In this sneak peek from the Action Alerts PLUS investing club, portfolio manager Chris Versace and renowned technical analyst Helen Meisler discuss how to approach headlines that can move markets in the short-term as Wall Street heads into the 2024 election with former President Trump and President Biden as the likely Republican and Democrat candidates.
FULL TRANSCRIPT BELOW:
CHRIS VERSACE: Let me say two things on this, J.D. . The first is, what do we do? We always pay attention to the data. The bread and butter of the business, right? We have to keep our head down, let the data talk to us, not get so wrapped up on what we want the data to tell us.
We've talked about this before, that's a recipe for disaster. But the other thing is when we see these bullish or bearish headlines, we want to understand what the logic is behind it, assuming that there is some. Sometimes there isn't, but we want to understand the thought process behind it. Because as we do that, it starts to clue us into what the market might be thinking.
And as much as we want to be right on our individual picks, we have to understand what could go right for the call, as it relates to the market, what could go wrong, perhaps what the herd is missing. That allows us to rethink where we want to be, how strongly we want to be it, or maybe if it's in times like this where the market might be getting out over its skis, maybe it's time to perhaps call some profits back, something that we've been doing over the last couple of days in the portfolio.
J.D. DURKIN: Chris, is the central bank the biggest potential challenge to any prediction, or is there some other catalyst to watch as we turn the page into 2024?
CHRIS VERSACE: The easy answer on that would be to say, of course, it's the Fed. Because they're going to be driving whatever happens with interest rates. But it's more than that, J.D. , to be candid. We're going to have to understand the vector and the velocity of the economy, not just here at home, but outside as well.
What does it mean for exchange rates? And then some folks will try and pinpoint, oh, the presidential election, we'll have to see what happens. As I think as we've come to appreciate, the election year tends to be a lot of noise. We'll see who wins. But the reality is that's going to be more of a 2025 impact. So I would say, I had to strip my answer down, it is going to be the Fed, it's going to be the economy, stupid.
J.D. DURKIN: (LAUGHING) It's going to be-- it's the economy, stupid, in the words of James Carville. Yeah, we'll be hearing that an awful lot the next year, there's no doubt. Speaking of noise, Helene, I can imagine how you might feel about something like a Santa Claus rally, but I do wonder if there are any trends, Helene, that you see playing out as we soon leave 2023 in the rear view, turn the page to the new year?
HELENE MEISLER: Well, I just-- I want to follow up on Chris's comment. Back in January of 2017 when everybody was concerned about Trump becoming president, I went back and I took a look at how much politics affects the market. And I can tell you that it was very hard pressed to find-- and I went back about 50 years, maybe a little bit more, almost 60 years, and I can hardly find a time when anything political, even JFK's assassination, really affected the market. So you might get a short-term this or that, but mostly what affected the market when I went back and I looked at it was taxes, earnings and the Fed. So just commenting.
J.D. DURKIN: Oh, love that long run context. So important, especially for all the conversations about how market performance may look during a presidential year. Obviously, we're not dealing with a traditional set of economic conditions, overall. But fascinating to watch, nonetheless.
