Personal Wealth Management / Market Insights

Insights on Inflation, Supply Chains, China & More – Dec. 2021 Listener Mailbag

In this episode, we answer listener questions about what’s currently driving inflation and how rising prices may affect stocks. We also explore recent news of labor shortages and supply chain disruptions to determine if investors should be concerned. We also look at the latest investment updates from China.

Want to dig deeper?

A forward-looking perspective is often the best way to examine inflation’s impact on your investment portfolio. Read “On Inflation and Portfolios, Think Ahead—Not Behind” from the MarketMinder section of to understand why.  

Learn how inflation can affect your income in retirement and how to calculate your own personal inflation rate “Understand Inflation’s Impact on Your Retirement Income Goal.”

Ken Fisher explains his take on supply chain shortages in this short video: “Ken Fisher Explains Whether Supply Chain Shortages Spell Trouble for the Economy.”

China’s struggling property developers, such as Evergrande, are another often-discussed topic in the media. Read “Neverpaide: An Update on Evergrande’s Apparent Offshore Debt Default” from MarketMinder to understand Fisher Investments’ take on their potential market impact. 

Have questions about capital markets, investing or personal finance? Email us at and we may use them in an upcoming episode.

Full Episode 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.

For the very last Market Insights episode of 2021, we’ve got a super-sized listener mailbag. We’re continually fielding questions from listeners, clients and investors about the issues that affect their investments. And today we’re going to dig into the four biggest concerns that we’ve been hearing about recently. We’ll get an update on inflation. Investigate the supply chain issues that are dominating the  headlines still today. We’ll examine the state of the US labor market. And, we’ll cover some of the questions we’ve received recently about China.

To help answer these questions, we spoke to a few different voices across Fisher Investments to get their perspective on these issues.

Before we dive in though, I need to ask you a favor. If you enjoy what you hear on Market Insights, take a few minutes to rate and review us wherever you listen to your podcasts. It just takes a few moments and it will help us continue to improve and share this valuable information with even more people.

With that, let’s dig in. We’ve packed this episode with great information—so, please enjoy!


Naj Srinivas:

One topic that we regularly hear about from investors is inflation, or the general rise in prices in an economy. Inflation can affect us as both consumer and investors, so it’s a very important topic to get a handle on. To help us unpack recent questions about inflation, we talked with Kristi Frates. Kristi is an Investment Counselor with our US Private Client Group and spends most of her time talking with clients, answering their questions about how current events and market happenings affect their investments or portfolio. Here’s Kristi speaking about what’s going on with inflation.


Kristi Frates:

So inflation is prices of things—goods and services—increasing every day, every year. When we think of inflation, all of us are factoring things like groceries, gas, the prices of things that we're buying. And inflation is a necessary part of life. We're going to see it at all times over our lifetimes. If we think of a candy bar, price of a stamp, inflation is always occurring.

The reason inflation is important for people who are saving for retirement is in retirement, as you approach it, you realize you will be going on a fixed income, and that fixed income has to buy everything that you need. So, as examples, we had a recent increase for Social Security for retirees of a little over 5%. We had an increase in Medicare premium for retirees—the cost that they pay for their share of Medicare—by over 14%. So, as you approach retirement, inflation is that pinch where the cost of what you need to buy is going up more than your paycheck or your income from Social Security and other sources.

Lately though, there's been a lot of concern around it because it's increasing so quickly. And year-over-year in the consumer price index, we have seen it jump. And there's a lot of news covered, a lot of the pundits talking about it. So the worry is that it's going to get out of hand, or increase too quickly, thus making the goods and services—our gas or groceries—too expensive for us.

When clients are asking us about inflation, it is generally a fear or worry. A concern at some level is driving that question. For some it's, will they have enough money, not only this month, but 10 years from now, to pay for things because prices are going up so quickly. Also though, for some clients, it is at the other end of the spectrum—will they run out of money. Because as inflation impacts and purchasing power lowers, then can they afford not only to do the things they like to do, but have money for the things they need? And this could be everything from your basics, but also that worry about maybe nursing home or assisted living costs later in life or helping kids and grandkids with homes or doing college things that maybe would be eliminated if, because their money is seeing such an impact from inflation, it won't be there in the way they expect.

