Fisher Investments - This Week In Review (Dec. 20, 2024)

Transcript

K.C. Ellis:

Hello and welcome to This Week in Review. This weekly segment is designed to highlight a few things you may have missed this week, what they mean for financial markets and, most importantly, for investors.

Now, let's review what happened this week.

First, German politics.

On Monday, Germany's coalition government lost a no-confidence vote in parliament, triggering a new election set for late February. Recent polls show growing support for far-right and far-left parties, sparking worries about how these developments could shape the country's direction.

But here's the reality these groups don't have enough backing to form a government on their own. The most likely scenario is another multi-party coalition. The exact makeup is still anyone's guess, but coalition governments are the norm in Germany. The surrounding uncertainty might weigh on markets in the short term, but once election results are in and a new government begins to take shape, that clarity should be a positive for markets.

Next, the Federal Reserve's rate cut.

Markets sank midweek following the Fed's decision to cut rates by a quarter of a percent. While the cut was widely expected, the Fed's official interest rate projections for the next couple of years suggest they may not reduce rates quite as quickly as previously thought.

For our part, we've never understood why investors hang on every forecast from the Fed or other central banks. Monetary policy has much less sway over the economy than most people think. Central bankers also notoriously deviate from their own projections. Right now, we think the best course of action is to remain calm and appreciate that the economy has held up just fine despite the Fed's meddling, and not because of it. This bull market never needed rate cuts to thrive. So, to us, this week's news changes very little.

Finally, the looming U.S. government shutdown.

Tonight, the U.S. federal government faces a funding deadline. A last-minute deal this evening or over the weekend remains possible. Uncertainty could flare and an actual shutdown might knock sentiment, but stocks usually move on quickly and rise in the months after shutdowns.

Since 1976, there have been 21 shutdowns or funding gaps, but none have caused an economic recession or a bear market. So, while dramatic partisan rhetoric and headlines may sound ominous, we believe this is a time for investors to remain patient.

And that's it for this episode.

To learn more about what we're watching, check out our other series, 3 Things You Need to Know This Week, released each Monday. You can also visit FisherInvestments.com for more insights. Thanks for joining us and don't forget to subscribe!