Personal Wealth Management / Market Analysis
Ken Fisher Shares Potential Threats to the Bull Market in 2022
Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher shares his views on potential threats that could derail this bull market in 2022. Ken believes investors should focus on important events that are not widely discussed, such as the potential downstream effects of the “great resignation” because these dislocations could surprise markets. In this video, Ken explains why frequently discussed headlines likely don’t present material risks to the ongoing bull market.
Ken believes frequently discussed headlines such as inflation, rising interest rates and COVID variants fuel sentiment concerns but are efficiently reflected in current stock prices—limiting surprise power to move markets in the future. While businesses have been resilient and, generally, highly adaptive to a post-lockdown environment, Ken says investors must remain vigilant for any further business disruptions that could create challenges moving forward.
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Ken Fisher: Risks to watch? What are they? What should you focus on as risks to watch in 2022? I get asked that all the time. I get asked it so often I wonder if people are asking me if it's a television show or something. I don't know, because I don't really watch television. But I'd like to break the top down into sort of three categories.
Ken Fisher: One, there's the stuff everybody talks about. This year it includes inflation, rising interest rates, things about politics which happen. There's a lot of yak yak about that all the time. Markets, pre-price, all widely known information. And these things that people talk about a lot, Omicron, et cetera, et cetera. They tend to be fully-priced really fast, and while there's still a risk about them in that they could end up being worse than what people talk about, probably only by about that much. And therefore, there's risk there, but not that much risk.
Ken Fisher: The second category I want to talk about are things that are catastrophic but almost never happen. You can pick these out. When I say catastrophic, I mean big potential negative consequences. World War, we all know what happened with COVID and we know that in the lockdowns broke the market fora few weeks, but only for a few weeks. By July we're back to new highs, so it would take something bigger and more catastrophic than that. And these things tend to be so rare and so unlikely that you can't plan for them in a timely way. You can't say, I think this year X will happen, or maybe you can, but it would be just a complete wild speculation, and the odds of it being correct are extraordinarily low. The third thing is what is important that people don't much talk about? And here's where the biggest risks are, because the biggest risks in markets are always surprise bad things that nobody talks about. Or if they talk about them, they don't think at all of them as being potentially bad things. It's always what people don't talk about that count. So, let's just speak to that for a minute.
Ken Fisher: This year, you've heard a lot, and last year as well, about the so-called great resignation, where people are quitting jobs at an extraordinarily high rate. That in and of itself is not a problem. The potential problem is if and when we run into other problems. An extraordinarily large part of the workforce is new at what they do and could have repercussions from rising costs, if they're not actually in their new jobs. In aggregate, what you might think of as up to doing it, the potential for the great resignation, not as it's occurred, but the aftermath of it, turning into something that's a form of dislocation that could contribute to recession, is not insignificant and is something to be paying attention to. How many of the people seeking the new jobs end up with new jobs in places where they actually end up being happy and doing well and adding productivity to the employer. The answer is we don't really know. But that's going to play out in 2022, and it's a risk to watch.
Ken Fisher: Another one is the concerns in legislation of flamboyance in the midterm election year. I think this is not very likely, but there's a lot of things that you could worry about. For example, this year and last year, stock buy backs to reduce the number of shares outstanding, to boost earning per share by using corporate cash or borrowed money to get corporate cash to buy back stock in the public market have been going to records. There's people in Washington, DC that do not like this. You take Elizabeth Warren over here and Marco Rubio over there, and they're both vehemently opposed to this, or at least they say so. Legislation that would try to stop stock buybacks would be very bad. Is that going to happen? I don't know that it will, because it's pretty hard right now to get anybody in Congress to agree with the other side on almost anything.
Ken Fisher: And yet I could see that as becoming a hot button midterm election feature because it cuts across partisan lines, to a large extent. The earlier concept of the great resignation causing dislocation scan be played back another way against business that could be very bad. In this period from the beginning of the lockdowns, business has been amazingly adaptive to try to do this and do that, to respond to whatever it is governmental jurisdictions have imposed on them. That has included everything from work from home, Zoom meetings, this’s, that’s and the other thing. Again, I point to the fact that some of this can be thought of as a dislocation. If you believe, and I don't want to say this, that work from home becomes a new standard, you have a huge office supply glut. How will that work out in 2022? I'm not 100% sure. As I am recording today, Larry Fink of BlackRock said that it's crucial that we get people back into the office. That's a tug of war. That may be a costly tug of war in 2022, and it may not be, but it's a risk to watch.
Ken Fisher: So, these dislocations from the aftermath of all of the jurisdictional governmental requirements associated with the lock downs is an area to watch for risks. Earlier this week as I speak, the United States Supreme Court vacated President Biden's so called vaccine mandates. The reality of the potential for extraordinary things to happen in this case vacated, but in other cases, moving forward, maybe not. Causing dislocations in business are not insignificant, and you should be looking on the lookout for dislocations of any form, because in this period, while business has been adaptive and responding well, you can get some curveballs thrown at business in general that we're not able to adapt to. Thank you 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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