Halftime Report: Can Stocks and Rates Rise Together? (January 14, 2025)
Published on January 14, 2025
Introduction
In the January 14, 2025 episode of CNBC’s Halftime Report, host Scott Wapner engages with top investors—Josh Brown, Stephanie Link, Jason Snipe, and Jim Lebenthal—to dissect the evolving dynamics between stock markets and interest rates. The discussion delves into the implications of potential Trump 2.0 policies, recent economic indicators, and specific stock performances, offering listeners a comprehensive analysis of where the markets stand and where they might be headed.
Market Overview: Diverging Signals
Scott Wapner kicks off the episode by highlighting the current tension between rising stocks and fluctuating interest rates. Despite a recent downward movement in rates following a better-than-expected Producer Price Index (PPI) report, yields on the 10- and 30-year bonds remained elevated. This divergence underscores the uncertainty surrounding the market’s trajectory.
Notable Quote:
"You had a little bit of a cooler read on inflation, but rates barely budged. And it's because we're still kind of assessing what Trump 2.0 policies are going to mean and if they're going to be more inflationary or not and what the market's going to do as a result."
— Stephanie Link, 02:30
The Impact of Trump 2.0 Policies
The discussion pivots to the potential effects of a second Trump administration on the economy. Stephanie Link emphasizes that the Trump administration's previous stint kept inflation low (1.9%) and suggests that new policies might balance growth with manageable inflation levels. The consensus among the panelists is that while there are uncertainties, the strong underlying economy (with 3% GDP growth and 4.1% unemployment) provides a stable foundation.
Notable Quotes:
"I don't think tariffs are going to lead to inflation, especially if they kind of phase them in. I think they're going to be more than offset by the pro-growth policies, lower taxes, less regulation."
— Stephanie Link, 03:20
"The economy is very strong right now. We've been clocking 3% real GDP growth for several quarters. That's fabulous."
— Josh Brown, 06:00
Stock Market Prospects Amid Rising Rates
Despite the upward pressure on bond yields, the panel remains optimistic about the stock market's potential for growth. Jim Lebenthal points to the return to pre-pandemic unit labor costs, signaling increased productivity and margin expansion, which could drive earnings growth in the coming quarters.
Notable Quote:
"Unit labor costs are back to pre-pandemic levels, which spells productivity and margin expansion where earnings start in earnest tomorrow."
— Jim Lebenthal, 04:05
Josh Brown concurs, suggesting that even with higher rates, stocks can appreciate if driven by robust economic growth and controlled inflation. He also downplays the need for emergency rate cuts, citing the current economic strength.
Notable Quote:
"Look, we didn't need emergency rate cuts then, we don't need emergency rate cuts now. Frankly, we don't need a rate cut this month. The economy is awfully strong."
— Josh Brown, 06:45
Sector Highlights: Healthcare and Technology
Healthcare Investments: Stephanie Link discusses her bullish stance on UnitedHealth, highlighting its strong market position and growth prospects through its Optum segment and strategic acquisitions. Despite recent challenges and regulatory uncertainties, she views the current dip in stock price as a buying opportunity.
Notable Quote:
"When you can get number one on sale, because if something is messy, I think the management has proven that they will re-engineer and get back to double-digit earnings growth and revenue."
— Stephanie Link, 15:47
Technology Sector Adjustments: Josh Brown explains his strategic trimming of technology holdings like Apple and Microsoft to reallocate resources into healthcare and other promising sectors. He underscores that despite recent declines, the long-term momentum in tech remains intact, particularly for companies like Amazon and Google.
Notable Quote:
"I am picking spots within the Mag 7 that I want to accentuate. Those include Amazon and Google. They are de-emphasizing or I am de-emphasizing Microsoft and Apple by the trims that I've done."
