Investing

Something Has to Give, This Market Is Ready to Puke

Austin Smith

Published: December 15, 2024 9:58 am

24/7 Wall St. Key Points:

• The pre-inauguration phase is crucial for investors since market uncertainty about the possible policies of the new administration may cause inflation and cause great market volatility.
• High values in the S&P 500 and concentrated gains in tech stocks point to weakness; should policy decisions negatively affect short-term market mood, a correction is probably in store.
• Before the inauguration, investors should think about lowering their positions in risk assets and evaluating the possibility of negative market reactions to declared policies.
• Also: Are you ahead or behind on retirement? Click here to find out. (sponsored) 

Watch the Video

Transcript:

[00:00:00] Douglas McIntyre: Market pullback. So

[00:00:02] Lee Jackson: market pullback,

[00:00:04] Douglas McIntyre: Market pullback. If you’re an investor right now, you’re in some of the really hot megatech stops or you’re, let’s say you just own the S&P 500. The

[00:00:16] Lee Jackson: right?

[00:00:17] Douglas McIntyre: keep going up. We’re about to hit a period of significant uncertainty. And the uncertainty is, is what is the new administration going to do versus what say they’re going to do next?

[00:00:31] Douglas McIntyre: So

[00:00:31] Lee Jackson: Right?

[00:00:33] Douglas McIntyre: I would be very worried if all of the proposed tariffs went into place right away. If that happens, it is inflationary. There’s no argument about it. You can’t, you can’t

[00:00:48] Douglas McIntyre: go find somebody who says, well, it’s not the minute you block the level of, foreign goods coming in that 100 percent tariff Canada and Mexico would do a 20 25 percent tariff on China and the BRICS, 100 percent tariff if they decide to move away from the dollar as the reserve currency. If all of that stuff happens, the market is going to get creamed. Because it’ll be clear that inflation, which the Fed, I think, has done a very good job bringing down, could hockey stick above where it was three years ago. I mean, 8 percent could look like a good day on the CPI. So,

[00:01:32] Lee Jackson: Yeah.

[00:01:32] Douglas McIntyre: investor, I am going to look at the day of the inauguration and ask myself, do I think the administration is going to do something that even if it’s, even if it’s good idea, let’s say it’s a good idea for what happens to the United States a year out. doesn’t mean that it’s good the day you put it into place. So

[00:01:57] Lee Jackson: You’re 100 percent right? Right. Right. Well, and and like like you said, We haven’t had a string like this. I’ve written about this a lot lately, recently. We haven’t had a string like this back in, I think it was 96, 97, 98, even at 99. We had four straight years of 20 percent gains plus in the S&P 500. And we know how that ended.

[00:02:20] Lee Jackson: And I’m not saying that now the Magnificent Seven is anything like how the dot com bubble was because it’s, it’s not apples to apples, but you know, we’re trading at 38 times adjusted earnings, adjusted earnings, and that goes back and back then we hit in like 99, we hit 43 times because something’s got to give.

[00:02:40] Lee Jackson: Something has got to give and what really makes sense is, is, and we wrote a piece about this is to, especially if you’re, if you’re older and you’re a baby boomer, for goodness sakes, call your broker up and say, you know, sell half of my S and P and sell, let’s, let’s move to other items right now because when we do get a correction, it’s going to be stiff.

[00:03:02] Douglas McIntyre: Well, I’m going to call this the inauguration trade. Okay.

[00:03:05] Lee Jackson: Yep,

[00:03:07] Douglas McIntyre: You can, the last trading day before the inauguration, investor has to make a decision.

[00:03:14] Lee Jackson: yep,

[00:03:14] Douglas McIntyre: think the administration is going to do something that’s going to affect the market negatively, whether it a good long term benefit or not, the day before the inauguration, last trading day, you need to make a decision. Do you think that the market is going to be hurt by decisions the day they’re announced, regardless of what the eventual benefit of them being? So, Everybody, Inauguration Trading Day. That’s the new, that’s the new, we’ve coined it here, Inauguration Trading Day.

[00:03:46] Lee Jackson: I’d like to say you coined it and I think you’re exactly right and, and, and something else to be considered is if you remember the last time Donald Trump was inaugurated, that was an ugly mess in DC, and I will guarantee you that they’re not going to let that happen again. Because they will just board up everything and lock down DC, you know, it’ll, and again, as, as portfolio managers get into the new year, they can start to strip their, their positions back and they will, if they have gains, you can bet they’ll strip them back.

[00:04:20] Douglas McIntyre: So, I don’t want anybody to call me the day after the inauguration and say, oh, I’m sorry I didn’t pay attention to your Inauguration Day

[00:04:29] Lee Jackson: All right. Well, we won’t be giving your number out anytime soon.

[00:04:33] Douglas McIntyre: the fact. So, yeah, don’t, don’t call me. I’ve given, I’ve given you fair warning.

[00:04:39] Lee Jackson: Yeah, and it just makes, I think everything with the new administration is extremely positive, but they’re gonna have to do some, you know, to get to the 2 trillion and cuts that musk and Rama Swami want to do, you know, the people on, you know, left leaning media were like, Oh, you can’t do that without.

[00:04:58] Lee Jackson: Touching, you know, social security and medicare. They’re not going to touch social security and medicare That is the fourth rail that you cannot touch but they are going to do stuff like sell government buildings And you know, I think everybody’s seen these numbers where you know, 90 percent of government workers don’t even go in They don’t even go in and these buildings are sitting empty So when they get to to swing in the the axe to cut That’s gonna, that’s gonna look a little ugly.

[00:05:28] Douglas McIntyre: Inauguration Day trade, keep it

[00:05:30] Lee Jackson: Okay. You just remember it was Doug that put that out there folks from the Lee and Doug show.