Commentary

Fisher Investments Editorial Staff
MarketMinder Minute, Taxes

Market Insights: Tax Reform and Stocks

By, 10/17/2017

In this Market Insights video, we discuss the relationship—or lack thereof—between US tax policy changes and US stock performance.

Commentary

Fisher Investments Editorial Staff
Personal Finance

Fiduciary Rules, Annuities and Due Diligence

By, 10/17/2017
Ratings134.961538

The Department of Labor’s fiduciary standard—unveiled in April 2015—was intended to prevent brokers from selling unnecessary high-fee products. A nice thought! Unless, we guess, you are a variable annuity salesperson. Some predicted these annuities—famously fee-heavy—would take a hit once the rule took effect (it hasn’t fully yet). But annuity factories are adapting in anticipation. They’re finding ways to keep targeting retirees—for example, by offering new products they expect to better fit the fiduciary standard, though they aren’t fundamentally different otherwise. In our view, this is a great example of the issues with the DoL’s rule—and a reminder for investors to always do their due diligence on any investment product or service before jumping in.

The DoL’s fiduciary rule is supposed to protect investors by requiring brokers and advisers working with retirement accounts to act in their clients’ best interest; disclose all conflicts of interest in writing and on a dedicated website; and inform clients how they are working to mitigate those conflicts. Most of the rule is on ice until July 2019 while regulators decide how to apply it, but many brokers and insurers are preparing now for its eventual implementation via new annuity offerings for use in IRAs and 401(k)s.

There is a basic problem here: Simply, annuity marketing promises funds that grow tax-free until withdrawal, when the assets can be converted into a “guaranteed” stream of income payments. But most retirement accounts already grow tax-free—and that annuity shell will still cost much more than a comparable non-annuity option. Adding another tax shell in your IRA or 401(k) is redundant. The SEC has had warnings on its website for about a decade regarding this practice.

Commentary

Fisher Investments Editorial Staff
Currencies, Into Perspective

No, IMFcoin Won’t Rule Them All

By, 10/16/2017
Ratings74.928571


A purse, wallet or blockchain basket doesn’t change the value of what’s inside. (Photo by sandorgora/iStock by Getty Images.)

Recently the IMF floated an idea for making its special drawing rights (SDRs)—the accounting unit for the IMF’s reserve assets and bailout funding—more relevant: relaunching SDRs as a bitcoin-like digital currency. Behold, IMFcoin! Naturally, this plays into longstanding fears the US dollar’s days as the world’s most-used reserve currency are numbered, in this case because where cryptocurrency talk goes, so goes wild speculation. It sort of reminds us of the brief “Fedcoin” hoopla after a Fed economist’s mere suggestion central bank digital currency could be useful.[i] Though the prospect of innovation is interesting, speculating about endgames—for cryptos, the IMF and the dollar—seems pointless for now. Markets don’t discount far-future hypotheticals and, in our view, the dollar losing reserve currency status was always a false fear.

As the SDR presently stands, putting it on blockchain and turning it into a cryptocurrency would be window dressing. The SDR isn’t a currency. It is a claim on five major currencies: US dollar (41.7%), euro (30.9%), Chinese renminbi (10.9%), Japanese yen (8.3%) and British pound (8.1%). Countries that hold SDRs simply have the right to swap them for the underlying currencies. Their original purpose was to give countries an alternative to gold and US dollars in international transactions—a way of supporting foreign trade.[ii] These days, they feature mostly in IMF bailout funding and a small part of countries’ forex reserves. SDRs in circulation amount to around $285 billion, which is tiny compared to major global central bank reserves, which total north of $14 trillion.[iii] Turning it all crypto doesn’t seem like much of a change. SDRs are already an electronic accounting unit—one that includes dollars. Putting it on a blockchain would just turn it into a different sort of electronic accounting unit ... that would presumably include dollars. The value of a global reserve currency basket isn’t the basket—weaved with blockchain or not—it’s the currencies in it.

