Fisher Investments Editorial Staff
The Global View, US Economy, GDP

Thankful the World Over

By, 11/27/2014
Ratings84.875

Thanksgiving is an American holiday, a time when we in the States give thanks for the many blessings in our lives. Family. Friends. Health. Turkey.[i] But we have our own Thanksgiving tradition here at MarketMinder: A global celebration of the bullish backdrop underpinning stocks—reasons investors the world over can celebrate right along with Americans, no matter their definition of football.

Overall Positive Political Scene

This year’s US midterm elections all but assured continued government gridlock—a positive for stocks many miss. Forget party affiliation. (Especially, we’d advise, at the dinner table.) Whether you celebrated or mourned the Republicans taking the Senate and adding to their House majority, the White House is still controlled by the Democrats—gridlock! The likelihood contentious legislation potentially dinging stocks or the economy becomes law is low, a plus for stocks. Since 1928, 86.4% of midterm election year Q4s—and the following Q1 and Q2 have been positive—well above the average quarter’s 67.8% frequency of positivity.[ii] While the identical frequency figure is coincidental, gridlock’s positivity is causal.

Fisher Investments Editorial Staff

Some Thoughts on 2016

By, 11/25/2014
Ratings134.192307

Don’t get all fired up over the 2016 Presidential election just yet. Photo by Joe Raedle/Getty Images News.

Editors’ Note: Our discussion of politics and elections is purely focused on potential market impact. Stocks favor neither party. Believing in the market/economic superiority of one group of politicians over another can invite bias—a source of significant investment errors.

Fisher Investments Editorial Staff
Investor Sentiment

All Quiet on the Record High Front

By, 11/24/2014
Ratings184.111111

This is a peak. The 131 S&P 500 record highs in this cycle were not peaks. Photo by Claude-Olivier Marti/Getty Images.

Stocks have quietly set a string of new all-time highs in recent weeks.

Fisher Investments Editorial Staff
The Global View

The Unnecessary $2 Trillion Global Stimulus Economic Benefit Concert

By, 11/21/2014
Ratings163.9375

Are the world economy’s lights flashing red or green? Photo by David Arthur/Getty Images.

Here is a memo for the G-20: The global economy is actually growing.

Fisher Investments Editorial Staff
Into Perspective

Clearing Up Bond Trading

By, 11/20/2014
Ratings213.714286

Most bond trading is as opaque as this black case. Photo by Todd Bliman.

Here is a simple question that often doesn’t have a simple answer: How much did you pay to buy that bond? This week, the Municipal Securities Rulemaking Board (MSRB) and the Financial Industry Regulatory Authority (FINRA) proposed amendments to their current rules that seek to make that answer easier to come by, clarifying transaction costs for municipal, corporate and agency debt securities. Their plan is a step in the right direction, in our view, but the proposed rules are still less clear than they could otherwise be.

Fisher Investments Editorial Staff
The Global View

Is the World Turning Japanese?

By, 11/19/2014
Ratings163.96875

Monday’s news of Japan falling back into recession continued spurring headlines Tuesday, albeit of a different flavor. They stopped expressing shock at Abenomics’ inability to spur growth and started fearing the world is turning Japanese too—and about to take stocks down with it. However, we humbly suggest the issues hamstringing Japan are the same ones that led to its lost decade. That didn’t go global, and we see little reason to think this time will be different.[i]

Japan’s struggles stem from its … ummm … unique take on capitalism, which is rather more mercantilist than Smithian.[ii] The result: deep structural issues like waning productivity, narrow labor markets, protectionist trade policy and an uncompetitive corporate sector dominated by large, horizontally integrated keiretsu—to name just a few (we could go on). These are supposedly in Japanese Prime Minister Shinzo Abe’s crosshairs, the target of long-promised but undelivered structural reforms.

But most pundits don’t acknowledge how much these structural issues muffle Japanese growth, arguing the lost decade[iii] was a product of deflation and demographics. They don’t acknowledge deflation is a signal—not a cause—of deeper problems. To the extent demographic issues are problematic, they are no match for a free, open economy. From this misdiagnosis, the experts hunt for the next economy ripe for its own “lost decade.” Today’s popular target: the eurozone.

Fisher Investments Editorial Staff
GDP

Sinking Fortunes in the Land of the Rising Sun

By, 11/18/2014
Ratings273.814815

No word on whether Australian PM Tony Abbott was giving Japanese PM Shinzo Abe election tips or just making a funny. Maybe both? Photo by Ian Waldie, Pool/Getty Images.