In the technical sense, inflation is measured by looking at the consumer price index, the CPI. And the CPI is a basket of goods. There is much debate if this basket of goods is fully accurate. All of us have interpretations of what should or shouldn't be in there, but there's a basic core CPI that's measured. It is looked at on a day-over-day, year-over-year basis to assess is it getting more expensive for this basket of goods, or less?

If it's getting more, we're seeing inflation. There have been periods of time historically, where it's done less and that's deflationary. We're seeing inflationary time now. And a lot of clients are talking to us about gas, groceries, the goods that they're buying that are sitting in cargo ships off the ports, waiting to come in, being more expensive. And as this measurement of CPI, they're not believing necessarily that it is fully the CPI index reflective of the things they need to buy each day.

There are many reasons why the inflation questions are picking up recently. There's a lot more news, media, online coverage of it, especially around the reporting year-over-year, that is fueling the concern. Also there's a lot of reporting around the supply side issues where you're ordering or buying things and you can't get them, or you have to pay more to receive them. And then also clients just feel it day to day. When they go to the grocery store and that item that they want every week is now more expensive. When the news outlets compound that by pointing out how much more expensive things are, and maybe doing an analysis of where it was a year ago, it helps fuel the worry. And then when our clients are getting increases in Social Security offset by increased Medicare premiums, they're calling to say, how am I going to pay for all of these things? And that worry leads to what's going to happen with their money.

Naj Srinivas:

For a deeper look into the recent inflation conversation and inflation’s potential impact on stocks looking ahead, we also spoke with Jarred Kriz, a Research Analyst within our Portfolio Management Group. 


Jarred Kriz:

The inflation conversation has changed quite a bit throughout 2021. If you recall, back in the early part of the year, inflation wasn't a big concern whatsoever for anybody. Inflation was running at about a 2% year-over-year clip—that was back in January and February. But then came spring and then came a few different things that really pushed inflation higher on a year-over-year basis.

Basically, what ended up happening was we had a low-comp situation, where the comparable to prices a year ago—this is thinking back in March a year from the previous March. Prices were really low during the recession. You need to remember that. Back in 2020, beginning in February, March, there was a recession. That pushed prices lower, and it would just simply make sense that spring this year, uh, the economy is doing better. That prices would be higher. And that's the low base effect that we saw earlier in the year that pushed to inflation higher. But we also saw supply chain issues.

There were problems with all sorts of different things, and this is due to COVID: a lot of people not going back into the workforce, a lot of supply chain issues backlogs you name it. And that pushed a lot of prices, a lot higher. And again, this was back in spring. Lumber prices, for example, were through the roof, uh, they doubled very quickly. You had your iron ore prices that spiraled higher and an oddity within transportation. You had transportation costs spiral higher driven by used car prices and car rental prices, of all things. Prices there jumped 40% to 50% for used cars. Over a hundred percent, 150% for a rental prices.

So, you had a lot of these one-time events that pushed inflation really high in the spring period of 2021. And we don't think that that is going to continue on a forward-looking basis. And that's what we told you is we didn't think inflation was going to continue at this really high clip. We thought that inflation was going to slow down a little bit and that's exactly what happened.

And that's where the conversation changed again, where during the summer months inflation actually slowed down on a month-over-month basis. You didn't see nearly as many improvements or, or hikes in inflation during the summer months because you no longer had that base effect, and prices of lumber were coming down, prices of iron were coming down and things just settled down…until just a few months ago. So, the conversation changed again a couple months ago where an inflation started to move higher again. And in fact, in October, we had an inflation print of a 6.2% on a year-over-year basis.

Now that again is being driven by supply chain issues and bottlenecks, but more importantly, it's being driven by energy prices. So, the price of oil has gone up quite a bit. It's still being driven by transportation, but more so it's being driven by your housing costs.

Basically, many of the bottlenecks are improving, but you know, if you look back and just look at the amount of price pressure that we've seen in very niche parts of the markets that collectively are able to move inflation higher, but these huge price gains that we've seen in cars and in rentals, that's not sustainable.