Commentary

Fisher Investments Editorial Staff

This Month in Global Elections

By, 10/13/2017
Ratings264.096154

Entering 2017, most everyone figured the global election circus would be over by now, as September’s German election was the last major contest on the docket. But politicians had other ideas, as Austria and Japan decided to get in on the fun. First Austria called a snap election after its centrist coalition government collapsed in May. Japanese PM Shinzo Abe followed suit last month in a bid to strengthen his hand. While both perhaps stir uncertainty in the short term, neither should upend this year of falling political uncertainty. Rather, they give investors a couple more opportunities to gain clarity and shift focus to the world’s strong economic fundamentals.

Austria: The Adventures of Wunderwuzzi  

The center-right People’s Party (OVP) leads polls ahead of Sunday’s contest, followed by the far-right Freedom Party (FPO) and center-left Social Democratic Party (SPO) in third, teeing up the prospect of the OVP’s 31-year-old hot shot leader, Sebastian Kurz (aka Wunderwuzzi), becoming the next prime minister. But as with most continental European elections, no party is likely to win an outright majority, forcing the eventual winner to cobble together a coalition.

Research Analysis

Christo Barker
Into Perspective

Making Sense of Catalonia

By, 10/13/2017
Ratings384.302631

On October 1, following a widely watched political spat, voters in Spain’s Catalan region went to the polls in an independence referendum and elected to leave Spain—despite Spain’s government and constitutional court declaring the vote illegal and Spanish police attempting to deter it. The vote ratcheted up investors’ uncertainty, and Spanish markets fell in the ensuing days as headlines called it Spain’s biggest constitutional crisis ever (Exhibit 1). Some even claim it threatens the eurozone. We think these accounts are vastly overblown. A small region of a country seeking secession is far different than an entire country seeking secession from the eurozone. Regional disagreements like this occur frequently across Europe—Spain has a rich history of them. Continued volatility in local markets wouldn’t surprise, but eurozone stocks have barely budged—and global stocks are even less likely to see much impact. 

Exhibit 1: Spanish vs. EMU Market Performance

Commentary

Fisher Investments Editorial Staff
US Economy, Reality Check

Help Wanted: Hurricanes Hit US Jobs

By, 10/10/2017
Ratings344.514706

The longest streak of US job growth is over! Nonfarm payroll employment fell -33,000 in September, the first loss in seven years. However, while headlines touted this drop, most also added a crucial caveat: Hurricanes Harvey and Irma. Those storms didn’t just exact a major personal toll on those directly impacted in Texas and Florida—they affected national economic data, too. The hurricane-impacted jobs report gives us a good opportunity to review an important investing reminder: Always put data in its proper context.   

While headlines picked up on September’s 33,000 job loss, they didn’t pay as much attention to the unemployment rate, which fell to 4.2% from August’s 4.4%. This may seem counterintuitive: If the number of employed fell, shouldn’t the unemployment rate rise? Not necessarily. The BLS’ “Employment Situation” report has two primary inputs: the establishment (or payroll) survey and the household survey. Each tells a different story.

To illustrate a major difference between the two surveys, consider food services and drinking places[i] jobs. Because of the hurricanes, many workers in this sector couldn’t work in Texas and Florida and thus weren’t paid. The establishment survey doesn’t count these people as “employed” because they weren’t on payrolls, so food and drink jobs fell by -105,000—the main contributor to payrolls’ decline. However, the household survey considers these workers “employed” and noted 1.5 million workers had a job in September but couldn’t work—the highest level in more than 20 years.[ii] The unemployment rate is based on the household survey, so comparing it to establishment survey data is apples-to-oranges.    

Research Analysis

Fisher Investments Editorial Staff
US Economy

Market Insights Podcast: Natural Disasters And Market Impact – October 2017

By, 10/10/2017

In this podcast, Communications Group Vice President Naj Srinivas speaks with Capital Markets Team Leader Brad Pyles about the economic effects of hurricanes, earthquakes and other natural disasters.