Pop quiz: What do you get when you hit a struggling country with higher prices and a three percentage point sales tax hike? Give up? Recession! At least, according to Japanese GDP released Monday that’s what Japan got, with the second straight GDP contraction placing the archipelago into recession by one common definition. Globally, this doesn’t mean a ton—growth elsewhere is more than enough to offset Japan’s -1.6% annualized Q3 drop. But the causes and domestic fallout reiterate why we’ve long thought investors’ expectations for Japan are too high and better opportunities lie elsewhere.

Fisher Investments Editorial Staff
Across the Atlantic, GDP, Investor Sentiment

The Eurozone’s Emerging Market Emerges, and Other Fun Q3 GDP Factoids

By, 11/17/2014
Ratings374.364865


Eurozone officials should really update this scuplture, as it is six stars short of the 18 current members. Actually, maybe they should just wait until 2015 and bring it to 19 reflecting Lithuania's membership. Photo by Getty Images/Bloomberg.

Preliminary Q3 2014 eurozone GDP hit Friday morning, and the data show the 18-nation bloc grew 0.2% q/q (0.6% annualized), beating analysts’ estimates calling for 0.1% q/q growth. This comes a day after US Treasury Secretary Jacob Lew wagged an accusatory finger at European leadership, claiming all that severe austerity they allegedly enforced at Germany’s insistence risks a “lost decade.” The deflationary depression drumbeat continued even after these better-than-expected growth data, with most claiming growth will prove “insufficient to create jobs,” too weak to forestall deflation, too sluggish to reduce debt and, perhaps most interestingly for investors, that core (French and German) weakness will prove too powerful for the rebounding periphery to offset. This last part is something of a sentiment sign-of-the-times worth noting.

First, some fun factoids:

Fisher Investments Editorial Staff
Emerging Markets, Into Perspective

All Aboard the Through Train?

By, 11/14/2014
Ratings294.137931

Starting Monday, foreign investors will have unprecedented access to mainland  Chinese stocks courtesy of the delightfully named “through train” program, which lets foreigners buy “selected” Chinese A-shares traded on the Shanghai exchange through Hong Kong brokerages. Many are cheery about the prospect of new demand worth tens of billions of dollars pushing Chinese stocks higher. But before you choo-choo your way over, we’d encourage you to keep a rational perspective. China has plenty going for it, but anyone expecting the through train to be the ticket to sky-high returns might end up a tad disappointed.

In recent years, Chinese A-shares haven’t quite reflected the economy’s rapid growth rate. They boomed at times during the 2000s bull market, but as Exhibit 1 shows, this was short-lived and out of step with the global bull that began in 2003. As of Thursday’s close, A-shares were still 36% under their 1/14/2008 peak. Meanwhile, China’s economy kept on chugging, taking Japan’s place as the world’s second biggest. Not that stocks and GDP should move one-to-one—that isn’t how it works ever. But it underscores how China’s political climate, capital market controls and sentiment have offset many an economic tailwind.

Exhibit 1: Chinese A-Shares

Fisher Investments Editorial Staff
Politics

What to Expect from Lame-Duck Season

By, 11/13/2014
Ratings453.844445


President Obama and Congressional leaders enjoy a friendly post-midterm lunch. Photo by Dennis Brack/Pool via Bloomberg.

Editors’ Note: Our discussion of politics and elections is purely focused on potential market impact. Stocks favor neither party. Believing in the market/economic superiority of one group of politicians over another can invite bias—a source of significant investment errors.

“What can we expect from the next Congress?” Over a week after midterms, speculation still hogs headlines. The latest: Some say this year’s lame duck session is the acid test. If the long-bickering, do-nothing, 113th Congress can shake hands and pass a raft of measures, we’ll know the 114th can break the ice, too. And if not? Don’t expect bipartisan compromise the next two years. But this overlooks what Congress usually does during the two-month purgatory between the election and when the guard changes in January. We believe investors should expect a typical lame-duck session, which doesn’t really indicate much of anything about what follows.

Fisher Investments Editorial Staff
Personal Finance

Risky Business

By, 11/12/2014


There is more risk than just volatility (and a board game). Photo by Robert Nickelsberg/Getty Images.

Risk. This four letter word both tempts and terrifies investors. Some folks think it’s the ticket to sky-high returns. Others find it scary or uncomfortable. Both mentalities lead many to an effort to measure it. Because if you can quantify something (e.g. this stock is risky based on this metric), you can understand what you’re dealing with—and understanding things is nice. Don’t want much risk? Avoid the thing with the higher risk number! But as one stellar paper we recently read thoroughly explained, you can’t reduce investment risk to a single number or set of figures. Most investment risks aren’t actually quantifiable. Believing they are can lead to truly risky portfolio decisions. 

Interested in market analysis for your portfolio? Our latest report looks at key stock market drivers including market, political, and economic factors. Click Here for More!

Fisher Investments Editorial Staff

Mark Carney Wants Big Banks to Save More—in Bullet Points!

