Personal Wealth Management / Expert Commentary
Fisher Investments Reviews What Economic Reports Say About the Economy
Ken Fisher, the founder, Executive Chairman and Co-Chief Investment Officer of Fisher Investments, explains how economic data affects the stock market. According to Ken, economic reports (e.g., GDP, inflation, and job-market data) address the recent past. Markets, however, tend to weigh and price probable outcomes 3 to 30 months into the future. Economic reports can affect sentiment and spark short-term volatility. Ken specifies, though, that they don’t tell you where stocks are going.
Interacting with clients either at client seminars or one on one whatever, I'm often asked "Do regular reports that come out, what do they say? Like unemployment numbers, GDP, earnings reports. What do they say about the economy moving forward?" And the answer is, and I can't make this categorically for all things, I'll give you some exceptions in a moment. For the most part, all of those like GDP, reported earnings, employment numbers or unemployment numbers, or other things like that, say nothing about the future. As it relates to markets, what's good for an investor, and really only relates in importance to how history will be written.
But fundamentally you take something like GDP as it's reported. It's telling you about what has happened, whereas always, always, always, always, always, always, always, markets are pricing the future. As I've said many times in many other videos in the past, stocks tend to be pricing in the future, sometime between 3 and 30 months into the future. Sometimes a little on the long side, sometimes a little on the short side, usually more commonly in between. But they're never pricing the past.
Earnings, as they're reported, are about what just happened a little while ago. GDP, employment, these are all things about the past. The future is what the market is looking at and thinking about. And these kinds of numbers can make people nervous. Nervous. Nervous. Nervous. And that can get the market more emotional. But that doesn't necessarily tell you where stocks are going, or interest rates or currencies or gold or anything else. Markets are pricing the future. Economic reports are telling you about the past.
Thank you for listening to me. Hi, this is Ken Fisher. Subscribe to the Fishers Investments YouTube channel if you like what you've seen. Click the bell to be notified as soon as we publish new videos.
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