Time stamps:

Commentary

Fisher Investments Editorial Staff
Into Perspective

Lessons From the 10th Anniversary of the Last Bull Market’s Peak

By, 10/09/2017
Ratings1594.459119

10 years ago today, markets peaked, and one of history’s worst bear markets began. At the time, there was little hint of the panic to come. Declines were gentle, and banks weren’t yet taking huge (and unnecessary) balance sheet writedowns. But a year later, as the fallout from banks’ having to mark illiquid securities to the most recent (fire-sale) price grew worse and the US Fed and Treasury botched the crisis response, panic was spreading. Autumn 2008 and winter 2009 were harrowing for most investors. From peak to the March 9, 2009 trough, the S&P 500 Index fell 55.3%.[i] In the darkest days, some felt like stocks would never rise again. Many feared their investment goals were finished. Yet 10 years later, stocks have erased the decline and then some. Even with that bear market, the S&P 500 is up 102.2% over the past 10 years.[ii] While that doesn’t make the memories of the bear any less painful, it does highlight a key lesson: If you have a long time horizon, staying invested through bear markets shouldn’t put your long-term goals out of reach.

This was hard for many to grasp during the bear’s depths. Since the last true financial panic occurred in 1930 during the Great Depression, most US investors in 2008 had never experienced one. Ten years on, it might be hard to grasp what sentiment was like—emotional scar tissue can blunt memories. But it was wild. Stocks would swing down big one day, then bounce high the next as speculators scrambled to cover short positions—and then tank again on day three. The volatility was gut-wrenching, and it seemed like anything—or nothing—could trigger it. Some folks worried the entire stock market could go to zero. Investors fled en masse, desperate to exchange stocks for anything that seemed less susceptible to the madness—cash, bonds, gold, annuities, you name it. Yet while this might have felt better immediately, it overlooked a simple truth: Bull markets follow bear markets. It’s often darkest just before the dawn.

In our view, losing sight of this can be dangerous. Depending on an investor’s time horizon and cash flow needs, participating in a bear isn’t necessarily devastating. However, abandoning stocks after participating in a bear’s deep declines locks in losses, and it raises the risk stocks snap back before you get back in. In the industry vernacular, you could get whipsawed.  

Commentary

Elisabeth Dellinger
Behavioral Finance

The Obligatory Investing Lesson From Blade Runner

By, 10/06/2017
Ratings914.153846

The interior of Los Angeles’ famous Bradbury Building, where Rick Deckard and Roy Batty had their climactic encounter in “Blade Runner.” Photo by Elisabeth Dellinger.

Because we’re so friendly (or something), investors regularly ask our opinions on articles and books—and occasionally, those books are works of fiction. One title making the rounds earlier this year was The Mandibles, by Lionel Shriver, a family saga set in a fictional US destroyed by the mother of all financial crises. Spoiler alert: I didn’t read it (sorry). But the description reminded me of other recent novels imagining economic calamity in the hypothetical near-future. Gary Shteyngart’s Super Sad True Love Story, published in 2010, imagined an America in hoc to Venezuela, whose oil might led it to dominate the western hemisphere. (Oops.) Ernest Cline’s Ready Player One, from 2011, saw a country ravaged by the aftermath of peak oil. (Oops.) And who can forget “Blade Runner,” whose sequel just hit theatres? The 1982 film, set in an imaginary 2019, pegged Atari and Pan Am as global titans and Japan the world’s economic superpower.[i] All take whatever happened in the very recent past and project it far into the future. It’s great entertainment sometimes, but it’s also a shining example of a classic investment error.

Commentary

Fisher Investments Editorial Staff
Finance Theory, Media Hype/Myths

America’s Pristine Balance Sheet

By, 10/06/2017
Ratings754.453333


In our view, America’s balance sheet is similarly clean. (Photo by Jurgute/iStock by Getty Images.)

