Ken Fisher Discusses Whether Stocks Are More Volatile Today Than Ever Before

Title screen appears, “Ken Fisher Discusses Whether Stocks Are More Volatile Today Than Ever Before.”

A man appears on the screen wearing a navy suit, sitting in an office.

He begins to speak.

A banner identifies him as Ken Fisher, Executive Chairman and Co-Chief Investment Officer, Fisher Investments.

Ken Fisher doing hand gestures time to time explaining.

Ken Fisher: So, I got into the investment business about almost a hair's whisker less than 50 years ago. I've been doing this stuff all my adult life. And throughout that almost half century, a fairly laughable statement that I've heard over and over and over and over again, irregularly is that stocks are more volatile than they used to be.

Ken Fisher: Usually this comes when stocks have had a punch it down period. And then people say, oh, my gosh, stocks are more volatile than they used to be. And in fact, they may be more volatile than they were the month before. Short-term volatility bounces around regularly without any ability to predict and doesn't mean anything. And if you've heard me often, you know that I always say that short-term volatility doesn't mean anything. But then the question of whether stocks are more volatile than they used to be forgets the longer-term history. Stocks used to be much more volatile than they are now, much more volatile.

Ken Fisher: They were more volatile when I was a young man. They were more volatile 20 years ago, but they were more volatile 50 years ago, and they were particularly more volatile 90 years ago. If you go into the 1930s, you had volatility that made anything that goes on today look miniscule. And you can see this several different ways. Part in history is just the overall price movements as a percentage of market value in number of days over time. How many days had 1% moves? How many days had 2%, 5%? And the answer is, over the decades, we've been having fewer and fewer big percentage moves. And that's because the markets become broader and more liquid. And as it become broader and more liquid, it can't be more volatile than it was when it was more narrow and less liquid.

Ken Fisher: Moreover, that doesn't mean better bull markets, worse bull markets, better bear markets, worse bear markets. It means it's not as volatile. Still volatile, but not as volatile. And at the same time, there's this other feature when we look at stocks, which is what's the spread between the bid price and the ask price for that stock relative to the split between the two of them and zero.

Ken Fisher: So, I remember a world very commonly where stocks that traded around $10 and $12 often had two-dollar spreads. And in the 1930s and 40s, it was common for a big percentage of the total stocks that existed in the world for a number of years to have 20% and 30% spreads between the bid price and the ask price. You want to see volatility? That's volatility. It's somebody buying a stock One day, trying to sell it the next day, and have nothing really change but getting whacked by 20 or 30% where the bid ask prices stay the same. That's volatility.

Ken Fisher: It's not that the stock was really going up or down. And over my lifetime, bid and ask prices have irregularly gotten smaller still. Again, that's more liquidity in a broader market. We'll have volatility, I hope forever, because it's impossible to have actual free trading markets without volatility. But the fear that it's more volatile than it used to be as some reason to do something, is actually misplaced and always has been. Thank you.

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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 investment 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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