Ken Fisher, founder and executive chairman of Fisher Investments, give his insights into the Trump tariffs and the potential for sending the economy into a downturn.
Robert Deutsch and Robert Hanashiro/USA TODAY
Want a happy, fun exercise for the dog days of summer? Contemplate all the debacles everyone thought would stop the stock market – but haven’t.
U.S. stocks are up on a one-week, one-month, three-month, year-to-date and one-year basis. And they are a hare’s whisker under all-time highs. How can that be?
What about tariffs becoming trade wars? The Brexit drama? The inverting yield curve? What about Italy’s high debt and political upheaval? Nosebleed oil and gas price projections? The Mueller investigation? America’s skyrocketing deficit? North Korean nukes? And Trump, Trump, Trump!
Many of these sparked volatility, but none broke the bull market. The flatter yield curve hasn’t sunk lending. Higher gas prices are an obstacle in some states that just hiked gas taxes – but haven’t destroyed consumer spending. And tariffs? I told you. They’re unbelievably super puny. (see my April 15th column on the topic: www.usatoday.com/story/money/columnist/2018/04/15/trumps-tariffs-north-korea-not-trade/513845002/). But I’ll update you more on that next week.
Corporate earnings, GDP and most major economic indicators chug along nicely pretty much everywhere but Japan. My favorite forward-looking indicator, The Conference Board’s Leading Economic Index, is high and rising – here and in Europe. (See my July 17, 2017 column: www.usatoday.com/story/money/columnist/2017/07/17/how-figure-out-whats-next-economy-few-easy-clicks/479617001/).
Small-cap stocks are doing well. So is the tech-laden Nasdaq. Pretty tough to envision a bear market when both are doing well. How long can naysayers howl “Wolf” before they’re tuned out? Who knows!
Said overly simply: If consensus thinking envisions things as bad, but reality is really less bad, then life must be good for stocks. Seem pollyannaish? It isn’t. False fears keep expectations too low. When reality tops those fears, relief slowly leads investors to bid up stocks.
For you to capitalize, you gotta own stocks while fears persist. Hence, stocks are often said to climb a “wall of worry.” They rise while investors re-cud-chew all manner of scary sounding stories. The more investors falsely fear, the higher stocks climb – until investors run out of worries, becoming too complacent. Legitimate fears strike when few watch for them. Like in early 2000, when few could fathom recession in the “new economy” of dot-coms and forever growth.
This bull market has thrived on false fears. It began in March 2009, when pessimists envisioned financial meltdown becoming sustained depression. Then 10 percent unemployment, automaker bailouts and fear the feds might nationalize the banks added nightmares galore. U.S. stocks rose 26.5 percent that year.
2010 brought Greece’s debt crisis, the Dow’s “flash crash,” Dodd-Frank and the Affordable Care Act. All widely feared. Yet stocks galloped up another 15.1 percent.
Flattish returns accompanied 2011’s Arab Spring, Japanese earthquake, Eurozone debt dread and America’s debt downgrade. But 2012 was great despite “fiscal cliff” dismay, two Greek defaults, Italian default fears, still more Euro fears and China’s slowdown. Then, 2013 brought alarm over the U.S. government shutdown, Cyprus’ bailout, more China dread – and a 32.4 percent gain for U.S. stocks. That year was also when the first fears of Fed monetary tightening went viral. They haven’t faded since. And folks have fretted over the stronger dollar since 2014. All this cud rechewing just keeps on giving.
The real monster risk is when few are fearful. That’s when folks cite mainly good news, brush off bad news as temporary or concoct elaborate, illogical reasons why stocks will rise. It’s when most pundits forecast growth for years ahead, with minimal potential risk. When headlines ignore an “inverted yield curve” here and throughout the developed world (see last week’s column: www.usatoday.com/story/money/columnist/2018/07/22/recession-coming-because-yield-curve-flattening/802985002/) and stop monitoring the Fed for stupidity.
Don’t wait for fears to fade. Own stocks now.
Ken Fisher is the founder and executive chairman of Fisher Investments, author of 11 books, four of which were “New York Times” bestsellers, and is No. 200 on the Forbes 400 list of richest Americans. Follow him on Twitter @KennethLFisher
The views and opinions expressed in this column are the author’s and do not necessarily reflect those of USA TODAY.
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