Mention “balance sheet” anywhere but an accounting cocktail party and you risk Snooze-a-Palooza. So rest assured, this article is not about America’s balance sheet. Rather, it’s about a perhaps quirky way to put investorslingering debt fears in context. Debt-to-GDP ratios have their uses, but measuring a level (debt) against a flow of economic activity (GDP) isn’t keeping like with like. Better, in our view, to weigh debt against assets and see what shakes out—just like a bank would. Do so, and it becomes clear investors needn’t fear US debt—whether household, corporate or government—sinking stocks.

Let’s start with US households, supposedly threatened by surging student and auto debt. Total household debt increased $146 billion in Q2 to $15.2 trillion—up almost half a trillion dollars since Q2 2016.[i] But household assets rose over 10 times more—up $1.8 trillion in Q2 and $8.7 trillion since last year![ii] Household assets now stand above $111 trillion, dwarfing liabilities.[iii] Now, there is an obvious rebuttal: What if the people with rising debt aren’t the people with soaring assets? And it’s true, averages obscure extremes. But mortgages make up the bulk of household debt (73.2%), and banks’ tighter mortgage standards during this expansion are pretty legendary. As the now-old joke said, for a long time, you couldn’t get a mortgage unless you didn’t need one. Mortgage loans comprise less than half of household debt’s total rise since its Q2 2013 bottom. Another gauge of residential real estate loans’ health is homeowners’ percentage of equity. During and shortly after the financial crisis, this dipped below 50%, a first. It has now recovered back to 58.4%, its highest level since Q1 2006 during the housing boom,[iv] as house prices nationally make record highs.[v]

Commentary

Fisher Investments Editorial Staff
Into Perspective

Lessons From the 10th Anniversary of the Last Bull Market’s Peak

By, 10/09/2017
Ratings1594.459119

10 years ago today, markets peaked, and one of history’s worst bear markets began. At the time, there was little hint of the panic to come. Declines were gentle, and banks weren’t yet taking huge (and unnecessary) balance sheet writedowns. But a year later, as the fallout from banks’ having to mark illiquid securities to the most recent (fire-sale) price grew worse and the US Fed and Treasury botched the crisis response, panic was spreading. Autumn 2008 and winter 2009 were harrowing for most investors. From peak to the March 9, 2009 trough, the S&P 500 Index fell 55.3%.[i] In the darkest days, some felt like stocks would never rise again. Many feared their investment goals were finished. Yet 10 years later, stocks have erased the decline and then some. Even with that bear market, the S&P 500 is up 102.2% over the past 10 years.[ii] While that doesn’t make the memories of the bear any less painful, it does highlight a key lesson: If you have a long time horizon, staying invested through bear markets shouldn’t put your long-term goals out of reach.

This was hard for many to grasp during the bear’s depths. Since the last true financial panic occurred in 1930 during the Great Depression, most US investors in 2008 had never experienced one. Ten years on, it might be hard to grasp what sentiment was like—emotional scar tissue can blunt memories. But it was wild. Stocks would swing down big one day, then bounce high the next as speculators scrambled to cover short positions—and then tank again on day three. The volatility was gut-wrenching, and it seemed like anything—or nothing—could trigger it. Some folks worried the entire stock market could go to zero. Investors fled en masse, desperate to exchange stocks for anything that seemed less susceptible to the madness—cash, bonds, gold, annuities, you name it. Yet while this might have felt better immediately, it overlooked a simple truth: Bull markets follow bear markets. It’s often darkest just before the dawn.

In our view, losing sight of this can be dangerous. Depending on an investor’s time horizon and cash flow needs, participating in a bear isn’t necessarily devastating. However, abandoning stocks after participating in a bear’s deep declines locks in losses, and it raises the risk stocks snap back before you get back in. In the industry vernacular, you could get whipsawed.  

Commentary

Elisabeth Dellinger
Behavioral Finance

The Obligatory Investing Lesson From Blade Runner

By, 10/06/2017
Ratings914.153846

The interior of Los Angeles’ famous Bradbury Building, where Rick Deckard and Roy Batty had their climactic encounter in “Blade Runner.” Photo by Elisabeth Dellinger.

