Fisher Investments’ Reviews How Non-US Elections May Affect Global Stocks

Transcript

Ken Fisher:

So, there's been a certain amount of talk this year—chatter, ballyhoo, whatever you want to call it—about the high degree to which there are not just the regular every four-year big elections in America, but moreover, elections all around the world in high volume this year. And that's true. A huge percentage of global GDP is having elections; A huge percentage of the world population is having elections; that's true whether you're talking about big populations that are also good-sized economies, like India or Mexico. Indonesia just did. But you run down the list, and of course, there's also some of these countries having bigger elections like we are in America, and some are having smaller elections, like Britain is this year—regional elections. But in all of this, there's an overarching trend that has some exceptions that I believe is actually quite bullish.

In America, if you're an American, you understand that gridlock is when one chamber of Congress can offset the opposition party in another chamber of Congress, or maybe the White House, which is what we have if, today, the Republican House won't go along with the Democratic Senate or the Democratic President. And what gridlock creates is low levels of legislation passed and signed by the President. This Congress that we're coming to the end of this year has the least legislation and will have the least legislation of any Congress in decades because of the gridlock. Because you can't get the Republicans or the Democrats to agree on very much.

Overseas—not completely, but mostly—you have parliamentary-type formats of elections with multiple parties instead of the two-party system. And it's harder for people to understand that even country to country, where the systems are slightly different, that those parliamentary systems can also have a different form of gridlock. And this is where no one party or group of parties with somewhat common ideologies can get enough of the vote to form a government that they control, where only control and the creation of a government through these very many splintered parliamentary parties can be formed when parties of one ideology join forces with parties of opposing ideology to create a government; to create a majority. And when that happens, which is what's happening overwhelmingly across the world right now, a flat profile on the election and a coalition being built out of folks who oppose each other. You get governments that are parliamentary forms of gridlock, and not much gets done.

Now, why do markets like that? Well, said simply, in worlds of capitalism, capitalism is really good at moving forward and creating progress, innovation and growth when rules are like fences that don't move, and they can figure out how to get in, get out, get around and move forward. Changing rules are a little bit like trying to go through a maze where the maze keeps moving around, and that's much tougher for capitalism. So, markets reflect that as they see gridlock building. And the American gridlock is an easier form, particularly for Americans, to see.

But right now, in country after country after country, with some few exceptions that are not terribly important on the scale of global GDP, we're creating forms of near gridlock or complete gridlock by parliamentary format of gridlock that allows little big change to go on; and of course, I want what I want. You want what you want. We all think we know what's best. But in reality, the changes that somebody wants impose problems on somebody else. And people hate losses more than they love gains all around the world, more so outside of America than inside of America, because Americans are, on average, more prone to be risk-takers than most countries in the world are.

But said simply, in a world where everything stabilizes because of governmental gridlock and the rules don't change much, businesses have a longer planning cycle. Stocks do well reflecting that it's a bullish feature and the focus of elections around the world this year is a contributor toward the global bull market that's going on that I've been talking about for quite some time.

Thank you very much for listening to me. I hope you found this useful and enjoyable.

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