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Halftime Report
Can Stocks Pull Off a Year-End Rally 12/26/24
00:44:19
Frank Holland and the Investment Committee debate whether stocks can pull off a year-end rally with only 4 trading days left in 2024. Plus, the Committee discuss some of Wall Street’s favorite stocks for the New Year including 3M, Amazon and Dell. And later, we’ll give Bryn Talkington her year-end portfolio report. Investment Committee Disclosures
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- [00:00]
Scott Wapner
Are you still quoting 30 year old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide 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 what's your boldest.
- [00:31]
Bryn Talkington
Truly ambitious life goal? Everyone has one and everyone deserves a.
- [00:34]
Frank Holland
Way to get there. That's why State street offers a wide variety of ETFs to give all investors access to the market and the chance to reach their goals. Like with DIA where you get 30 US blue chip stocks in a single trade. Wherever you're heading, getting there starts here with State Street. Before investing, consider the fund's investment objectives, risks, charges and expenses. Visit ssga.com for perspectives containing this and other information. Read it carefully. DIA is subject to risks similar to those of stocks. All ETFs are subject to risk, including possible loss of principal Alps Distributors, Inc. Distributor. I'm Scott Wapner 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 and thank you Sarah and Brian. Welcome to the Halftime Report. I am Frank Holland in for Scott Wapner. Happy holidays. Front center this hour, the four day dash. Can stocks pull off a year end rally or are the gains for 2024, are they already locked in? We will debate that and much more. Our investment committee joining me for the hour we have Joe Terranova, Jim Leventhal, Bryn Talkington and Josh Brown. But first a very quick check on the markets. Taking a look right now you can see markets actually doing a bit of a reverse. They were fractionally lower earlier, now they are fractionally higher. The Dow up just, you know, a tenth of a percent essentially the S&P just a tick or two above flat. The Nasdaq similar story. And we also want to take a look at some other parts of the market right now. The Russell actually the best performer out of the whole group. It's been positive all session long up over a half a percent right now. And one other thing we have to watch right now, the yield on the 10 year. Take a look at this right now at 4.6 so very close to its highs that we have not seen since May of earlier this year, well above the 4.5% mark that a lot of people have cited as something that will put pressure on equities. And I think that's where we have to start. Josh Brown, I'm going to come over to you. Happy holidays. Over to you. How do you see these last trading days of 2024 playing out? What trends are you watching?
- [02:29]
Josh Brown
I got to be honest, I don't assign a particularly high amount of importance to the last two or three trading days of the year. I would actually say that most people have had a great year in the markets. It's been pretty hard to not have a good year. So if you're trading very aggressively on December 30th, I'm going to go ahead and assume that you are either insane, don't have a lot of family, or are drastically underperforming everyone else and need to do something weird in order to catch up. Most normal people have done most of what they plan to do. In my side of the business, which is wealth management, you're going to see a lot of rebalancing take place, and most of that will happen in January, not in December. And the reason for that is after a year like this one, there are going to be taxable gains for. For wealthy households, and nobody wants to. Nobody wants to take those earlier than they need to. So I think you're going to see some activity. I think you're going to see some stocks for sale, particularly some of the biggest winners of this year. The prevalence of custom and direct indexing within wealth management, which is, by the way, about $7 trillion worth of assets, means that you'll see this stuff happen regardless of fundamentals and regardless of technicals. It's just people that are overweight, one thing, that want to be slightly less overweight, and they'll be adding to things that haven't worked as well. They'll do that systematically. People will look at it and say, oh, it's the great rotation. It'll run its course and that'll be that. But I just want to give people a sneak preview of what they should expect to see in the first two weeks of the new year.
- [04:06]
Frank Holland
All right, there we go. So just hypothetically, Josh, in case someone doesn't have family or they are insane or lagging the rest of the market, what areas do you expect to see some pressure on? When you talk about the stocks that have really benefited so far that you may see less weight on those, we're talking Nvidia, we talking Palantir. What areas, if you want to go individual names, are you talking about where.
- [04:25]
Josh Brown
I think there'll be pressure.
- [04:27]
Bryn Talkington
Yeah.
- [04:28]
Frank Holland
Right. I mean, you're saying some people want to trim some positions where they're overweight. So are there other sectors, are there.
