Fisher Investments Reviews How Markets Pre-Price Widely Known Information

Transcript

Ken Fisher:

For a very long time, I've said that the stock market is pricing events 3 to 30 months off into the future. And people often ask me, what the heck are you talking about? And the reality is, the market is, in theory and in reality, a pre-pricer of all widely known information. And it's the things that happen in the 3 to 30 months ahead that will surprise us, but we don't quite recognize somehow, some way, that moves stocks as a form of surprise. But the market's always trying to price in everything that will happen in the next 3 to 30 months. Sometimes on the very short end— the three month part.

Sometimes off toward the long end. That's when we tend to be more optimistic and less afraid—the 30 month period. But take, for example, when Covid hit. When Covid hit, the market had a very short, very sharp, long break, that's unlike normal bear markets. That immediately skyrocketed back up like an oversize correction. Short, sharp, didn't last long and reversed just as quickly as it came in a perfect "V"-like pattern such that what it was pricing was the lockdowns, which actually didn't last very long but were a complete surprise to all of us when we got governmentally locked down.

As I've often said about that period, the economic decline was not at all like a traditional recession, even though the official powers that be only measure, "yes, it's a recession," "no, it's an expansion." "Yes, it's a recession." "No, it's an expansion." So officially they categorize that as a recession. It's really, I always use the phrase at the time it was a contraction, governmentally shut down, not a classic recession. Not a business cycle event. If the governments had not locked everybody down.

We could debate this. I don't want to debate it because there's no point in debating it, because it's going to be argumentative with no way to get a conclusive result. But the fact of the matter is, if we hadn't been locked down, we would have gotten a different economic outcome. We could debate what that is, but we wouldn't have gotten the one we got. But like the lockdown with Covid and the short, sharp break in the stock market, that was more like an oversize correction than a traditional bear market that has long duration tied to an economic cycle. The market's pricing out what's ahead of it.

The market's falling before we got the lockdowns. Somehow it's sensing it's up and it prices that pretty well. What you should always be doing, and I've said this for decades, the market's pricing all widely known information. It doesn't matter what you think about how the Israel-Gaza conflict would impact stocks, because everybody else is already focused on that and priced it in. It doesn't matter what you think about the election of 2024, because everybody else has already got that priced in.

Whether, in this case Vice President Harris or former President Trump will do better or worse or win or lose. That ain't going to help you a whole heck of a lot here. Why? Because the market pre prices out all that stuff. What you should focus on always is what is it that's going to happen in the next 3 to 30 months that isn't what everyone's talking about. It's always what everyone isn't talking about that will move stocks. And that's where your focus should always be. Thank you for listening to me.

Voice of Ken Fisher:

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