By, 11/11/2014

The Financial Stability Board released plans to make banks less “too big to fail”[i] Monday,[ii] continuing their long-running effort to prevent governments from ever profiting off failing banks again.[iii] Or taking losses. Or just bailing them out in general. Starting in 2019 or so, a few dozen of the world’s biggest banks must hold at least twice as much “loss absorbing capital” as normal banks so they can replace bailouts with “bail-ins,” Cyprus-style. Regulators, led by BoE chief Mark Carney, believe this will allow the system to deal with failing banks in an orderly way, without triggering panic, and without governments stepping in. We are skeptical.

Here is a quick outline of the FSB’s plan:

Who: “Globally Systemically Important Banks,” aka G-SIB—the 30 biggest and/or most interconnected banks globally.[iv] Here is the 2014 list.[v] Here is the geographical breakdown:

Fisher Investments Editorial Staff
US Economy

The Employment Sentiment Trap

By, 11/10/2014
Ratings224.772727


There are plenty of reasons to cheer the US economy's prospects, but unemployment isn't one of them. Photo by Thomas Starke/Bongards/Getty Images.

October’s jobs report was another dandy, as payroll gains topped 200,000 again and the unemployment rate ticked down from 5.9% to 5.8%, its post-war (1948) average. We’re inclined to spare you the bells and whistles and say, “here’s more confirmation the economy grew recently.” Headlines, however, claim sunnier labor markets mean the economy is improving and has momentum—reasons to be bullish. Public Service Announcement: Unemployment, a late-lagging indicator, is pretty much never a reason to be bullish or bearish. Assuming it is can lead investors to a dangerous place.

Interested in market analysis for your portfolio? Our latest report looks at key stock market drivers including market, political, and economic factors. Click Here for More!

Fisher Investments Editorial Staff
Politics

Goldilocks Gridlock

By, 11/06/2014
Ratings614.254098

 
We vote for gridlock. Photo by Scott Olson/Getty Images. 

A reminder: This article deals with politics, which we are told is often a contentious topic. Please note we don’t favor any political party—Republican, Democrat, Tory, Labour, Green, LDP, DPJ, Fidesz, etc.—and believe that ideology is blinding and quite dangerous to your portfolio’s health. All (excluding maybe Fidesz) have done good and bad things for stocks over time.

Hey! Did you hear? The US midterm elections are over, with the Republicans logging a lopsided win to wrest Senate control from the Democrats and increase their House majority. Well, of course you did. Additionally, the GOP took the majority of the gubernatorial races, in what amounts to an electoral trifecta (or tri-terror, depending on your point of view). We admit, we were modestly surprised by the victory margin. As we wrote here and here, the structure of this year’s midterm tilted Republican all along, but we expected a Senate sweep would require a virtually perfect campaign. Ah well, the outcome is the same either way—gridlock, which stocks love. In fact, we got even more delicious gridlock than we expected. We would suggest tuning out the media speculation over what it all means and where the two parties can agree. Celebrate instead this bigger, material positive for stocks.

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Recent Commentary

Fisher Investments Editorial Staff
The Global View

Thankful the World Over

By, 11/27/2014
Ratings84.875

There is much to be thankful for, not just in the US, but globally too.  

read more
Fisher Investments Editorial Staff

Some Thoughts on 2016

By, 11/25/2014
Ratings134.192307

Some polls show some people would get some votes if New Hampshire held a Presidential primary today.

read more
Fisher Investments Editorial Staff
Investor Sentiment

All Quiet on the Record High Front

By, 11/24/2014
Ratings184.111111

What can we glean from the media’s lack of attention to the market’s recent record highs?

read more
Fisher Investments Editorial Staff
The Global View

The Unnecessary $2 Trillion Global Stimulus Economic Benefit Concert

By, 11/21/2014
Ratings163.9375

The G-20’s vague, unlikely-to-materialize stimulus plan is nice sounding, yet unnecessary.

read more
Fisher Investments Editorial Staff
Into Perspective

Clearing Up Bond Trading

By, 11/20/2014
Ratings213.714286

How far do regulators’ rule proposals go for improving transparency for bond investors?

read more

Global Market Update

Market Wrap-Up, Tues Nov 25 2014

Below is a market summary (as of market close Tuesday, 11/25/2014):

  • Global Equities: MSCI World (+0.2%)
  • US Equities: S&P 500 (-0.1%)
  • UK Equities: MSCI UK (+0.2%)
  • Best Country: Ireland (+2.0%)
  • Worst Country: New Zealand (-2.7%)
  • Best Sector: Consumer Discretionary (+0.7%)
  • Worst Sector: Energy (-1.2%)
  • Bond Yields: 10-year US Treasurys fell .05 to 2.26%

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. Sector returns are the MSCI World constituent sectors in USD including net dividends.