Personal Wealth Management / The Well-Read Investor

SR VP Of Research at Fisher Investments and Author Aaron Anderson on Communication and Market outlook

Hello everyone today is June 23rd 20-21 and welcome to another edition of the Well-Read Investor, the podcast that profits your mind and your money. I’m your host Mike Hanson.

We have a real treat today—someone perfect for this program. Our guest is Aaron Anderson. He’s the author of two investment books, but much more importantly to me he is a fellow member of the Investment Policy Committee here at Fisher Investments, a longtime colleague of mine, and one of the sharpest investment minds I’ve known.

We talk about his outlook for markets, books, and the importance of communication in investing. Aaron doesn’t just write well, he’s an accomplished speaker, and great at creating compelling and easy to understand visual presentations. He fits the right information and message to his audience, and can explain the abstract and complex concepts as effectively to novices as to experts. You can’t just be a good investor to be very successful in this industry—you have to articulate and constantly tell your clients what you’re up to and why. Communication is the secret sauce that creates lasting client relationships—which is essential for great investing strategies to reach their long-term goals.

A little more about Aaron. He’s been with Fisher Investments since 2005 and currently serves as Senior Vice President of Research and has been on the firm’s five-member Investment Policy Committee (IPC) since 2011. You’ll see him regularly on major financial TV networks like CNBC and publications like The Wall Street Journal and Reuters. He’s written two investing books, and I’ll highlight here his excellent, Own the World: How Smart Investors Create Global Portfolios—which explains how anyone can globally diversify their portfolio for better and smoother returns over their time horizon. I’d also note that Aaron has over the years become something of an expert in Environmental, Social and Governance (ESG) portfolio management. And with his guidance in that area, along with our tremendous Research and Institutional group, Fisher has won several awards and recognitions for ESG portfolio management. Aaron tells us a lot more about his biography in the interview, so I’ll save those details.

Enjoy this one. This is a great market mind in addition to communicator. Here’s Aaron Anderson.

Full Episode 24 Transcript

Mike Hanson (02:42):

Aaron Anderson in with us a long time colleague of mine. We've worked together many years in many different ways. In fact, as analysts as, as two of us who wrote content for a long time, and now we serve together a course on the investment policy committee. Aaron, thanks so much for taking the time to be with us. Yeah,

Aaron Anderson (03:03):

You're welcome, Mike. It's great to be here. We talk all the time, of course, but never in this type of format. So thanks for having me.

Mike Hanson (03:11):

Yeah. You know, I, everyone I talked to about you, I always say that we've been working together for years, but I always listened to whatever you have to say with great interest. You're one of the smartest guys. I know. And so I think our listeners are really going to benefit from this, but tell us about yourself a little bit in your own words. I mean, what's been your career path. How did you get to this part of your career?

Aaron Anderson (03:33):

Well, you know, going all the way back to my college days, you know, when I got into college, I thought I wanted to be a mechanical engineer and kind of set down that path. Did that for a couple of years, kind of realized it wasn't for me. You know, ultimately had done so much undergraduate work in that field that I ended up getting a degree in geophysics, which, you know, of course is a bit of a departure from engineering, but you know, a big leap to where I am now working in money management, financial services. And then when I got out of college, I was really not sure what I wanted to do with myself. I wasn't too keen on going and becoming a geophysicist. Really was just open to new opportunities, happen to have a friend who lived in San Francisco, his father was in our industry.

Aaron Anderson (04:21):

He kind of got me a job that I thought would just be a placeholder until I figured myself out. And it turns out I really liked the industry. And so basically I've been working in it ever since that was back in Boyd, I'm going to really date myself here, but that was back in 1996. I think it was. I think I remember the big debate at the time was, was the Dow Jones industrial average going to hit 6,500 or not. And that was a big milestone. And here we are of course, much, much higher, but you know, entering the industry at that time was real interesting just because it was the tail end of a big booming bull market. It seemed like nothing could ever go wrong. Plus I'm working in the San Francisco bay area. Literally my office was in the city and that was kind of the heart, a lot of the tech boom and biotech boom that was going on.

