Personal Wealth Management / Expert Commentary

Ken Fisher Explains What Slower Economic Growth Means for Markets

Economies around the world have largely bounced back since COVID-related lockdowns curbed much of the world’s economic activity. But, are higher growth rates the real economic story for investors?

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Title screen reads “Ken Fisher Explains What Slower Economic Growth Means for Markets.”

A man in a blue shirt appears on screen and begins to speak.

A banner at the bottom of the screen identifies the speaker as Ken Fisher, Executive Chairman and Co-Chief Investment Coordinator of Fisher Investments.

Ken Fisher: So a lot of people are excited about growth rates right now. The growth rate over the last 12 months has been high. It increases people's optimism, but right now it's actually a little more important to focus on the level of the economy than it is the growth rates. And let me try to explain why.

Ken Fisher: Before COVID struck we were growing in America and around the world—some places more some places less—but at a moderate but okay pace. We didn't have excesses that are problematic and we had a seemingly good solid base. And then COVID struck and the short aftermath of that was the lockdowns that we all know about that constricted the economy. I like to refer to it as a constriction rather than a recession because it didn't have any of the normal attributes that a recession has which means former excesses in the economic system somehow, some way that had to be purged in a downturn before you could resume growth.

Ken Fisher: And then when the lockdowns started to get lifted and even before, the growth started to pick back up. And some parts of the thing just shut down too much out of fear that there wouldn't be a rebound: a lot of steel capacity, lumber capacity, oil capacity just shut down too much. It took longer to pull back up--we still haven't had enough capacity in some of those areas because it takes longer to open the capacity up than to shut it down.

Ken Fisher: But we've now gotten to a point where our economy is back to the levels that it was pre-COVID. Now what does that imply, when you stop and think about it? It implies that we revert to that lower growth rate and that we don't extrapolate from recent growth rates thinking into the future that were early cycle. In fact, we're not early cycle we’re late cycle. Because while there was some improvements that businesses naturally made during that constriction, the v-shaped recovery didn't provide enough time for a lot of that the way it would in a long protracted bear market and recession. And instead the whole period--as I’ve said many times before in other videos and in other writings in all the places that I write--was more like a hugely oversized, typical correction than a traditional recession.

Ken Fisher: And hence in that coming back at these levels that are the levels we were at before COVID, we're now to the level where the growth rate resumes back to that slower rate that it existed at before. And that natural tendency to feel the exuberance of extrapolating from the recent past into the future is excessively optimistic. Growth rates will moderate. That's not bad, it's just not to have the euphoria about that would expect huge growth rates. So with that you should expect a world and all the things that go with it that are in their inherent nature more like it was pre-COVID than anything you've seen, experienced, or felt since COVID on the downside or on the upside.

Ken Fisher: --The future is back to the past and we're now back to a point where the growth rates and the future growth begin to look more like what we were experiencing in that pre-COVID period.

Ken Fisher: Thanks for listening to me.

A series of disclosures appears on the screen “Investing 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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