question says, outside of China, I'm not too robust about anything inside of China, but the reality, and haven't been. But the reality of emerging markets is it's kind of like saying, "What did you think about food?" Well, you know, the reality is we need some food, but there's meat over here, and there's vegetables over there, and there's fruit. There's lots of different kinds of fruit, and there's lots of different kinds of vegetables. And what about grains? You know, that's food too. And, you know, it's all kind of a little different. And you better think about each one by itself. And every one of these countries is somewhat unique and some of them are doing better.

India is doing very—you ask about India— India is doing very well right now, and I'm relatively optimistic on India. But some of them aren't doing so well, and they're all with their own circumstances. And I don't think you should think of them as emerging markets. I think you need to think of them one by one, by the each. And in fact, that's not a bad thing to think about when you think about developed markets. Heavily, they're really impacted by what are the industries that come out of them. And one of the basic problems for a lot of them is it's Utilities, banks and natural resources— those are the three main categories that you mostly see. And the banks end up acting like the banks. The Utilities end up acting like the Utilities. Neither one of those are very exciting. And then you come down to the natural resources and commodities have been in a bear market. So overall, in most of those places, to the extent that's true, it's not very exciting. You have to parse through them one by one.

Thank you for listening to me today on these questions that people write. I do hope you find some of that useful and educational, and I hope you listen in next month as well. Thank you again.

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Naj Srinivas

That was Ken Fisher answering listener questions as part of his monthly mailbag. Thanks to Ken for sharing his insights with us.

If you want to learn more about the topics discussed today, you can visit the episode page of our website, Fisher Investments.com. You'll find a link to that in the show description. While you’re on our website, you can also subscribe to our weekly digest, which rounds up our latest commentary and delivers it right to your inbox every week. And if you have questions about investing or capital markets that we can cover in a future episode of Market Insights, email us at marketinsights@fi.com.

We'd love to hear from you, and we'll answer as many questions as we can in a future episode.

Until then, I'm Naj Srinivas. Thanks for tuning in.

Disclosure:

Investing in securities involves the risk of loss. Past performance is no guarantee of future returns. The content of this podcast represents the opinions and viewpoints of Fisher Investments and should not be regarded as personal investment advice. No assurances are made we will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. Copyright Fisher Investments, 2023.

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