Aaron Anderson (05:04):

And so you got a bit of a, a skewed view of how finance worked and how markets worked. And I think, you know, kind of fully making my way through that market cycle you know, seeing the good times, but then the bad times that followed now I think was critical to a long-term career in the industry. You know, just realizing that good times don't last forever, bad times. Don't last forever. Ultimately I made my way to Fisher in 2005 and have been here ever since, you know, growing up with you here at the firm and that's been just an amazing experience and then back in about 2011 or so to you know, be you know, invited to be a member of our investor policy committee that manages all of our client's portfolios really been one of the great honors of my life. So really have been in the industry a long time, of course, been a Fisher a long time. And just so grateful for all the people I've, I've learned from all the years and all the experiences that I've had.

Mike Hanson (06:03):

What is your work like today? I mean, what does it mean to be on the investment policy policy committee? I of course got my own views about that, but what does that work mean to you? What is your day-to-day look like?

Aaron Anderson (06:14):

At Fisher investments, the investment policy committee is what you can think of as the portfolio management group. So we're ultimately responsible for overseeing all of the various client portfolios that we manage. And we have a private client side of a part of our business, of course, and an institutional part of our business. And across those two business units, we manage a number of different types of equity, fixed income, other types of portfolios. And so being a member of the investment policy committee essentially means that you're the portfolio manager for, for all of those strategies, which is a bit unique, you know, most firms, you know, have smaller teams that work on individual strategies or individual portfolio managers that run individual strategies. And what's different about that approach is that we take more of a, a joint portfolio management approach.

Aaron Anderson (07:07):

We manage all of those strategies as a team. And, you know, I work a lot with our institutional clients and a question I always get, well, how do you do that? How does a five member team like you have manage you know, 180 plus billion dollars today, or the number of strategies that we manage. And it really just comes down to support, you know, and we have the support of the other members in the investment policy committee, but really the other members of our research group or portfolio engineering group. They're just so many very capable folks, very dedicated folks that work with us on these strategies that might seem like it's a five member team doing a lot of this work, but in reality, we've got a lot of support that, that that's helping us do that. And that's really what makes it manageable.

Mike Hanson (07:50):

Yeah. And you know, one of the things that goes along with that is, is the basic investing philosophy that kind of underpins the whole process and we call ourselves top down. But how would you characterize your personal investing philosophy and how has that changed over time?

Aaron Anderson (08:05):

Well, like you said, that, you know, I, I very much believe in the top-down approach that we use. And essentially what that means is we want to understand the macro economic environment, how that's likely to impact different types of equities or bonds or, or, or different asset classes. We really try and use that top-down macro economic analysis that we do to point us into what we think are really the most favorable categories of equities. And then we do, you know, more in-depth research on the individual companies, themselves to choose the best companies we can within those areas. But to me, that's just so critical. What impacts inequity price or a bond or lots of different types of investment. Isn't just how well run a company is or what their distribution strategy is or what their balance sheet looks like.

Aaron Anderson (08:51):

That all matters of course, quite a bit, but you're, you can be the best run, say energy company in the world. And if it's 2013 and 14, when oil prices are plummeting, you're probably facing some pretty big headwinds. Not because they're not doing a good job managing the company, it's because you're facing a big macro economic tailwind. These days, lots of work from home type companies have been doing really well, not just because all of them are great companies and all of them are going to be tremendously successful. It's just, that's a big macro economic tailwind that's at their back. I mean, our industry is so centered around company analysis, traditional bottom up type analysis. And I don't want me to disparage that in any way. I think that's incredibly important as well, but to me that's just not sufficient on its own.

Aaron Anderson (09:39):

You really have to have a good sense of not only what's going on in the world from an economic standpoint, what's happening with resource prices and interest rates and monetary policy what's happening politically. But you know, your area of specialization, psychology sentiment plays such an important role as well. That if you're not incorporating some of that analysis, I really think you miss out on a big part of what impacts equity pricing. And as you know, at the end of the day this is a probabilities business, and anything you can do to give yourself the highest probability, highest probability of success really is an opportunity. And it's a missed opportunity, not to incorporate that type of analysis into an investment process. And I really think that's been some of the keys to our success.

