Bob Iaccino, editor of the Stock Think Tank, says investors should prepare to “buy the rumor and sell the fact” when it comes to plans of the incoming administration of President Elect Joe Biden.
We’ve either got a couple of days left or a week left of political turmoil now, Iaccino said, addressing the final days of the Trump administration and ongoing impeachment proceedings in Congress. “Where it goes from there at least it won’t be from the seat of power, it will be from somewhere off in the sidelines,” Iaccino said. “Which isn’t necessarily undangerous for lack of a better phrase, but it’s not dangerous to the markets.”
Regarding tech stocks such as Facebook and Twitter, the decline in those shares following the news of their deplatforming the president and others has led to a sell-off that might cause the NASDAQ to lead market downward in the short run.
Long term, however, much depends on how the companies manage political speech issues.
“I think we might recover from that, and we might not,” Iaccino said. “There’s a there’s a real question as to whether Facebook and Twitter specifically can come up with the same kinds of profits if their theoretically alienating 48% of the public.”
Watch the full interview with Bob Iaccino below:
Nevertheless, Iaccino said, don’t expect the impact to be long-lasting.
“I think the markets aren’t looking at politics like they may have a year ago,” Iaccino said.
What the market is more focused now on is an incoming President Biden. “He’s going to have the entire Congress within his party so there’s a good chance that things like stimulus checks will go out large and quickly,” Iaccino said. “Whether that’s a long-term good for the economy remains to be seen.”
Iaccino’s said his own Stock Think Tank subscribers were advised to purchase Best Buy (BBY) on Friday, for instance, because it’s likely that large stimulus checks will get spent spent on electronics.
“From my perspective if you’re excited about a $2,000 check it might mean you need one,” Iaccino said. “But if you look at the data from the last stimulus check, not this most recent but the prior one, a decent amount of that was saved.”
Goldman Sachs is forecasting a jump in GDP, an outcome that will only be further fueled by larger checks under Biden. Investors could buy a number of different retail stocks that would benefit from such an outcome, he said.
“So you can go to places that may be didn’t have the best holiday season, again like a Best Buy or even like a Macy’s (M) and stores like that that maybe didn’t have as good of a holiday season as they otherwise would have and you can look for money to be spent there.
“You could look at a Walmart (WMT) as a competitor to Amazon (AMZN) and money getting spent there as well. In the face of that, we do have rising Covd-19 cases, so we’re likely to still be work from home school from home, and I think a lot of those areas will still get a little bit of a push,” he said.
“I’ll touch on an old market cliche, ‘Buy the rumor, sell the fact,’ and I think that’s what we’re seeing right here,” Iaccino said.
“What markets tend to do is price in perfection profession would be enhanced unemployment benefits, extended unemployment benefits, a $2,000 check or more.”
If we get any less than that, that’s when we’ll see that first little sell-off and it’s likely that we get less than that. That’s always the way things work.
For example, look at the tax plan that’s starting to leak out, he said. “There’s quite a bit of increased taxes,” Iaccino said, however “it’s likely that that’s the first salvo. It’s the tax increases the President Biden would like to get passed, and it’s likely to be less than that.