Because we’re so friendly (or something), investors regularly ask our opinions on articles and books—and occasionally, those books are works of fiction. One title making the rounds earlier this year was The Mandibles, by Lionel Shriver, a family saga set in a fictional US destroyed by the mother of all financial crises. Spoiler alert: I didn’t read it (sorry). But the description reminded me of other recent novels imagining economic calamity in the hypothetical near-future. Gary Shteyngart’s Super Sad True Love Story, published in 2010, imagined an America in hoc to Venezuela, whose oil might led it to dominate the western hemisphere. (Oops.) Ernest Cline’s Ready Player One, from 2011, saw a country ravaged by the aftermath of peak oil. (Oops.) And who can forget “Blade Runner,” whose sequel just hit theatres? The 1982 film, set in an imaginary 2019, pegged Atari and Pan Am as global titans and Japan the world’s economic superpower.[i] All take whatever happened in the very recent past and project it far into the future. It’s great entertainment sometimes, but it’s also a shining example of a classic investment error.

Commentary

Fisher Investments Editorial Staff
Finance Theory, Media Hype/Myths

America’s Pristine Balance Sheet

By, 10/06/2017
Ratings754.453333


In our view, America’s balance sheet is similarly clean. (Photo by Jurgute/iStock by Getty Images.)

Mention “balance sheet” anywhere but an accounting cocktail party and you risk Snooze-a-Palooza. So rest assured, this article is not about America’s balance sheet. Rather, it’s about a perhaps quirky way to put investorslingering debt fears in context. Debt-to-GDP ratios have their uses, but measuring a level (debt) against a flow of economic activity (GDP) isn’t keeping like with like. Better, in our view, to weigh debt against assets and see what shakes out—just like a bank would. Do so, and it becomes clear investors needn’t fear US debt—whether household, corporate or government—sinking stocks.

Let’s start with US households, supposedly threatened by surging student and auto debt. Total household debt increased $146 billion in Q2 to $15.2 trillion—up almost half a trillion dollars since Q2 2016.[i] But household assets rose over 10 times more—up $1.8 trillion in Q2 and $8.7 trillion since last year![ii] Household assets now stand above $111 trillion, dwarfing liabilities.[iii] Now, there is an obvious rebuttal: What if the people with rising debt aren’t the people with soaring assets? And it’s true, averages obscure extremes. But mortgages make up the bulk of household debt (73.2%), and banks’ tighter mortgage standards during this expansion are pretty legendary. As the now-old joke said, for a long time, you couldn’t get a mortgage unless you didn’t need one. Mortgage loans comprise less than half of household debt’s total rise since its Q2 2013 bottom. Another gauge of residential real estate loans’ health is homeowners’ percentage of equity. During and shortly after the financial crisis, this dipped below 50%, a first. It has now recovered back to 58.4%, its highest level since Q1 2006 during the housing boom,[iv] as house prices nationally make record highs.[v]

Commentary

Fisher Investments Editorial Staff
Media Hype/Myths, Into Perspective

The Path to Wealth Isn’t Through Homeownership

By, 10/06/2017
Ratings774.11039

Last week, the Fed published its triennial Survey of Consumer Finances, which triggered predictable hubbub over inequality[i]—largely too sociological and inconsequential for markets. But of all the media angles emerging from this, there is a directly investment-related one we take issue with: Housing as “The one surefire way to grow your wealth in the U.S.” Stocks and other liquid securities not only offer a viable path to wealth, but history suggests it’s a faster road.

The study claims homeowners are gaining wealth far faster than renters, and media seized this to claim it shows the power and virtue of owning a home. Some may see this as supporting the view that real estate is a terrific investment. But there are some issues with that—principally, the fact stocks far outpace housing historically. And stocks are available for renters or homeowners to take advantage of.

