Fisher Investments' "Three Things You Need to Know" Dec. 16th

Transcript

Liz Dhillon:

Hello and welcome to 3 Things You Need to Know This Week, our regular series designed to help you sift through the noise across financial media and understand what really matters for markets. Here are three things you need to know this week.

First, let's look at U.S. vs. global stock leadership. Once again U.S. stocks are leading the pack this year, outperforming stocks from the rest of the world. That's been an overall trend since the financial crisis of 2008-2009. So it might seem tempting to think, why not just stick to U.S. stocks? Here's why that might not be the best idea.

This decade plus run of U.S. outperformance has a lot to do with strong returns concentrated in technology and growth stocks, things like big tech giants and innovative industries. But history tells us that no one category of stock dominates forever. Trends change, and at some point, non-U.S. stocks will likely catch up or outpace U.S. stocks again, something which has happened at various times in the past.

This is why we believe a global approach to investing makes sense. For long-term investors, diversifying across different countries helps provide access to more opportunities around the world while balancing risk. Next central banks. This week, we'll be hearing from two major central banks, the U.S. Federal Reserve and the Bank of England (BoE).

The Fed is expected to announce another interest rate cut, while the Bank of England is likely to keep rates as they are. People often think rate changes, especially cuts, will either dramatically boost stock markets or signal bad times ahead. But history shows it's not that straightforward. Sometimes rate cuts happen when a recession is looming or already underway, which can weigh on stocks. Other times, rates are cut during periods of economic strength and stocks hold up just fine.

Right now, we think economic fundamentals look solid, and the likelihood of a recession on the near horizon seems low. Good news for investors. Finally, government funding deadlines. On Friday, the U.S. government faces a possible shutdown if Congress doesn't pass a new spending agreement in time. Shutdowns can sound dramatic. But in reality, politicians often use these deadlines to bargain with each other and usually come to an agreement, even if it's at the last minute.

If there is a shutdown, it might cause some short-term uncertainty, but stocks are rarely fazed for long. For example, since 1976, there have been 21 federal government shutdowns. While stocks can wobble during or just before a shutdown, they've historically bounced back fast. Sure, the political rhetoric might be frustrating to watch, but for investors it's usually just background noise.

Thanks for catching this week's episode of 3 Things You Need to Know This Week. For more insights, check out our other series, This Week in Review, released every Friday, or visit the Insights section on FisherInvestments.com. Thank you for joining us, and don't forget to subscribe!