“Stocks are the best asset for building a retirement supplement”

Founder of Fisher Investments with just $250 in 1979 — now responsible for nearly $300 billion in assets under management — Ken Fisher has spent half a century challenging conventional wisdom in the financial markets. On a rare visit to Lisbon, the famous Californian investor debunks deep-rooted myths about inflation, regional wars and the true impact of protectionism, explaining in an interview with ECO why much of what is taken for granted is, in fact, already discounted and outdated in the markets.

Fisher rejects superficial analysis and fearmongering. For this 74-year-old American and author of several bestsellers on finance, it is not the Trump administration’s wave of tariffs that is fuelling inflation, but the excess of currency in the market — a lesson backed up with data, economic history and a clinical look at the big global narratives. When “only 1% of containers are inspected in the US”, he says, the effect of actual tariffs falls short of what many suggest.

In his investment philosophy, the most costly mistakes are those of consensus and blind conviction — a confession he has no trouble admitting, recalling how long it took him to free himself from the idea that value stocks outperform growth stocks. “The market is the great humbler”, warns Fisher, always ready to contradict certainties and expose where the herd is wrong.

From the pandemic to the conflict in Ukraine, through to the effect of currency volatility on the stock market, Fisher leaves us with this warning: the secret lies in connecting history and data, rejecting dogma and seeking out information that others ignore. And although he does not make projections or forecasts for the markets, he has no hesitation in stating that stocks are the best asset for long-term investment.

Over more than 50 years in the markets, what were your biggest mistakes and what lessons did you learn from these setbacks?

I think everything we do has some kind of mistake built into it, because there is no perfection in this. The biggest mistakes are those we hold on to for a long time. One of my biggest mistakes was, as a young man, to believe more rigidly in the consensus thinking about how markets work, because I didn’t fully understand that the market is much more an evaluator of so many things that would otherwise be considered wisdom. Wisdom can be read by everyone and is priced in.

I used to have notions that value stocks were better than growth stocks because of what academic studies said. It took me a long time to realise that, in the long run, no category can truly be better because the market will eliminate any perception of superiority.

Many of the mistakes made by investors take unexpected situations into account. Does this group of mistakes also include some underestimation of bizarre forms of government regulation, as already mentioned in relation to the regulatory changes that led to the subprime crisis?

Significantly. If we consider normal public policy — changes in taxes, government spending — all of this is discounted by the market because it is debated publicly. What I didn’t understand was, for example, the single biggest cause of the 2007-2009 decline: the change in the Financial Accounting Standards Board’s rules on mark-to-market accounting, which wiped about $3 trillion off bank balance sheets. No one understood what was happening at the time.

Total mortgage losses were only hundreds of millions, not billions, but the FASB rules forced banks to write down their balance sheets by $3 trillion, putting them in a position where they no longer had the capacity to lend.

And did the effects of the Covid-19 pandemic on the markets also surprise you?

During my more than 50-year career, I have seen many pandemics, but none the size of Covid. I studied what happened to stocks during the Spanish flu of 1918 — the market continued to rise. I had never seen a pandemic cause significant declines in stocks. But we had never had a pandemic where the government shut down commerce. It wasn’t Covid that caused the market to fall, it was government lockdowns.

Your investment philosophy emphasises the principle that investors should focus on “knowing what others don’t know”. In an environment saturated with information, how can a small investor gain an advantage?

Most institutional investors are mediocre. The reality is that they make decisions by committee, and committees always make consensus decisions — and consensus is already priced into the markets. If I were an individual Portuguese investor, I wouldn’t worry about what the big investment houses are doing or saying.

Most people focus on consensus, thinking the same things as everyone else. The history of what has really worked in the markets tells us that consensus is wrong most of the time.

Can you give some practical examples?

When regional wars began, such as the Ukraine-Russia or Gaza-Israel conflicts, the immediate reaction was to think that they would be a big problem for stocks. In reality, regional wars have never caused bear markets. We have a long history of regional wars.

The easiest thing any investor can do when something like this happens is to do a little research to see how many times similar events have caused bear markets in the past.

Does this mean that history still matters in the markets?

History is terribly important. If the thing that everyone fears has already happened many times in history, but the markets do not react, why should we fear it? However, we are programmed to react to certain types of things.