Through thick and thin, the S&P 500’s annualized return since 1926—when good data begin—is 10.8%.[ii] Home prices nationally have returned 4.6% since 1976.[iii] Now, of course, these time periods differ. But even if we compare the same 40-ish years, stocks far outpace housing. (Exhibit 1)

Commentary

Fisher Investments Editorial Staff
Across the Atlantic

Eurozone Stocks Don’t Need an Ever Closer Union

By, 10/03/2017
Ratings404.5375

Last week, French President Emmanuel Macron shared his grand vision of a stronger, more unified Europe and called on newly re-elected German Chancellor Angela Merkel to back him.[i] We won’t bore you by belaboring one politician’s speech about things that may never happen, but it did resurrect several long-running questions, such as: Will the eurozone survive without a common fiscal policy, common debt and the like? Would voters support such reforms? What would they look like? There are many options, and even if folks agree on goals and principles, the specifics are messy. We don’t have all the answers and suspect no one will any time soon. Regardless, we wouldn’t overstate their importance for markets. Whether or not Macron’s push for a eurobond or fiscal union is successful, the last seven years have proven such long-term structural issues don’t materially impact stocks.

To see this, let us take our time machine back to the 2010 – 2012 European debt crisis, when the prospect of eurobonds became a going concern. Greece, Portugal and Ireland, drowning in high sovereign debt and unable to tap capital markets, had to take bailouts. Spain and Italy were teetering. Most pundits worried the euro would splinter if any of these nations defaulted and bombed out of the common currency. While each nation had its own reasons for being in trouble, many (then and now) blame the eurozone’s incomplete nature for the broader crisis: Member states share a currency and monetary policy, but taxing, spending and borrowing are country-level matters, and the rules outlaw fiscal transfers. In fiscal transfer unions like the US and UK, the strong states or constituent countries subsidize the weak, helping less competitive members skate through tough times. If the eurozone had a similar arrangement, whether through outright fiscal transfers or common borrowing via eurobonds—which would reduce borrowing costs for less competitive nations—perhaps there would be no need for bailouts.

Debate over this preoccupied eurocrats for much of 2010 – 2013. “Europe can’t last without figuring this out,” said many. Others feared trouble arising if the eurozone did become more fiscally integrated: What of spendthrift nations free-riding off responsible taxpayers elsewhere? One country’s (think: Greece) much-needed fiscal transfer is another country’s (think: Germany) bailout—unpopular! Similarly, why should more creditworthy countries back riskier debt just because peripheral nations ruin their finances and fudge budget numbers? At the time, we spent quite a lot of pixels covering the debate—not because it had high stakes for markets but because it was sort of an interesting conversation. As we wrote in 2014 following Greece’s not-so-triumphant return to international bond markets, disputes over which reforms could have sidestepped the debt crisis and how to prevent future ones stalked European markets for years—but didn’t end the bull. To quote:

Commentary

Fisher Investments Editorial Staff
Emerging Markets

How Emerging Markets Fit in a Global Portfolio

By, 09/29/2017
Ratings714.338028

With nearly three-fourths of 2017 in the books, global stocks are up nicely—hoorah! However, one segment of the market looks particularly tantalizing: Emerging Markets (EM). They are up nearly 30% year-to-date and are outpacing developed world markets—including the US—and enticing all comers. While we too are generally optimistic about EM presently, that doesn’t mean we’d encourage investors to make a broad categorical play without delving deeper. Whether you’re dabbling in EM as a global investor or have more exposure, it’s important to consider country-specific nuances. Investors must differentiate among EM opportunities because they aren’t a homogenous category, and specific sector drivers likely have a big influence on performance. 

First off though, it’s important to understand a few things. While EM nations tend to grow faster than the developed world, their stocks aren’t inherently superior. Stocks are stocks, and everything has its day in the sun and the rain. EM stocks have had some great times, but they have lagged developed markets for most of this bull market. While the MSCI World has returned about 245% since March 9, 2009, the MSCI EM is up only about 174% since the same date.[i] (Exhibit 1)

Exhibit 1: MSCI Emerging Markets Vs. MSCI World Since March 2009

Research Analysis

Fisher Investments Editorial Staff
Into Perspective

Market Insights Podcast Emerging Markets Update-June 2017

By, 06/23/2017
Ratings273.925926

In this podcast, Communications Group Manager Naj Srinivas speaks with Research Analyst Scott Botterman about recent developments within Emerging Markets and our current outlook.