Mike Hanson (10:57):

Yeah, there's no doubt. I mean, you said support and I really think that's important because our research staff, which has really grown over time is, is so world-class. And we really do. We spend the time thinking globally, which I believe many people really don't do today. They kind of think in terms of their own country or whatever it is that they're thinking of. But what would you say, some things that changed your mind about over the years,

Aaron Anderson (11:21):

Things I've changed my mind about, well, I'd say just that evolution into top-down thinking I would say was a process for me as well. I mean, I came from a firm that was much more traditional you know, tended to be more bottom up focused. I was constantly working with our various analysts who were pitching individual stocks and setting price targets, upgrading and downgrading. I started with that mindset as well. And so it was a process for me to understand the benefit of that type of, of top-down analysis and equity selection. And, you know for me, a lot of my experience here at the firm was doing that type of work. When I started in research here, it was what we call as what we call a capital markets analyst. And that's an analyst who's looking at macro economic conditions. You're looking at countries and sectors and how regulations and economic conditions and politics and all those types of things are, are changing and influencing equity pricing.

Aaron Anderson (12:18):

And so I was throwing kind of right into that pool. And it wasn't necessarily a natural transition to me, you know, suddenly I had to change my thinking into more of a top-down orientation, I was able to embrace it pretty quickly as I saw the benefits of all of that. And then over the years, you know, utilizing that process, there are always iterations. I mean, things are changing all the time. No, it's not just some static set of factors that you look at and assign some value to. And you know, that spits out how you, what you ought to be doing. You constantly need to be assessing reality versus expectations. And a lot of the, you know, obviously you go through economic cycles, but no one cycle is different for them is the same as the last one.

Aaron Anderson (13:06):

And so you constantly need to be adjusting your thinking about, you know, are we early in a market cycle late in the market cycle? How is monetary policy playing a role here? What do we expect out of politics? All of those things are changing all the time. And so really it requires just a perpetual analysis of these types of things. And then ultimately you need to make investment decisions based on all of that, which, you know, it's one thing to do the analysis. It's the next thing is it's a whole nother thing to then say, okay, well, here's what we're going to do about it in our client's portfolios.

Mike Hanson (13:38):

Yeah, no, it's, it's interesting. You characterize it that way because one of the things I find is that so many investors want the set of rules, quote, unquote, that will make them successful. And there are some good rules and so forth, but it's just, like you say, things are constantly intentioned. You're constantly making adjustments. So I guess my next question for you is, especially starting out thinking about things like mechanical engineering, geophysics, do you think that there's a certain type of mind that's best suited for this? And do you think you had that all along or do you think you really had to kind of change yourself over to think like

Speaker 3 (14:10):

This? Well,

Aaron Anderson (14:13):

I think there's some real synergies there actually, especially in the way that we tend to analyze things because we really do take a scientific type approach to it where we do a lot of research and we asked a lot of questions and we've got a hypothesis and then we go in and we do a lot of research to support it, or maybe prove that it's incorrect. And, you know, I always describe investing, at least in the way we do it is kind of running a research gauntlet. But if you can have an idea and have it poked and prodded and lots of different ways and, you know, do a lot of research around it and still go through that whole process and come out on the other end and have a lot of confidence that that's the right investment decision to make. Well, I, you know, and then I think you're probably gonna end up with more good decisions than bad ones, hopefully. And I think it's very similar when you're talking about the sciences, you know, you're, you know, having peer reviewed papers, you're doing a lot of research, all those types of things. And if it can make it through that type of a research conflict and you know, it holds up, you know, I think that's somewhere where your best research comes. And I think from an investment standpoint, that's also some of where your best and, you know, most thoroughly analyzed best thought out highest conviction investment ideas can come from. Hmm.

Mike Hanson (15:22):

I want to talk to you now about communicator because you are prolific in that since you do speaking, you do writing, you've even written a couple books. And did you intend to get into this business and become an author you've written two books was that expected. And tell us a little bit about you know, that process in particular,

Aaron Anderson (15:41):

You, you know, that whole process, all of that is just some of the luckiest stuff in my entire life. I mean, you're, you're familiar with all this. I know, but you know, I, I was a person who didn't really think of myself as much of a writer didn't ever think of myself as much of a public speaker. And you know, as we at the firm, I've always believed in those things immensely. And, you know, we have, you know, all the way back to the beginnings of our firm has had tremendous value on communication, client interaction, getting our thoughts across to our clients, just so they can better understand what we're doing, how we're thinking, hopefully that makes them more comfortable with the decisions that we're making for them, at least understand that the rationale that's going into them. And for a long time, when we were much smaller firm, we had a select group of folks that would do those types of things including, you know, our founder, Ken Fisher in, in a, in a small handful of others.

