Politics don't typically impact markets like you might think

Our top experts explain how politics typically don't impact markets long-term and share tips on how to sort through short-term noise.

Transcript

00:00 Let me say two things on this, JD. The first is, what do we do? We always pay attention to the data.

00:05 So that's the bread and butter of the business, right? We have to keep our head down, let the

00:12 data talk to us, not get so wrapped up on what we want the data to tell us. We've talked about

00:18 this before, that's a recipe for disaster. But the other thing is, when we see these bullish

00:25 or bearish headlines, we want to understand what the logic is behind it, assuming that there is

00:32 some. Sometimes there isn't, but we want to understand the thought process behind it,

00:37 because as we do that, it starts to clue us into what the market might be thinking.

00:42 And as much as we want to be right on our individual picks, we have to understand what

00:47 could go right for the call as it relates to the market, what could go wrong, perhaps what the

00:53 herd is missing. That allows us to rethink where we want to be, how strongly we want to be it,

01:00 or maybe if it's in times like this where the market might be getting out over its skis,

01:06 maybe it's time to perhaps call some profits back, something that we've been doing over

01:10 the last couple of days in the portfolio. Chris, is the central bank the biggest

01:16 potential challenge to any prediction, or is there some other catalyst to watch

01:21 as we turn the page into 2024? The easy answer on that would be to say,

01:26 of course it's the Fed, because they're going to be driving whatever happens with interest rates,

01:32 but it's more than that, J.D., to be candid. We're going to have to understand the vector

01:37 and the velocity of the economy, not just here at home, but outside as well. What does it mean

01:42 for exchange rates? And then some folks will try and pinpoint, "Oh, the presidential election,

01:49 we'll have to see what happens." I think as we've come to appreciate, the election year tends to be

01:54 a lot of noise. We'll see who wins, but the reality is that's going to be more of a 2025

01:59 impact. So I would say, I had to strip my answer down. It is going to be the Fed. It's going to

02:05 be the economy, stupid. It's going to be, it's the economy, stupid, in the words of James Carville.

02:12 Yeah, we'll be hearing that an awful lot the next year, there's no doubt. Speaking of noise, Helene,

02:17 I can imagine how you might feel about something like a Santa Claus rally, but I do wonder if

02:21 there are any trends, Helene, that you see playing out as we soon leave 2023 in the rear view,

02:27 turn the page to the new year. Well, I just, I want to follow up on Chris's comment in back in

02:33 January of 2017, when everybody was concerned about Trump becoming president. I went back and

02:44 I took a look at how much politics affects the market. And I can tell you that it was,

02:50 I was very hard pressed to find, and I went back about 50 years, maybe a little bit more,

02:55 almost 60 years. And I could hardly find a time when anything political, even JFK's assassination,

03:03 really affected the market. So, you know, you might get a short term this or that, but mostly

03:09 what affected the market when I went back and I looked at was taxes, earnings, and the Fed.

03:14 So just commenting. Oh, love that long run context. So important, especially for all

03:21 the conversations about how market performance may look during a presidential year. Obviously,

03:27 we're not dealing with a traditional set of economic conditions overall, but fascinating

03:32 to watch nonetheless.

03:35 [BLANK_AUDIO]