Personal Wealth Management / Expert Commentary

Fisher Investments Reviews Its Outlook for Markets in 2024

Fisher Investments’ Vice Chairman & Co-Chief Investment Officer, Jeff Silk, explains why 2024 should be a good year for stocks. Contrary to popular believe, Jeff says election years are typically positive—particularly when the second year of a president’s term are negative, as 2022 was. Jeff also believes businesses are poised to reverse recent year’s budget cuts, which should provide a tailwind to an already growing economy. According to Jeff, the disconnect between current investor skepticism and healthier-than-feared economy should help boost stocks.

Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer, Ken Fisher, agrees with Jeff’s optimism, but cautions investors to not expect returns as strong as last year. Ken says that historically, the second year of a bull market isn’t as strong as first years and election years aren’t as strong as president’s third year. However, he believes the consistency of positive returns, along with the tailwinds Jeff mentioned, should be welcome news for investors this year.


Jeff Silk:

Go back to the beginning of last year, and so many people thought we'd have a recession, or there would be a hard landing or some type of big economic hiccup. Well, guess what? The economy did well last year. We would expect a lot of the positive things that helped us last year to continue on and help us this year. We would expect this year to be another strong year in the stock market. We also believe this could be a very bumpy year. There's the wall of worry is very, very tall to say the least. We have an election, so we know that this could be a volatile year. We know there could be corrections, but the most important thing is we think this is going to be another strong year in the stock market. Yeah. Great to hear.

There are some normal features about a bull market that are worth noting that add to our bullishness. And the first is that bull markets on average lasts for five years. When you go back to the mid 30s what you see is bull markets are very very often longer than two years. This is the, we're going on the second year of a bull market. So we've got the market dynamics working for our bullish call this year as well. We talk about the influence of politics and the election on the market. And I think there's two powerful forces this year. So when you look at the first year, second year, third year and fourth year of a president's term, what you see is when the second year of a president's terme is negative, the fourth year is almost always positive. The other thing is this is a fourth year, as we've talked about. And we had that second negative year.

Exactly. So it's also an election year. So we know that when we look at the returns in the fourth year, those are also very, very strong returns and very, very often very positive. And so that's great as well. We think this could be a year tied to the election where you have, for lack of a better term, politicians running around and talking about how bad things are and how they're going to solve all of those problems, that creates a lot of noise, that creates volatility. And so from our standpoint, that feature with the whole notion of gridlock and politics are also important dynamics that would lead to a strong year in the stock market. One of the things about this year that I don't think a lot of people are thinking about, and that is how strong the economy can be. I think expectations for the economy are just not that strong this year. Go back to the beginning of last year, and so many people thought we'd have a recession, or there would be a hard landing or some type of big economic hiccup. Well, guess what? The economy did well last year.

So if you were a corporate CEO and you were thinking about budgeting and spending money on growth, you probably cut back. You probably cut back on your expansion plans last year. But because the economy was strong, you probably feel a lot of pressure to spend all that money this year. So we think that there's a very strong likelihood that a lot of money gets spent on the economy to grow corporations sales, to improve their profit margins. That's a very positive thing. So this could be a year where the economy probably exceeds some pretty low expectations. Or another way of putting it. Sentiment right now is pretty low. Not quite as low as sentiment was at the beginning of last year. But it's low and it's it's amazing because when you look at what the professional market forecasters think is going to happen to the market this year, they're calling for a market that's like up 2 or 3% , right? We're already up more than that. So there is lots of upside surprise, not only from the market but from the economy. Or let me just summarize, we think that this is going to be another strong year in the stock market and how the economy and the market are likely to exceed a lot of expectations.

Ken Fisher:

Well, let me temper some of what Jeff said. 2023 ex a couple of months in 2022 is the first year of that bull market. And it is true that when you hit a first year anniversary of a bull market, you almost always get a second. There's pretty much no exceptions to that. Young bull markets are harder to kill than people think, but second years are pretty regularly not as strong as first years, and we have not said that this would be as strong a year as 2023 was. We kind of like to couch it as likely moderate double digit returns, not gangbuster returns. The fact of the matter is, election year returns in history have averaged about 12% when a second year is negative like Jeff talked about, the fourth year has been positive every single time since the bottom of the Great Depression. But those positive returns have averaged 15% , not 25 30% . And so that's still a good year. That's nothing to sneeze at. That's nothing to turn your back on. The consistency should be good, but don't think it's going to be gangbusters like 2023 was.

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