Aaron Anderson (16:34):

And I just happened to be there as you were, when they started to open up that up to a broader speaker set and started, And so you and I both participated in something we had called investment idle, which again was just a happy, you know I say happy, it was terrifying at the time, but it was literally modeled after it was modeled after American idol where we would go up and present some stuff and answer some questions in front of a big group, which as I said, was terrifying at the time. But the more and more you did that, the more repetitions you got, the more comfortable you got with it.

Aaron Anderson (17:19):

And I just happened to be at the right place at the right time and got invited to do some of those types of Kleiner interactions and, and the rest was sort of history. And so I really consider myself just very fortunate to have been there. That intersection of being at the time at a relatively small firm in a smaller research group at a time when they needed people to do those types of things happened to do okay. In that particular event that they held and the rest was history. And the same thing sort of happened from a writing standpoint, you know, as you mentioned, you know, you and I both worked in the content department here at the firm, and that was sort of a happy accident as well, where I got the opportunity to write a few things. And then we embarked on an effort to, you know, write a number of books related to different types of investing global investing sector, specific books, geographic books, like books centered around investing in emerging markets. And I just happened to be there and had the opportunity to write one of the first ones of those. So really it's, you know, a lot of it is like, you know, th th there's a lot of effort involved of course, but a lot of it for me has just been luck. And you know, I, I now that's become a huge part of our career and huge part of my know everything I do day to day. And so been very fortunate in that regard.

Mike Hanson (18:35):

I knew you were going to bring up the, invest, the investment idle speaking competition for our listeners. I actually came in third in that competition, both Aaron and another one of our senior analysts, Brad piles beat me. And for those of you that don't think it can happen, especially for, even for seasoned speakers. I mean, I completely blanked on that final round, as you will recall. I just went like why'd, I didn't had nothing to say. I forgot all about inflation and the rest of it, but I want to ask you though, in writing those books, I mean, you say you were lucky to do it, if you really think it's lucky, you've been lucky about a lot of things in your life. I personally attribute a lot of it to ability, but you think that it is writing is writing, learning for you for you. Did you learn a lot from

Speaker 3 (19:15):

Writing these books

Aaron Anderson (19:18):

So much? I mean, I, I can't even tell you, you know, that writing a book seems so daunting when you're asked to do it, or you decide to do it in my case, you know, initially asked to do it and, you know, I know you have written in books as well. Of course. I think that's probably come a bit more naturally for you, for me. It was hugely intimidating at first. But I think with all types of communication, there's just, it's just such an important part of our business for a number of reasons. One is that it just, if you can describe something well and create a narrative surrounding it then I have trouble having confidence that what we're doing is the right thing. You know, if, if I can't describe to somebody while we're doing something, and I really have to question if what we're doing is what we ought to be doing because right or wrong, you should be able to explain why you're doing it.

Aaron Anderson (20:11):

And I think of a book is just a long form version of that. I mean, a seminar is doing the same thing. Just a client meeting is doing the same type of thing where, you know, if I can't, I think defend is the wrong word, but if I can explain in a coherent manner what we're doing, then I really have to question why we're doing it. And then just from a broad communication standpoint, you know, just being able to communicate clearly, clearly, you know, has, has a lot of advantages, but then I jesting information in the other direction as well. You know, the critical part of our businesses, understanding what our client's needs are and, you know, understanding what want us to need us to be doing for them. And so just all forms of communication are incredibly important to our business, both from a working with a client, helping them understand what we're doing, helping them understand what we think is best for them, but then from the investment side of things as well.

Aaron Anderson (21:02):

And I think writing a book really was a great way to just dive into that in such an in-depth way. I mean, when you're writing a book, as you well know it, it's not just, you're having to write it. You're having to research it. You're having to edit it. It's a, it's a fairly long daunting process, but coming out the other side of that one just gives you a huge sense of accomplishment. And so then suddenly writing the next book, if you decide to do that becomes a lot less intimidating. And certainly some of the shorter form things you might do suddenly seem so much more digestible and certainly not easy. But relative to, you know, starting out and running a book where you think there's no way I'm ever going to get this done. And by the end, you're absolutely exhausted. And you think it's just awful and you know, maybe it's not perfect, but it probably is better than you think it is, you know, suddenly every next thing you do beyond that becomes a little bit easier.

