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.