In this sneak peek from the Action Alerts PLUS investing club, team member Stephen 'Sarge' Guilfoyle explains how he's approaching 2024 with a touch of caution and a large cash position.
FULL VIDEO TRANSCRIPT BELOW:
J.D. DURKIN: Sarge, for 2024, how is your outlook for next year shaping, how is it coming together now that we're already staring, impossibly, at the end of November right around the corner?
STEPHEN GUILFOYLE: Yeah, I think if you've been cautious, as I have been, I think you want to maintain that posture going forward. We are enjoying something of a seasonal rally here. I don't if it goes away through the first few days of January. Typically, it gets really red hot towards the very last few days of December and first few days of January, and then we go off a cliff a little bit.
So I do see us going over that cliff a little bit when the January effect kind of wears off and it gets a little nasty into February, especially if the government is shut down, especially if that provokes, what was it, Moody's the other day that downgraded-- didn't downgrade US debt, but downgraded their outlook on US debt. I think once all three have then taken away the triple-a rating and probably put a further negative outlook on US credit ratings, I think that will have a negative impact, I think, that could reverberate across the economy at a time when the Walmarts of this world and the Targets of the world are going into their own little problems where their margins are being compressed by deflation because they've already bought this stuff.
They've already bought their inventories for the holiday season and beyond. And now, they're not going to be able to sell them for as much. So the part of the economy that is consumer facing, where the point of sale is between the consumer and the retailer, is going to run into a bit of a problem here.
I see their earnings, S&P 500 earnings, for next year-- I think are still over 11% on estimate, but we've seen how the fourth quarter has come in from over 8% four or five weeks ago down to a little over 3% right now on their estimates. So I do see that coming in probably rather sharply.
J.D. DURKIN: Sarge, would you say that are currently bullish or more bearish for the new year?
STEPHEN GUILFOYLE: I think I'm spotty. I think you have to pick your spots. It sounds like I'm copping out, but I'm not copping out. I think investors need to have a large cash balance as long as they can get 5% plus for that cash. If you can get 5% plus for that cash in 30 day paper, hey, you're still liquid if your paper is tied up for 30 days. 90 days is not 180 days.
So if you can keep rolling that over while the short term rates are this high, how much are you really missing out on? Yeah, you might get a little bit more in some equities, but other equities are probably going to be hurt to a greater degree. So yes, my largest exposures are still in tech. I'm still long Microsoft, ServiceNow, AMD, NVIDIA.
I'm still long all the crazy dangerous names. I added some Palo Alto this week, I'm still long CrowdStrike. So yeah, but also it's tempered. It's measured. And I do have a sizable chunk, as I have almost all year, in cash, because I'm getting paid for cash.