Mike Hanson (21:50):

Yeah. You know, it's funny you say all that, because I would say that the process of writing a book really teaches you to be concise as well, because you start getting impatient with stuff that's too long. You realize how much time it takes to write a book. And so you say to yourself, do I really have an idea that's worth exploring here? Or am I just, you know, spewing stuff out on the page, but you use the word narrative, which I want to just ask you about very quickly, or just get your comment on, because you know, there are a lot of folks in this industry who would say you don't need the narrative. It's what the numbers say. You know, just, just hard statistical analysis. That's what you ought to do, but I very much agree with you. I mean, it's a client focus issue because clients need to understand and they, and they need to understand the pathway of what's going on. You've probably seen both versions in your career though. People who are just very quantitatively focused. Do you see things like writing and that type of communication as a pathway to communicate with them as well? Or do you take a different tact?

Aaron Anderson (22:45):

Absolutely. I mean, I think of writing as a bridge between the two. I mean, you have people who are just very quantitatively focused and very data driven and provide information in a very technical way. And that's essential, you know, I mean, that's incredibly important. And, you know, for instance, within our research group, I expect to get that type of analysis from our analysts all the time. And they do a phenomenal job of that, but that's not something that your average investor can digest very easily. So I think of writing in many ways as taking that type of information, creating a narrative around it, or, you know, by narrative, really what I just mean is figuring out a way that you can tell the story that you're trying to tell and present that information in a way that can be digested or whoever your audience is.

Aaron Anderson (23:29):

And that's different for different types of people. You know, it's might be different for an individual investor versus institutional investor, even amongst within those two subsets, you're going to have different types of institutional investors, different types of individual investors who digest information in lots of different ways. So, you know, writing is a key component of that. Some people would rather listen to a podcast, somehow people would rather go to a seminar. And so I think it's really important. One to be able to create the narrative, but also be able to apply it in lots of different ways. I mean, writing is just one part of that. There are lots of different ways to communicate, of course. And so providing people different venues in which to digest the information that you're trying to present to them, I think is just critical. But, you know, moving from the technical to the digestible, I think is the key to communication in our industry.

Speaker 3 (24:19):

So let's

Mike Hanson (24:20):

Just switch gears slightly. And, you know, top-down investing a lot of AUM to cover a lot of strategies thinking about the world every day. How do you keep up, what's your strategy for doing things like reading, or just keeping up with data analysis in general?

Aaron Anderson (24:39):

Well, you know, I'm fortunate in that, you know, that's my job. And so, you know, I'm afforded a lot of time to gather information, work with our analysts, you know, kind of organize my days as I see fit. And, you know, I would say it starts like with everyone, with the topical information you come in and something's happened and the market's reacting to it, and you want to understand what that is, and maybe it's something worth exploring and something you, you decide you want to dig into a little bit more deeply, or maybe it's something you say, well, this is, you know, not really consequential or maybe it's having an impact on the market today, but we don't think this is going to be something that's having a longterm impact. And so I would say like for most folks, the first part of my day is just understanding what's gone on in the world overnight.

Aaron Anderson (25:22):

And I think that's critical when I say the world, I really do mean the world. I mean, we're really in a 24 hour news cycle here, when you think about, you know, global macro economic developments. And if you just look at data that gets released in any given month, quarter, year, you're talking about hundreds of thousands of economic data points globally. And literally every day, there are some that you can take a look at, not all are meaningful, but that there's something there. And so the first part of my day is just, you know, looking at the economic calendar, seeing how the data came out, what happened relative to expectations. Maybe there's some other events that have gone on, and then I kind of move into some of the things that I think are more important and maybe it's projects that I've been working on.

Aaron Anderson (26:04):

Research I've been working with our analysts on, you know, kind of moving into, you know, some of the more things, things that I'm interested in over the longer term, and I think are more likely to be consequential for the economy or for markets, or have a bigger impact beyond just a, you know, some short-term volatility within the markets. And then I always, you know, enjoy the more theoretical type projects. I always save a little bit of time and my days just for doing, you know, kind of individual exploration of different theories I might have about, you know, economics or markets, whatever it might be. And so combine that with, you know, the different communication functions that I tend to, whether it's interacting with clients or putting together some of the presentations that you mentioned before, it makes for a pretty full day.

