Personal Wealth Management / Expert Commentary

Ken Fisher Says Energy Prices Have Less Impact on Markets Than You Might Think

Ken Fisher, the founder, Executive Chairman and Co-Chief Investment Officer of Fisher Investments, believes current investor worries over high energy prices are overdone.

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Title screen appears, “Ken Fisher Says Energy Prices Have Less Impact on Markets Than You Might Think.”

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A banner identifies him as Ken Fisher, Executive Chairmen and Co-Chief Investment Officer, Fisher Investments.

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Ken Fisher: energy prices have been going up. Oil prices, natural gas prices. I think you know that there's a natural tendency for people to overemphasize the impact of energy on the economy and capital markets. The fact is that in my lifetime, energy as a percentage of GDP domestically in the United States of America, in Western Europe and around the world has been falling as we have become ever more energy efficient in our production of goods and services.

Ken Fisher: And as that's continued to become the case, energy, which had a big impact once upon a time on things, has had ever less of an impact. It has less of an impact now than it did ten years ago. Less of an impact ten years ago than 20 years before that. Most people of my age or older remember very well the energy lines during the OPEC oil cartel of the 1970s and how devastating that was to the economy.

Ken Fisher: It wasn't the singular thing that did that then. It worked in conjunction with some other negative forces that were going on in parallel at the same time, but it was a negative force of significance. But as energy has become a smaller and smaller component, we've seen not only that energy has less impact, but also, we see more diverse streams of energy.

Ken Fisher: Now in this particular time period, some of what's gone on is the aftermath reaction to the comeback from the COVID Lockdowns. And during the COVID lockdowns, lots of energy capacity was shut down, not expecting to have to come back so fast. Secondarily in Europe this year, we've had the lowest winds on record in Europe set up over the last couple of decades to be ever more wind dependent, which has left them in a shortage position, demanding energy that comes from elsewhere. And then finally you've got some geopolitical factors going on in terms of features like the flow of gas from Russia into Europe that are of some import and probably take some time to wind their way through.

Ken Fisher: But the turbines in Europe will blow from wind again. American fossil fuel producers are increasing production. There's a lot of fear that and I don't mean this to potentially fly in the face of anything you may believe or disbelieve, but there's a lot of concerns about how Green New Deal type forces might impact fossil fuels in the short to intermediate term.

Ken Fisher: And yet I'm going to tell you that that'll happen pretty much not at all. And to understand why that'll happen pretty much not at all, all you have to do is look at the reconciliation bill and then remember that the chairman of the Senate Energy Committee is one Joe Manchin from West Virginia Coal State. To see that the things that so many people hope, and other people fear just probably get watered down hugely. Because it's pretty obvious joe Manchin's got a fair amount of determination to do what he thinks is right for his state.

Ken Fisher: But all of these features say to me that the energy price spike is to be less than people have thought it would be over sooner. And in that regard, because energy is less important than it used to be, less impact on the economy. And is it a negative when energy prices go up? Yeah, a little bit. Is it catastrophic enough to cause recession or a bad economy? No And then remember finally, as one last point, that so many people right now are of the view that value stocks should be better than growth, but in reality, rising energy prices impact negatively the value stocks more than the growth stocks. The growth stocks are not ones that are typically energy sensitive much at all.

Ken Fisher: So, to the extent that you do see high energy prices, it's an argument against the value stocks. For the growth stocks, the market should do okay in that environment. The economy should do okay might subdue a little bit, but we're moving into slower growth in the economy anyway.

Ken Fisher: We're moving back to the norms that existed before COVID And by the time you've got to twelve months from now, that'll be pretty assured. And remember, finally that which I always say, which is markets are always prepricing the next approximate three to 30 months. And the things that have been going on right here and now, that's not what the market's focused on. Really. People talk about things, but that's what's being pre priced. What the market's focused on is what will be out there three to 30 months from now. And all of this will be old news by then.

Ken Fisher: Thank you.

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A series of disclosures appears on screen: “Investing is 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 investment 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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