Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher answers viewer mailbag questions about recessions, stagflation, deflation, and more. To begin, Ken says the US is unlikely to experience a prolonged period of economic stagnation. According to Ken, the US economy thrives on innovation and doesn’t have the demographic and cultural barriers to growth seen in countries like Japan. For the same reasons, stagflation, a period of both high inflation and economic stagnation, is not a likely scenario.
Ken then explains the difference between deflation and disinflation. Deflation is a fall in the overall level of prices in an economy, which can impact consumer demand significantly as consumers postpone purchases continuously anticipating lower future prices. Disinflation refers to a slowing in the rate of inflation—prices continue to grow, but at a slower pace. Following a spike in inflation, central banks implement policies to target an inflation rate of about 2%—not a negative rate.
Lastly, Ken speaks to the idea that a recession in the near future would be widely anticipated, neutralizing most of its effects because companies and people have had time to prepare. While a recession is possible, it is unlikely to be as severe as many investors may fear.
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Investing in 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. Nothing herein is intended to be a recommendation. The opinions expressed are subject to change without notice.
