Fisher Investments Founder, Ken Fisher, on What Investor Sentiment Means for Markets Going into 2023

Title screen appears, “Fisher Investments Founder, Ken Fisher, on What Investor Sentiment Means for Markets Going into 2023.”

A man appears on the screen Wearing A navy suit, sitting in an office with a view of a thick forest behind him from the window.

He begins to speak.

A banner identifies him as Ken Fisher, Executive Chairmen and Co-Chief Investment Officer, Fisher Investments.

ken fisher doing hand gestures time to time explaining.

Ken Fisher: Let me talk about sentiment a bit. Some of this I've talked about in other videos in recent months. Some of it I haven't.

But, most major sentiment indexes, and I've written about this in things that I've posted on my Twitter feed, that I've written and posted on my Twitter feed, and some in LinkedIn, that I've written directly in LinkedIn.

Sentiment indexes, however you measure them, show sentiment to be very depressed. They tend to be very low to some at all-time lows. There's quite a few of them and they measure sentiment different ways, but they all show depressed sentiment.

I don't think you find that surprising. There's a lot of things that people have fears about right now. And the analogy, or an analogy that I've used on this often has been that, which is there are so many things in 2022 that people have been afraid of, at least eight major stories that keep going, whether it's a Ukraine war, inflation, fear of recession. You can go on about supply chain disruptions, political turmoil, and then subset ones like the inflation fear and rising interest rate fear, inflation fear, and central banks reacting to that, maybe overreacting to that, causing recession, on and on and on.

The phrase being, is the Fed in America going to kneecap us? And the reality is, all of these many fears and more, high oil, on and on, feel a little bit like we've got a swarm of bees chasing us. And the stings don't actually kill us, but they scare the dickens out of us because there's so many bees.

And that builds fear and it builds

depressed sentiment, and it builds a tendency and desire to look for more problems. The strong dollar. Oh my God, the strong dollar!

And as we look at all these things, they can't all be true, number one, some can, but the ones being true offset other ones. Let me just give you an example of that.

Recently, there's been a lot of fear about that central bank, US Fed, raising rates to fight inflation, which will choke off the inflation eventually, and in the process probably cause recession. Well, mind you, that's not an impossible thesis, but for that thesis to play, some other things have to happen. Let me point out that there's abundant evidence that that's not happening.

First, despite the increased rates, a simple fact is, in America and overseas, global loan growth is continuing very robust. You do not get global loan growth being robust as a recession unfolds. That would have to break. Secondarily, as inflation has gone up, the profit margins of corporations have gone up with an almost perfect fit. I mean it's almost perfect. It's stunning.

I put a chart on my Twitter feed

on that in September, and it's staggering. People don't see or understand that that's going on, but it is. It's simple fact. And that can't happen if we're in a recession, period. Both of those can happen if we have continued inflation, but they can't happen in a recession period.

How bad is inflation for the economy and the stocks if we don't have recession? Well, it's not that bad.

In fact, we have a long history of

that—stocks are actually pretty good Inflation hedge in the long term. Always have been. Not perfectly, not immediately, but eventually. That inflation ripples into stock prices.

But then again you get these other

inconsistencies like gold being weak, which doesn't correlate well with the history of inflation. And what you really have is a strong dollar, and then high energy prices in Europe.

Let me just say that all these sentiment features lead to pessimism. And as a bull market begins, there's this feature that I've talked about before that I call the Pessimism of Disbelief, which is the tendency of people to get more pessimistic as the market starts to go up. Where maybe we had a bottom in June, the middle of June, on June 14. Maybe we had a bottom, depending on how you measure it, which indexes you look at in July, the stocks are higher either way. And when you think about these things, it is normal. I'm not saying those were the bottom. I don't really know.

But it is normal when you have a bear market make a bottom and start to go up for people to keep getting more pessimistic as it goes up. The pessimism leads to future positive surprise which becomes doubly bullish fully buoying the bull market.

And you should view today's sentiment as the precursor to higher prices ahead without any precise

timing of whether we've had the bottom, the bottom still a little bit ahead. What's going on? That negative sentiment is not consistent with a world that's about to fall apart. It's more consistent with a world that's already seen its stock market bottom and is starting to rise and the Pessimism of Disbelief builds.

So, you get yes buts to all positivity, all new things that come along better than people feared as people keep looking for the bad that looking

for the bad is a good. And you should view sentiment in that way because negative sentiment is one of the most bullish features you can get.

Another way to say that is just to go back to Warren Buffett's famous line, which is that you should be fearful when others are greedy and greedy when others are fearful. And I don't think it takes a genius to see that these days people are not so greedy, they're mostly fearful.

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 investment 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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