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Halftime Report
Battle Over the Broadening 1/23/25
00:49:53
Scott Wapner and the Investment Committee debate the best way to play this bull market. The panel reacts to President Trump’s address to world economic leaders at Davos. The experts detail their latest portfolio moves. Josh Brown updates his best stocks in the market list. Investment Committee Disclosures
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- [00:00]
Scott Wapner
And now a next level moment from ATT Business. Say you've sent out a gigantic shipment of pillows and they need to be there in time for International Sleep day. You've got AT and T5G so you're fully confident, but the vendor isn't responding. And International Sleep Day is tomorrow. Luckily, AT&T 5G lets you deal with any issues with ease so the pillows will get delivered and everyone can sleep soundly, especially you. ATT 5G requires a compatible plan and device coverage not available everywhere. Learn more@att.com 5G Network.
- [00:30]
Josh Brown
Are you still.
- [00:31]
Jenny Harrington
Quoting 30 year old movies?
- [00:32]
Josh Brown
Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted?
- [00:38]
Scott Wapner
If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places.
- [00:44]
Josh Brown
That take credit cards nationwide.
- [00:45]
Scott Wapner
And every time you make a purchase with your card, you automatically earn cash back. Welcome to the Now It Pays to Discover. Learn more@discover.com credit card based on the February 2024 Nelson Report, I'm Scott Wapner.
- [01:00]
Josh Brown
And you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. All right guys, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the battle over the broadening the Dow at a six week high tech on fire lately. We will debate the best way to play this bull market plus discuss President Trump's comments. Just a few moments to that crowd in Davos. Joining me for the hour today, Josh Brown, Jenny Harrington and Bill Baruch. We are all here at post nine at the New York Stock Exchange. We're holding gains here. Dow's up a 1/2 of 1% s and P is positive to NASDAQ given a little bit back today. But I do want to begin, Josh, with some of the commentary that we just heard from the president really making the case for America on the global stage. And those that he was addressing talked about economic confidence in this country, quote, soaring like never before. The things that we've heard before about his agenda in terms of re upping the tax cuts, deregulation, investment in the United States, asking the Saudis and OPEC to cut oil prices, doubling energy production. I mean, all of this is why to some degree investors have been as optimistic as they are about where the stock market can go.
- [02:21]
Jenny Harrington
There's no question it's a vibe shift and you're faced with two choices here. As an investor, you can Be cynical about it because your politics are different than the president's and you don't like every single thing on the agenda or you don't like Pete Hegseth or whatever. You could do that or you can say, hey, clearly this vibe shift is going to lead to an increase in M and A activity, maybe an increase in IPOs coming to market, maybe an increase in companies thinking bigger, maybe better relations with international powers versus worse given the way that we know President Trump likes to personalize the negotiations. You just heard him talking about his relationship with President Xi. So just be open minded regardless of your politics and look at the market reaction not over the election but over the comments that have been made just in the last 48 hours. We're starting the week small caps up 4% on the year. The S and P is up just under 2%. So you've got leadership in the types of stocks that have been left behind. They're basically neck and neck right now. And I think the Russell being as strong as it's been, I think it's meaningful. Look at the small business owner optimism in all the surveys and just think beyond whatever the politics of the moment are to people being willing to take risk. Again, do more. Consider mergers, consider corporate transactions. That would have been impossible even three months ago. I want to talk financials really quickly as well because they're starting to feel the momentum. Also once again, in the first couple of weeks of January, 0% of the financial sector within the S&P 500 was above its 20 day moving average. That's changed. They have just exploded again. 79% of the names in the financial sector are above the short term 20 day moving average. Less than 5% of the index was above the 50. Now that's 53%. So you're seeing within one of the most economically important sectors a renewed sense of momentum. And again, it's not election related, it's new. It's based on comments that we've been hearing in just the past couple of days about the administration following through on what they said they wanted to do.
- [04:37]
Josh Brown
All right, Jenny, it's a good segue to the conversation that I really wanted to have which is this battle over the broadening as Wolf Research today comes out on small caps. Specifically, as Josh was just documenting the activity in the Russell 2000 and saying they could go on a massive run entering the year. We thought small caps had a great shot to outperform. They stick with that call. Needs to get over the highs. There's resistance at 24, 50 you take that out and you could be off to the races in that part of the market that we finally get maybe the most acute sign of the broadening that many have been calling for.
- [05:15]
Bill Baruch
I think so. I think it's so interesting too when we're talking about the broadening just to like really put numbers around it. You've got S and P up three and a half. You've got Russell up 3.3, Dow and Nasdaq both like 3, 83 6. So it really is like everyone's winning this year. And when we talk about small caps specifically, this is something I've been really hooked on frankly since the third quarter of last year. When you look out to earnings growth this year, what you see is you see the large cap growth Companies, S&P 500 are expected to grow earnings about by about 15% this year over last year. And it's really consistent quarter by quarter. You see like 15 to kind of 17% growth, I think 12% in the middle. But when you look at small caps, you see that growth rate accelerate wildly into year end. So by the time you get to the second, third and fourth quarters, you see year over year growth rates of like 50% for small cap. And I think that's where it takes off. But we really need to see it happen. And so when we look at that, we look at those returns that are all clumped together in that three and a half percent range, I think people are still a little sitting on the sidelines in the small cap and saying, like, you really need to show this to me. I really need to see those earnings reports. When I think about the broadening too, I think, you know, I don't think that the broadening needs to come at the expense of anything. So we've got the rich valuation companies like the mega cap tech, but the thing is they're still going to have earnings growth and they have fabulous fundamentals underlying them. You look at the cheaper valuations like small cap value anything mid cap, they're cheaper, they're not cheap to history. They also, for a nice change, have lovely fundamentals underlying them. And beneath all of that, you've got an economy that's chugging along, a consumer that's chugging, chugging along. So I really do think, Scott, I really do think the broadening is real, but I don't think it necessarily means rotation. You know, I don't think anyone crumbles as something else takes off.
