Fisher Investments' "Three Things You Need to Know" Jan. 21st

Transcript

Austin Standiford:

Hello and welcome to the 3 Things You Need to Know this Week— our regular series designed to help you sift through the noise across social media and understand what really matters for markets.

And now, here are the three things you need to know this week.

First, a presidential transition in the US.

As a reminder, when it comes to politics, we are party agnostic and solely focused on potential risks and opportunities that may arise from political developments.

All eyes are on Washington, D.C. today for President Trump's second inauguration. Global media is abuzz with speculation about what policies the new administration might pursue. To kick things off, President Trump is expected to sign several executive orders to start his term. While executive orders often spark dramatic headlines, the actual market impact is usually far more muted. Why? Executive orders are typically limited in scope and focus on tweaking existing laws rather than creating brand new ones. Plus, courts can step in and block or adjust these actions, which we saw with both the Biden and Trump administrations early on. We'll be watching the new administration closely to see what developments arise, but we'd caution investors from any knee-jerk reactions in these early days.

Next, the 2025 World Economic Forum.

Starting today, the annual World Economic Forum convenes in Davos, Switzerland, with meetings through Friday. This event brings together business leaders, politicians, economists and others to discuss global challenges—everything from the economy to geopolitics. It's a big stage with some big names, so it's understandable why many tune in to hear what's said. But here's the thing—it's just a forum for conversation, not action. The World Economic Forum doesn't make laws or set international policies. While attendees may toss around bold predictions or debate the future of the economy, these discussions don't directly impact markets or global regulation. Investors should take this event for what it is: A lively discussion, but not an event likely to produce anything of material relevance for the economy or stocks.

Finally, the Bank of Japan.

On Friday, the Bank of Japan meets to discuss its interest rate policy, and officials at the bank are expected to debate whether to raise rates again. The Bank of Japan has been an outlier in recent years. While other major central banks raised interest rates during much of 2022 and 2023, the Bank of Japan maintained its negative interest rate policy until March of 2024. Now the reverse is true, with many central banks cutting rates while the Bank of Japan has begun raising them.

Notably, despite this policy divergence, Japanese GDP has largely followed global economic trends in recent years. We believe this illustrates how many overestimate the impact central bank decisions have on the economy. Therefore, we think the bigger picture for Japan's economy lies in what's happening globally, rather than just focusing on what Japan does from an interest rate policy perspective. The world economy grew nicely in 2024, and we believe this economic underlying trend likely carries into 2025 for now.

And that's all for this week's episode of 3 Things You Need to Know this Week. For more of our thoughts on markets, check out This Week in Review, released every Friday. You can also visit the "Insights" section of fisherinvestments.com. Tune in next week and don't forget to subscribe!