Personal Wealth Management / Expert Commentary

Ken Fisher Discusses How Inflation May Impact Holiday Consumer Spending

Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher discusses why he doesn’t believe inflation will have a material impact on holiday consumer spending and the broader economy. Ken points to the fact that bank lending continues to be robust—indicating consumers are actively borrowing and spending. While he acknowledges this increased leverage could have longer-term implications, investors shouldn’t fear a consumption-led recession in the short-term—emphasizing that recessions are more often caused by a decrease in business investment instead of weakening consumption.

Ken also notes how personal consumption expenditures don’t typically fluctuate much from year to year, as it can be very difficult for consumers to make permanent changes to their spending habits. While Ken acknowledges some consumers may be affected by inflation more than others, he thinks the overall impact inflation will have on spending habits this holiday season will be small.

Transcript

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Ken Fisher: You another worry people have, which I don't really see as a valid worry.

I understand why people worry about it, but I don't think it's right, is they worry about how the consumer is going to hold up during Christmas for shopping when inflation is

a problem, eating into their ability to buy Christmassy things, whether it's for children, adults, whatever.

Fact is A and B, A, as I've said

in some other videos recently, right now other than mortgage rates, overall bank lending is extraordinarily robust.

Ken Fisher: Consumers are able to borrow money.

They are borrowing money.

They're borrowing and spending it.

They are levering themselves more.

In the long term that may be bad.

In the short term it offsets

this problem that people fear.

The B part of that, is and people don't want to believe this, they just never want to believe this.

But it's true.

It's always been true.

There is about a 4% bandwidth that consumer spending stays within as a percent of GDP, about 65% to 70%.

Right in there.

Sometimes little high, sometimes little low, but it stays right in that bandwidth.

Ken Fisher: Consumers are just viciously reluctant to cut their personal expenditures, their personal consumption expenditures.

Now let me have you think of that another way.

I think we all know that people

have a hard time losing weight.

Sometimes people do lose weight, but they have a hard time keeping it off if they lose weight.

Personal consumption expenditures are a lot like that.

To cut your expenditures and keep them low takes an awful lot of discipline people don't have.

They just keep going back to the well if they can.

Ken Fisher: When we have recession, it mostly doesn't come from that.

It mostly comes from business investment being cut back, little bit in consumer, alot in business investment.

And the fact of the matter is, that during Christmas, there may be a little bit of negative effect, but it's not going to be that much.

It may impact some people, but not so much others.

In fact, others may actually spend more clearly at any point in time in the economy.

Whatever is happening, some people are hurt by it, some people are benefited by it.

Ken Fisher: The question as it's framed and asked of me or you would worry about is but what about overall?

And overall, this isn't going to

have a big impact this year.

Overall lending is too robust, averaging an eleven and a half percent annual rate, with declines in mortgage therefore stronger still.

Otherwise, should actually have the

negative effect that people fear.

Thank you so much for listening to me.

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