- [07:00]
Josh Brown
Phil Baruch, on this note, you bought more of the small cap etf, the RSP you're playing for the broadening.
- [07:07]
Phil Baruch
Absolutely. In our diversified portfolios, 80, 20, 60, 40, we have a sleeve, it's 10% of the entire portfolio where we're tactical with ETFs, we trim some other other ETFs, we hold about 3 to 5 in there on average. We'll get to that. But the, the IJR we increased in RSP. They're each about 4 40% now to couple with IVV, which is the S and P. We're broadening our exposure as a very tactical play and we think that's going to continue here. You look back, I mean the bit max 7, the big tech names had a huge move in the fourth quarter. I think it's time for some of those industrials financials, as Josh highlighted to, to really start making some moves here and lead the market maybe for the next couple of months.
- [07:45]
Josh Brown
Let's talk about the financials more specifically for a moment because a lot of pickup from Davos at the very moment here has to do with a comment that President Trump made to bank of America CEO Brian Moynihan in which he was talking about opening his bank more to conservatives suggesting that Moynihan and others within this industry have not been doing such quote, I hope you're going to open your banks to conservatives because what you're doing is wrong. That is what, that is what Donald Trump, the president, has said to Brian Moynihan right on the stage there at Davos. I mean, look, we've seen sort of this kind of stuff before in terms of a president who at times can be heavy on hyperbole and light on specifics. So I'm not exactly sure what that comment is regarding. There's some suggestion that maybe he's talking about deep debanking related to crypto. Your guess is as good as mine. Nonetheless, it's notable that the president said it directly to Brian Moynihan on that stage, leaving some to wonder sort of what the policies are going to be towards the banks in an environment I think which the market was by far giving the benefit of the doubt to these stocks suggesting animal spirits, dealmaking, deregulation are all going to be positive. But is there a darker side of some of the policy that needs to be considered too? If these are going to be a target of the White House, is that fair?
- [09:19]
Jenny Harrington
Yeah. So I don't, I don't think that should be a concern for investors. I'm going to pull you out of all that because I see how, I see how gingerly you were tiptoeing through the minefield.
- [09:29]
Josh Brown
I mean, I just want to say it for what it is. You know, he said it.
- [09:33]
Jenny Harrington
Yes. There are no conservatives that couldn't get a loan while Joe Biden was president. And I guarantee you, if you were to somehow establish a data set that said these people are further to the right. How many loans they get versus I don't think there's anything there. But the optics are important. Trump is a reality TV producer at heart. He knows his audience. He understands the power of looking directly at one of the biggest bank CEOs in the country making that statement. He knows they're going to lead with that on Fox News Tonight. And he knows it's going to be all over social media. And it is effective insofar as it keeps the conversation going. Promises made, promises kept. Does that relate to the earnings at bank of America and Citi and JP Morgan? Probably not. I don't think they're going to have to do anything differently as far as how they make loans. The DEI stuff, you could argue maybe there's. There are some expenses related to that that maybe come out that's possible. If you're an investor in these companies, this is, this is not what you're worried about.
- [10:37]
Josh Brown
Some are suggesting our own Jeff Cox, for example, who covers the banks for CNBC.com is pointing to podcast in which Marc Andreessen, who obviously has a foot inside the White House in terms of these tech heavyweights who have made their way close to President Trump and the policies that may follow, was on Joe Rogan's podcast and claimed that the Biden administration and regulators in the administration had cut off tech and crypto companies from a phone for sure system.
- [11:10]
Jenny Harrington
True.
- [11:11]
Josh Brown
So maybe that is what is specifically being referenced here in a roundabout way in the criticism directly to Brian Moynihan, who really didn't answer the question or respond to it specifically, because how do you respond?
- [11:23]
Bill Baruch
I mean, it's a silly. I think it's a silly thing to say. And I think this is a beautiful case in point of what our challenge as investors as well as advisors who talk to our clients is going to be for the next four years. And it goes right back to the previous four years. So, as an investor, here's what I would do. If I were researching bank of America and I was thinking about investing in it. I would put this in the category of pure noise. Nothing I need to think about. That sentence would have zero impact on my investment process and how I was thinking about potentially investing in bank of America separately. Now I have a pain in the neck on my hands because we've got a pile of clients who are going to hear it and read it and, like, misinterpret it or think about it over analyze it, you know, and say, do I want bank of America in my portfolio? You know, do I not? I'm conservative, I'm not conservative. And that noise enters in.
- [12:12]
Jenny Harrington
So.
- [12:12]
Bill Baruch
So I think this is the challenge of the next four years, is when you hear lines like this, figuring out which bucket to put it in. Noise, don't worry about it, or this is actually meaningful.
- [12:21]
Jenny Harrington
I think I agree with Scott, though. It's not noise as it pertains to crypto, but.
- [12:25]
Bill Baruch
Okay. But I think it's kind of baloney to conflate crypto with conservatism right now.
- [12:31]
Jenny Harrington
Right now it's not. But generally it is.
- [12:33]
Bill Baruch
Right. Because that's just a regulatory, like, you know, policy thing. Like that's, you know, I don't. Well, of the crypto people.
- [12:39]
Josh Brown
Well, I will say this. I will say this. There are some who do believe and who have made the case on that stage in Davos as well, that the embracing of crypto by conservatives, including the President and those close to him, is one of the reasons why the Republicans were able to have the sweep that they did in the House and the Senate.
