Personal Wealth Management / Expert Commentary

Ken Fisher Explains What Political Gridlock Means for the US Dollar

Fisher Investments founder and Co-Chief Investment Officer Ken Fisher says there is a sneaky connection between the US dollar and US politics.

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A title screen reads β€œKen Fisher Explains What Political Gridlock Means for the US Dollar”

A man appears on screen. A banner identifies him as Ken Fisher, Executive Chairman and Co-Chief Investment Officer of Fisher Investments.

Ken Fisher: People don't know it, people don't think about it, but there's a sneaky little trick about the connection between the Dollar and American politics. It's powerful, it's pervasive, it has a long history, it isn't perfect, but it's more perfect than most things that people rely on to trade and it works like this. And I’m just going to say this really simply: in periods of gridlock, overwhelmingly the dollar rises. In periods of real one-party control of the House of Representatives, the Senate, and the Presidency, the dollar falls.

Ken Fisher: This actually links directly not to the years in office so much, although heavily, but more particularly to the immediate effect of the elections. Because as soon as people see what the elections are they know who'll be in Congress or the Presidency come January. And the reality of the currency is that it starts getting priced very quickly, if not almost immediately. So if you think from election date to election date instead of when Congress is in position or when the President gets inaugurated over these years, gridlock makes the dollar rise, strong one-party control or one-party control makes the dollar fall.

Ken Fisher: I want you to think about this. Since the election, the dollar has been strong and what is that telling you--since the election the dollar being strong tells you as I have told you before--that there is this gridlock effect when most people don't think there is. The gridlock effect is that as we move past the president's initial honeymoon--the traditional honeymoon and commonly associated with the first hundred days, although there's nothing magical about an exact number of days, rather obviously that's true--as we move past the president's honeymoon, the ability in Congress, Senate and House of Representatives, for the Democrats to put through legislation with one party control unravels slowly and steadily as you move toward the midterms.

Ken Fisher: It's unraveling, in my opinion, as we speak and you can see the discussion and debate about β€œwhat do we do on an infrastructure bill,” whereas on the 1.9 trillion dollar spending bill early in the honeymoon period--they could ram that right through. I believe what comes of this is that those effects of gridlock that I've talked about and its powers are well already priced into the dollar. And consistent with what I told you on videos before the power of gridlock coming early in this cycle--in prior videos--that gridlock is stronger than people recognize. For example, as I speak--and this can change a little tied to a couple of untoward deaths in the House of Representatives and a couple of untoward resignations in the House of Representatives, the current actual--because if a seat is vacant it doesn't vote--as I speak the Democrats can only afford to lose two seats, maybe two votes if they want to pass anything. 218 to 212 as I speak.

Ken Fisher: As we move forward--and again I don't wish ill on anyone ever--but as we move forward there can be unexpected untoward deaths from all the normal natural causes. There can be unexpected scandals associated with resignations and you can't tell when those will be. You can't tell when the deaths might be from a heart attack or whatever. And that balance with the margin in Congress so slight is very paralyzed and therefore the gridlock effect gets stronger. What's the real magic of gridlock well--as I've explained many times in many ways, written about at length and done in videos here in the past--gridlock is a tremendously powerful effect to help boost the stock market. And what the dollar strength is telling you is we have a gridlock effect here now that people don't recognize because they don't see this time period as gridlock when it is because the history is the dollar is strong when you have gridlock.

Ken Fisher: The dollar is weak when you don't and the dollar strength since the election almost immediately after the election is a signal that this really is gridlock. It's here, good for the stock market.

Ken Fisher: Thank you very much for listening to this video.

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A series of disclosures appears on the screen β€œInvesting in 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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