Fisher Investments' "Three Things You Need to Know" Dec. 30th

Transcript

Don Gaston:

Hello and welcome to 3 Things You Need to Know This Week, our regular series designed to help you sift through the noise across financial media and understand what really matters for markets. Here are three things you need to know this week.

First is January a good month for stocks? As the new year begins, you may hear about the popular seasonal investing adage dubbed the "January Effect". Depending on who you talk to, the belief is that January is typically a strong month in the markets or that returns in the first few days, first few weeks, or the full month of January can then predict how the rest of the year unfolds. But here's the thing: this is just another seasonal market myth that assumes past performance can predict what happens next. But the market doesn't really work that way.

Once information is widely known, it's typically already reflected in stock prices, making it unlikely that calendar based trends like these can reliably forecast the future. Sure, historical averages may show some patterns that seem convincing, but those numbers include plenty of years when the January effect didn't pan out at all. Markets are fickle, and trying to time them based on seasonal patterns is more guesswork than strategy. We believe long-term investors are better served by focusing on a disciplined plan that can withstand the test of time, rather than getting too focused on just one single month.

Next. Bitcoin. Bitcoin's price has more than doubled in 2024 and it's got people buzzing. Now returns like that sound exciting, but here's the tricky part. How confident can you really be about where Bitcoin will go in 2025, let alone five or even ten years from now? Bitcoin and other cryptocurrencies are incredibly volatile. They behave more like speculative bets than, say, traditional investments such as stocks or bonds. For instance, since just 2017, Bitcoin has had nearly 200 days where its value dropped by more than 5% in just a single day. That's a wild ride compared to US stocks, which only experienced five such days over that same period. Now, all investing involves some level of risk, but Bitcoin's track record is short and unpredictable. That makes it very tough to be confident about how Bitcoin may behave in varying market conditions. Bitcoin certainly isn't going away anytime soon, but ultimately, we believe stocks and bonds are better suited tools for helping investors reach their longer term goals.

Finally, a new U.S. Congress begins. Now, we understand politics can be a deeply personal topic for many. At Fisher Investments, we favor no political party or individual politician. Rather, we watch politics strictly to monitor for risks and opportunities that arise from political and legislative developments. On January 3rd, a new Congress is sworn in, and then the House of Representatives will vote to choose its speaker. Now, after November's election, many investors believe Republican majorities in both the Senate and the House will pave the way for sweeping legislation during the upcoming Trump administration. But we think it probably won't be that simple.

Republicans' margin of control is tiny, particularly in the House. Given this, congressional Republicans may struggle to agree on and pass major policies. December's rush to avoid a government shutdown was a pretty good example of these challenges. Even when laws do make it through both the House and Senate, they often look very different from their original proposals, and a lot of the most controversial aspects get watered down during negotiations. Whether that provides you comfort or distress. the legislative process typically gives stocks plenty of opportunity to digest winners and losers from potential legislative changes. We'll be watching this closely and look forward to providing updates as the new administration's legislative agenda comes further into focus. And that's a wrap!

Thanks for catching this week's episode of 3 Things You Need to Know This Week. For more insights, check out our This Week in Review, released every Friday, or visit the Insights section on FisherInvestments.com. Tune in next week and please don't forget to subscribe!