- [13:06]
Jenny Harrington
Undeniable. Undeniable.
- [13:08]
Josh Brown
That's a fact. And that's out there because it's been said by people who do believe that that is true, that you had a very punitive administration and a punitive SEC led by Gary Gensler as it relates to crypto that might have cost the Democrats votes in the prior election.
- [13:24]
Jenny Harrington
Well, Operation Checkpoint is real. Chokepoint is real. I think. I think you just look at a couple of races, look at how Sherrod Brown was tossed out of Ohio. That's purely crypto money coming in and swinging that election. So that's all real. But what to Jenny's point question is, what do you do with this from an equity investing standpoint? And the answer probably, unless we're talking about Coinbase and Robinhood and MicroStrategy, the answer is probably nothing.
- [13:53]
Phil Baruch
We do know that he likes to play favorites. The only thing you could potentially extract, extrapolate is maybe he's not playing favorites to bank of America right now.
- [14:01]
Josh Brown
The other thing.
- [14:02]
Bill Baruch
What do you do with that?
- [14:02]
Josh Brown
The other thing that President Trump neutral. The other thing that President Trump said as we bring in our senior economics reporter, Steve Liesman, was this quote, I will demand that Interest rates drop immediately. Now, Steve, we have discussed leading into the election and, you know, some of the, I don't want to say proposals, because they're not official proposals, but some of the things that have been thrown out into the ether about a shadow Fed chair, perhaps some wondering of what the relationship was going to be between Fed Chair Powell and President Trump when the Fed is in itself at a sort of tricky point in its path here, trying to gauge what these new policies are going to mean for the path of inflation and figuring what all that means for the path of the Fed as it relates to interest rate cuts. What do you make of that comment that the president made? Quote, I will demand that interest rates drop immediately?
- [14:58]
Steve Liesman
Well, I kind of woke up this morning thinking that the President had been through a lot of things and done a lot of what he said he was going to do on the campaign trail in terms of the emergency orders. And I said to myself, and the President starts to criticize The Fed in 3, 2, 1. And I thought this might be a day we might get that. It's kind of interesting, Scott. He had been somebody who was critical of the Fed and some of the things that you talked about were discussed and the President kind of, kind of stepped back from all that. And so I was thinking about our Fed survey, which we're in the field now, which last month, camera, last meeting came back and said, you know what, people thought that Trump was going to respect the independence of the Fed. And now I guess the pendulum has swung back. He can demand, let's be clear, nothing stops him from demanding. And there's nothing technically wrong with him basically jawboning the Fed. And I think the Fed expects that, Scott. I think with this president, they've come to the point where they know he's not going to be provide. I guess maybe you call it rhetorical independence. He's going to be out there saying what he thinks. But the notion, maybe the word demand is one that's a little worrisome when it comes to, to the President of the United States.
- [16:12]
Josh Brown
But, but are you, are you now thinking that you could have a greater battle over Fed independence because of statements like this from the president? I don't know how that issue in and of itself doesn't gain sort of a greater platform in the weeks, if not months ahead.
- [16:34]
Steve Liesman
I think that's probably right. I will say, personally, I didn't expect the President to back off from the idea of asking for or I guess, demanding lower interest rates. That's, I think, who he is. It Would be interesting to question him about that and say, Mr. President, inflation is running above target. What is it exactly you want the Fed to do? He's always a guy who has wanted lower interest rates, Scott. And I think you correctly point out that the a huge number of changes that he plans to make in economic policy is a lot of the reason why the Fed is not hiking in response to this. It's just taking a step back and saying let's see all this stuff work through. I've been through this a lot, Scott, as you know, and thinking about all of the elements of the president's plans and there's questions about the impact of tariffs, there's questions about the impact of immigration. But there's also on the other side if some of his things to help out business spending, they could help supply. And then there's this idea that Kevin Wash and others have put forward that deregulation is a supply side disinflationary impulse to the economy. And the Fed I think is going to step back and take a look at all this and try to account for it and figure it out whether or not it means higher growth or a higher neutral rate if that happens. And I think at this point point, Scott, the only choice that Powell has is to take these comments on the chin. If the president demands lower interest rates, that's his right, but it's not the obligation of the Federal Reserve to provide them.
- [18:08]
Josh Brown
Do you want to also, before I let you go, take a stab at what the president said to Brian Moynihan because, you know, it's hard to figure out specifically what he is talking about. There are some suggestions, as I said about debanking conservatives. There are said to be issues related to crypto. I mentioned Jeff Cox passing, you know, some recent articles to me. Fifteen attorneys general last year sent a letter directly to bank of America complaining about discrimination regarding politics and religion. So you know, rather than be outwardly and openly dismissive of what the President said as a lot of nothing, as long as there's a belief out there that there is an issue and that he confronted Brian Moynihan directly on that stage in Davos in front of World leaders and CEOs of global corporations that it needs to be discussed, I think.
- [19:06]
Steve Liesman
I find it remarkable, Scott, that Moynihan did not push back on the President. I am reading, Scott, the same thing that you are. It's not an issue that I covered at the time time back in April of 2024. And I'll read you from I believe this Is the letter a news release from the Attorney General of Virginia, Jason Myers. And he said, according to the letter, Bank America is consistently discriminated against groups for political and religious reasons. The nation's second largest bank has denied service to gun manufacturers, fossil fuel producers and contractors for U.S. immigration and Customs Enforcement. It also canceled the accounts of Christian ministry groups, saying one such group that trains pastors is quote, operating a business type we have chosen not to service. So I have to say, Scott, these kind of allegations strike me as remarkable. I have to doubt their veracity. But somehow this has reached the presidential level. It's been leveled publicly at bank of America. The bank of America president or chairman did not respond back to it. So they are out there and they are now for reporters to follow up on and figure out if these are accurate. We'll see by the way, if we get a statement from bank of America and whether or not they responded to this in any way. I've not had a chance, I must say, to say what the B of A response is.
