Personal Wealth Management / Expert Commentary

Ken Fisher Explains Whether Supply Chain Shortages Spell Trouble for the Economy

Ken Fisher discusses the potential stock market impact tied to shortages in semiconductors and materials like lumber and steel. Many fear these shortages could drive sustained price increases, leading to strong inflationary pressures that could impede economic growth.




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Ken Fisher: So a lot of people worry about the question of whether what's been going on just recently with materials and semiconductors things like lumber, steel in terms of pricing and what appear to be shortages speak badly for the economy moving forward. And there's a yes and a no to that and some causality behind it as well.

Ken Fisher: The fear that many have is of a rampant inflation in a world that's over hot in this regard and that the shortages can impede growth. And in fact the shortages can impede growth. Shortages can always impede growth. But these shortages come from a very simple feature which is that--not so much the semiconductor firms but more particularly the materials firms. When COVID hit just over a year ago, en mass vendors in these categories anticipating a very slow economic bounce back or no bounce back at all from that which was widely banded at the time as this thing that would be so much worse economically than it's been for so much longer--to shut down capacity.

Ken Fisher: Now sometimes when you shut down capacity you do it in a way that's going to make it a permanent shutdown, sometimes you do it in a way that's going to make it a temporary shutdown. I don't care what you do, either way it takes longer to shutter them than it does to reopen them. And hence as the economic rebound was so much faster than any of these firms anticipated and the bounce back in that v-like pattern we talked to you about a year ago plus came on so strongly, they're caught without capacity. So yes they raise price, yes there are shortages seemingly as the economy is strong when it isn't wasn't expected by them to be strong and they're short of capacity. With these strengths to the extent they can, they'll add capacity and as will the semiconductor industry, but all of these things take a long time to build and as they take a long time to build the permitting and the environmental stuff and on and on and on before you can add plant capacity.

Ken Fisher: And in doing that this is going to end up, in some ways, impeding parts of growth but it's inherently not inflationary because inflation is about an overall macro phenomena which shows some numbers that confuse people now because the year-over-year comparisons seem big. But people forget that those comparisons about right now are comparing against a year ago when those same prices were actually depressed.

Ken Fisher: So you're comparing normalized prices to previously depressed prices and in that what this really does is slows down growth with pressures in some part of the economy that impede growth taking away pressures in other parts of the economy and is indicative of what actually is a slower growth economy. it's not too hot not too cold in a lot of ways It's not a bad economy with some parts in it which are bad.

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“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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