Investment professionals are somewhat divided in their market outlooks. There are those like Bill Gross, Pimco's fixed income maestro, who believe we're entering a "new-normal" era of prolonged lackluster performance. Then there's Ken Fisher, who's telling investors that the idea of a new normal is garbage just as plainly as he tells investors: "Be bullish."
Fisher has 37 years of investment industry experience, having founded the well-known money management firm that bears his name. He's known for challenging conventional wisdom both in his investing and the way he runs his business, recently sharing the Tiburon CEO Summit Award with discount-brokerage pioneer Charles Schwab. And like Bill Miller, he's bullish on stocks; in his words, "While obviously far from March's lows, stocks (globally) are still very cheap by historical standards."
Doing the bull dance, feeling the flow
Fisher says we're still in the early stages of a bull rally, and that the stock market is simply doing what it has always done after a major pullback: springing forcefully forward. All year, Fisher has been telling investors: "Big bear markets are almost always followed by big bull markets in a V-shape pattern. The steeper the decent, the steeper the ascent."
The sectors that fall with the most force, he claims, bounce back the most. Fisher says: "Skip the biggest U.S. banks. Focus instead on materials, industrials and technology. More important, invest heavily overseas, where opportunities are the best."
Consumer discretionary strength
Fisher has also observed over the years that the sectors that perform well in the first half of a bear market -- and underperform in the back half -- usually lead in the first half of a bull market rally. For example, take a look at the following table comparing the respective performances of the S&P 500, Disney
Dates |
S&P 500 |
Disney |
DuPont |
---|---|---|---|
10/9/07 through 10/2/08 |
(29%) |
(15%) |
(19%) |
10/2/08 through 3/9/09 |
(39%) |
(47%) |
(57%) |
3/9/09 through 11/30/09 |
62% |
94% |
123% |
Source: Yahoo! Finance.
You can see that the behavior of Disney's and DuPont's stock prices supports Fisher's argument. Fisher says that the same pattern repeats itself throughout the materials, industrials, technology, and consumer discretionary sectors, but that right now, it's the consumer discretionaries that have the most potential for further price appreciation.
One such stock that Fisher has been touting lately is toymaker Hasbro
What else is on the table?
You won't have to dig very far to find Fisher's recommendations; he's one of the more outspoken investment professionals around. Recently, he's hailed Spanish energy syndicate Respol
Fisher also likes the South American petrochemical giant, Braskem. He says it's still a buy, arguing that, "In this hemisphere only Dow Chemical
Not so new normal
Finally, Fisher has one final response to Bill Gross and other new normal believers: Consider the source. He notes that Pimco "is getting into the equity business right now. Watch what its managers do, not what they say." In a bull market, interest rates are likely to rise, and fixed-income investors will have a tough time making profits. If Fisher's predictions about the stock market are right, it's easy to understand why even the company running the biggest bond fund in the world might want to get in on some of the action in stocks.
What do you think about Fisher's optimism? Do you agree with the new normal sentiment? Are you buying global equities? Let us know what you think in the comments section below.