- [20:27]
Josh Brown
Yeah, it's gone global as they say, because that's indeed what's happened. Steve, thanks. I appreciate you. That's Steve Liesman, Budget on that issue. Can we look markets Dow is up to 56s and P tried to get a new closing high yesterday. Couldn't quite get there but did hit a new intraday high. And the fact of the matter is there's just a lot of optimism about what is likely to happen, investors think in the years to come because of the agenda that President Trump was going over in Davos, industrials have been near a record high. So it hasn't only been all things tech. I do that to you because you bought Caterpillar. Best month since December of 2023. Why are you trying to get more exposure to industrials?
- [21:06]
Phil Baruch
Well, this isn't a story that started last week when we bought Caterpillar. This was back to October when our number three are number five holdings, Westinghouse Air Brake and United Rentals. We slashed them and leaned into tech. Now we're rotating back in to industrials here and what we really like about Caterpillar is China exposure. I mean you're seeing industrial production last week in China GDP both beat. We do think the dollar is topping out a bit. And you know, multinational companies, they are going to, they're going to, they're going to benefit from this. So we're moving back into the industrial exposure and we're doing that by getting Caterpillar. We own other industrials as well and we're ramping that up.
- [21:43]
Josh Brown
How about industrials here?
- [21:46]
Jenny Harrington
I don't want to step on anything that we're going to do later in the show, but I am looking at a ton of industrials right now that are at breakouts or breaking out currently. Some of them are mid caps and they're not all the usual suspects, but I think broadly speaking, These stocks are 100% reacting to things like, I don't know, $500 billion stimulus, stimulus announcements and AI build out announcements, etc. Some of these companies are more relevant to that than others and some of them are just going along for the ride because of ETF flows. But so what, you've got stocks working in the industrial sector. They look like they want to repeat what the financials did last year and maybe you'll get that upside surprise in their earnings. Maybe the story all of a sudden becomes a profitability or build out story for the industrials and they start to beat on earnings the way financials did in the first and second quarter of last year, which led to such a torrential downpour of winners.
- [22:45]
Phil Baruch
I would add though, you know, last year the Inflation Reduction act, you started getting this infrastructure spending coming out.
- [22:51]
Jenny Harrington
That was.
- [22:52]
Phil Baruch
That got us really bullish on names like United Rentals. And then you really have a question, you know, what is the Trump presidency going to do about infrastructure spending? And we're getting that answer now and industrials are responding. So a lot of questions are being answered here. I think this is just getting started.
- [23:06]
Josh Brown
Jenny. You have a lot of exposure here.
- [23:07]
Bill Baruch
We do. And I think it's like a pond that's right for fishing and for all the reasons that Bill and Josh just talked about. But when you look at the sector overall, you've got a really nice matchup of valuation which is about 21 and a half times the market like. But you've got 19% earnings growth on average. It's tough, I think, to talk broadly because for example, we own carrier, but we also own United Rentals. You know, to your point, those are ones in air conditioning, H Vac company One's industrial equipment. We own Stanley, Black and Decker, which is tools and we also own JetBlue. So within there there's enormous divergence. But you can, you know, you can look, it was kind of ignored relative to the rest. So you can sort through, you can find some great valuations. That goes to my earlier point about broadening out. Like there's really decent earnings growth underlying a lot of those companies.
- [23:51]
Josh Brown
All right, we're going to that's what I want to do. Let's take a quick break. When we come back, I want to talk about tech as well. Bill Baruch has another move right ahead of earnings of Mega Cap Tech next week. And just as an influential analyst has come out to try and defend Apple shares, which have certainly not been trading well in the midst of the worst month in a couple of years for Apple in jeopardy of losing its place as the number two biggest market cap company in this stock market. We will discuss all next.
- [24:20]
Scott Wapner
And now a next level moment from AT&T business. Say you've sent out a gigantic shipment of pillows and they need to be there in time for International Sleep day. You've got AT and T5G so you're fully confident, but the vendor isn't responding and International Sleep Day is tomorrow. Luckily, AT&T 5G lets you deal with any issues with ease. So the pillows will get delivered and everyone can sleep soundly, especially you. ATT 5G requires a compatible plan and device coverage not available everywhere. Learn more@att.com 5G Network.
- [24:50]
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- [25:19]
Josh Brown
All right, big week ahead for Mega Cap Tech. As you know, we're going to start earnings on the 29th meta and Microsoft are going to report that day. Bill Baruch, you sold the qs. Yes, ahead of these prints. Why?
- [25:30]
Phil Baruch
Well, this is about that rotation I spoke of. It's in that tactical ETF sleeve. We're selling the qs, we're moving that money into industrials, but we still own a lot of tech. And I believe in what we're going to see. I mean, what we're doing is rotating. We trimmed Apple, I talked about on the show the first week of the year. We trimmed in video as well. And I think what we're going to see is solid results. I think these, these companies are going to perform form. But how much have we seen that being priced in here in the last week? You get a lot of this news about AI initiatives in the White House yesterday. The numbers Nvidia is up for, Microsoft is up for, I mean, these, the Oracle has had a huge week. So a lot of this is getting pumped in. And I think as we, as we take a look back, these names, they need to be in portfolios. And if you want to outperform the S&P, you have to still hold these, but it's how you rotate and how you manage it as things go.
- [26:16]
Josh Brown
All right, Josh, how should we think about these names heading into a really critical earnings season here?
