Personal Wealth Management / Market Analysis

Ken Fisher Details How Regional Conflicts Impact Stocks

Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher discusses how regional conflicts impact stocks and capital markets. Fears of potential conflicts between Russia and Ukraine or China and Taiwan may garner headlines, but Ken says regional conflicts don’t tend to cause bear markets.

According to Ken, a long history of regional conflicts and stock prices demonstrate a fairly consistent pattern—markets reflect early pre-conflict fear, which often transitions to market relief once fighting begins and proves limited in geographic scale.


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Ken Fisher: Lately tied to things in the news I've been asked, what about if there's a war associated with Ukraine? What about if China decides that It actually is going to invade Taiwan? How do regional conflicts progress? And how do they impact stocks and bonds and capital markets? And the answer to that is that there is a long history of regional conflicts. The parallel stock prices tell us a kind of a pattern that's irregularly, pretty good, pretty consistent. There tends to be a certain amount of fear in advance of these kinds of things because no one's ever really wanted, although sometimes we've had world wars, they've tended to be limited in scale, these regional conflicts today more than ever because we have such a global economy.

Ken Fisher: Nobody wants a world war. The Chinese don't want a world war. The Russians don't want a world war. We don't want a world war in America. Europeans don't want a world war. We're not going to have a world war. But we might have regional conflicts. And the market tends to have some fear of the regional conflict before it starts and then tends to do pretty well because it does pretty well at pre-pricing as it does well at pre-pricing all widely known information.

Ken Fisher: At pre-pricing the fact that the outcome of the regional conflict is going to be limited and the world's going to be fine and it's going to be over. In recent decades, we've had quite a lot of regional conflicts associated with the Mideast. We've had fears of it associated with North Korea. We've had these two that right now have been in the news a lot as potentials. There's an age old saying that goes back hundreds of years, sell on the fear, buy on the bullets. Of course, there's not a lot of bullets today. It's mostly more like bombs.

Ken Fisher: But the reality is that there is a pressure on stocks as fear of this regional conflict starts that into day's world probably does not create bear market, but it does tend to slow down the progression of the market. It tends to get relieved when the actual conflict really starts. And whenever you actually see these regional conflicts begin, to the extent they do, you should be bullish. I'm not suggesting that the fear of them should make you bearish. It should make you be on the lookout. But the fear of them is one that does put a downward pressure to some extent on the price of securities. And that gets reversed when the conflict actually becomes a real hot conflict. If the fear then passes and you don't have the hot conflict, the market tends to just disregard it. But a hot conflict tends to be almost as if it's relief.

Ken Fisher: That age old saying of sell on the fear, buy on the bullets today might be, be careful on the fear, buy on the bombs. And that's the way you should think about regional conflicts. Thank you for listening to me.


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A series of disclosures appears on screen: “Investing is Securities involves a risk of loss. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice or a reflection of the performance of Fisher Investments or its clients. Nothing herein is intended to be a recommendation or a forecast of market conditions. Rather it is intended to illustrate a point. Current and future markets may differ significantly from those illustrated here. Not all past forecasts were, nor future forecasts may be, as accurate as those predicted herein.



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