Fisher Investments' "Three Things You Need to Know" Dec. 9th

Transcript

Jessica Smith:

Hello and welcome to Fisher Investments’ Three Things You Need to Know This Week—a weekly segment designed to help investors worldwide sift through the noise across financial media and understand what really matters for markets.

And here are the three things you need to know this week.

First up, an update on US inflation.

This Wednesday, we get the US Consumer Price Index report for November. For those not familiar, CPI is basically a snapshot of how prices for goods and services, like groceries, furniture and airline tickets, have changed over time. Some investors are worried inflation might be trending higher after October’s CPI showed a rise of 2.6%—a modest acceleration from September’s report. But if you look at the bigger picture, inflation around current levels is actually pretty normal. Since 1914, the average yearly increase in CPI has been 3.2%. Central banks these days try to target slightly lower levels inflation, but the data bounces around from month to month and inflation’s broader trend is far from concerning.

Next, let’s talk about central banks.

This week, central banks in Australia, Canada, and Europe have meetings to discuss monetary policy. These meetings typically come with plenty of chatter from financial media, but we don’t think long-term investors should pay too much attention. Central banks play a role in shaping the economy, but not as much as many believe. Big-picture trends like global trade, consumer spending, or how businesses are investing are too complex for central banks to steer alone. Stocks can react to surprises in the short term, but these policy decisions won’t do much to alter a global economy—which to us, appears healthier than many appreciate.

Finally, German politics.

On Friday, Germany’s parliament will hold a vote of no confidence for the current ruling government. If the current government loses, this could lead to a snap election next year, likely in early February. German politics have been a bit of a roller coaster lately, and some extreme parties have gained support in the polls, which has weighed on investor sentiment. That may continue in the short term but eventually the German government will probably end up with another unwieldy and deeply divided coalition—not much different than the one they have now. It’s worth keeping an eye on, but it doesn’t look like a new government changes much about the backdrop for stocks.

That’s all for this episode of Three Things You Need to Know This Week. For more insights, catch our other series, “This Week in Review” released each Friday. You can also visit FisherInvestments.com. Thanks for joining us and don’t forget to subscribe.