— Josh Brown, 23:19
Tactical Stock Picks: 3M, Becton Dickinson, and EOG
3M (MMM): Carl Quintanilla highlights 3M’s potential for a significant breakout, given its consolidation since September and proximity to its 52-week high. He notes that the stock isn’t overbought and anticipates a positive movement.
Becton Dickinson (BDX): The discussion points to Becton Dickinson’s resilience and steady performance in the medical and surgical products sector. Carl emphasizes its modest dividend and robust market presence as key investment strengths.
EOG Resources (EOG): Carl describes EOG as poised for a breakout, noting its consolidation and the revitalization of its sector. He advises traders to watch key price levels for potential entry points.
Confronting Market Volatility and Uncertainty
The panel acknowledges the increased volatility in the current trading environment, attributing it to a broader range of potential outcomes driven by new policies and economic indicators. However, there is a shared optimism that the foundational strength of the economy will support continued market growth.
Notable Quote:
"The primary trend is higher, I think, but I suspect that moderately higher volatility is here to stay for a bit."
— Jim Lebenthal, 04:41
Special Segment: UnitedHealth's Strategic Moves
A significant portion of the episode focuses on UnitedHealth's recent actions, including the sale of shares and management’s handling of disputes. Despite some short-term setbacks, panelists like Josh Brown and Jim Lebenthal remain bullish, citing strong earnings growth projections and strategic expansions through segments like Optum.
Notable Quotes:
"They got to handle it. They're going to see double-digit growth in earnings and revenues and they have an $18 billion buyback program."
— Stephanie Link, 15:14
"This has always been an earnings compounder. They're talking about 13 to 16% EPS growth over the next five years."
— Jim Lebenthal, 14:36
Housing Market Insights: A Bullish Perspective
In a dedicated segment, Josh Brown shares his enthusiasm for the housing market, underscoring the long-term supply-demand imbalance with a shortage of five million homes. He highlights KB Homes' impressive delivery numbers and revenue growth despite higher interest rates, viewing these factors as indicative of enduring demand.
Notable Quotes:
"We're 5 million homes short in this country. And now you're on the 15th consecutive year where the home builders have underproduced."
— Stephanie Link, 32:52
"I think the Fed is going to cut maybe not four times this year, but not zero times. I think the Goldilocks scenario for the housing market would be for the labor market to say strong but not too strong and for mortgage rates to gradually work their way down to a five-handle."
— Carl Quintanilla, 34:54
Closing Thoughts and Future Outlook
Scott Wapner wraps up the episode by summarizing the key takeaways: the interplay between rising rates and stock growth remains complex but navigable, supported by strong economic fundamentals and strategic sector investments. The panelists express cautious optimism, emphasizing the importance of long-term investment strategies amidst short-term volatility.
Conclusion
The January 14, 2025 edition of Halftime Report offers a robust discussion on the delicate balance between stock market performance and interest rate movements. With insights into strategic investments, sector-specific opportunities, and the overarching economic landscape influenced by potential Trump 2.0 policies, listeners are equipped with a nuanced understanding of the current financial environment and actionable perspectives for future market engagement.
Notable Timestamps and Quotes:
- 00:00 - Edward Jones' ad segment (skipped)
- 00:41 - Scott Wapner introduces the episode theme.
- 02:30 - Stephanie Link on inflation and Trump 2.0 policies.
- 03:20 - Stephanie Link on tariffs and pro-growth policies.
- 04:05 - Jim Lebenthal on unit labor costs and productivity.
- 06:00 - Josh Brown on the strength of the economy.
- 06:45 - Josh Brown on rate cuts.
- 15:14 - Jim Lebenthal on UnitedHealth's growth prospects.
- 15:47 - Stephanie Link on UnitedHealth as a buy opportunity.
- 23:19 - Josh Brown on adjusting technology sector holdings.
- 32:52 - Stephanie Link on KB Homes and housing market.
- 34:54 - Carl Quintanilla on the housing market and Fed policies.
Note: Advertisements, intros, and outros were omitted to focus solely on content-rich discussions.