Yes, used-car pricing may be up 50% on a year-over-year basis, but we need to look forward, and do we think that's going to happen on the forward-looking basis? Do we think after used cars’ prices have gained 50%, do we think over the next 12 months they're gonna gain another 50% and then another 50%? And the answer is no. In all likelihood, a lot of these bottlenecks are going to be resolved. Supply chain issues are going to be resolved. And on a forward-looking basis, inflation is unlikely to maintain that 6%-plus pace.

Now, one thing that I've talked through with clients, and I just want to make this very clear is that when we say we don't think inflation is going to move meaningfully higher from here, we're not saying that we think inflation prices are going to come down. A lot of places, prices are not going to come down. I think wage inflation is one area that prices aren't going to come down anytime soon, but the rate of change in which they are growing or increasing, we believe that is going to be lower on the forward-looking basis. So all this fear over high, super high inflation in the future, we just don't buy into that. We think a lot of that's going to dissipate over coming quarters.

Naj Srinivas:

For our next topic, we’ll investigate the recent supply chain challenges that’ve been affecting businesses everywhere. The media has focused a lot of attention on the subject, but does all that attention translate into a real impact for stocks today?

Here’s Wendy Nicholsen, a Client Service Program Manager with our US Private Client Group, to give an overview of the supply chain issues that are affecting businesses and why listeners might be concerned.   


Wendy Nicholsen:

So, with supply chain issues right now, there's a couple of main pieces to what's happening and what that picture is. There's the workforce side where there've been changes with the pandemic, how folks are working, where they're working, some of the benefits in different parts of the country and world. And then, also on the side of companies, production, buildings, factories stopping when things were shut down, shifting to different types of businesses or having to turn themselves back on. All of those moving parts have added to some months really at this point on and off in different industries with supply chain issues.

When clients ask about supply chain issues it usually comes down to a couple of concerns, either a personal concern or a market-related concern. And on the personal side, I would even expand that to mostly all of us as citizens, myself included, folks are paying more for gas or my family works in food service—their supply chain challenges. Getting things where they need to go. Um, we have clients that work in transportation or live near ports that are seeing the results of some of the challenges.

And then from a market perspective, on an off, some of the supply chain issues have created price increases or inflation in some measures and aspects, things that folks oftentimes fear can change the course of the market cycle. Potentially take us into a bear market. Or if not, should I change my strategy because of what's happening?

We are seeing some of the supply chain issues in goods, but also services. And there's a few industries that have been more in the headlines than others because some of the challenges have been greater—things like transportation, used cars, food. But, I was talking to some clients just a couple of weeks ago that were having issues finding people—not just supplies—to do a certain home renovation, but there were also workforce strains in getting the people to do the services that they needed done. So, there are areas of the economy that are service-based and also manufacturing-based that are having different challenges at different times.

The supply chain issues also are not just isolated to the US or certain regions. This is something that different countries and different aspects of the economy are experiencing. Some of it is different from a timing perspective. For example, if we're looking at last year in March, generally shutdowns were fairly widespread across the US at first, but then from there on, there were different months or points over the last year and a half that different states, countries, regions had their own challenges. And so when you're looking back, and at times also measuring differences in supply, prices, inflation from these points in the past, you can get different readings and results as far as what's even happening with the supply chain issues or with prices in different countries. Or again, not just the US, but across the world.

Naj Srinivas:

As Wendy pointed out, supply chain disruptions are fairly widespread, but they haven’t affected every sector, industry or company equally. That leaves room for investment opportunities. And for more detail on some of these investment opportunities and how supply chain issues affect stocks, here’s Davis Hein, a Capital Markets Research Analyst for the firm.


Davis Hein:

Supply chains are extremely important to investors because they're increasingly important to corporate business models due to the evolution of a couple of trends over the past decades. The first trend is just-in-time inventory management and the globalization of the supply chains, which has provided consumers with lower-priced goods. But these geographically stretched supply chains have also shown their fragility when disrupted by events like COVID-19 economic shutdowns.

