Personal Wealth Management / Expert Commentary

Fisher Investments’ Ken Fisher Looks at Investor Sentiment and the “Pessimism of Disbelief”

Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher describes the pessimism of disbelief and explains what it tells us about investor sentiment. Ken says the pessimism of disbelief occurs when investors dismiss good news—either by ignoring good news altogether or suggesting good news will eventually turn into bad news. According to Ken, the pessimism of disbelief is currently on full display, a common occurrence early in most bull market cycles.

During the 2022 bear market, Ken believes a variety of fears—such as high inflation, recession worries, the Russia/Ukraine war, and supply chain issues—unfolded near-simultaneously and spooked investors. As some fears began to recede, Ken says the pessimism of disbelief appeared. For example, Ken notes how recession worries faded earlier this year when GDP data positively surprised. Rather than welcoming the good news, investors instead worry that strong economic activity would lead to more aggressive rate hikes from central banks—emblematic of the pessimism of disbelief. Ken believes this dynamic is actually positive for stocks since fear of a false factor is generally bullish.


Title screen appears, “Fisher Investments’ Ken Fisher Looks at Investor Sentiment and the “Pessimism of Disbelief”


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A man appears on the screen wearing a navy suit, sitting in an office in front of a fireplace.

He begins to speak.

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

Ken Fisher doing hand gestures time to time explaining.


Ken Fisher: So, I've written a lot, but very irregularly over time, for a long time, on something that I created a long, long time ago called a “pessimism of disbelief” which parallels the “wall of worry” that bull markets legendarily climb.

But there's a little bit of confusion for folks because they can't tell how's the pessimism of disbelief that you're talking about different than the wall of worry?

The wall of worry ties in neatly to the concept that John Templeton famously said many decades ago, which is that bull markets are born on pessimism, grow on skepticism,

mature on optimism and die of euphoria.

Ken Fisher: Now, the fact is that when he's saying that, he's using the words pessimism and skepticism to create the first two phases of bull markets.

But the wall of worry is about things that people would worry about moving forward solely.

The pessimism of disbelief which parallels it and in large ways is contributory, kind of like as bricks within the wall of worry, is that when things happen better than people previously feared

in the prior bull market as the new bull market is moving upward, the people tend to dismiss the good

as not real or accepting it as real, but something that will morph into something even worse than if that

thing that was better than people thought never happened.

So let me give you some examples of that, if I may.

Ken Fisher: Last year, 2022, as the bear market was getting going good, you had a lot of fears about a lot of different things, many of which were

entangled, but not all of them.

There was a supply chain crisis.

Fears of recession in the first two quarters of last year as GDP came in negative by about that much,

not big enough to be counted as a recession. Rising interest rates, inflation fears which tangle into the

supply chain problems, fears of the Ukraine war and skyrocketing concerns about oil prices tied to the Ukraine war and shortages and lack of oil coming out of Russia, natural gas also.

And then with that, fears of grain prices and maybe people would starve in the winter and with that energy stuff, maybe people would freeze in the winter and on and on and on.

Ken Fisher: By the time you got to the market's bottom at the end of September, these things started to coalesce into fewer and fewer fears that began to run around a little bit

like a dog chasing its tail. In that

it kind of became, as I've said over

the last month on Fox Business with both Neil Cavuto and with Charles Payne. That it's a little like it's the Fed, it's the Fed, it's the Fed.

It's all about the Fed!

No, no, no, it's not all about the Fed.

It's really about interest rates, interest rates, interest! No, it's not all about interest rates.

It's really about inflation, inflation, inflation!

No, it's not really about inflation.

It's really about the Fed, the Fed, the Fed, the Fed!

Ken Fisher: So, when you get a period in that vein, as we've seen this year, and something happens where, let's say, the economy, GDP, as became clear early in the year, was doing better than people feared,

somewhat taking recession fears away and increasing the likelihood

of a soft landing versus a hard landing or no recession at all later in 2023.

Increasingly people would say, yeah, but, that means the Fed will have to raise interest rates even higher and that'll make it even worse!

That's the pessimism of disbelief.

It's a disbelief that the good is good and instead, will turn into something bad and is usually, although there's some other phrases that can be used,

paraphrased in a yeah, but mode yeah, that might be true, but it's not really true.

Or yeah, that might be true, but that's going to become something worse, over and over this year.

Ken Fisher: Take for example, in the month of March, we had the Silicon Valley Bank failure. That was a surprise.

It actually wasn't nearly as big a bank as people think it was, but it didn't

create some huge disaster outside of the bank itself, didn't have the contagion that people feared.

But many people said, oh, you know what that means?

That means the Fed won't be raising

rates as much the following week after the Silicon Valley Bank, so called crisis.

Ken Fisher: Okay, but the yeah, but that went with that is, yeah, but you know what? That means they'll have to do it later in the year

and even more so to make up for it

because in the interim inflation will be even worse.

That's the yeah, but, that's the disbelief, the pessimism of disbelief that what you previously thought would be good news will actually morph into bad news is both archetypal of the early phases of an emergent bull market as it's going up, but is also in that a basic component, part of the wall of worry as a subcomponent, that it's not

just worrying about some new thing in the future, it's disbelieving.

Or in a sense because disbelief

psychologically is a form of denial.

Technically a denial of what you previously thought would be a good thing that wouldn't happen when it happens.

Ken Fisher: So, that is what the pessimism disbelief is.

It is basic to a bull market.

It is going on in 2023 and that's a pretty good thing.

Thank you 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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