Ken Fisher Discusses Market Corrections, Bitcoin, the Auto Industry and more– February 2025

Transcript:

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Naj Srinivas

Hello and welcome to the Fisher Investments Market Insights podcast, where we discuss our firm's latest thinking on global capital markets and current events.

I’m Naj Srinivas, Executive Vice President of Corporate Communications here at the firm. Today, we’ll hear from founder, Executive Chairman and Co-Chief Investment Officer of Fisher Investments, Ken Fisher.

In this episode of Market Insights, Ken answers some common listener questions to help you better understand the world of finance and investing.

But before we dive in, I'd like to ask you a favor. Recommend our podcast and rate it wherever you listen. In just a few minutes, you can help make this valuable information available to even more people. Thanks so much for your help, in advance.

With that, let's dig in with this month’s Ken Fisher mailbag. Enjoy.

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Ken Fisher

So, every month I get questions sent in to me and I'm 74 years old, so my eyesight's not that great. I write them up with big letters so I can read them. And then I read them to you. And I do my best to answer them real quick. So, one here is, since newly elected President Trump seems to look favorably on cryptocurrencies, does that change your outlook on Bitcoin?

The answer is no. I don't need to give you a lot on this. I've been writing recently a fair amount about this topic. Bitcoin and other cryptos are inherently volatile. They've done spectacularly well since their introduction. But with extreme volatility that's included periods that were down, you know, peak to trough 80%. If you think you can time that kind of volatility, you don't need any advice from me about anything.

But the fact of the matter is my views are neither firm and or again, let me just give you a couple of them real quick. There's no industrial usage to any of the cryptos. Bitcoin itself has a limited supply, but crypto itself has no limit to its supply. And in the long term, one cryptocurrency which isn't really they're not really currencies, they're commodities, will compete against every other.

So, you're talking about a category that a long term has unlimited supply. And they keep coming up with new ones. Is President Trump a promoter of crypto? Yes, but let me just make the point to you that everybody knows that and therefore it's already priced into the marketplace. And presidents aren't kings. The regulatory status of that will be determined in the agencies and in Congress. And presidents aren't kings. And I always say, and I will say again, this president, like every other president before him, will be able to get less done than some people hoped for, and other people feared. That was my view before. That's my view now. I'm sticking with it, and I don't really need crypto to get me to where I need to go to. And I don't think you really need crypto to get you to where you need to go. But if you think you can time something as volatile as crypto has been, or Bitcoin has been, my hat's off to you. You know more about how to time sentiment than I do, because that's what it is. Full stop. It's forecasting shifts in sentiment better than other people. And good luck to you with that one.

Why did the market go up after the election?

The market did go up initially, and that was excitement that Trump would be pro-business, anti-regulatory. This would be great for stocks. They'd be growth promoting. And I think maybe they're just too much optimism there in the short term.

During a bull market, what's the longest time that a correction can last, and a correction is defined in the question as 10 to 20% drop, which is the way corrections are typically defined. And there's no real rule on that. But the definition of a correction is a short, sharp drop in the marketplace that typically goes away about as fast as it comes. You could argue that periods like the 2020 Covid crash, which went on for about three weeks, and then a sharp bounce back, was really kind of just an oversized correction rather than a bear market. You could argue that 2022, where the market is down peak to trough, about 25%, at ten months long, was a little too long to be a correction, and therefore it's a bear market over 20%. I mean, it was over 20%, that's fact.

But the reality is most corrections are a 3, 4 or 5, 6 months at the most. And they tend to go away real fast, and they tend to have a scary story that ends up proving to be not able to create a full scale bear market. And there's no absolute rule about exactly how long is the longest they can run.

I love this one, whoever did this must be young. Some investment return calculators use a 10% average annual growth estimate today, higher than the 6 to 7% used 30 years ago. Do you expect average annual returns to increase in the future?

I don't get it. Let me just go back to the question. Some investment return calculators use a 10% average annual growth estimate today, higher than the 6 to 7% used 30 years ago. 30 years ago, there were no investment return calculators. 30 years ago, you had calculators that allowed you to input whatever you wanted, but they didn't input for you. So, this notion that it was a 6 or 7% assumption and whatever assumption you wanted it to be.

Now to the other part of the question, I do not believe that there was any 30 years ago I would have said normal returns in the stock market are about 10%, if you're talking about including inflation. And then if you're talking about inflation adjusted, then they'd be about 6 or 7%. I don't have a reason to have a long-term forecast of where the stock market go. I've never had a long-term forecast of where the stock market goes. I don't think there's a right way to have a long-term forecast for where the stock market goes, which leads directly into the next question, which was, why don't you try to forecast 5 to 10 years out?