0:50 – MSCI announces Chinese A shares to be included in Emerging Markets index

Research Analysis

Christo Barker
Into Perspective

Victory to En Marche!

By, 06/19/2017
Ratings104.15

The fourth and final round of French national elections concluded over the weekend, clearing a major milestone in the year of falling political uncertainty. President Emmanuel Macron’s centrist La République En Marche! party and its ally, the Democratic Movement (MoDem), gained a clear majority in the National Assembly after winning 61% of the seats (350 of 577) in the second round of the French parliamentary election. (Exhibit 1)

At a surface level, this result technically reduces political gridlock in France. However, the En Marche party is itself an exercise in gridlock, as it is essentially a blend of center-left and center-right politicians. It includes lawmakers that defected from both of the traditional Socialist and Republican Parties. A centrist coalition likely pursues more moderate policies aimed at incremental change rather than broad, sweeping legislation with the potential to really shock markets. For example, the party’s primary policies likely include reforming labor laws, cutting corporate taxes, reducing a bloated civil sector and promoting entrepreneurship. Yet none of the proposals unveiled thus far appear terribly radical. Labor market reforms, for example, appear to dance around third rails like France’s 35-hour workweek. Plus, En Marche is also just over a year old, and over half of its National Assembly members haven’t held any political office before. How well these political novices work with the old guard—and how well the center-right and center-left can agree on policy details—will be worth monitoring, but intraparty gridlock likely creates additional hurdles to legislation.

While one could argue French gridlock could dash hopes for big pro-business reforms, potentially setting up stocks for disappointment, Macron’s relatively watered-down agenda is already widely known. Moreover, having less potential for radical legislation means less chance for new laws to create winners and losers, which reduces one source of risk for markets.  

Research Analysis

Fisher Investments Editorial Staff
Into Perspective

Market Insights Podcast: Energy Sector - June 2017

By, 06/13/2017
Ratings323.5625

In this podcast, Communications Group Manager Naj Srinivas talks to Research Analysts Luis Casian and Brad Rotolo about the Energy sector’s recent developments and our current outlook.

00:56 - Major Energy stories
01:48 - OPEC vs. US production
03:50 - What could cause oil to venture out of its recent norm near $50?
05:30 - Recent globalized nature of oil production
07:03 - Technological improvements in fracking
09:15 - Natural gas byproducts
10:13 - US production meets demand

Research Analysis

Fisher Investments Editorial Staff
Into Perspective

Market Insights Podcast: Market Update - May 2017

By, 05/15/2017
Ratings623.830645

In this podcast, we talk to US Private Client Services Vice President Erik Renaud about some recent client questions on the market and our current outlook. Topics include all-time market highs, Trump Administration tax and trade policy, European elections and bear market causes. We also discuss some of the economic fundamentals supporting Fisher Investments’ bullish outlook.

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What We're Reading

By , The Economist, 10/17/2017

MarketMinder's View: This article draws on a global fund manager survey, which we wouldn’t put too much stock in by itself, but it provides a decent summation of where investor attitudes lay: “Almost half of all the managers now expect above-trend growth and below-trend inflation, what is dubbed the Goldilocks economy (she wanted porridge that was not too hot, or too cold, but just right). ... asset prices are generally high, thanks largely to low interest rates. At some point, rates will rise too much, or the economy will slow, or one of the geopolitical risks will bow up (literally or metaphorically). Until one of those three bears appear, investors will trust in Goldilocks.” The problem with these prevailing investment beliefs, however, is they aren’t stock drivers the way most think. Stocks don’t need above-trend growth (or below-trend inflation) to rally. Stocks can rise—and have risen—just fine with a slowish economy (or highish inflation). Low interest rates aren’t the bull’s fuel, either. Stocks rose despite low long rates, which flattened the yield curve, not because of them. As for short rates, stocks haven’t minded the four rate hikes since late 2015. Stocks care about the yield curve, not any one interest rate on its own, and the yield curve isn’t close to inverting. And while geopolitical risks are omnipresent, none are likely to derail the global economy and threaten stocks. Investment surveys generally aren’t very useful, except in combination with other sentiment gauges as a barometer on conventional thinking. Surveys like this inadvertently reveal why the bull market persists: Investors, though optimistic, remain far from euphoric.