- [04:32]
Josh Brown
Names that you're looking at saying the opposite, Frank? I'm saying the opposite. I'm saying you're going to see big moves after the first of the year, which will be mechanical in nature. They'll be rebalancing trades at wealth management firms, family offices the next two days. I have no idea. The point I'm trying to make is I don't think you're going to see a lot of activity one way or the other because most people have had a good year and they don't feel the need to push it into the end of December.
- [05:01]
Frank Holland
All right, Joe, going to come over to you. Looking at these last trading days of the year, is there anything that you're watching as we look at these last days?
- [05:08]
Joe Terranova
So I think there's a very important conversation that we need to have and it's regarding what we're seeing within the market. We'll talk a little bit about January and the January effect as the show develops because there's some interesting statistics in particular related to the last four years. But Josh used the word several times. People, he talked about people participating on a day like today. This morning we're looking at the market. I'm looking at the market as an individual and what I see is a 10 year treasury yield rising to its highest level in the spring. Well, everything that I've heard now. And the market is under pressure. All three of the major indexes are under pressure at this point. And what I've heard over the last two weeks is rising yields is really bad for small caps. And what have small caps done? They're down 7% so far, month to date, dramatically trailing the NASDAQ and everything else. So I think there's a very strong public service message here for investors. There's more money in the market right now than ever that cares about where the market is at the end of the day. And that is not what the overwhelming majority of people actually concern themselves with. People actually worry about. Where's the market at the end of the quarter? Where's the market at the end of six months or in a year, or three years, or five years? Algorithms and zero dated options are dominating the daily price action. And on a day like today, when you see things that seem not logical, like the simple premise that a 10 year treasury rises to its highest level since the spring and the one equity size class that should suffer most is actually leading the market higher. You begin to understand what's going on in the markets right now. And I always had the expression it.
- [06:50]
Josh Brown
Is what it is.
- [06:51]
Joe Terranova
I'm not trying to change the game, but you understand the game. And if I look at zero dated options today, okay, if I look at options overall, option volume overall, this is fascinating. If you look at the top 10 options traded in the market today, nine of the top 10 options have an expiration today or tomorrow. The top three are S& P calls with a notional value of nearly $50 billion. And they came early for the zero dated options in small caps at 224calls. So for the viewers you have to understand as you move into 2025 sometimes there's going to be price movement that seems completely not logical. And you just have to understand it's quants, it's algos, that's the growth of the market. We're not putting the genie back in the bottle. It is what it is, but you.
- [07:40]
Frank Holland
Can'T react to it, so can't react to it. Brent, I'm going to come over to you. Joe making a point. We're going to talk a little bit more about again the January effect and some of the impact that Aller made algorithmic trading is having on the market. Harder to get out than you might think. But I do want to talk to you about the end of the year. A couple of things I just want to point out. S and P coming off its best day since the day after the election earlier this week. NASDAQ had its best quarter since Q4 a year ago. And as Joe was just talking about, the Russell have this worst month Since September of 2022 back in the pandemic.
- [08:10]
Bryn Talkington
Right. Well, I mean I think if we could just take what Joe said and record it and just replay it, that would be like a foundational piece of knowledge all investors need to understand. Or the machines run the market on a daily basis. But over the immediate intermediate and longer term it's like momentum, sentiment, fundamentals and earnings drive returns. And I think what's interesting right now is that while the S and P this year going into the end of the year, even though the tape, the volume is really light, continues to to charge towards all time highs, the breadth underneath the market really continues to disintegrate where I think as of this morning only 30% of S&P names were above the 50 day moving average. And so I think that what's going to happen next year and to kind of Build on Josh's point as well. The first two weeks of January are the biggest two weeks of the year for money going into the market from rebalancing. And so I think that the going to your original question going towards the last few days of the month, the tape is light, the direction should be higher. There's no reason to think that it would be anything to counter that. I think also you're going to get continued momentum into that first two weeks of the year which happens to coincide with the inauguration. But I do think after that, when we do have Trump, we do have his team, I think there's going to be a lot more volatility in like the third and fourth week of January than the first two weeks, which I think is going to be excitement moving towards the inauguration. And then number two, all of the money coming into the market from to Josh's point, simple rebalancing that, that happens very mechanically the first two weeks of the year.
- [09:53]
Frank Holland
All right, Jim, want to come over to you. Looking at year end right now, I think it sounds like everybody at the table here is kind of looking ahead to January, but we do want to talk about these last trading days of 2024.
