Personal Wealth Management / Podcasts

Ken Fisher Answers Questions on the Fibonacci analysis and his expectations for GDP in 2024– Feb 2024

In this episode, Fisher Investments’ founder and Co-Chief Investment Officer answers a new round of listener questions. Ken explains why the Fibonacci analysis isn’t useful for stock prediction, what happens if the reverse repo market and the treasury funds get drained and what he expects for U.S. GDP in 2024. Lastly, he debunks any correlation between inflation and debt.

Want to dig deeper?

In this episode, Ken shares his expectations for US GDP in 2024. To find out more about how US GDP defied forecasts with stronger than expected readings in 2023, read “America’s Economy Defies the Doubters … Again!“ You’ll also learn why the current disconnect between GDP expectations versus reality may be a positive indicator for stocks in 2024.

For a closer look at what’s driving inflation in the US, read “Inflation’s December Uptick in Context.” This article examines the reaction to December’s Consumer Price Index data, while also discussing long term inflation trends.

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

[TRANSITION MUSIC]

Ken Fisher

Every month people send me questions and I like to do this monthly mailbag where I just take a few of them and rattle off with real quick answers. So this month I was asked, “what do you think of Fibonacci analysis? Do you use it?” The answer is no, I don't. The concept of almost anything that begins with the word fib, I'm kind of a little gun shy of. In this case, the Fibonacci itself is a simple mathematical process of how a sequence mathematically evolves, but it has nothing really to do with anything that's useful for stock prediction, even though some people erroneously think it does.

The fact of Fibonacci analysis is it's predicated on a falsehood that prior price action alone is predictive of future price action so chartists and people who like to think of the world in that way, like to think that it's useful. But I learned when I was young, and I've known ever since through statistical analysis that prior price action alone, any which way you cut it tells you nothing singularly about future price action.

So Fibonacci analysis itself isn't much more than a fib, when used to try to predict what will happen with stocks, either single stocks or the market as a whole. And if I were you, I would know that anyone who tells you that Fibonacci analysis is useful doesn't really understand what they're doing in markets.

The next is what happens when the reverse repo market and the treasury funds get drained? Well, that’s an easy one. The Fed will do the next stupid thing after that. They always do the next stupid thing. And you don’t have to know more than that. And you also get to know that which I have preached for a really long time, don’t get overly carried away with almost anything the Fed does. It never knows what it’s doing.

It never knows what it will do. It doesn’t understand how things really work. It’s wrong economically. The only thing the Fed does that’s actually really important despite the fact that so many people believe otherwise. The thing the Fed really does that’s important, is their role in the regulation of banks. The regulation of them, not the setting of interest rate levels or liquidity.

They may think they have a lot of power and control there. But I think you can see in so many ways, like the fact that most of the interest rate hikes that they did, started with June of 2022 and global stock markets bottom between June and October of ’22. So while the rate hikes were going on all through the rest of ‘22 and into 2023, the market’s going through the roof exactly the reverse of what people thought at the time. That tells you how wrong, paying too much attention to this stuff actually is.

US GDP grew in 2023 despite widespread recession forecasts. Yeah. What do you expect us for U.S. GDP in 2024? So first, I'm going to tell you, obviously the 2023 forecasts were wrong. Doesn't take a genius to know that in retrospect, the fact of the matter is I expect GDP in America and around the world to be A-OK starting the year at continued low levels relative to historical growth but accelerating as the year goes on. My expectation, which is not the consensus view, is that GDP growth will accelerate as 2024 grows on, not to some super high robust number, but to higher and higher levels. And soon by the end of 2024, we'll get to a world where the perception of improving GDP growth will begin to become more and more widespread.

How is inflation going to keep coming down while we continue to run up debt, funding wars and growing social programs? Well, the answer is that inflation itself has nothing to do with funding wars or growing social programs. Mind you, I don't like wars, and most growing social programs are stupid to begin with. But the fact of the matter is, the government spending money isn't what causes inflation. It's central banks creating money that causes inflation. The fact is, what government spending does takes money out of the private sector, putting it into the public sector, which often trades better spending for worse spending. Better spending being private sector spending. But inflation comes from the degradation of the money that we have, not from the government spending money that already exists. When that debt is created, if the debt is monetized, meaning if the central banks of the world buy it up and use it as reserves and the basis for making ever more loans and increasing the quantity of money, if that happens, then you get more inflation.

If that doesn't happen, government can take on all the debt in the world you want and it largely makes the economy less efficient and a bad thing. But it's not the bad thing you're worrying about. The bad thing you're worrying about when you talk about inflation is caused by that money being degraded, not by government spending itself. Thank you for listening to me.

I hope you tune in next month for more of these mailbag questions.

[TRANSITION MUSIC]

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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