Mike Hanson (26:50):

Yeah. You know, what's interesting about that is that everything is moving so fast today. How often do books fit into that? I mean, w what is the good of a book in the investing world when everything basically changes every 24 hours? It seems like,

Aaron Anderson (27:05):

You know, I was, I was thinking that was before we came on, because you almost can't get a book published quickly enough to be relevant to what's happening in the day. And I do think that there's some truth to that. I mean, I, I think books great, of course. And I think they're great for establishing foundational knowledge about things, because despite all of the volatility, there are just some basic concepts that are really important to understand. Maybe it's macroeconomic concepts, maybe it's market concepts, maybe it's, you know, equity analysis concepts, some of those go back, you know, decades plus. And so I think books are a great, great way to get a lot of that foundational knowledge. And I think books are a great way also to review some things that have happened that have been meaningful. You know, I think there are a lot of great books, some much better than others.

Aaron Anderson (27:51):

Of course, that came out about things like the global financial crisis. We're going to see some great books that come out about the, you know, COVID-19 and the economic impacts of all of that, you know, but, you know, to your point, it takes a while to get a book published. And so it's hard to rely on books to get information that might explain what's going on, you know, day to day, week to week, month to month, even year to year within the markets, at least not in a fashion that's timely, you know, for that particular period. But I think they do a great job of helping you build up the foundation, that foundational knowledge that I mentioned. And then I think history is always important to analyze and boats are probably one of the best ways to do that. And so, and sort of an ex-post fashion, looking at, looking at books, you know, that, you know, try and help you understand what's going on historically to help guide you in the future.

Aaron Anderson (28:41):

So you can look back and say, well, I think I really have a grasp on some of these past events. And as I said, you know, earlier today, the future is never going to be exactly like the past, but a lot of it, there are a lot of similarities there. And so I think learning as much as you can from the past is important. And I think books are a better way to do that than any, you know, you might rely on an article in a magazine or a newspaper to tell you what's going on right now, but they usually don't do give you the depth that you need to really fully understand some of the past events. And then I think you need to reel it off and read a lot of them because every author of every book has got their own subjective take on it, their own narrative that they're trying to get across, and you gotta be able to separate the facts from their opinions and all those types of things.

Aaron Anderson (29:27):

And so, you know, if you're going to study the global financial crisis, you can't just read one book, that's going to explain what happened in the global financial crisis, because the next book you read is going to tell you something different. You don't want your understanding of that period, just to rely on, be a function of the book that you happen to choose to read about it. You really need to look at several of them and then parse out your own views, I think, but that's how I use views book. Mostly, I'm not going to rely on it to tell me what's going to, you know, how we ought to be positioned in our portfolios over the next year, but certainly in helping me understand some of that foundational stuff or some of those events over time, that that's where they're critical.

Mike Hanson (30:03):

Yeah. You know, the way you described that, it's almost as if there's an additional layer that's required for, you know, good money management. That's undercurrent to all this. Then in fact, you have to do, which comes in the form of those big narratives in the past and in the books and so forth. I want to ask you a random question though. You are a prolific traveler, at least once upon a time, but people are traveling again. And since you've been on planes so much in your life do you have any good recommendations for reading or consuming stuff on a plane? Do you have any hacks for that? Well

Aaron Anderson (30:37):

I don't want to call it any products specifically, but Kindle, you know, two's your, you know, E reader that you liked to use iPad, you know, whatever it might be. I mean, you can just load up so much great stuff on there. And I mean, I don't know, you might, you know, me, I've got four kids at home, they're all aged 12 or younger, so rare is it that I go home and have much time to just sit down and pop down and read as much as I'd like to. And so one of the great benefits to me of all that travel is as painful as it can be sometimes is that if I'm on a trip to Asia on a trip to Europe, suddenly I've got, you know, 8, 9, 10 hours. Sometimes more than that, if I'm going to further fund places where you can really settle down and kind of take that pile of reading that you've been meaning to do, but just can't get to whether it's research reports, whether it's books, whether it's articles and, you know, it's just such a great format. You don't have to stuff, a briefcase full of a bunch of newspapers and things or books, just to have so much information at your fingertips in an electronic format. Like that is really been just incredibly beneficial to me.

