Fisher Investments' "Three Things You Need to Know" Feb 10th

Transcript

Ben Thistlethwaite

Hello and welcome to 3 Things You Need to Know This Week. It's our regular series designed to help you sift through the noise across financial media and better understand what really matters for markets.

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

First, U.S. inflation and tariff concerns.

On Wednesday, we'll see the latest consumer price index numbers for January. Now in recent months, you've seen inflation rise slightly, and some investors worry that tariff developments might actually make things worse. But here's what's really important to remember— inflation isn't about the prices of certain goods or certain services rising. Inflation is when prices rise across the entire economy as a whole. That comes from too much money chasing too few goods and too few services.

So, tariffs may impact demand. They may affect supply chains and create winners and losers. But what they don't do is increase money supply. So, unless the Federal Reserve significantly increases the money supply again, we believe it's unlikely that inflation will resurge. Ultimately, we don't think tariffs are necessarily good for the economy, but the threat of rising inflation isn't the reason why.

Next up, UK GDP.

On Thursday, the UK releases its first estimate of last year's final quarter of GDP and analysts are calling for a second straight quarter of no growth. Now, that might sound uninspiring, but the details really matter here. GDP—or gross domestic product—measures the total value of goods and services that are produced within a country over a specific period. But the overall number doesn't always tell the whole story. And it's really important to look under the hood and understand the components. Things like household spending, business investment and exports can really reveal what's actually driving the economy.

So, for example, while the UK's headline GDP may show no growth, stronger household spending and business investments suggest underlying economic resilience. And these factors indicate the private sector is actually holding steady, which could pave the way for future growth even if the broader economic picture seems a little stagnant at first glance. So, looking ahead, we believe the stage is actually set for even modest UK economic growth to positively surprise.

Finally, French politics.

France has been in the spotlight due to ongoing budget drama, and more developments are expected this week. For months, the government has struggled to pass a budget. This led to the resignation of its previous prime minister. That caused some volatility in debt markets as well. Its new prime minister is pushing ahead with a plan to bypass parliamentary gridlock and enact the overdue 2025 budget. Now, this move opens the door to no confidence votes against the government. The Prime Minister already survived one of those just last Wednesday, but more are expected this week. If he endures, it could reduce some of the political uncertainty that has weighed on European markets and potentially provides a boost to investor confidence as well.

And that's it for this 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 fisherinvestments.com. Don't forget to subscribe and thanks again for tuning in.