- [10:02]
Jim Leventhal
Well, I think I agree with what's been said so far, which is to say that there's a lot of unique, somewhat unnatural forces that occur in the last days of the year. I definitely would not impart too much importance to what happens in these last few days. As Josh pointed out, there's tax lost harvesting, there's deferral of gains. Joe, you made a fabulous point with regards to zero dated options and what's going on there, moving the markets around on an hour by hour basis. If you're in the world that I live in of trying to fundamentally analyze companies and think about what a business is worth, compare that business worth to where share prices are trading. None of that has any bearing on how I would position my portfolio going into the new year. So it's not that I want to punt on the question at all, Frank, but I think all four of us are saying that these last few days of the year are not where fundamental analysts are really making their bones. However, now, you know, if you look into January and beyond, I will make the case for the third year in a row and hopefully the third time is the charm that the rally should broaden. You know, we have a very strong economy. We do have a Fed that is continuing to cut interest rates regardless of where the ten year is, Joe, and maybe that's reflecting inflation and maybe inflation, after a little bit of scare here in January and December, actually turns out to be just a little head fake and rates come down. I don't know. But what I do know is that the Fed is still cutting interest rates. China stimulating its economy needs to do more. Again, from my perspective, which is defined as a fundamental business analyst, I like what I see as far as the broadening of the rally to include the equal weight S&P 500. Brin, you've talked about that a lot. And small caps. One quick comment on the equal weight S&P 500. It has underperformed the headline index by 14 percentage points this year. Year. 14 percentage points. That's more than last year. I mean, there is something that will cut against what I'm saying, which is passive investing will always feed the largest stocks in the market. And that's where people like me calling for the broadening of the rally may be wrong, but my goodness, at some point this will reverse.
- [12:06]
Frank Holland
All right, Josh, I'm come back over to you. I mean, clearly we all want to talk about 2025. So as we look ahead, Josh, we look at things like the rise of the $$ up more than 4 and a half percent since, since the election. The rise in bond yields up more than 85 basis points since the election. How do you see that impacting trading going into the new year? And things like earnings, I mean earnings estimates right now at about 9 and a half percent growth year over year. In your mind, is there a risk of some big companies, especially these multinationals, missing on these estimates and that impact in the market?
- [12:33]
Josh Brown
I think you have three landmines in the first quarter. The biggest one is Nvidia's earnings on February 26th. If they don't beat and raise, it's problematic for the nasdaq, which de facto is now very problematic for the S&P 500. So that's, that's number one. I'm not telling you that landmine will detonate, but if you ask me what's the number one risk in the next 90 days, I'm handing it to you on a silver platter. This is very obvious stuff. The number two risk is the dollar gets out of control. It is incredible. Another year of a rallying dollar versus every currency under, under the banner of heaven, so to speak. You take a look at the chaos happening in places like Brazil with 14% interest rates still three years after the rest of the world started fighting inflation. You take a look at some of the issues that have now been plaguing the Japanese stock market and economic recovery story. It's just this thing where we cannot sustain probably a continued rally in the dollar to this extent. So that's another landmine. Count on companies using that as an excuse to sandbag and possibly temper earnings expectations. They'll start talking about currencies on their conference calls. Landmine number three is tariff stuff. How aggressive? Who's getting them? Who's not getting them? How wild will the discord force around tariffs be? What will other countries do in response? So we know what probably the three biggest, most obvious landmines are. We sort of know where to look for them. We sort of understand what the impact will be on sentiment. We don't know fundamentally what the impact will be, but we know that people will sell stocks if and when those things rear their ugly heads. And probably one out of three at least will. So I think the setup here is if you missed out on 2024, that's not a reason to get like, carried away now and start doing things that you wouldn't otherwise normally be doing. I don't think you want to throw away your allocations to other areas of the market to go and chase the circus. And I don't think you want to just expect this to continue forever without an interruption. And by the way, this is why the four of us are focused on the big rebalances that will probably happen at some point in January, because this is what smart investors do. They don't constantly push more chips onto the square that just got hit 27 times in a row. They start thinking about moving their chips into other squares. So I think you'll see rational behavior, at least from my part of the market. Asset management, wealth management, will. Will day traders take Nvidia up another 10 points? Maybe. I don't know. I can't stop them. I don't care. So I think the options crowd and what you see happening in the degenerate stocks, it's its own world. It's unaffected by the things I'm talking about. Which is why I'm so hesitant to give you a comment on what's going to happen in the next 48 hours. I'm not in that world. I really don't care.