Mike Hanson (31:45):

Do you do audio books?

Aaron Anderson (31:48):

I do. I do. Not only do I travel a lot, but I've got quite a long commute every day. You know, I commute, well, again, not so much these days COVID has changed things a little bit, but back in the pre COVID days when there was a lot of traffic and there is getting to be a lot more of that here now, I had a good, you know, two to sometimes two and a half hour commute every day. And so there, I would do a lot of podcasts, a lot of eBooks, you know, financial news, those types of things, which to me is phenomenal because suddenly you can take what I think, you know, before having access to all these digital formats was sort of wasted time. You know, you might sit in your car and just listen to music, nothing wrong with that. Of course, I listen to music as well and listen a little sports radio, but suddenly I can take a good chunk of my commute and make it something that's actually productive. And you feel like you've actually got some work done by the time, get into the office. And it's not just a waste of time. So actually don't load my commute nearly as much as other folks do, because I kind of look at it as a extension of my work day. In some ways,

Mike Hanson (32:49):

You know, it, it's a funny thing because you echo comments that I hear a lot. And it's true for me too, is that these periods of sequestrations in life, even though they may seem frustrating are actually huge opportunities to consume this type of content that we're talking about. But Aaron, since we've got you here, even though this is a podcast about books and reading, I've got to ask you, you know, what your current outlook is and what you think about the markets today. First of all you know, we're sitting here it's mid June, 2021. What's your take on the global stock markets at the moment? Do you see things continuing on? It's been a pretty good year so far.

Aaron Anderson (33:25):

It has been a good year. Absolutely. In fact, I think a lot better year than people are expecting already. And there were, you know, just about halfway through the year. And so I, I think we're in a bull market and I think that bull market goes on until it doesn't anymore. And I think we're at this phase of the market cycle where, you know, again, thinking about things from a top-down standpoint, I think a lot of what you're seeing fundamentally in the economy, it looks very good. You know, condoms are reopening people starting to travel again a little bit, as you mentioned, lots of parts of the economy have already recovered. Now that the macroeconomic backdrop I would say is a fairly positive one, but really, I think what's most compelling about markets today is what's going on with investor sentiment. I mean, I think that's such an underestimated feature.

Aaron Anderson (34:09):

I mean, that's something that you've taught me about so much, you know, given your areas of specialization, that sentiment plays such a big role, psychology plays such a big role in how equities perform, you know, how bull markets progress, the types of companies that are doing well or poorly at different phases in a market cycle. And I think we're at that phase of the market cycle where sentiment is really one of the key drivers. I think there's so much attention today on monetary policy and vaccinations and economic reopening and how fast is GDP going to be growing that people lose sight of the fact that we're at a phase of the market cycle, where sentiment is as big a driver as anything else here. And so I think that's a reason to be really optimistic because clearly where has sentiment is heading, is becoming more and more positive.

Aaron Anderson (34:53):

And I think you can see in some parts of equity markets and outside equity markets, whether it's cryptocurrencies and equity markets, whether it's facts and IPO's, you know, in certain smaller segments of the markets, maybe it's electric vehicles, whatever it might be. There's some real optimism out there. And I think that's really more sentiment driven than fundamentally driven. And I think that's just a good indication of where we are in this market cycle. And then it tells you that we're headed up that curve eventually that can get ahead of itself. Of course, it'd be really problematic. You know, we, we always use a quote from famous investors, sir, John Templeton, to describe how sentiment progresses, who said bull markets are born in pessimism pessimism growing mature on optimism, dine euphoria. And I think that we're at that optimistic phase, certainly maybe headed towards euphoria and there maybe it's time to become more cautious, but I think people really underestimate one, the role sentiment plays at this phase of the market cycle, but two just how powerful a force that can be.