Just-in-time inventory management is the concept of not holding excessive goods in one's warehouse, but instead relying on new import of goods to meet demand as it arises. So, basically, companies are carrying thinner and leaner inventories than they historically have in an effort to control cost structures.

The problem with disruptions for just-in-time inventory is there isn't a lot of slack within the supply chain environment. You have a lot of downstream impacts because no one is sitting on a lot of inventory. So these problems tend to snowball as they become more acute as they go through additional producers.

Secondly, the rise of e-commerce has caused retailers to become increasingly focused on their supply chain infrastructure to ensure faster delivery to their customers.

While companies around the world have struggled with supply chain disruption. Many of the issues have been driven by the US, where supply has struggled to meet strong demand for durable goods. Government stimulus supported the income of many US households through COVID. And many of these households shifted their spending from services to consumer goods as activities like dining out and travel were restricted. The end result was almost five years of us durable goods spending was packed into about a one-year window and supply of goods has struggled to keep up with that rising demand.

Industries with complex input components that are not easily substituted, like industrials or auto manufacturers, have been most impacted as the late delivery of one component may slow down or halt production altogether. Less-impacted industries would be areas like financials or utilities, which are generally not shipping input goods or final products across long distances.

Supply chain issues have impacted stocks by driving uncertainty in some areas such as industrials or household products where input costs increased due to supply chain disruptions. But overall, it's hard to say that supply chain concerns have had a significant negative impact on stocks given the strong year-to-date performance of global markets.

It's important investors understand how supply chains impact the various sectors, industries and companies they invest in, as some areas have navigated issues better than others and disruptions have altered competitive balances. But, it's also important to remember that many supply chain issues have been around for some time now, are frequently discussed in the media, and lacks surprise power. And therefore, many of these issues may already be priced into stocks.

I think the, the issue that's not being commonly discussed is how quickly some of these issues may be resolved. Uh, what we've seen time and time again in economics is that supply increases to meet demand, and entrepreneurs and producers find a way to meet that demand. So I think we're going to, going to see a lot of innovation. I think we're going to see companies becoming leaner and more flexible as they respond to a changing environment, but a lot of consensus seems to assume that these issues will go on in perpetuity. And I think that they're underestimating how innovation and corporate flexibility can quickly address these issues as we've seen in areas like lumber production.

Naj Srinivas:

There’s been a lot of questions recently about labor markets and how they might impact stocks. Here’s Paige Tyson, a Capital Markets Research Analyst, to explain. 


Paige Tyson:

I think clients are asking questions about this just because it's so apparent. If you listened to NPR or read any sorts of news media, unemployment numbers and job scarcity and rising wages are kind of par for the course these days. Everyone is talking about it. And I think that part of the reason for that is because this is a pretty new phenomenon, meaning that, you know, last year in the height of the pandemic, everyone was talking about really high unemployment numbers and it's a complete 180—just about a year and a half later talking about extreme jobs scarcity, which I think caught a lot of people off guard. This is also the first time we've had really high wage growth. In Q3, it was about 4.2% year-over-year, which is the fastest we've seen in 30 years. So combine that with all of the recent inflation concerns, it seems pretty reasonable that people would be looking at this and worried about it.

The primary reason they're asking about this is if the shortage in labor is going to cause such sustained higher wages that that will trickle in through the economy and we'll see significantly higher prices at more sustained levels than maybe what we're seeing now. Another question that we get a lot is just why is this happening? And there are really a number of reasons for that. Everything from, you know, fears over COVID to a lack of childcare options, kind of forcing parents to stay home. And the fact that, you know, people really used the pandemic as an opportunity to potentially switch careers. Combine that with the abundance of stimulus and unemployment benefits, it's not surprising really that there is a little bit of hesitancy in people getting back to work.

The way that the labor shortage and increasing wages could impact stocks is really twofold. So if you think about the labor shortage, businesses might have the demand for their goods or the service, but if they can't actually get those goods to the stores or to consumers, that could impact their revenue and their bottom line, eventually. And so there is of course the potential risk to just these businesses’ sales, whether it's for goods or services, if they're not able to actually get the labor to deliver those goods or to stay open and provide those services. The potential impact on stocks from rising wage growth is it could, again, cut into their bottom line, not necessarily from revenue coming in, but it just increases their headcount costs.