- [15:40]
Joe Terranova
Just real quick, Josh, I want to ask you a question. I'll ask everyone on the panel. Does anyone think that the growth of these options come potentially with the risk of disrupting market structure at some point?
- [15:52]
Jim Leventhal
Well, there's a. There's an article that came out, and I don't remember if it's Wall Street Journal, Bloomberg, whomever it was, I'm sorry, maybe with cnbc about the intersection between gambling, particularly for young men and investing. And it's the data is factual that a lot of the younger generation, particularly skewing to males, are looking at the stock market market as a source of gambling. To me, and I suspect to the other three of us on the panel, I suspect that that's totally anathema to what we do. I was talking about fundamental equity analysis before. It has nothing to do with gambling. It has to do with an intellectual pursuit of trying to find a dollar's worth of value selling for $0.50. However, to your point, Joe, it's real. I mean, I'm not saying, I'm not sitting here excusing it or wishing away what you're talking about with zero dated options has nothing to do with analysis at all. It has to do with rolling the dice. Only it's not in the back.
- [16:44]
Frank Holland
Well, really quickly, I believe it, I believe it was Gunjan Banerjee and it is a pretty fascinating story. But Josh, I'm sorry, go ahead.
- [16:53]
Josh Brown
I would say that, I would say that the impact of zero days till expiration options trading and the options speculation bubble in general amongst men in their teens and twenties has a much bigger impact on the real estate market in Miami than it has in the stock market. Structurally, I don't think it, I think it matters on a day to day basis, but I don't think it changes valuations or the way investors are behaving. I think it's noise that we need to tune out. It has a huge impact on Brickell. Ken Griffin is the beneficiary of all this gambling. He is the proverbial house. He was able to buy a 54 story glass tower in Miami's new financial district. Then he bought an office tower, 1221 Brickell. Then he bought another plot of land, 1250 Brickell. He bought 1201 Brickell Bay Drive. He owns half the buildings in that area of Miami. And that's as a result of people who are 27 years old and need to make 4,000% every time they place a trade. It's a, it's a delusion within a delusion and it has a much bigger impact on the amount of activity in the real estate market down south than it has with any anyone that's actually investing for their retirement.
- [18:10]
Frank Holland
All right, before we get to the real estate values in Wynwood or some other part of Miami, Brent, I want to come back over to you. Why don't we circle back to where we were originally talking about the dollar? I know you have some thoughts on the dollar again, rising about 4 1/2% since the election.
- [18:22]
Bryn Talkington
Yeah, I think also to go back to, I think Josh had some good landmine conversations. Let's just like start with Nvidia. I think for investors, Nvidia's numbers don't come out until February 25th, so that's like a solid two months. So we'll know what's going to happen because all the hyperscalers will have had earnings before that. So we'll get a good sense of the spend. I think on the dollar, on, on how you want to play this or not play it is if you look at energy and materials over the last month, energy is down 12%, materials are down 8. And so is that dollar continues to strengthen. That's a headwind to both sectors. On the flip side, though, especially with an energy, there's a ton of these, a basket of these companies that have a ton of free cash flow, capital discipline. And so ultimately from that dollar headwind, that will be a tailwind at some point. And so if you're looking to get into this, this trade that has not worked, you know, writ large, some names have. I think watching the dollar and see for a turn could be a catalyst where you're going to see money start flowing into those two spaces because they've been such heavy underperformers. And the dollar strength is one of the biggest reasons why.
- [19:29]
Frank Holland
All right, so one other question for you at all worried about the yen carry trade? I actually did a story about this a few weeks ago. The rising dollar along with the action over at the boj, really impacting that trade, that's been a big tailwind for tech overall throughout the year.
- [19:42]
Bryn Talkington
So I never think about the yen carry trade. We don't do, we don't do parrot, we don't do long and short dollar trades. I think we'll leave that to the hedge fund community. They do say the yen carry trade has long been the widowmaker in terms of saying we're going to shorter go long the yen. But I think if, you know, we saw that, what was it two months ago when that trade unwound for a minute when Japan started to raise rates, which for us, I won't speak for all four of us, but for myself, I never think about it, but that was a great day for us as investors to be able to pick up some names that sold off for only mechanical reasons in the market.