- [26:23]
Jenny Harrington
Look, these stocks, every time we think there's going to be some sort of a move out of these stocks in size, maybe you get one or two of these names fall like an Apple or a Tesla recently, but as a theme, they just continue to be bid. And I think, I think it's like not an accident that we've seen this internal rotation, rotation amongst the Mag 7. Or if you want to broaden that out like the biggest 20 technology companies, throw like ServiceNow in there, which looks unbelievable. Alphabet looks great again. And, you know, maybe that's money that's rotating out of the Teslas of the world, or maybe it's just people continuing to feel good about their purchases in these stocks because they give you the ability to play both offense and defense. Alphabet's got an RSI of 64 right now. It's above its 50 day, it's above its 200 day. It's up 6% on the year. You see people saying, all right, maybe this is the time I want to own a cheaper of the Mag 7. So I'm going to buy Alphabet 26 times, trailing P E versus Apple, you know, closer to 40. So you're going to see a lot of that go on during the course of this year. It's been happening over the last two years. Don't be shocked by it. I also think Amazon looks great for the same reason. Not one of the cheaper names in the group, but one of the names people are really excited about for 2025.
- [27:45]
Josh Brown
Wolf Research says they expect continued tech dominance this earnings season. I mean, the elephant of the room frankly is Apple, which has gotten a bunch of downgrades lately. As you know, it's having its worst month since December of 22nd. It was the largest market cap company world until recently, eclipsed by Nvidia a day or so ago. Now in danger of dropping to number three behind Microsoft because of the recent troubles. Right on cue. Dan Ives is defending Apple today, as you might expect. Says fear's overdone. A China turnaround is in the cards. Morgan Stanley's Eric Woodring is hesitant to call earnings season a quote clearing event, though he also doesn't believe there's reason to get tactically bullish around earnings either. Bill, how do you think about Apple going in? It's the one maybe with the most to prove. I think at this point.
- [28:37]
Phil Baruch
Yeah. Again, this is name I'm actually looking at right now. We trimmed it and I think when it falls out of love, that's when you have to get Apple on your radar. And right here I think there's a lot of support. Yes, the iPhone 16 cycles may be disappointed, but at the same time, I think when those disappointments start making it front page news and driving the stock lower, that's. You have to think about adding it here. And I'm glad we're not seeing Apple trading to 50 plus going into earnings. It gives it room to, to beat and maybe respond.
- [29:05]
Bill Baruch
I want, I want to talk about when they say dominance. When Wolf Research says dominance on these, like I would love to hear them define that because dominance in 2024 meant the following. And the top 10 stocks in the S&P that included these seven were up 48%. All the rest, the other 490 in the market were up 10%. Do they think dominance means 50% versus 10% or to our broadening conversation, does it narrow dramatically? And I think dramatically. Dramatically.
- [29:33]
Josh Brown
You think it's going to narrow dramatically?
- [29:35]
Bill Baruch
Dramatically. I don't see how that dominance continues. That magnitude of divergence.
- [29:41]
Josh Brown
No, no, no, no. Why does it have to be of that magnitude? You just said dramatically. Yeah, I think insinuating that what was 48 to 10 is somehow going to be, you know, 15 to 13.
- [29:53]
Bill Baruch
Yeah. Doesn't that seem more reasonable?
- [29:55]
Josh Brown
No, actually it doesn't.
- [29:56]
Bill Baruch
Okay. I'll tell you why I think it does. So I think it does seem more reasonable for the following reasons. One, if we look at the S and P collectively, so let's look at them together. Those 10, those seven, plus a couple others, plus like Berkshire, JP Morgan, they make up almost 40% of the S&P. You can go back 50 years. There's never been a time where such a small collection of companies has dominated that much market share. You can go back to the 70s and look at the Nifty50.50 stocks only made up 50%. So there's no precedent for this kind of concentration. Then you take that and you couple it up with the conversation that we were having about industrials. And you look at things like Apple or frankly like Microsoft. So you've got Microsoft trading at 31 and a half times earnings. And when you look at their earnings growth, it's lovely. It's 10% next year, it's 15% next year, it's 18% the year after that. But you look at industrials that are in that other 490. And you're like, okay, they're trading at 10 multiple points lower and they've got collectively 19%.
- [30:55]
Jenny Harrington
Gross margins are the puzzle piece you're missing. You have the whole puzzle. You're missing one piece. It's on the floor, under the couch. Gross margins are the single business biggest determinant on whether or not this type of outperformance can continue to the extent that it has a company like a service now has margins that no industrial in their wildest dreams will ever get to. Wait. Which is why rightly or wrongly investors continue to bid stocks like that up. I'm just looking. I have three non mag 7 tech stocks right now and you can't tell. And I have industrials too. Jenny. You can't tell me any of the industrials will ever have the gross margins that these companies have. And that's why people are paying up for them. Wait, wait, I've read it. I've read it. I have CrowdStrike and I have Samsara Iot.
- [31:47]
Bill Baruch
But here's the thing. There's a very, very important nuance. You said that people are paying up.
- [31:51]
Jenny Harrington
Well, I was about to tell you the degree to which they're paying up.
- [31:54]
Bill Baruch
I would argue that they have paid up. Right. They've pulled it forward.
- [31:58]
Jenny Harrington
And what happens? And what happens? These companies come out, these companies come out with 20, 30, 40% earnings growth.
- [32:05]
Bill Baruch
No, but they're not. No, but I mean I like you're.
- [32:08]
Jenny Harrington
Talking about the ones you follow. I'm talking about names that you don't even know the tickers of. Oh no, you're saying Microsoft.
- [32:14]
Bill Baruch
You are proving my point.
- [32:15]
Jenny Harrington
How so?
- [32:16]
Bill Baruch
Because the ones that I've never even heard of aren't in the top 10.
- [32:19]
Jenny Harrington
Yeah.