And so then there's this kind of this theory of the spiral of, well, if costs are increasing, then earnings are going to be smaller. There's going to be less investment for future growth. And so now, you know, is this stock really just going to go down? But in our view, these are really just temporary things that we don't think are going to have as much of an impact. When we think about stocks’ ability to absorb these kinds of uncertainties and costs, it's really baked into the system already. And especially with all of the supply chain issues that we've been having, this is just another layer of uncertainty for businesses, but one that we do believe is going to be resolved.

Naj Srinivas:

As with many macroeconomic topics that can affect stock markets, it’s often useful to dive a little deeper to understand some of the determinants that are affecting that market. So here’s Luke Puetz, another Research Analyst here at the firm, to provide a little bit more detail on labor markets and what’s driving them today.


Luke Puetz:

Yeah. So when you think about the current labor shortage there are some shorter-term, very pandemic-specific issues. And then there are some longer-term issues that been developing for a while. And most of the discussion that you hear broadly in the media focuses more on those shorter-term, pandemic-associated issues, which, you know, examples would be a good number of people who have just left the labor force—they are retiring early and they haven't come back. And the pandemic probably just kind of sped up their retirement from what otherwise would have been. So, there are some short-term pandemic stuff like that, that's a part of the story, but it's definitely not the only part of the story, because if we go back pre-pandemic, there already was evidence that labor markets were tightening.

Surveys were showing labor market tightness, wages were already rising. And that's pretty normal when you're late in a business cycle, which, when we think about what happened last year in, in March, we saw a big decline in the market in a very short recession. In our view, that functionally was more of a big correction rather than a true bear market where you get a new cycle beginning.

So, we still think we're late cycle and the tight labor markets is just a part of that. And it's normal. It's just a little more acute this time around. So, that's why we don't necessarily think it's going to go away just as the pandemic goes away because the labor market was already tightening before, and this is normal when you're late in the cycle.

When you think about, you know, sector and industry performance, it's probably good to think about, you know, direct impacts as well as indirect impacts from a tight labor market. So for example, certain industries like retail and restaurants tend to be very labor-intensive businesses.

So, those types of companies are more vulnerable, especially because they operate in competitive industries. So, your costs—as that type of business—your costs are rising and hopefully you can pass those costs onto your customers, but sometimes if you're in a really competitive industry, you can't do that.

There's also secondary effects. You know, a bank for example, is, you know, a good secondary effect because banks aren't necessarily as exposed to the rising wages, but, you know, Federal Reserve policy looks at employment and inflation in terms of directing its monetary policy. And banks make money off of the spread between short- and long-term interest rates. So as labor markets tighten and inflation picks up, the Federal Reserve might start hiking that short term rate of interest, which can flatten the yield curve, which compresses that the earnings basically for banks. So, you know, we're underweight both of those categories: the types of industries that are directly impacted as well as the, financials.

When you think about the current labor market issues that are facing the US economy, Northern Europe—in the way that we think about that with respect to the stock market is that we think that we are late in a market cycle and tight labor markets are ordinary late in the market cycle. They're just a little worse this time around.

Generally speaking, early in a business cycle when unemployment rates are high, there's less inflation in the economy. That's usually when small, value-oriented companies, uh, tend to thrive. And that's how we were positioned in the early years, you know, 10 years ago, 2009, -10, -11. When we were in the early part of the business cycle, we were positioned in those smaller, more value-oriented companies, whereas today, and really the way we've been positioned even before the pandemic, we were, we favored these larger-cap, more growth-oriented companies. These are the types of companies that are much more immune to late-cycle pressures, which is not just tight labor markets—tight labor markets is one symptom of a late-cycle economy. But for example, if you are a large company with fatter profit margins, you just have more cushion to absorb rising wages. Oftentimes, those businesses might be less labor intensive than, you know, smaller companies like restaurants or retail operators. So, our view is you should be in larger-cap, growth-oriented companies in this part of the market cycle.

