Ken Fisher: Enjoy the Bull Market in 2021, but Be Vigilant About the End

Title screen appears, “Ken Fisher Provides His 2021 Stock Market Forecast.”

A man appears on the screen wearing a navy suit, sitting in an office.

He begins to speak.

A banner identifies him as Ken Fisher, Executive Chairman and Co-Chief Investment Officer, Fisher Investments.

Ken Fisher doing hand gestures time to time explaining.

Ken Fisher: So, forecasting is always tricky and every year at year end people are prone to want to ask what do you see for the year ahead? And I think it's going to be a pretty good year. It may be the last pretty good year of this, what I consider to be very long bull market, or it may not. One of the things that we've done in our analysis is, my analysis of what went on in 2020 necessary to review the year, but we saw real time as it was happening, is that we recognize that bear market as technically a bear market because it was big enough in its magnitude drop to qualify as a bear market by the standards by which bear markets are measured.

Ken Fisher: But it was so short and driven by such different features than traditional bear markets that it actually acted in almost every respect more like a significantly, maybe hugely oversized market correction in a typical V pattern than a normal bear market does. A normal bear market. Starts off gently, rolls along for a long time with some volatility cascades in the back one third of its duration to generate two thirds of the drop of the total peak to trough decline and precedes a global economic recession of a relatively normal type that is centred around overcoming and rectifying prior cycle excesses of one form or another. This one was none of that. This one was the fastest bear market off an all-time high in history by any measure. It was driven by the market needing to pre-price super-fast what would soon be governmental lockdowns all over the world to fight COVID. And you know that.

Ken Fisher: And literally in this drop from February to March 23 did not do what most bear markets normally do, which is to take more marginal companies as stocks and grind them slowly into the ground. Instead, on the way down, growth did better than value, big did better than small. And in the initial bounce off the bottom, growth did better than value and big did better than small, which does not happen when new bull markets begin.

Ken Fisher: And in that, we've continued to see, as in the period since then, growth overall done better than value, even though much of the media tells you and wrongly that value is doing better than growth. Now, they kind of got that wrong. Once they got the story wrong, they never quite got it right. But the fact is that this market has acted off the bottom more like the reaction after a correction late in a bull market, even though it was technically a bear market, than normal bear markets really act than real bear markets really act.

Ken Fisher: And so the markets in the economy are more like, acting like because this did not correct prior excesses, this did not have the normal patterns, it's acting more like an extension of the very long bull market that we've had since March 2009. And in that, as we look forward, we expect to see this process of sentiment continuing to improve. Once sentiment in the last third of a bull market starts accelerating, which it clearly has, it tends to do that for a good long time. And that's what we're seeing right now that some people are confusing with extant euphoria. We're moving toward euphoria, but we haven't gotten there yet, and the last years of bull markets are often accelerating and very powerfully positive.

Ken Fisher: We're looking at the first year of a president's term where a Democrat has won and taken the House and the Senate. The reality is that there's only one negative first year of a president's term since World War II, and that was Jimmy Carter's first year, which is only a negative 7.4%. In the rest of the years, they're all double digit positive. People fear business-oriented folk, and investors, often being more leaning to the right than leaning to the left, tend to often fear the incoming Democrat. And then the incoming Democrat has trouble getting as much of what he wanted to do as president through Congress as people might have thought. And that effect becomes positive surprise in the inaugural year. In the first and second years of president's terms, returns are typically much more varied than in the third and fourth years of president's terms. But when they're not negative, they've been hugely positive. And I don't think this is going to be a negative year. Therefore, it should be a good, strong year.

Ken Fisher: The fact is that that improving sentiment continues for a good long time. Even after you get to euphoria, the bull market continues for a reasonable period of time. How long? Too early to tell. But looking at when we started to warm up in sentiment, which is in the back half of 2020, we ought to be seeing sentiment improving irregularly through the end of 2021, and that gets us into 2022.And I never make projections or forecasts more than about a year at a time. But this should be a pretty good year. You should enjoy it. You should not let yourself get too frightened by the things that appear to be bubblicious and overly good. It's a time to get more careful and not let yourself be chasing heat and overly greedy. But you do want to stay in the market and enjoy this good time.

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A Series of disclosures appears on screen: “Investing is Securities involves a risk of loss. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice or a reflection of the performance of fisher investment or its clients. Nothing herein is intended to be a recommendation or a forecast of market conditions. Rather it is intended to illustrate a point. Current and future markets may differ significantly from those illustrated here. Not all past forecasts were, nor future forecasts may be, as accurate as those predicted herein.

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