Another example: if our currency — the euro in Portugal’s case, the dollar in America’s — rises or falls dramatically, people always think it will be bad. In reality, there is no history of currencies causing reactions in the markets in the long term. This does not mean that sometimes, when a currency rises or falls sharply, the stock market cannot move in the same direction. What an individual investor can do is use one of the many online tools to cross-reference price series with events and measure the correlation, understanding how it works.

So, if there is no correlation in the long term, as is the case with the euro and the dollar and the market, then there is no causality — X does not cause Y. So, when alarm bells ring because the dollar or the euro is falling and it is said that this will sink the stock market, if the correlation coefficients show that ‘there is nothing there’, the sensible position is to counteract that fear.

This same contrarian thinking compared to the market at large is also evident in his thinking regarding European equities versus US equities. You have been consistently bullish on European equities throughout 2025, predicting that they would outperform US equities, as has been confirmed so far. Do you believe we are reaching a point where European sentiment has improved enough to reduce that advantage, or do you see more upside potential for European equities?

It’s not just sentiment, although I have written about that. Another part is tariffs. Tariffs always hurt the country imposing them more than the countries on which they are imposed. If we look at the countries where Trump has imposed tariffs most heavily, they have risen the most this year.

Europe has done very well as a whole, but it’s not just Europe. It’s the whole non-American world. China has risen strongly this year, Mexico has also risen a lot.

You have argued that tariffs do not cause inflation and are largely irrelevant to markets in the long term. Will the tariffs imposed by the Trump administration have a much smaller impact than people think?

The tariffs Trump sets end up being much lower than the sticker price. The Customs Border Protection Agency [the entity that controls the entry of goods into the US] has to cover several hundred import points in the US, and despite having several thousand employees, it has the capacity to inspect only about 1% of the containers that enter the US daily.

There are many legal and illegal ways to obtain lower tariffs and avoid tariffs altogether. For example, sending a product to Canada or Mexico and then resending it to the US without being noticed.

Is that why you say tariffs do not cause inflation?

It is one of the main reasons. Inflation does not come from many things that people think. It does not come from government spending or taxes. As Milton Friedman said, it comes from too much money chasing too few goods. It comes from excessive money creation by central banks. If we impose tariffs on things with inelastic demand, people have to buy them at a higher price, leaving them less to spend on things with elastic demand. Where substitution is easy, prices fall. So some prices go up, some go down, leaving the average unchanged.

That is why inflation only arises when central banks increase the amount of money in the economy, as seen in the 2021-2022 surge following the 20%–30% monetary “bucket” in response to Covid, at a time when GDP shrank due to lockdowns. This was followed by the fight against inflation with interest rate hikes starting in 2022, but monetary policy does not aim to bring prices down, only to curb further price increases.

To actually lower the price level, it would be necessary to shrink the money supply, which generates deflation and triggers the dangerous pattern of postponing purchases in anticipation of lower prices, opening a downward spiral and a greater economic downturn.

Are European and American economies at risk of deflation?

No, not at all. Money supply growth in the US, Japan and the UK is between 3% and 6% per year. With a few percentage points of GDP growth, this is consistent with inflation of 2% to 4% per year. The reality is that central banks are a little nervous because, on the one hand, they want to end the war on inflation, but they are also afraid that things will go the other way and end up causing an economic recession.

Central banks, particularly the European Central Bank (ECB) but above all the US Federal Reserve (Fed), have shown reluctance to go further in their policy of interest rate cuts, preferring to remain in a ‘wait and see’ position.

Central banks cannot control the economy by guessing at the effect of small adjustments to short-term interest rates, and the sensible approach would be to adopt a simple rule of stable money supply growth, aligned with expected GDP growth plus desired inflation, rather than discretionary short-term tweaks. Yet this discipline is rarely followed because, as Milton Friedman said, when you give central bankers ‘toys’, they will want to use them, maintaining the temptation to intervene on a case-by-case basis.

The variable that really drives the economy is not so much the price of money, but its effective availability to those who depend on bank financing. For a typical borrower, a variation of 25–50 basis points should not dictate the decision to obtain financing or not. What matters is whether or not they can obtain credit, because when the money supply is ample, ‘any fool’ can get financing, and when it closes, it is like being in the desert without water, and those who suffer first when credit tightens are the agents most dependent on banks. High-quality giants maintain access to credit, but small ‘value’ companies are usually the first to be cut when risk managers are instructed to reduce exposure.

