Personal Wealth Management / Market Analysis

2021 Market Outlook from Fisher Investments

Fisher Investments’ Investment Policy Committee—the firm’s 5-member group responsible for all client portfolio decisions—expects the bull market to continue in 2021.

Transcript

[Music] what is our outlook for global stocks in 2021. in many ways what we would expect to happen this year is a continuation of what happened last year we would expect above average returns in global stocks and that the global market will do pretty well this year we think that we're in the later stages of a bull market not the earlier stages of a bull market so we would expect high quality big cap growth names technology names to be the category of stocks that do the best from a sentiment standpoint sentiment is high but it's not euphoric and sentiment could remain high for quite a long time and the fact that sentiment is high and elevated will be something actually will help stocks this year from an economic standpoint for the most part the global economy is pretty much recovered what it lost so we would expect the economy to continue to do well in moving to higher levels from a political standpoint the political environment should again help stocks this year note that this is the first year of a president's term and in the first year when stocks are positive they're normally very strong also from a political standpoint something that should help stocks this year is the whole nature of the political system being very gridlocked meaning that things are just so close there's not going to be a lot of major legislation that gets passed or major redistribution of wealth things are pretty gridlocked this year from an interest rate standpoint and from an inflation standpoint we would expect inflation expectations to stay fairly low keeping interest rates fairly low we wouldn't expect a material pickup in inflation and or interest rates i think it's also important to note that when you think of interest rates and inflation expectations you think on a global basis and when you look overseas to the major developed countries rates and inflation expectations are lower there than they are here again keeping interest rates in check here in the united states there's an important point that i want to make that you've heard us say before and will likely say again in the future and that is if you don't have a real strong good reason to be bearish you're bullish and when we look at all the major causes of a bear market right now we don't really see a bear market out there right in front of us so we're bullish and we would expect 2021 to be a great year for global stocks while everything that jeff just said is 100 correct [Music] additionally i'd like to make another point the history of investor graveyards is full of mistake made by anticipating a market peak that does not occur and getting out getting left in the dust when a bull market bucks you from a false illusion due to the great humiliator playing its role successfully is more normal than not going back to jeff's point that if you don't have a really good fundamental valid reason to be bearish you should be bullish and we developed this set of concepts a very long time ago which is also different than the way most people think which is the combination of the three-month rule and the two percent rule which is you never want to turn bearish actually and act on it until you've seen higher prices three months earlier because the beginning of normal bull markets unlike what happened in last year 2020 when you had that fastest ever bear market that acted more like a super mega oversized correction than a normal bear market came and went fast normally bull market peaks roll over slowly the beginning decline is relatively gentle you're going down maybe two percent a month that's a two percent rule and so you look back three months later and you see has have i seen higher prices three months earlier b has the decline been relatively gentle as opposed to steep sharp like a correction and third now can i see that unpriced big bad thing that people haven't pre-priced into stocks because as uh michael said earlier markets very well pre-price all widely known information and when you see that and can find that then you turn bearish but we would never want to be in an anticipatory mode uh we turned bearish before it's three major bear markets but we would never want to do that we missed some three major bear markets successfully somewhat successfully at least but we never want to do that in an anticipatory sense because the beginning is usually gentle you don't lose much and there's plenty of time to get up jeff and ken both spoke about bear markets and how to look for them and that of course is one of the things on top of our mind but this is an interesting time in a late cycle market as we view it because you do have pessimism you also have some optimism out there and we haven't had to say this for a long time but one of the features of the discipline of doing this business is you stay in when others are too fearful but you also stay disciplined when others are starting to become optimistic one of the things we've seen whether it's in our client base or outside of it is people starting to have that fear of missing out some areas optimism is fairly high people want even more gains they say to us maybe i could get even more truthfully this really isn't the time for that what you really want to do is reap the gains of the stock market be positioned appropriately but this is not the time to try and go chasing after heat that's just as important as staying in the market at vital times and that's where we are today this is about being disciplined sticking with the plan and the program and making sure we reap the right gains but not getting overextended either how quickly do you expect the global economy to recover fully and how does that factor into our outlook and how do covid vaccines play into that you know the most interesting feature of that question in fact is that much of the global recovery has already happened to sort of see that correctly i think go back to the things that bill and jeff were saying about how we view this as a super-sized correction rather than a traditional bear market there's some analogy there in how you view the economy as well one of the things we've been saying over the course of the last year is that this has all behaved more like a contraction than a recession but what does that mean well in a traditional recession what you end up with in an economy are excesses sometimes many different types of excesses that need to be worked off the economy contracts and eventually goes on to new highs in a more robust and efficient way it's not really what happened last year last year the economy didn't have a lot of excesses throughout the global economy instead covet of course created forced lockdowns and a lot of curtailed economic activity that's very different than a traditional recession as a result as some of those things start to lift and people start to move again which we have to a large extent today although not fully then the economy can actually bounce back rather quickly i think the trouble with that though is now as we look ahead people's expectations are starting to go in different directions i think that yes we're going to continue to see a strong recovery for the recovery part that's left but as i mentioned much of the global economy has already gone through most of its recovery phase and once we get back towards new highs for the global economy i have an expectation that's more like getting back towards global economic growth that looks a lot like pre-covet which was modest moderate positive growth that was somewhat unexciting but certainly enough to sustain a bull market now in terms of the vaccines i think this is a very important point this actually applies to a lot of different types of data you'll see out there what i think you're going to see especially in the media over the course of the next months is a tremendous amount of obsession about whether vaccines are on schedule or behind schedule whether they're effective or not and in fact the market's probably going to move past quite a lot of that very much coincident with what ken said about pricing 3 and 30 into the future we do this a lot with economic data was this quarter or this month bad and what does that tell us about the future when in fact in a much larger broader sense the real story is that vaccinations are proceeding in some places slower in some places faster than others there is some concern that perhaps other strains of the virus might supersede the vaccine but there's not really a lot of evidence on that yet and we'll keep our eye on that but for the most part the broad scope is global recovery moving on to new highs probably within the next year and vaccines that are widely implemented and that's all the market needs to know as it prices forward that points to a better future and well mike is absolutely right there the economy has indeed mostly recovered by most measures in aggregate i think a lot of people don't feel that recovery because when they look around themselves they see that we're still locked down in some ways i mean certain parts of the economy are indeed still struggling i think it's important to acknowledge that whether it's you know people being locked down not being able to go to restaurants or theaters or travel like they would normally want to and those are things that we all feel in our personal lives and you're not so immediately aware of the fact that manufacturing is booming or that even though we're not going to a mall online retail is booming and so forth and so i think one of the reasons that people aren't fully aware of the fact that the economy has done as well as it has is that a lot of the things that are in our day-to-day lives still feel like they're severely impacted by covid in the lockdowns where a lot of the things that we don't feel is directly are really doing quite well and required massively but what's important for the stock market of course is what's going on in aggregate in fact those real high visibility things like travel and restaurants and leisure and so forth actually are relatively small part of the overall economic pie so while they might not be doing as well as you might hope tied to the continued lockdowns and covet and so forth other parts of the economy that are bigger more impactful those are doing quite well and so i think the perception of how the economy doing these days can be very different than the reality of the economy just because what we feel in our day-to-day lives is indeed still impacted [Music] and for views on current events in the world of investing visit marketminder.com updated daily it offers on-demand access to fisher investment's most current thoughts on capital markets and the global economy as well as our sometimes irreverent commentary we hope you will enjoy it [Music] you

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