By , Bloomberg, 10/17/2017

MarketMinder's View: We highlight this not to pile on any of the fine academic institutions or managers listed here—one year of performance isn’t all-telling about the merits of an investment style or strategy. However, we do think it is interesting evidence countering the notion complex investment strategies accessible to large investors are inherently superior to simpler ones. Don’t buy the hype: Craft a plan that puts you on the best path to reach your personal investment goals. Some investors find working with an adviser helpful while others prefer self-management, but regardless if you hire someone or not, simpler is often better (to paraphrase Occam’s razor). In order to build wealth, regular, boring stocks make sense for a lot of long-term, growth-oriented investors.

By , CNN, 10/17/2017

MarketMinder's View: No they shouldn’t. For one, we think it’s a stretch to characterize the center-right People’s Party (OVP) as “populist”—its history and centrist leanings suggest “establishment” is more apt, and it’s totally normal for parties to creep in one direction or the other in order to compete with a challenger. That’s just politics for you. While it is true the OVP may form a coalition government with the far-right Freedom Party (FPO), this is neither guaranteed nor a sign that euroskeptic populists are taking over. The OVP didn’t campaign on leaving the EU, and the FPO has cooled down some of its hotter rhetoric. Turns out politicians the world over moderate when the opportunity to grab power comes along—who would’ve thought! Also, we found it interesting how this article characterized establishment politicians’ wins in the Netherlands, France and Germany as “interim events” while Brexit, the US and now Austria are signs of a trend of growing far-right populism. We could flip that around and coherently argue the populists’ rises are temporary blips. In our view, this is all an exercise in why investors mustn’t let their political biases blind them. Rather than focus on speculative theories, we believe the Austrian election’s passage is another example of falling political uncertainty in Europe—a reason to be bullish, in our view.      

By , The Guardian, 10/17/2017

MarketMinder's View: We quite like this because it shows how calculating your return on a rental property you own isn’t as easy as dividing annual rent by the home’s price. That might be the technical yield, but it is only part of your return. Costs matter, too, and this piece explains a lot of them. In the example used, costs knock a 5% annual yield down to about 2%—not much different from a savings account or Treasury bonds. Thing is, those alternatives are at least liquid. If you have to sell a home tomorrow to cover sudden expenses, you probably have to accept a lower price. This is why we’ve long believed real estate just isn’t all it’s cracked up to be as an investment. Own a home for the roof over your head, by all means. But if you’re investing to reach a set of long-term goals, you’ll probably find some combination of stocks, bonds and other securities better fits your needs.

Global Market Update

Market Wrap-Up, Tuesday, October 17, 2017

Below is a market summary as of market close on Tuesday, October 17, 2017:

  • Global Equities: MSCI World (-0.1%)
  • US Equities: S&P 500 (+0.1%)
  • UK Equities: MSCI UK (-1.0%)
  • Best Country: New Zealand (+0.4%)
  • Worst Country: Norway (-1.2%)
  • Best Sector: Health Care (+0.7%)
  • Worst Sector: Materials (-0.5%)

Bond Yields: 10-year US Treasury yields fell 0.01 percentage point to 2.30%.

 

Editors' Note: Tracking Stock and Bond Indexes

 

Source: FactSet. Unless otherwise specified, all country returns are based on the MSCI index in US dollars for the country or region and include net dividends. S&P 500 returns are presented including gross dividends. Sector returns are the MSCI World constituent sectors in USD including net dividends.