- [20:22]
Frank Holland
All right, let's put a button on this conversation. You want to talk a little bit about that January effect. You were alluding into it a bit earlier, but yes, I want to get a bit deeper into it.
- [20:29]
Joe Terranova
Well, the way I think about the month of January is I want to be very judicious. I want to be very, very conservative in my approach. In exactly what Josh is talking about is how are you moving the chips in terms of reallocating away from certain areas of the markets. I think earnings are incredibly important. You get the first glimpse in that early, obviously and early in the quarter with, with some earnings reports that are being released. If you look back annualized over the last 10 years, I think you're talking about earnings growth of somewhere north of 8.5% percent. I've seen estimates for the upcoming year that approach 14%. So what's interesting about the January effect, and it's popularized and it's put into action by the hedge fund community and the speculative community. If you go back over the last four years and 2025 is probably going to be the year that we break the Trend. But in 2021, you have the S&P up 28 +%. The low for the year in 2021 occurred on the first trading day of the calendar year. Okay, 2022, the S&P is down 19%. The high for the year occurs on the second trading day of the calendar year. Move forward to 2023, you're up 24 +%. The low for the year again, first trading day of the calendar year. And then finally this year we're up 26 plus percent. We waited until the fourth trading day of the calendar year long where we got the low. So you get last four years. The early days of January have given you insight for what the overall trend for the calendar year is ultimately going to be. Maybe it works for 50 or maybe it breaks.
- [22:08]
Frank Holland
And so smart money and big money, they're watching this trend again going into next year.
- [22:12]
Joe Terranova
Look, the hedge fund community will look at the first two weeks of the year and they'll say, okay, Hypothetically, we're down 2% in the first two weeks of the year and the high was on the first or second trading day of the year. They'll push capital in the direction of further declines. The same can be said if, in fact, we're up 2% for the year and you've got the low in the first couple of days of the calendar year, you'll see capital to try and push markets higher based on that. So the January effect and the way that people speculated around it is real for consumers years. It's work. We'll see if we go for five.
- [22:47]
Frank Holland
So it sounds like it's going to have a big impact on Jim's theory that we're going to see a broadening coming up next year just depending on those early day trends.
- [22:54]
Jim Leventhal
Correct, Joe? I mean you've identified a pattern. There's no reason to think that the algos, the quants are not going to see that pattern and do the same thing. I can grant you on that, I literally don't know. Like when I say I don't know that it's going to repeat, it's not.
- [23:07]
Joe Terranova
Like we know that those early weeks of January are really, really, really important.
- [23:13]
Jim Leventhal
I'm going to take the other side of that and not just to be argumentative. Here's what I was going to say before you said anything about that pattern. I was going to say this, that I don't think I really care about the January effect this year. I mean, there's something that's to be said that most January's right. If you're down, people say, well, the odds of having an up year go down significantly. If you have a negative January, that's fine, but it's almost tautological, right? I mean, if you dig a hole in January, you're just that much, much less likely to dig your way out of it by the end of the year. What I think could very well happen, and I'm not taking anything away from your argument, the algos and quants may listen to what I'm saying and say you're an idiot. I don't care. Okay? But what I think may happen, Josh, was, I think alluding to this earlier, is some of the deferred gains that people have not wanted to trim their Broadcom or in video or whatever. Maybe some of that happens in early January. If it does, based on, hey, look, the top three stocks, Microsoft, Apple and Nvidia are 21% of the S&P 500. That might be a little bit of a headwind. Might be a little bit of a headwind in January. But you know, whether it's a durable trend or just a, just a cycle. I think Josh was alluding to it as a fad that will pass. I think they will look at other areas of stock. What do you do with this money? I've made a lot of money. Maybe you look at some other cheaper areas that do have good growth to your point.
- [24:25]
Joe Terranova
That's why I said exactly. Be conservative, be judicious be early in January, don't be aggressive in allocating or reallocating capital.
- [24:33]
Frank Holland
Really we do have to move on to something else. But Jim, very quickly I'm going to show the quarter to date chart of the S and P and the S and P equal weight. If you look here at the moves it takes the equal weight takes a sharp dive the beginning of December. So with your thesis about what we might see going into next year, what happened here? We saw the broadening working out, especially post election. Why did the money go out of the broadening out story?
