With stocks notching all-time highs here and abroad, investor skittishness is likewise going through the roof – after all, there’s more to lose than ever, right? Here are four particularly niggling and nervous questions I have been fielding of late. Let’s try and sort out which are worth our time – and, of course, our money.
Don’t the economy and stocks need the Fed to cut rates NOW?
Might Fed cuts benefit America? Sure! Cuts can steepen the yield curve — the gap between short-term and long-term interest rates. This spurs bank lending, as I detailed in July — one crucial reason that US stock markets this year have been outrun by rate-cutting Europe and other markets overseas.
But that doesn’t mean the US desperately needs cuts. As America’s own yield curve flipped from inverted (meaning short rates topped long) to flat this year, lending accelerated from 2.8% versus a year earlier at 2024’s end to 4.5% now. That should continue. America’s economy has other headwinds, but tight credit isn’t an overwhelming one.
And yes — there is a chance that Fed cuts will trigger lower long rates, including mortgage rates. But it’s only a chance — not a given. The global free market sets long rates. History proves you can’t predict long rates from short rate wiggles — at all.
How should investors position if they expect manufacturing to reshore in America?
Despite hearsay, a manufacturing homecoming isn’t necessarily bullish or bearish for US Industrial stocks. Markets mostly care about earnings. Where something is made doesn’t necessarily translate to profits. Reshoring can bring high upfront and ongoing costs – example, vastly higher environmental regulations – hurting margins.
Also, reshoring is a looooong-term issue – if it ever happens at all. Consider the investment, planning and multi-agency state and local permitting time and requirements involved in reshoring plants. Then lawsuits – NIMBY opposition dragging timelines painfully further. This takes years, far beyond the 3-to-30 month window I’ve long taught you stocks generally weigh — making current investing based on reshoring pure speculation.
Can I trust the Bureau of Labor Statistics’ jobs numbers?
Jobs data grow more slippery – not from politics but because firms respond ever less and more slowly to the BLS’s surveys – everywhere. Indeed, response rates to statisticians’ surveys are declining globally. That sparks revisions – sometimes huge ones – as lagging data trickle in. Yet private-sector data abound for cross-checking.
Critically: Monthly data are always wiggly – too noisy for sound investment decisions. Plus, jobs are always late-lagging indicators – usually confirming past realities markets previously pre-priced. Don’t fret or trust one or two months’ revisions – or any single data point.
Will President Trump’s “One Big Beautiful Bill Act (OBBBA)” kill Social Security funding?
This is fraught with politics, so check your biases. Focus on facts not opinions (which with politics most people painfully confuse). Social Security Agency (SSA) officials estimate OBBBA’s $4,000 SSA tax deduction will lop $169 billion from the Old-Age and Survivors Insurance and Disability Insurance trust funds over the next decade. That shifts SSA’s projected “insolvency” date from Q3 2034 to Q1 2034.
Scary? Zoom out. First, “insolvency” doesn’t mean “zero benefits” or the program’s “bankruptcy.” Annual revenues would keep paying about 70% to 80% of SSA’s benefits through 2100.
The SSA taxes OBBBA cuts actually account for a measly 4% of SSA’s revenues. Most – 91% – comes from payroll taxes. OBBBA doesn’t touch them. And that $4,000 deduction? It is temporary, expiring in 2028 (kind of obvious why…).
Finally, all these estimates are notoriously imprecise, hinging on assumptions about economic growth, interest rates, birth rates and more. They exclude potential future adjustments politicians can make without affecting current beneficiaries. Politicos have huge electoral incentives to keep Social Security chugging.
Welcome these fears – they form the “Wall of Worry” that fuels bull markets. Have others? Drop ’em in the online comments! I may include them in future columns.
Ken Fisher is the founder and executive chairman of Fisher Investments, a four-time New York Times bestselling author, and regular columnist in 21 countries globally.
Credit: Source link