And the answer is because there isn't a right way to do it. So let me take you to this. Over the course of the time of a year, the big shift in the stock market is always whether things work out better than had been expected or worse. It's always about what today's sentiment is compared to reality about 12 months out.

Therefore, shifts in sentiment are terribly important. As I wrote about at some length in my Only Three Questions book, shifts in sentiment are really the equivalent of saying shifts in demand for the ownership of equity. Now humans, being the way we are, individually, and more so as a group, can only get so optimistic or pessimistic for so long before the emotion being away from our normal emotion begins to wear on us.

If you get in your normal person too depressed for too long, it's fatiguing. If you get too manic for too long, it's fatiguing, and then you tend to revert back to your normal sense of optimism or pessimism. And as a culture, we do the same thing, but within tighter bandwidth, because we're all averaging out. So sentiment can only swing so much one way or the other before it tends to mean revert.

And that tends to happen over not terribly long time periods because we get worn out. There's a limit to how much sentiment can go up, and there's a limit to how much sentiment can go down. But with supply, there is no limit. We have no way to know, how to forecast supply long term. Pricing is set by shifts in demand and supply. And in the long term, supply is more powerful in setting price than demand is because in the long term, to create supply of securities is really, the eagerness, of vendors to create security, which just translates into pieces of paper and a little bit of regulatory. But that's why it's so deadly.

Once people get excited about category X and they get excited about it too long, too much, wait a while and you'll see supply coming out of the woodwork. And it can keep coming out of the woodwork until it brings the price back down to normal. You can see that over and over and over again. Perfect example of that was the 1990s with tech. You create the supply, eventually it brings the pricing back to normal.

Is too extreme over the process? Yes, sometimes it way too extreme. Stocks are volatile, but the reality is I don't know a way to forecast supply ten years from now or five years. And if you think people are bad at forecasting a year out, you should see how bad they are at forecasting ten years out, unless they just sit there and say, you know what I'm going to forecast today and ten years from now, come back and see if you can even find me.

Where do you see the auto industry going?

I don't have a bad joke about this. Driving off the cliff. They're going to have a crash. I don't have a bad joke. Particularly different, fuels versus EVs. I've said this before in relation to so many other things. For more reasons than I've actually got time to explain, we are not going to get away from fossil fuel, whether in cars or overall, otherwise, in my lifetime, and probably not any. The fact of the matter is the laws of physics works against that. There's all kinds of other forms of energy and some of them work just fine, but there's either political or cultural arguments against expanding them on a large basis. Fundamental problem with a lot of them is, they only exist today because of government subsidy.

That's true if you're electric vehicles. That's true, and mind you, you're going to need a lot more than that to increase the charging stations. That's true of wind, except for periodically. Sometimes the wind works, sometimes it doesn't. You can't rely on wind all the time. Nuclear's got a lot of people upset about putting in nuclear stuff. Maybe what happens if you get a Chernobyl? We've had a culture that's held up part of the political culture biased against nuclear all of my life.

So where do I see this going? First off, I think the auto industry should be largely fuel the California's interesting example. Labels. Anything you can have? Whatever it is after, I think it's 2035.You can't have, anything but, in gas powered cars. Watch what happens in California when you get close to that, it'll go away. I mean, that'll fall faster than, you know, a castle built out of a deck of cards. So my view is, I don't really see the auto industry going anywhere in relation to different levels of fuel, except for offering options to those that really want to pay a price for it.

Thank you very much for listening to me. I hope you found this useful. I'd bet that was when a lot of you didn't want to hear. But it is true. And thank you and I hope you have a great month until I come back and answer grab bag questions again next month.

Naj Srinivas
That was Ken Fisher answering listener questions as part of his monthly mailbag. Thanks to Ken for sharing his insights with us.

If you want to learn more about the topics discussed today, you can visit the episode page of our website, Fisher Investments.com. You'll find a link to that in the show description. While you’re on our website, you can also subscribe to our weekly digest, which rounds up our latest commentary and delivers it right to your inbox every week. And if you have questions about investing or capital markets that we can cover in a future episode of Market Insights, email us at marketinsights@fi.com.

We'd love to hear from you, and we'll answer as many questions as we can in a future episode.

Until then, I'm Naj Srinivas. Thanks for tuning in.

Disclosure:
Investing in securities involves the risk of loss. Past performance is no guarantee of future returns. The content of this podcast represents the opinions and viewpoints of Fisher Investments and should not be regarded as personal investment advice. No assurances are made we will continue to hold these views, which may change at any time based on new information, analysis, or reconsideration. Copyright Fisher Investments.