- [24:53]
Jim Leventhal
I mean look, this is, this is a choose your adventure type of answer. I'll answer. You can ask anyone you want. But you know, one of the things that's undeniable rate is the spike in the ten year treasury. I mean that's, that's a lot, right? Over three months it's gone from 370 to 460. And I think that eventually caught up that people start to think hey, you know, maybe there might be some headwinds from interest rates. Let's go to what's worked in a higher interest rate environment before defensive growth.
- [25:17]
Frank Holland
We're definitely choosing our own adventure because right now we just hit yields at their highest level since I believe end of May. Right now we're seeing the small caps working, market rebounding. They pulled back a couple of basis points but rebounding throughout the day with these elevated.
- [25:29]
Jim Leventhal
Look, it's a silly time in the markets. Let's not try to log on.
- [25:32]
Frank Holland
Try to do that holiday shortened week. All right. We do have to move on. We're going to turn to our sema. Modi joins us now with a look at this year's biggest software winners and the setup for 2025 SIMA Happy holidays, Frank.
- [25:43]
Seema Modi
Happy holidays. I've been enjoying this discussion. We've been talking about software outperforming chip stocks in the second half of this year. Wedbush securities, among others say the run in software is just getting started with use cases exploding and enterprise consumption increasing. There's a new survey run by Evercore ISI which found that technology budgets are on the verge of increasing, driven in part by artificial intelligence and this growing belief that deregulation and more M and A under Trump will be good news for the entire sector. Investors also assessing what a growing number of Silicon Valley veterans in the White House will mean for AI. Any adventures expecting AI policy to be fast tracked, which they say will give tech companies much needed clarity. Wedbush says the two best software plays still remain, Palantir and Salesforce which yes, are up big this year. Salesforce is still trading about $60 below the average price target on Wall street while Palantir is trading right in line with analyst targets. And that many others are also positioned to benefit according to the analysts we spoke spoke to. Calling out names like Oracle and IBM, both of which are helping clients incorporate AI into their businesses. Others are pointing to Snowflake's products that are increasingly competing with Amazon's AWS and then the smaller to mid cap names like MongoDB, Elastic and Pegasystems. That's actually a sign that investors are already starting to diversify their holdings beyond the large cap software names.
- [27:09]
Frank Holland
Frank Seema, thank you very much. Seema Modi with a look is software. Appreciate it. Josh, I want to come over to you. Just your reaction with Seema had to say and looking at some of those charts, I mean the acceleration of a name like a Palantir, some of these other names, just big upside moves.
- [27:25]
Josh Brown
Yeah, I think what this boils down to is investors this year, Frank, selected for profitability and growth. I really don't think it's more complicated than that. So if you think like, just think about what the biggest winners of the year look at, look at Apple and look at Nvidia as like Mega cap examples of this. Their ROE is literally off the charts. The European mind cannot comprehend a company like Apple with 147% roe, Nvidia not far behind 130% roe. This is like literally absurd. The S&P 500 overall is more like 19%, 20% and we think that's good historically. So when you think about these software stocks that have been leading and that have been just ripping all year, what most of them have in common is just extremely high growth and extremely high roe. And these are the types of stocks, these are the characteristics in stocks that people have been selecting for all year in what's overweight. And you could point to all these different secular trends like and I have like CyberSecurity or Connected TV in the case of a company like a trade desk. Like there's a lot of different cross currents here in terms of trends. But like the bigger picture thing is people want to own the companies that have the fastest earnings growth and are the most efficient at generating that growth, which is return on equity. And I, I don't know, I don't really see that changing materially in 2025. So I think there's a durability to this trend. But again it doesn't mean it will be uninterrupted so use the corrections when people temporarily get afraid of the valuations as as your opportunity to buy them.
- [29:17]
Frank Holland
All right, we got to leave that conversation there, Josh. Thank you for that. Coming up here on Halftime, Wall Street's favorite stocks for the new year, the analyst community out with their top picks for 2025. We got the names and we got the trades. That's coming up next on halftime. Stay with us. 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.
- [29:43]
Scott Wapner
Fully confident, but the vendor isn't responding.
- [29:46]
Frank Holland
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 5G requires a compatible plan and device. 5G is not available everywhere. See att.com 5G for you for details.
- [30:04]
Scott Wapner
Are you still quoting 30 year old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. 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.
- [30:34]
Frank Holland
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- [30:55]
Bryn Talkington
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- [31:19]
Frank Holland
Welcome back to Halftime. You see the Dow just trying to stay in green right now. This week we're looking at all of Wall street top stock picks for next year. 3M, Amazon and Dell are some of the names on the UBS list. Josh, we're going to start with you. You own 3M?
