Learn These Key Lessons from 2025

Transcript

Ken Fisher:

A year like 2025 has a lot of good lessons in it. If you think back to prior years, we had the US beating non-US stocks for years and a view that that was maybe like permanent. In 2025, you have a year where the US moving from one of the very top performing country stock markets in the world to one of the lower performing country stock markets in the world. And a region like Europe, thought to be lethargic at best and likely expected to go into recession in 2025, which never quite happened, leading the world regionally in an explosive stock market. These are all things that make you say common expectations on a broad basis, whether they're yours or others around you, maybe you shouldn't adhere to them quite so much. And maybe, in fact, the notion that one country or one sector or one type of investing is best for all times, and you can just do that and not worry about anything else. Maybe that's a little too simplistic. And then if you think through at the beginning of 2025, and I think it's useful at a time like the beginning of a new year, to go look at what forecasts look like by looking at old media from the beginning of the year before. You'll see that most people were at best, at best, mildly bullish with expectations of maybe single high single digit returns for the stock market.

The fact that the returns for the stock market on a global basis, depending on which global index you would look at as we end the year, very close to 20% is very wildly different than almost anyone was forecasting at the beginning of the year. Now, mind you, I'm going to go off to a different point. Decades ago, I proved that whatever consensus forecasts are for the stock market don't happen 12 months out because they've already been priced. So, the consensus forecasts at the beginning of the year for single digit returns wasn't likely to happen anyway, because the single digit returns have been priced and whatever surprise was either going to be on the low side of that or the high side of that in 2025 on the high side of that. But the reality of 2025 is just a very good example of why consensus forecasts at the beginning of the year tell you what won't happen, not what will happen. And therefore, as we look at 2026, you should also remember that consensus forecasts for 2026 won't be what the year does as a whole. Another point, of course, is that in 2025, you had a lot, a lot, a lot, a lot, a lot of political excitement about all kinds of stuff and most of it didn't actually drive the direction of the stock market.

So, for example, while it is true that the initial announcement of tariffs on April second, so-called Liberation Day, was met with a short, in time, sharp, almost bare-market-size market correction. A correction being defined as a drop of more than 10% but less than 20%, whereas a drop of more than 20% is conventionally deemed a bear market. That short, sharp correction volatility didn't begin to stop the whole year from being a nicely positive double digit year, well above average. Again in 2026, you could see a correction at any time for any reason or no reason, just a crazy story that swings sentiment around. And in that, end up with a potentially very different year than the volatility in the short term. Again, headlines evolve as the year goes on, and sometimes they evolve into new topic matter. Sometimes they just regurgitate like chewing cud on old topic matter and maybe a little more so. So, if you think through 25, 2025, as the year progressed, you got more and more bubble talk, particularly associated with AI. And the fact is, almost always as soon as you see a lot of talk about almost anything being the thing, the thing, the thing, the thing that everybody talks about, all widely known information and opinions are almost perfectly, not perfectly, but very pretty darn efficiently priced into stocks at that point in time.

So, you take things like that and you say a lesson from 2025 is whatever everybody's talking about is already in the stocks, you should be thinking about something else. Those are some of the key highlights of 2025. And as we face 2026 and soon to be in it and charging forward, you're going to see all of the normal stuff. You're going to see volatility, you're going to see lots of stories. You're going to see new things. You're going to see regurgitation of old things. And in reality, the lessons of 2025, I think will help you if you keep remembering them, as the year progresses, to navigate better through 2026 than if you just put 2025 in the rearview mirror and don't think about it. Thank you very much for listening to me. I hope you found this useful and educational. Hi, this is Ken Fisher. Subscribe to the Fisher Investments YouTube channel, if you like what you've seen. Click the bell to be notified as soon as we publish new videos.