Personal Wealth Management / Market Analysis
Ken Fisher Shares His 2023 Market Outlook
Ken goes on to address investor concerns surrounding a potential recession and high rates of inflation. Ken doesn’t see clear signs we are in a recession—pointing to healthy corporate revenues and robust loan growth. Instead, he thinks recession fears are a byproduct of dour investor sentiment following weak market returns in 2022. Ken also believes inflation should continue to decelerate. He observes how input costs—such as grain, lumber, crude oil and most metals—have fallen consistently since last summer and should eventually work their way through supply chains and translate into milder inflation levels, a positive surprise for stocks. For more of Ken Fisher and Fisher Investments’ thoughts on the markets, visit us at
Title screen appears, “Fisher Investments’ Founder, Ken Fisher Shares His 2023 Market Outlook.”
A man appears on the screen wearing a navy suit, sitting in an office in front of a fireplace.
He begins to speak.
A banner identifies him as Ken Fisher, Executive Chairman and Co-Chief Investment Officer, Fisher Investments.
Ken Fisher doing hand gestures time to time explaining.
Ken Fisher: People always want to know, as we get to the end of the year, what will happen in the next year?
And it's reasonable that they might want that.
And yet there's only so many things you can and cannot say, because a lot happens in any year that is beyond the ability to pontificate about in advance with anything other than lunacy.
Ken Fisher: The key questions are, is it going to go down in history as a relatively good time or a relatively bad time, and for what kind of things?
Ken Fisher: I'm just going to say to you that I believe in my bones that everything about 2022 makes 2023 look like a pretty good year coming.
Let's think about that some.
One of the points that I have made often, I have used this for decades, it's worked regularly, and I believe it will work now, in particular is that third years of US President's terms, which is what 2023 is, tend to be overwhelmingly positive.
We haven't had a negative third year of a US President's term in the United States of America since 1939, which was only down nine tenths of 1% in the accurate measured history of the stock market, only down twice.
The fact is, 1939, as you recall, is
as we were going into World War II.
It's a pretty big, bad negative thing.
Ken Fisher: As I have said in prior videos talking about what I call the midterm miracle, which is the nine months that begin October 1st of the midterm election year 2022, which has worked perfectly in the fourth quarter of 2022.
Those nine months collectively are the most consistently profitable nine-month span in US stock market history, positive 92% of history with an overall 20% positivity.
But that is because of the gridlock, or the relative gridlock created in the midterms, which rolls right on over
into those first two quarters, calendar quarters, of the next
year, the third year of a President's term.
Ken Fisher: And traditionally, although not always, it is the first half of that year tied to that realization that the government isn't going to change a lot of taxes, isn't going to change a lot of property rights, isn't going to be able to create a whole lot of new regulation.
When people have been all through the first and second years of the President's term fighting over all
that stuff, which was abundantly clear in 2021 and 2022, that relative calm ushers in peace, longer term
investing horizon for businesses and capital expenditure and people
in their investment activities.
And it bouys stocks up.
It's a form of surprise that no one ever expects.
It always works.
But let me make this further point.
It's a point that no one ever notices.
Ken Fisher: Not only is the third year of a President's term force powerful in American stock market history, not only is it always disbelieved, which is part of why it works, because no one ever expects it in its positive surprise, even though they can look at history, they just don't think it'll happen this time, every time.
But it is also true that when the second year of the President's term has been negative, the third year has been doubly powerful, big returns.
Am I going to predict those big returns definitely happen in 2023?
No, but that augers further toward
this being a good year.
Ken Fisher: Let me speak to that a little bit differently.
When you look at the first year of
President's terms, they're positive about half the time and negative about half the time in history.
And when they've been positive, they've been pretty big most of the time.
The second year similarly so not quite as much about half the time often pretty big when they're positive, half the time not.
But when that second year is negative, the third year is like a springboard and the returns have been even higher.
The average third year of the President's term has returns that have averaged about 20%.
The third-year returns when the second year has been negative are over 30% on average.
These are big numbers, and I don't want you to underestimate the power of that. Secondarily,
there is this endless fear of recession.
Ken Fisher: I want to cast this as A or B, either have one or you don't.
We're either in one or we're not.
That's pretty obvious.
The question is which and which? Now think about that for a second.
The stock market is a leading indicator.
It peaked in January of last year,
bottomed at the end of September, and has been rising through the fourth quarter.
If we're in recession now, it's got to
be a mild one, since sales, corporate revenue and GDP are moving along just fine ,thank you.
Lending remains robustly strong, been accelerating ever since May
in the United States and around the world.
Ken Fisher: But also, if we're not in recession, that as a leading indicator of a market peaking in January and falling all through 2022 into the end of September is a very long lead time for what many envision is a recession that starts later on in 2023.
That's too long of a lead time.
The lead time is typically more like six, eight, nine months, in which case we should already be in recession.
I don't believe, I may be wrong, that
you can have recession coincident with robust lending on a domestic and global basis.
So, I'm going to say to you, if I'm wrong about the fact that we're not going to see a recession, but moderate growth, if I'm wrong about that, what we'll need to see in parallel with my wrongness there
for 2023, is that the lending falls back heavily and goes down to some low level, like 2, 3, 4%, or less on an annualized basis. Right now, we're running at 10, 11, 12% at an annualized basis. This can be measured in the United States of America a little less frequently overseas, but it can be measured weekly. And we do. And I don't see any sign of that which would be consistent with moving toward recession.
Ken Fisher: When businesses and people borrow short to intermediate term funds, they tend to spend them pretty quickly. They tend not to sit on them. And that robust lending does not speak to a weak economy immediately ahead. It speaks to sentiment being dower now. And sentiment being dower now is because the stock market was weak in 2022 and dower sentiment is a bullish feature. Looking forward.
Ken Fisher: I want to point out finally that as I have written abundantly, while inflation is annoying at every level, inflation as we measure it and think about it, is what I would call output pricing. It's the final price that you're paying to buy something in a store or wherever you buy it, good or service. It's the final price. It isn't the price of the things that went in to make it because it took a while to make it. Those prices are input prices. Input prices have been falling irregularly through the course of 2022 starting in about May and consistently since the latter part of the summer. That hasn't worked its way through the competitive commerce process that creates final output but are the inputs that that final output later will be based on. And the inflation war, no thanks to the Federal Reserve or other central banks has largely already been won. Grain prices are down. Crude oil prices are down. Most metals are down. The fact of the lumber prices are down. The prices of most of the inputs of things that we later buy as finished goods those inputs have been falling. It only takes time for that to translate into a positive inflation effect. When I say positive inflation winning the inflation war is not going back to the price of the final input prices that used to exist. It's returning to the kind of low levels of inflation that we lived with for a very long time that nobody complained about. And that is not terribly far ahead in 2023 and is a terribly positive surprise for most everyone. 2023 should be a much better year than people expect, should be a positive year in capital markets. Bonds should react well, not maybe as well as stocks overall, things should get better.
Ken Fisher: People should be surprised. And the pessimism of disbelief that I talk about regularly caused by the bear market in 2022 causing people to overly fixate on negatives will slowly lag that process as people nag onto the notion that it's not reflecting the reality that they've been built up to believe is there. But the surprises should end up on the positive side and you should look forward to that. Thank you very much for listening to me.
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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 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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