Naj Srinivas:

Another question or topic that we’re hearing about a lot lately, both in the media, but also from investors, is China—and what’s going on in China. Here’s one of my colleagues, Meg Leiken, a Vice President in our Corporate Communications group, to unpack what’s going on there.


Meg Leiken:

We get a lot of questions about China from clients and investors for a few reasons, really. First off, China is the world's second-largest economy and is part of a very interconnected global economy for investors. And China is a common place for folks to invest because it houses a lot of large growth-oriented companies that are very popular. And so, naturally, you know, folks have interest in that area. And as you've seen, especially this year, negative headlines about China have been really sweeping the media circuits worldwide.

And that's for a few reasons. One, we've seen slowing economic growth in China, which has caused some concerns. We've seen a lot happening in the property market as well, with the real estate developer Evergrande, especially in the news recently. We've also seen regulatory announcements and fines being announced against big internet companies, which spooks investors.

Despite all of these headlines, we still believe China is an attractive investment opportunity for a few reasons. Predominantly, it fits into our thematic preferences of big growth-oriented stocks, which tend to do really well in the later stages of a bull market, which we believe we're in right now. And it also provides that very important global diversification to help—especially with long-term investors—help them mitigate risk and volatility in their portfolio.

Before investors invest in China, there are a few, I think, very important things for them to know, especially when you think about what we've been seen in the headlines. So, first and foremost, we think that China is an attractive investment opportunity, less so for the country and location itself, but it's more about the big, growth-oriented tech companies, for example, that they house, which we think are poised to do very well.

But in terms of, what's been really alarming folks, let's start with the slowing economic growth. Slowing growth rates are natural as economies mature and move past the rapid gains from industrialization and infrastructure build-outs, which is where they're at—they're more focused on services and consumer goods and companies. And that's actually, while a driver of slower growth, a reason to be really bullish about these big, large, growth-oriented tech and consumer discretionary companies out of China.

And the other thing that's important to remember is that as an economy develops, when they get beyond the infrastructure industry build-outs where you're going to see that large double-digit growth, slower growth is okay. It's natural. It's like when you think about a child growing up, when they're in infancy, I mean, they're growing, they're growing very quickly. I have a one-year-old—they are just inches and inches, and as children grow up, they don't grow as quickly and that's okay. And that's natural, and it's just a sign that, you know, their economy is strong and a worth investing in.

Naj Srinivas:

Successfully investing in China requires a good understanding of the unique relationship that many Chinese companies have with the government. Here with that detail—along with context on China’s slowing economic growth recently and its current investment potential—is Austin Fraser, a Portfolio Engineer in our Portfolio Management Group. Austin joined us via Zoom from the Fisher offices in Tokyo.


Austin Fraser:

You have to remember these companies operate in isolation within the Chinese boundaries of, of the country. So, you know, I think there's a desire from the government to maintain what I'll call national champions. It's been something that we've seen throughout history and other emerging markets, like say a Korea with Samsung Electronics. And so I think there is an advantageous relationship between, um, how the rules of the game, so to speak are put in place because there is a desire to maintain these companies as household names, as worldwide names.

You have to remember, these are the first companies in our lifetimes that have truly been known to the Western world or the, the broader investment community. Typically it would be more, more of your arcane emerging market investment managers that would notice some Chinese stocks, but now they're household names. And so I think that there is motivation by the government to not go too far with any sort of regulatory change, uh, with the fear that you would ultimately choke off, ultimately the business and the power of these companies over time. So I think that, you know, the relationship while it'll become a little more fine-tuned over time, will still remain a positive one with the, with the government.

I think the slowing economy in China is just a natural development of its economic progression and demographic progression. So for quite a bit of time, uh, really call it from the early 1990s when much of the current Chinese economy, uh, the rules were put in place for capitalism has really been about creating jobs. And the way to create jobs was through higher economic growth. And you saw most government policies pushing for increased growth at all costs, so to speak.

So if you, uh, think about some of the environmental things that have happened in China over the last, uh, few decades, in part that was a result of the government pushing for growth at all costs; that they would essentially say, well, you need to meet certain GDP targets at the local, regional, provincial level in order to provide enough jobs for the people that are coming into the workforce.

