Ken Fisher: Don’t Fall for This Wartime Investment Mistake
Ken Fisher argues that defense stocks do not perform as many investors expect during geopolitical conflicts. He explains that brief spikes in defense stocks at the start of a conflict typically fade and often lead to underperformance from the conflict's onset. Only unexpected, material increases in global defense spending drive sustained gains in defense stocks.
Summary
In this short commentary, veteran investor Ken Fisher addresses a common misconception about defense stock performance during geopolitical conflicts. He opens by referencing his longstanding characterization of the stock market as 'the great humiliator,' a term he says he has used for decades to describe the market's tendency to confound investor expectations.
Fisher focuses specifically on the behavior of defense stocks when geopolitical tensions or armed conflicts emerge. He notes that while there is typically a brief, sharp rise in defense stocks at the onset of a conflict, this rally is usually short-lived. In most cases, defense stocks subsequently underperform and often end up below where they were at the start of the conflict — a pattern he says has played out in the context of the Iranian conflict referenced in the video.
Fisher then explains what actually drives sustained, meaningful gains in defense stocks: an unexpected and material increase in defense spending, not just in the United States but globally. He emphasizes that it is the surprise element of increased defense budgets — spending above and beyond what markets had already priced in — that creates the conditions for a lasting rally in defense sector equities. A short-duration military conflict, by contrast, does not provide that fundamental catalyst.
He concludes by reinforcing his core message: defense stocks do not behave the way most investors hope or expect when a conflict begins, and falling for that assumption is a mistake he urges investors to avoid.
Key Insights
- Fisher argues that the stock market functions as 'the great humiliator,' designed to confound as many investors as possible — a characterization he says he has held for decades.
- Fisher claims that when geopolitical conflicts begin, defense stocks experience only a brief, sharp spike that typically does not last long before reversing.
- Fisher asserts that defense stocks during the Iranian conflict followed the typical pattern, ultimately underperforming from the beginning of the conflict — not just afterward.
- Fisher argues that what actually drives sustained gains in defense stocks is an unexpected, material increase in defense spending on a global basis — not merely the outbreak of a conflict.
- Fisher emphasizes that it is the surprise element of defense spending increases — above and beyond what was previously expected — that is the necessary ingredient for a lasting rally in defense stocks.
Topics
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