- [32:19]
Bill Baruch
So we're talking about mega cap tech.
- [32:21]
Jenny Harrington
CrowdStrike's pretty big.
- [32:23]
Bill Baruch
How big is CrowdStrike compared to the $3 trillion market cap?
- [32:26]
Jenny Harrington
Not a trillion, but it's not 10 billion.
- [32:29]
Bill Baruch
Think it's going to triple and like actually give Apple and Microsoft a run.
- [32:33]
Jenny Harrington
Let me, let me say it this.
- [32:34]
Bill Baruch
Way, proving my point.
- [32:35]
Jenny Harrington
Let me say this in the other four, Let me, let me say point.
- [32:38]
Phil Baruch
Is that these earnings from the big tech companies, they're going to be, they're going to be great, they're going to be solid. But at the same time, these industrial companies may not even have as good as earnings. But the America first agenda that we're seeing and talking about this this week is going to create the flows that would help these industrials outperform in the Next couple of months.
- [32:54]
Bill Baruch
Good point. So, ok, but let me put you.
- [32:56]
Jenny Harrington
Dominance is what percentage of the S&P 500 earnings are coming from industrials versus what percent are coming from not just Max7 semis software. It's like it's night and day. So you could be bullish on both. But dominance, according to Wolf research is probably still the right call.
- [33:14]
Bill Baruch
But what magnitude of dominance? But let me ask you this. So when I'm arguing, I'll tell you in December. Okay.
- [33:20]
Josh Brown
But Josh, this is the last quick point. Okay.
- [33:22]
Bill Baruch
So the question is, do you really think that Mag 7 will be up 50% in 2025?
- [33:27]
Jenny Harrington
No.
- [33:27]
Bill Baruch
There you go.
- [33:28]
Josh Brown
Okay.
- [33:28]
Jenny Harrington
Would you win? I don't understand.
- [33:30]
Bill Baruch
No, it's just, it's not going to be that level.
- [33:31]
Jenny Harrington
All right. We're going to have to leave it there. Thank you, Scott.
- [33:34]
Josh Brown
Thank you. Somebody had to leave it there. Leslie Picker has joined us on the desk.
- [33:39]
Jenny Harrington
Thank God.
- [33:40]
Josh Brown
Seriously, Leslie, because it's breaking news. Because you have a response from both bank of America and JP Morgan about what the president said in Davos to Brian Moynihan.
- [33:52]
Leslie Picker
We do. And just for a little bit of context, taking a step back on the whole debanking issue as well, which it's been an issue for I would say a year plus at this point in time. Kind of the backstory as it pertains to bank of America as there was a group of 15 attorneys general who sent a letter alleging that bank of America was dropping customers that were had religious affiliations and more conservative political leanings. The bank sent a response to that. This was back in April of last year where they said the specific examples that were highlighted were dropped as customers for reasons that had nothing to do with their political affiliations. Other reasons, one of the groups was allegedly doing business in Cuba, which is a sanctioned country. Another one was doing debt collection services in Africa. And typically the big bulge bracket, banks can't have customers who are doing debt collection services, so they had to drop them as a customer as well. Additionally, some additional context here. John Eastman, who was a former lawyer for Trump, was dropped by bank of America and he says he was dropped by USA as well. But that was due to his legal issues, issues, I'm told, as opposed to his political affiliation. So kind of just to take a step back, banks drop customers and don't typically give those customers a reason for why they are dropped. That is usually to eliminate, you know, a back and forth which may take place with their call centers and so forth. So here are the statements that we received from those two banks that were highlighted. Bank of America saying we serve more than 70 million clients, we welcome conservatives and have no political litmus test. JP Morgan also responded saying, quote, we have never and would never close an account for political reasons. Full stop. We follow the law and guidance from our regulators and have long said there are problems with the current framework. And then they go on to say Washington must address those problems. We welcome the opportunity to work with the new administration and Congress on ways to remove regulatory ambiguity while maintaining our country's ability to address financial crime. So that kind of speaks to this broader issue of kind of why clients, why customers are dropped may not have anything to do with their political ideology, may have more to do with kind of the business.
- [36:08]
Josh Brown
The other notation that you make here, which I think is worthy of bringing up is that after bank of America sent its responses to the attorneys general on why the accounts were dropped, the issue was essentially dropped itself by the ags. Yes, correct.
- [36:27]
Leslie Picker
Yes. And the letter, I have it here. You know, they talk about how bank of America, they say that they have banking and investing relationships with approximately 120,000 faith based clients in the United States and support their employees, monetary donations and volunteering efforts in supporting such institutions. So this is something where they say all these broad based clients that kind of walk all spans of life.
- [36:55]
Jenny Harrington
I think one way to just put a bow on this topic. It's not that it doesn't matter. Of course it matters. Does it affect earnings for these companies and revenue? No, it doesn't. And bigger than that, there was this whole outcry when everyone was doing the ESG stuff five years ago and it was like, oh, I insist on ESG because I'm socially woke or whatever. It's like, so all right, but, but leave the oil companies in because those pay good dividends. Okay, no problem. So what do you want to take out? Gun manufacturers. You know what the gun manufacturer percentage of the S&P 500 market cap is? It rounds to zero. It's like 0.01%. So that's like what this issue is. It's a big political issue.
- [37:36]
Leslie Picker
Right.
- [37:37]
Jenny Harrington
Obviously I don't think it's an investor issue that is really going to move these stocks around. And to Jenny's earlier point, like this is going to be the challenge of the next few months. Every time there's a pronouncement, do we have to. Well, I think the market will start ignoring it eventually like it did last time.
