Personal Wealth Management / Expert Commentary
Ken Fisher Discusses Underappreciated Bull Market Threats Nobody is Talking About
Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher says the commonly feared threats to derail bull markets aren’t the dangers many investors think they are. Ken believes two things investors aren’t talking about constitute the real risks to the bull market in 2022: business inefficiencies and further COVID lockdowns.
Ken says surprises, as opposed to common fears, pose the greatest threat since markets pre-price all widely known information. According to Ken, the broad-scale business inefficiencies resulting from operating under global supply-chain challenges are the biggest surprise investors should be watching. Ken believes another less likely risk is the reinstatement of regional COVID lockdowns, which would be harmful to markets.
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Ken Fisher: One of the biggest risks that we face today that people don't seem to see as a risk, well, let me go on a tangent for a moment. The things that people most see as a risk for the stock market really aren't, because as I say over and over again, market pre-price is all widely known information, opinions and what have you which includes all the things that people think are risks. It's the things that people don't think of as risks that are actually the risks of the stock market. It's surprise, it moves to market that's just the way it is. It's always been. People don't like to get that lesson in their bones but it's true.
Ken Fisher: The feature can, however be, that that which is a surprise is about something that we talk about in another way that has nothing to do with the surprise. And in that way the issues that have been the supply chain dislocations aren't themselves a direct risk. But what we are doing over time potentially, is getting businesses on a broad scale used to doing business differently in ways that are trying to adjust for the supply chain dislocations.
Ken Fisher: And to the extent that they get used to operating inefficiently, by getting inventory levels that are too high because they can't get these parts, but they can get those parts and they're waiting for the other parts before they can ship things out the door and they get comfortable with that. Then you get to the world of that inefficiency and excess inventory that has to be corrected to become efficient. And that's exactly what recessions are all about, things like that. Correcting, previously built excesses. And we could easily, as this year progresses, build those excesses in our system tied to businesses getting comfortable and used to dealing with these dislocations and the excesses that come of them.
Ken Fisher: This is, I think, potentially the biggest single risk that we have. There is, of course, and this is not very likely, I believe in my bones that in most of, not all of most of the developed world, we've already passed the point of the pandemic and moved into the endemic.
Ken Fisher: Although with COVID although that's not been fully emotionally embraced by everyone, in that people do have a sense that we are not at the level that we were with COVID and as Omicrons fading away, we're getting to the point where we're beginning to enjoy more normalized life. There's pretty clear notion that we'll certainly have another variant and that variant is probably more contagious, less deadly still, which moves you further into the endemic like near flu like life, but it's not impossible that we get restrictions again imposed and those could be a market risk.
Ken Fisher: The restrictions that have been imposed on our economy have always been hurtful to markets. So those are the two biggest ones that you could think of, which is more lockdowns, because lock downs aren't expected and inefficiencies that have to be rectified tied to the supply chain disruptions, which of course, in and of themselves were caused by past lockdowns and openings and lockdowns and openings and lockdowns and openings associated with reacting to COVID. Thank you very much for listening to me.
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A series of disclosures appears on screen: “Investing is Securities involves a risk of loss. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice or a reflection of the performance of Fisher Investments or its clients. Nothing herein is intended to be a recommendation or a forecast of market conditions. Rather it is intended to illustrate a point. Current and future markets may differ significantly from those illustrated here. Not all past forecasts were, nor future forecasts may be, as accurate as those predicted herein.
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