Personal Wealth Management / Expert Commentary
Ken Fisher Provides His Market Outlook for the Rest of 2023
Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher recaps why stocks rallied the first half of 2023, and shares his forecast for the remainder of this year. Ken believes a key driver since October’s market lows is what he coins the “Midterm Miracle”—where historically, the three consecutive calendar quarters beginning in October of US midterm election years are overwhelmingly positive tied to increased political gridlock.
Looking ahead to the rest of 2023, Ken explains the back half of US presidents’ third years tend to be positive for stocks as gridlock strengthens and risk aversion falls. Ken also notes how pervasive pessimistic investor sentiment—which he refers to as “the pessimism of disbelief”—sets the stage for better-than-feared economic results, typically a positive for stocks. Last, Ken details why he believes high quality, mega-cap growth stocks should continue to lead the market higher in the intermediate future.
Thanks for joining me. We're here at the middle of the year in 2023. Common question is, after a relatively good first half of the year in stock market, what might be the back half of the year? Let me try to paint that in a pretty simple way. If you've paid attention to my writings and my videos over the course of the last year, I pound the table pretty hard on this thing that I've called a midterm miracle, which is said simply that the nine months starting October 1st of a midterm election year.
Those three calendar quarters, the one that ends here in the middle of 2023, those nine months are the most consistently profitable period in the stock market and in all stock market history. The effect of absolute or relative gridlock introduced into. Congress. Slows down political risk aversion because pretty much things get absolute or relative gridlock and people don 't become afraid that some kind of legislation might blow back on them.
People hate losses more than they love relative sized gains. And as that slowly settles in on people, the market loses a fair amount of risk aversion. Stock rise. That's been working. Picture perfect. Picture perfect since October 1st. Parallel to that strong first half of 2023 and the stock market. Uh, the reality can be extended in this way. The back half of. The year after. A mid term miracle. Is also not as consistently profitable, but much more profitable than the normal stock market in consistency. That normally stock 's rise, depending on whether you think about us or global 6,570% of the time. In the mid term miracle period. They rise historically, 92% of history, 92% of all those periods.
In the back half of the third year of a president's term, they 're normally positive, about 85% of history with slightly lower average quarterly returns than in the midterm miracle, the mid term miracle. You're getting average returns of about six and one half percent, a little bit better this cycle, but only a little bit almost picture perfect. And then in the back half of the year following that, you 're typically getting 4 to 5% return. Will that happen this time? Well, you don't really get the average except for by luck, but it 's probably a profitable time. It's probably a good time.
Let me make this point. We haven 't had a negative third year of a president's term since 1939 in the S&P 500, and that was only down 9/10 of 1% as America was facing the beginnings of World War Two. The fact is, there 's a pretty good time. It's a good time, partly because people still remain skeptical. I 've written and talked about the pessimism of disbelief, and people keep coming up with abbots to try to justify why this can't really be a bull market. And it is a bull market. It 's acted like a bull market. It's acted like a new bull market in ways a lot of people don 't understand. Not all bull markets start off the same way.
This one has intuitively been big cap and growth led because we're in a period where people don 't really. Believe in the economy growing. It's a low growth economy with a lot of people skeptical about growth. So therefore, things that are dependent on the economy aren 't doing well. Things that can grow in a relatively stagnant economy are doing better and the higher quality they are. So it's more assured that you get that growth, the better still they do, and that tends to concentrate and has concentrated, I believe will through the balance of the year on the high quality mega tech growth, on the high quality, large luxury goods producers.
I 'm not talking about big expensive things like luxury cars so much, although that might apply a little. I'm talking mostly about physically smaller. High end, big brand luxury consumer items and that world which is mostly led out of Europe, not America. America 's got a little has been very strong also. So that world is what's leading. I think that world continues because we still have so much doubt in our culture about the economy.
Are we going to go into recession? Are we not going to go into recession? What about this? What about that? What about the other. Yeah, but yeah, but yeah, but and the result of that is that the really high quality growth stocks, what 's called narrow breadth, few big names leading the market continue to do so.
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