- [37:54]
Bill Baruch
It won't. You know, you're going to Wake up every morning for the next four years and check your Twitter to see what, what came out, if it might have a temporary impact on that stock and which of your clients is going to call you and be like, oh my God, I want bank of America.
- [38:06]
Jenny Harrington
Leslie, will let you have the last word on this.
- [38:07]
Leslie Picker
I was just going to say, I absolutely agree with you. These are our kind of rounding errors for the banks in terms of client numbers. That said, these banks are going to Washington and you saw Moynihan was a participant in this conversation today because they want this broad, broad spanning deregulation. They're really pushing for this. So they want the administration on their side. So this is something they really, you know, if it is important to President Trump and his constituents, they have to make a very clear case that they are not doing this and need to make sure that he is, he is on board.
- [38:40]
Josh Brown
You also don't want to be in a position, I think as an investor in what has been a broad brush positive narrative about these banks to then have to think about things like what the president said, what ramifications may be and then have to be a little more specific in the kind of financial institution you're willing to buy in terms of stock because of all those, those issues. I'm glad you flagged this and great getting those responses. Leslie Picker. Up next, Josh Brown just added three new names to his exclusive best stocks in the market list. We will discuss next.
- [39:16]
Scott Wapner
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- [39:46]
Deirdre Bosa
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- [40:18]
Eamon Jabbers
We'Re back on halftime. I'm Deirdre Bosa with your CNBC News Update. UPDATE Federal workers are being told to report names of coworkers who work in DEI roles or face adverse consequences, according to emails sent to government employees Wednesday night obtained by NBC News. Workers have 10 days to report colleagues who made changes to personnel position descriptions since November in order to hide connections to those programs. The White House has yet to comment on details of the directive. The teenager who killed three girls at a Taylor Swift Swift themed dance class in England was sentenced to over 50 years in prison today. The attack set off street violence and inquiries over how the system failed to stop the killer despite being referred to law enforcement multiple times over his violent obsessions. And Amanda Knox got a final chance to clear her name when Italy's top court heard her appeal today of a slander conviction for falsely accusing a Congolese bar owner in the 2007 murder of her brother, British roommate. It's unclear when a verdict would be announced, but if the court upholds a conviction, Knox will not risk more jail time. Scott, back to you. Quite a saga for her.
- [41:26]
Josh Brown
Yeah, Dee, thank you very much. That's Jerry Bosa for us. All right. We told you Josh Brown just updated his list of the best stocks in the market according to the things that he looks at. Robinhood makes the list. Let's do that first.
- [41:38]
Jenny Harrington
Yeah, I wanted to do Robinhood because it's one of the names that's been on for a while and I think it's notable because it's so extended but it's still in this incredible uptrend. So I want people to keep an eye on it. And I think it's going to set up but it's got to get a little bit less extended. I think it's going to do that through correct through time rather than price. But let's talk about what's happening here. It's within 1% of a new 52 week high. The last time this stock was at an all time high was right after the ipo and then it crashed and it was never near one again. It had gone public back in July of 2021. It's about three years. What's happening here is incredible gross margins which in addition to the technicals is how it made the list. Gross margin has been above 85% for the last three quarters, which is remarkable especially when you consider it's in the brokerage industry. It's it's had greater than 20% net income margin for the last three quarters as well. Year over year revenue growth outstanding 60% three quarters ago. Then 69%. Nice. Now 72%. So this is a company that effectively is a tech stock in the financial sector. So I want you to keep an eye on this, let it consolidate a bit More, but it's going to set back up. You want to do the next one.
- [42:58]
Josh Brown
Or I will prompt you on that one. Is that.
- [43:01]
Jenny Harrington
Yeah, let's go.
- [43:02]
Josh Brown
Okay. Emerson Electric, ladies and gentlemen.
- [43:04]
Jenny Harrington
Funny you should bring that up, Scott. Emerson Electric is industrial automation hardware, software and power tools. Basically, you can decode everything I just said and hear one word. Robots. EMR is a stock I flagged on the show about a month ago, maybe a little bit longer back in November. RSI of 64, not overbought yet, within 4% of making a a new 52 week high. This is absolutely a Trump trade situation, but it's a bigger story. If you pull the chart back, it's 2% above its 50 day, 14 above its 200 day, not terribly extended. And if we can take out those previous highs from right around the end of the year, there are no sellers here, nobody is down in the stock. So this is a name that should be on your radar. And if you have little to no industrial exposure, it's trading really well.
- [43:56]
Josh Brown
Okay. Last but certainly not least, a stock that just hit your list yesterday.
- [44:00]
Jenny Harrington
H D. Yeah, Home Depot. It's weird because this thing is now diverging from the ITB names positively. It just barely made my list. It has an RSI of about 58, which is rising and good four quarters in a row of negative year over year revenue growth from July of 2023 through the first quarter of 2024. And so the bet here would be that that's about to bottom out and potentially reverse itself if you get lower rates. The stock looks like it's a powder keg. It could explode. I really get excited. Above 420, it's a bun in the oven right now. Not yet. A breakout in progress. Wait to see how it acts around those previous highs. And if she wants to go, it's going to be really obvious. So put this one on your screen. It's outperforming the ITB by 9% over the last 90 days. That kind of positive divergence is exactly the sort of thing that should get your attention technically so that you want to go do the fundamental research and try to figure out why.
- [45:03]
Josh Brown
All right, good stuff. Thank you for that. Take a quick break. We will be right back. We have more breaking news to Eamon Jabbers now at the White House. Amen.
