Fisher Investments Report:
Excerpts from 2012, Part III
(Originally published August 7, 2012)
After a choppy quarter, stocks staged a sizeable comeback starting early in June. Global and US stocks ended the quarter in slightly negative territory but are still positive for the year. As detailed in our Q1 2012 Stock Market Outlook, we remain optimistic global stocks will be strongly positive for full-year 2012, with large cap growth stocks leading overall and market breadth (the number of stocks outperforming the broad market) narrowing. What’s more, election years commonly see a bulk of stock market returns in the latter half of the year—stocks can and do move very fast.
Why Be Bullish?
We remain very optimistic about equities in 2012 and beyond—in our view, this bull market has a lot of room to run. We understand many may wonder how we can remain bullish when the media is so negative.
In our view, that media is generally negative is actually a positive. One great and often overlooked value of media is, taken together, it’s a good sentiment indicator. If media is generally negative, we know most investors—who are typically big consumers of media—are generally negative. And negative sentiment is a good sign of more bull market to come. The disconnect between better-than-perceived fundamentals and sentiment is a powerful force that can boost stock market prices.
This is why all needn’t be rosy during a bull market for stock prices to rise. Rather, for a bull market to continue, fundamentals generally need only be better than expectations. If expectations are for disaster, reality need not be stellar to surprise many to the upside. This is the force at play during the early stages of most bull markets—which usually feature a huge initial thrust upward. The surge off the March 2009 bear market bottom was a classic example. This bull market didn’t start because all the world’s economic and other problems were suddenly solved. The realization the depression many expected wasn’t afoot was enough to fuel a historically massive surge off the bottom—with stocks climbing a wall of worry.
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Commentary in this summary constitutes the general views 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. In addition, no assurances are made regarding the accuracy of any forecast made herein.