Murmurs of the 2024 election cycle are having investors reconsidering their portfolios, especially as the Federal Reserve is opting to cut interest rates later in the year. Truist Co-Chief Investment Officer and Chief Market Strategist Keith Lerner explains how he is advising clients around the presidential election, including how much farther the AI hype can drive Magnificent Seven leaders.
"I tell clients today... markets have done good and bad under both Democrats and Republicans. More important for this economy and the stock market, is the Fed going to be able to stick the soft landing?" Lerner says.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Luke Carberry Mogan.
Video Transcript
BRIAN SOZZI: When you talk to clients, how concerned are they about the election? Do you hear a change in their tone when they ask you about this? And are they making changes to their portfolio today?
KEITH LERNER: Yeah, as a strategist, my least favorite year is around the election time, because people tend to make the wrong decision based on their political views. And we write a paper every four years saying, don't mix portfolio and politics. To your question, it's starting. It will get-- as we go further in the year, we'll start having that as one of the main conversation.
But I tell clients today, markets have done good and bad under both Democrats and Republicans. More important for this economy and the stock market will-- is the Fed going to be able to stick the soft landing?
I remember back in 2020, I mean, that was a heated election as well. And we wrote a note back then saying, I know you have a sensitivity around the election. But what happens with COVID? What happens with the vaccinations and so forth?
And it was notable in November, right after the election, Pfizer came out with their vaccine and the market took off. So again, I'm not saying it's not important. And it could certainly drive different industries and so forth. But I think the direction of the economy is more important.
BRIAN SOZZI: Keith, are they raising cash now? If they're sitting on the Magnificent Seven paper gains, are they selling a little bit now or in moving to treasuries or not?
KEITH LERNER: No, we're not seeing anything really directly related to the election yet. I think-- listen, we haven't really seen all the rhetoric that's coming. We know as we get deeper into the year, that's going to drive more of those conversations. We have seen over the last year-- obviously, a lot of money and money markets and treasuries. And I always tell people that everyone loves 5% treasuries until the market's up 20% itself.
SEANA SMITH: Keith, well, one thing that we have seen is there's still a lot of excitement surrounding AI. When you take a look at Palantir, the results that we got last night, that stock up about 20% here shortly after the open. There's been so much talk of an AI bubble, and whether or not that is maybe at risk of popping any time soon. Is there still an investment opportunity in AI? And I guess how are you advising clients to identify those more attractive opportunities?
KEITH LERNER: Yeah, it's a great question, and I think one we're all wrestling with as you talked earlier about that Magnificent Seven. So, I don't think there's an AI bubble yet. There's definitely parts of the market that's speculative. But I think, if you think about AI, we're still in the early phases. I mean, we've had the infrastructure, the chips, and so forth. The next phase of this is going to be the adopters and what businesses are able to amplify this.
If you think about-- I think about-- and I got in the business in '97. I equate it back then-- you had like the Cisco Systems of the world building the infrastructure, and then you had the Amazons leveraging. So I think what we're going to see over the next year-- the next few years is really the transition on who's really leveraging AI the best.