- [45:30]
J
Hey, Scott. That's right. Our Megan Casella and I have been just trying to get the backstory here to that dramatic moment earlier today in Davos when President Trump was speaking to a group of business leaders and addressing Brian Moynihan, the CEO of bank of America. And Trump really went after bank of America, saying that bank of America and also JP Morgan, he said debank conservatives. And he said, what you are doing is wrong to Brian Moynihan. Moynihan sort of ignored that and kept rolling with the commentary in the event. But it was a real flashpoint in that conversation this morning. Getting the backstory now from people here in the building to the sense of where this came from. And what we're told is that this is a long standing view among conservatives and that the President himself holds, and he's said this a number of times at rallies over the past year, that bank of America and other major Wall street players refuse to do business with certain conservatives and have debanked specific conservatives because of their political worldview. Now, we'll see what the banks have to say about that. But that is a view that the President has held consistently for some time, I'm told. I'm told this was not a preplanned attack on bank of America in the sense that the President went out to sandbag Brian Moynihan today, but more of a target of opportunity in the sense that he found himself on live global television talking with the CEO of Bank of America and decided to make this point directly to him. And I can tell you also that there is an expectation in the White House today that bank of America will respond to this and will respond to this relatively quickly. They take note here that a number of CEOs have been doing a lot recently to get out of Trump's doghouse, and they expect that bank of America will respond in kind today. We'll see whether that happens in terms of any kind of formal peace offering or policy change or something, statement maybe from bank of America. But that's the sense here, Scott, is that this was something that's been on the President's mind for a long time. He's spoken about it in rallies in the past, and he took the opportunity today to make the point directly to the CEO. Man to man, as it were. Back over to you.
- [47:42]
Josh Brown
Yeah, I mean, in fact, they have responded, as Leslie Picker was talking about with us, you know, a few moments ago when they said amen, quote, we serve more than 70 million clients. We welcome conservatives and have no political litmus test. Although, as I'm sure you'll agree, this issue is not likely to die on the vine, so to speak, anytime soon, given how this was said and where it was said and to whom it was said. And it's just going to put the onus more on bank of America and the banks in general to further prove their case, one could suggest. But you want to wrap that up?
- [48:21]
J
Yeah. I want to just give you one more thought, Scott, which is this is a different issue. This idea of conservatives being debanked is a different complaint from conservatives and from White House officials and from the president than the one you've also heard from Marc Andreessen, which is about crypto people being debanked from the banking sector under FDIC regulations. There is some concern that Marc Andreessen has expressed publicly about, you know, regulatory action being taken under the Biden administration to push people with a high concentration of value in crypto out of their banks for risk management reasons. That's a separate set of concerns. They may also share that here at the White House. But this is specifically about people's conservative ideology and whether or not they're allowed to stay inside the bank for a variety of reasons. And clearly this is something on the president, President's mind. You know, a lot of folks in corporate America have said that they're excited about this administration because they have a seat at the table. But as we just saw today, sometimes if you're at the table there can be direct face to face criticism as.
- [49:23]
Josh Brown
Well as praise excited until you're called out on the global stage, I suppose. Eamon, thanks. We'll see you soon. That's Amy and Jabbers outside the White House for us. As you see. We're back right after this with final. All right, welcome back. 327 on the Dow. We're only a few points away by the way from a new closing high on the S and P. So we will watch that throughout the rest of the day. Crypto, it's been volatile lately. You bought more of the, I bet.
- [50:00]
Phil Baruch
Big ranges but for all intents and purposes hasn't done much since the middle of November. I talked about on the show we want to add to it, waited for a little shake out about a week and a half ago. It was a new low, was rejected into the 50 day moving average. Good strength off of that we added and I think this could be setting up to see 150,000 over the next couple of months. Few months here.
- [50:17]
Josh Brown
Okay. We'll follow that obviously as well as everything else over the final stretch. Today on closing bell, we'll see if we can get that closing high on the S&P 500. Dan Greenhouse will be with me, Lauren Goodwin, Goldman's Mina Flynn as well And Chris Verone. So I hope you'll join me in a couple of hours. Time. We got about a minute left. You want to give me a final trade?
- [50:35]
Phil Baruch
Yeah, fcx. Today's earnings report. It's come off the lowest. Pretty good. Indonesia production is flushed out. I think copper is going higher. FCX will follow.
- [50:43]
Bill Baruch
Okay, agree. And I almost chose that.
- [50:46]
Josh Brown
Yeah, you think copper. You're really excited about copper.
- [50:48]
Bill Baruch
Well, it's cheap and the earnings growth is great. Great. And the free cash was unbelievable.
- [50:52]
Phil Baruch
It beat profits.
- [50:53]
Josh Brown
You own Freeport.
- [50:54]
Bill Baruch
Yeah, in our growth portfolio.
- [50:56]
Josh Brown
All right, well, you missed your opportunity. Front ran you, Peter to it.
- [50:59]
Bill Baruch
Oh, no, I'm glad I have another one.
- [51:01]
Josh Brown
Who's Clearway Energy.
- [51:02]
Bill Baruch
Clearway, that's me. So Clearway is a renewable power generation company. It's down 6% with all the fossil fuel rhetoric that's been coming out, but it's not at Clearways expense. So now you get to buy the stock with a 7% yield.
- [51:14]
Josh Brown
Thank you very much, Josh Brown.
- [51:16]
Jenny Harrington
NASDAQ successfully retested the breakout level and is now on the rise once again. Keep an eye on this name for the IPOs that are to come this year. Primary beneficiary.
- [51:27]
Josh Brown
All right. We've been up six or seven days. We'll see if we can notch another positive day on the S and P. And maybe a record setting one. I'll see at three. You've been listening to CNBC's Halftime Report, the podcast you can always catch us live weekdays at 12 Eastern only on.
- [51:45]
Deirdre Bosa
All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Halftime Report participants consider reliable. But neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com halftime reportdisclaimer@ Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think with Capella University. Learn more at Capella Eduardo.