What Comes Next for US Stocks?

Transcript

Ken Fisher:

People are always asking: "What sectors or styles do you think will lead the market ahead?" And at the beginning of the year, we said we thought the world would be led by non-US stocks and by value over growth, which is largely the reverse of recent years. And that forecast has worked pretty well. But let me hedge my bets a little as we look to the future.

The forces that have helped forge that which has occurred in 2025 so far have been the result of the tariffs, and bank lending becoming more profitable relative to America overseas than in America. And lending is always a very important function. It's part of what goes on under the hood of the car that most people don't examine very carefully. And that world has gotten much better outside of America than was the case before relative to America. So if instead we were to envision a world moving forward in the back half of 2025, where those two functions were to reverse, then you would see America picking up steam again. I don't envision seeing that right now. But that doesn't mean it doesn't happen.

Let me go back to a different point. As I've been prone to say in columns, and whenever anybody asked me, this year America's run among the 47 countries in the MSCI All World Index, from running steadily up at the top of the pack among the top four over the last few years to where this year we're running—depending on whether you're looking at dollars or some foreign currency—someplace between about number 36 and number 42. And a big piece of that is because of the fear of American tariffs and capital moving away from America associated with that. And then the other part is this bank financing feature. I don't envision—at this moment in time—clarity on the tariff situation for a whole series of reasons. But I might be wrong.

Right now—and I'm not going to put a lot of time into this in this video—but right now, where it looks like we're going is President Trump trying to deploy 10% tariffs largely across the board with some minor variations globally. If that's the case, that's not a, compared to the beginning of the year, very positive outcome. Because those tariffs will hurt America. And then, if that's the case, you'll continue to see the non-US world leading America. It is also, however, possible that the court and other court cases upend the tariffs and move us back to a world much more like the world that we had before these tariffs were escalated. In which case, that whole scenario would reverse. I don't have a right, correct way to tell you how those court cases will proceed.

As you probably know, the tariffs that were struck down by the International Court of Appeals—the International Court of Trade, excuse me, were put on pause by the appellate court while it would hear the case. And that won't be decided until the end of July—if on time. And then after that, that could get appealed to the US Supreme Court and that could take more time.

How all that plays out, I'm not going to speculate on. But if all that works out to dampen the ability of the tariffs being imposed, that will pull capital back into America, will make US stocks improve relative to non-US stocks and that would be one key feature that you would look for. The other key feature would be if we should unexpectedly, which I don't expect but could happen, see the central bank, Federal Reserve, fear downside in the economy more than it fears inflation and start cutting short rates. Because as short rates would fall relative to long rates in America, on a relative basis to overseas—which where most countries already have been cutting rates more aggressively than we have. You would then see a cost of deposit base falling relative to the longer term rate at which banks lend. And you'd see American banks becoming more aggressive as lenders. Exactly the reverse relative to other countries of what we've seen building over the last 12 months. If that also were to happen, that would make America perform much better compared to other countries.

But right now, my expectation is the back half of the year will irregularly,—with some months more so, some months less so, some months the reverse so—go on doing what it's done in the first half of the year, which is to see non-US leading US. Europe particularly strong as a region. And I don't see any great reason at this moment in time to see that change.

Thank you very much for listening to me. I hope you found this useful. But as a second and final point, remember whatever you think of America at a point in time, greatest country in the world in my opinion. Most diverse economy in the world by any measure. Create a stock market in the world—long-term—it is still true that you always learn more about your own country. If you think about the world stock market first and your own stock market second. And most Americans don't do that because our American economy is so big, so wonderful, so diverse and so blessed that Americans tend not to look overseas much and see what's going on over there.

But whatever's going on over there—sometimes for good, sometimes for bad—impacts us significantly, as well as what we do here impacting them. And the best place to start in seeing the world correctly is to focus on the world and then your own country. Thank you very much for listening to me.

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