Personal Wealth Management / Expert Commentary

Ken Fisher Examines Where Investor Sentiment Stands Going into 2022

Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher considers investor sentiment—how investors are feeling about markets—to be one of the most important factors influencing markets.

Transcript

0:03
A valid question always is where investor sentiment stands
0:07
because, as I cite over and over and over,
0:14
sir John Templeton's legendary line, that bull markets are born on pessimism,
0:18
grow on skepticism, mature on optimism and die of euphoria is a piece of
0:25
permanent wisdom.
0:26
And as we've moved from a world 12
0:30
years ago, with tremendous fear and pessimism of all things,
0:36
you're regularly forward into a world that at the beginning of this year,
0:40
as I've said,
0:41
was beginning to bite onto the early stages of euphoria,
0:47
that the concern about sentiment is a valid one.
0:50
But in fact, since about March,
0:55
while we've had a stock market,
0:58
that up until about a month ago was rip-roaring.
1:01
And over the course of the last month has kind of wiggle sideways.
1:05
We see sentiment actually having backtracked,
1:09
fairly significantly. A lot of the features that were
1:15
heavily beginning to get
1:19
a little bit scary, have backed off,
1:23
the huge surge that had occurred and set all time records
1:27
in Special Purpose Acquisition Funds,
1:30
which is a sort of a tricky way to do, alternative
1:36
initial public offering.
1:38
The move toward Non-Fungible Tokens,
1:42
which are these bizarre ways to have some thing be
1:48
traded at a very
1:52
high level, supposedly backed by some form of crypto.
1:57
And crypto itself and the spring spiking to record
2:03
pricing.
2:04
These and other signs for example,
2:09
early in the year,
2:10
surveys from institutional investors showed up,
2:15
most institutional investors expecting to see mildly
2:20
higher prices year ahead. Now of course, stocks have done much better than that.
2:25
So they were wrong about that.
2:27
But now we've seen a world where they actually expect lower
2:31
prices by the end of the year, and they're almost always wrong.
2:35
So you should see that as a positive sign,
2:38
the back off in a Special Purpose Acquisition offerings,
2:43
both in terms of some that blew up and others that were
2:51
stalled off from regulatory concerns. And in fact, regulatory concerns,
2:54
not just from our government,
2:57
but also from foreign countries have led that
3:02
as well as crypto to become more, if you will,
3:06
down to earth, all of these are actually signs.
3:11
That sentiment is backed off.
3:14
John Templeton's line is a good one,
3:17
but the move from pessimism to a bull markets,
3:20
euphoria is not a straight line. It's a wiggly line,
3:24
it's a wiggly line a little bit like the stock market's wiggly.
3:28
And what we've had since March is that wiggling back into
3:32
an area that's now clear optimism,
3:36
but we're clearly not at euphoria.
3:38
We've got numbers of things that people wrongly associate with fear,
3:43
a fear for example, about what's gone on in Afghanistan,
3:47
which is a true human tragedy.
3:51
It's a humanitarian tragedy,
3:54
but it's the kind of thing that doesn't really impact capital markets,
4:00
capital markets are cruel mean non-caring and literally things like that.
4:04
We have a very long history of them in different forms.
4:08
Market don't care about that.
4:10
Things like the Delta variant and
4:14
fears about other future variants of COVID causing
4:19
slower growth,
4:20
when before people thought we were off to the races and along boom,
4:25
this also was an optimism that was always a false
4:30
optimism, because as I've said from early in the year,
4:34
what we really did was had a fairly strong upturn that was moving
4:39
us back toward normalcy. But then we hear people say,
4:42
and there's some validity to it, that what's gone on with
4:47
COVID has put restrictions in varied ways,
4:51
in varied places that has impacted some of the small
4:55
retailing.
4:56
Some of the hospitality industry negatively impacted some
5:01
other parts of travel and that's all true,
5:05
but those features, all of them in aggregate are a tiny,
5:10
tiny,
5:11
small percentage of the US or global stock
5:15
market ranging in the area of about 2%.
5:20
That is that, which is impacted is 2%.
5:23
So that tells you why it is that those things would get a lot of attention in
5:28
media don't have any real ripple over effect into the stock market.
5:32
These features have moved us back
5:36
into what I would call an area where sentiment now,
5:41
having wiggled backwards a little bit from where it had been now
5:46
has room to run.
5:48
As we move into the next leg of this long bull market.
5:53
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5:56
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