Aaron Anderson (35:54):

So many people look at valuations today and look at some of those parts of the market, do a little look a little bit bubbly and say, boy, we gotta be right at the end. It's time to get cautious. It's time to get away from equities and worry about maybe something like a, you know, a tech bust like we saw in 2000. And I think people forget even in that period, how powerful the later stages of that market cycle was, you do have to be on the lookout for the end of the cycle. But you know, just looking at some of those elevated sentiment levels today and assuming that pretends the end, I, I think one of my favorite quotes actually goes back to our founder. Ken fishery said wall street is littered with the bones of investors who tried to call bear markets too early. And I think we're at that phase of the market cycle where fundamental macro economic environment actually looks relatively positive, but the real driver here is sentiment. And there's no telling when that peak and sentiment is likely to be. You just have to watch out for it. Certainly that's a lot of the work that we do in the research group these days is watching out for maybe sentiment starting to roll over here eventually. But I think until that time comes, we're probably in, for a pretty healthy bull market. So

Mike Hanson (37:01):

One last question for you you know, I agree with you on the sentiment stuff. You know, we have, you talked to clients today and they're probably equal proportions of people who are hopeful about today's politics and also fearful about today's politics from a market perspective and from an investment perspective, what do you have to say to them today?

Aaron Anderson (37:24):

Well, I think absolutely right in describing it that way. And I know we see it within our clients all the time, you know, people really bullish about this administration and things they might want to do. And then just as many people who are very fearful about it, I think that just tells you a little bit about the divided state of politics today that, you know, I think people describe it pretty well as being quite polarized, but I think that we're in a pretty sweet spot from a political standpoint only because, you know, here we are, yes, it's true that we've got one party in control of the white house and the house. And technically the Senate when you get the tie-breaking vote from the vice president, but by some of the slimmest margins we've ever seen. So I think the fact that you have that one party control creates a bit of fear, at least for those folks, or maybe, or some more, a little bit more worried about this administration's policies, but I think that creates the potential for upside surprise or at least less fear.

Aaron Anderson (38:19):

And when I say I've said, surprise, I don't mean to make a political statement there. I mean, to say that any of the policies are good or bad, it's just so hard to affect any meaningful legislation in a very gridlocked environment like this. And, you know, one party control might not sound gridlock, but outside of having a divided Congress, this is about a spread locked. As you can get with the president already. Having spent a lot of political capital in his first you know, months in office tied to COVID and some of the relief measures there. And so getting big bills passed even through his own party beyond this is a bit of a challenge. And then when you look at the makeup of Congress, let's very slim lead the house, very slim lead in the Senate. Boy, it's really tough to get controversial sun and stuff done in that environment.

Aaron Anderson (39:03):

And so if you think of the general sentiment being one where there's a little bit of uncertainty about what might happen politically well, you know, whether you are fearful about it or hopeful about it, probably both of those end up a little bit disappointed, or, you know, maybe disappointed the wrong word, but you shouldn't be as fearful as hopeful as you are. So if there's some fear baked into the market about what might happen, politically chances are, there's going to be a lot less happening than people think there is. And that's not just true in the U S that's true globally. We've got big elections coming up in parts of Europe, whether it's France coming up. Of course, there's a big election in Germany this year, Japan, we've kind of been very, we'll have an election pretty soon. So there's going to be a lot of gridlock really globally. And so to the extent there's some political fear baked into the equity markets today, we're probably due for some relief from those fears going forward. And I think that can be another tailwind to, to, to this bull market, continuing

Mike Hanson (39:55):

Some political relief, I think would do everyone pretty well. Aaron Anderson, the man does it all. Thank you so much for taking the time to be with us today.

Aaron Anderson (40:05):

Yeah. Thanks for having me, Mike, always great to speak with you.


That was our talk with Mr. Aaron Anderson. The big takeaway, always with him, is think globally, take a big perspective about the world—not just geographically but also in terms of time. Are the great debates of the day truly global phenomena, and, will they really, truly, matter in 5 years, not to mention, 10 years? That’s how Aaron thinks and it’s great investing discipline.

Ok, we’re back in two weeks on July 7th with another great episode. Remember to find us on Twitter @wellreadpod and Instagram at @wellreadinvestorpod or just google the Well Read Investor to see what I’m reading, reviewing, and talking about week in and out. And as always, may all your reading profit your mind and your money.


Investing in securities involves the risk of loss. 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. The opinions and viewpoints of podcast guests are not necessarily those of Fisher Investments. Copyright Fisher Investments, 2021.

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