More than the level of the key interest rate, it is this channel of credit availability that drives business expansion and contraction, defining who can invest and grow and who has to shrink. Thus, in a cautious ‘wait and see’ environment, what really matters to monitor are credit granting metrics, approval patterns and loan developments, not every marginal move in the short-term rate.

“There is no rational basis for making long-term predictions”

Long-term predictions continue to seduce investors and analysts, but Ken Fisher warns that they are nothing more than a dangerous illusion, criticising the insistence on seeking deterministic formulas in asset valuation. What really makes the difference, argues the legendary investor, is knowing how to identify relevant factors that are being ignored by the consensus, exploiting the misalignment between fear and euphoria and using historical data as a source of opportunity.

Despite his scepticism about long-range projections, Fisher remains convinced of the unparalleled role of equities in wealth creation. The stock market, he observes, is a reflection of everything that springs from the human mind to improve people’s lives, bringing together successes, failures and innovation. That is why, even in times of crisis, it remains the most powerful asset for accumulating wealth and ensuring a solid supplement to retirement, he says.

In your book, The Only Three Questions That Still Matter, the first question you ask is, “What do I believe is false?” What is the most common belief among investors that is false?

People simply cannot get over the idea that valuations are discounted from the direction of the market. In this book, I show data that clearly demonstrates that, over periods of one, three and five years, valuations say nothing about the direction of the market.

We have a long history of share prices and valuations. It is easy to look at the price level of an index at the beginning of the year, its valuation, and know what the return was 12 months later. When I do this for every year, we find that they have exactly the same number where the market performs well versus poorly.

So what matters when choosing stocks? What indicators should investors use to evaluate opening a position in a company?

The most important thing is to see what is happening that is important, for better or for worse, but that no one pays attention to.

Does that mean knowing how to identify so-called ‘Black Swans’?

Black swans refer only to negative events and by definition happen once every 100 years. Looking for something that happens once every 100 years is a foolish task.

But the subprime crisis, the European debt crisis and the Covid-19 pandemic all occurred in less than 20 years.

So my reasoning is correct. The stock market crash during Covid-19 was brief – it lasted about three weeks – which is an exception that proves the rule, whereby the effective approach is to look for relevant factors, positive or negative, that are being ignored by the consensus rather than reacting to momentary noise.

In markets, what typically works is to identify where fear or euphoria are misaligned with history and data, because that is where opportunities arise to counter the crowd based on evidence and probabilities, not guesswork.

Is that what you find, for example, in the relationship between interest rates and equities?

Yes. A recurring misconception is to assume that rising long-term interest rates are, in themselves, bearish for equities. Historical evidence shows that there is no such determinism, and many analysts do not even correctly distinguish between short-term rates (influenced by central banks) and long-term rates (set by the market), confusing channels and time horizons.

The useful exercise is simple: observe movements in long-term rates over more than 100 years and see how often they coincided with rises or falls in equities, rather than accepting the assumption of automatic causality — a discipline that helps to focus on what is significant and little observed, and to ignore what is just noise.

In another of the many books you have written, Plan Your Prosperity, you argue against the ‘10% myth’, which assumes that stocks yield 10% per annum in the long term. What realistic expectations should investors have for the coming years?

I never make long-term predictions. I believe that the market is discounting approximately 3 to 30 months into the future. In the long term, it is changes in supply that control prices. No one knows how to predict changes in supply, so there is no rational basis for making long-term predictions.

Look at Robert Shiller, who used the CAPE ratio to make 10-year forecasts since the 1990s and was always wrong. All along, he said we should have below-average returns, when we had above-average returns.

But even without making long-term projections, do you still believe that, in the long run, stocks are the best asset for building a retirement supplement?

Yes. stocks are still the best asset for building a retirement supplement because they are the only instrument that takes advantage of all the things that come from the human mind over time and that improve the material life of humans.

The global stock market is the collection of all economic activities that spring from the human mind to improve things for people. It is true that some companies fail, others succeed, and new companies emerge along the way. But everything that can be thought of in someone’s mind and that ultimately improves life is reflected and aggregated very well through the stock market.