One of the big things that came out this year, that I think is really relevant is the latest census for China, which showed that the population is actually aging quite rapidly and faster than what people thought it was. So, now the priority instead of growth at all costs is more of a quality of growth. And so naturally that's going to lead to a decline in the overall growth rate. And also there's a law of, of averages and base effects, which is, you're just a bigger economy now—it's much harder to grow at 10% a year these days. But, you don't need 10% growth to provide jobs anymore because the overall workforce is on a longer-picture-term, starting to slowly decline and the focus should change slightly differently. So it's now more about, you've probably heard the term “common prosperity” in the media quite a bit lately, which is really about improving the livelihood of all of the Chinese citizens. So it's not about just providing a job, it's providing all the other infrastructure, if you will, social infrastructure that goes around with that.

And so, I'd say a 5% growth rate from China, 6% growth rate from China is still a very healthy, robust number. But the idea that you'd see growth rate in the sort of double-digit range is probably a thing of the past. We're not likely to see that moving forward. And I don't think it's really necessarily something to be concerned about because there are really forceful reasons for why that's happened. And if you go back in history, no economy can sustain that level of growth rate for, for that long of a period of time, uh, because it becomes unsustainable.

One of the things that we do quite a bit of here at Fisher is try to measure broad-based fundamentals in what sentiment is doing versus fundamentals. And in our view right now, a lot of what you're seeing, in our opinion, is overly negative sentiment based off of where the fundamental environment is. I'll acknowledge that growth has slowed to some degree in China, but it hasn’t slowed dramatically. And the government seems to be willing now to provide some support. Lots of things that we've been hearing about recently in recent weeks has been that 2022 will be a year that the, the government plans to support the economy. You saw a reserve-rate requirement cut for the banks. So I think that the fears of a big slow to on are probably overblown.

And then if you look at their equity markets, very particularly, that is almost entirely due to what's happened with fears over regulation within the tech sector. So Chinese equities are technically in a bear market if you look at the MSCI China Index. However, that is because the companies that present say the ADR universe, which are highly tied to names that, you know, like, probably Alibaba. Names that appear to be targeted for regulatory concerns are down over 50%. So it's really, uh, about those types of names that have dragged down the overall index level. Not that there's broad concern about China and emerging markets and the rest of the world.

And the, the key point I'll make with that is if you just look at the spread—performance spread—between the MSCI Emerging Markets Index and MSCI China Index it's at its widest in over 20 years. If what was going on in China was more about fundamental economic variables, which would have a global impact, you would not see that big of a spread because emerging markets would be down significantly along with China because there's that spillover effect to it. So that says to us in many ways that people are pretty negative about Chinese equities right now. Now it is a good time to own them. Uh, we expect a rebound in sentiment as we progress through the new year as less regulation, as regulatory changes are announced.

I think some is still inevitable over time. Just again, think of the Western model of how Google and Facebook and the rest of the world still face regulation, but it has gotten more and more quiet over time. It's less of an onslaught that you saw before. And in some ways, just the idea that you remove this constant stream of negatives is actually a positive—meaning things aren't, uh, getting worse that they've probably hit some sort of floor. And so we're, we're pretty optimistic about Chinese equities next year, we think, especially names that have been beaten down because of some of these regulatory already concerns. Uh, so it's an area we still remain invested in.


Naj Srinivas:

Well, that’s it for this Listener Mailbag episode and Market Insights for 2021. A very big thank you to all of our guests for joining us.

If you want to learn more about the topics discussed on this episode, you can visit the episode page on our website— You’ll find a link in the show description. While you’re there, you can also visit the MarketMinder section of our website. It’s a great place to check in regularly for our latest capital markets insights.

You can also subscribe to the MarketMinder Weekly Digest, so all of our latest content that we produce here at the firm will be delivered right to your inbox every week.

And if you have questions about investing or capital markets or personal finance that we can cover in a future episode of Market Insights, email us at We’d love to hear from you.

Until 2022, I’m Naj Srinivas. Be well, stay safe and thanks for listening.


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, 2021.

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