- [31:34]
Josh Brown
I do. I think this is like the second or third inning of a really big turnaround story. I don't have a ton of industrial exposure, but this is something that I identified as a technical breakout. And the more I looked at the fundamental drivers as to why it was breaking out, the more I wanted to convert it from a trade to a longer term holding. And that's what I've done and it's been rewarding so far. I think I'm in the stock like 103 or 104, so I'm gonna stick with it. I do have a stop loss here at much lower levels just in case things change. But I do think there's a ton of potential for this business going forward.
- [32:11]
Frank Holland
We talk about cyclicals overall concerned at all since we saw that hawkish cut by the Fed that industrials have been lower overall and the cyclical trade overall is just kind of unwound?
- [32:23]
Josh Brown
No, not really. I don't think the relationship between interest rates and the real economy is as well understood as a lot of other people seem to feel. We just had 100 basis points worth of interest rate cuts and the Yield on the 10 year is up 100 basis points. Somebody has to explain that to me. I'm not sure how that's possible unless the relationship isn't quite the same as we think it used to be. I think higher rates have actually acted as a form of stimulus. I look at wealthy households and their willingness to consume going higher as rates have risen and that's not how the textbooks taught it. So I'd be reticent to point out any sort of linear correlation between industrial stocks and the overnight interest rate.
- [33:09]
Frank Holland
All right, let's move on to another one. Dell. Brin, you're in. This name shares up more than 50% year to date.
- [33:16]
Bryn Talkington
Yeah, so Dell, I think Dell is a really interesting name. Dell to me as a story is more the parts are greater than the sum for next quarter earnings which are February of 2025. The street's looking for 10 and 14% revenue and earnings growth. But underneath the hood, their infrastructure solutions group is where people are buying Dell. That is their networking, their servers. That's where they're getting data center growth and they had 38% growth. And so when I look at this company, you're going to continue to see that isg group dealing larger and larger part of the earnings. Right now it's about 40%. And so I think long term as we continue to build out data centers, which Vertiv has told you, Microsoft told you, Oracle's told you, Dell is going to continue to be a participant, especially as that ISG group becomes a larger and larger part and the PCs continue to be a smaller part where to.
- [34:11]
Frank Holland
Keep going on this UBS list. Amazon's another name on that list. Jim and Joe, you both in this name. Jim, start off with you. Your view on Amazon, relatively new to.
- [34:20]
Jim Leventhal
The name, having started it, built the position in February through May. It had actually at that time the same price as it was three years earlier. So I had it at a much cheaper price, which made me happy. I mean, there's so many superlatives to say about the stock. If you think retail is going to do well as employment stays strong and interest rates lower and credit card costs go down, guess what? Amazon's going to benefit. If you think hyperscalers are going to turn to propertization eventually that's going to lead to more monetization for Amazon Web Services. You've got logistics, you give out other moonshots. I know it's applicable to Alphabet, but really, what are you going to say? Negative about Amazon. The momentum is there, the fundamentals are there. I frankly think the valuation is attractive.
- [35:02]
Joe Terranova
The cloud story is very compelling. But I think also when you think about sensor sentiment and positioning, this is one of the mega cap names that was somewhat unloved a year ago and it was warranted because it had the relative underperformance to the others more recently. And I think it's been in the second half of the year. You've seen momentum build and now arguably it probably has the strongest momentum when you measure it against some of the other mega caps. So it's got a good fundamental story and that's now being supported, supported by a reversal in what was muted sentiment and muted position.
- [35:38]
Frank Holland
We do have to go. I want to ask both of you very quickly concerned at all about the labor issues that Amazon starting to see. Very small. It's about, I believe, single digits of its workforce, but it seems to be a uptrend.
- [35:48]
Jim Leventhal
I mean, pay attention to it. It's not worrying me right now. It could be a worry. Look, this is happening across many of corporate America. Look at what's happening with Starbucks. Obviously unionization there is starting to bite. Still, that stock's been on a tear since Brian Nichols came in. I think this is something that you keep your eye on, but it's surmountable.
- [36:06]
Frank Holland
All right, we've got to leave it there. Shares of Amazon pulling back almost a half a percent right now. All right, time now for some headlines with our Pippa Stevens Pipa. Happy holidays.
- [36:14]
Pippa Stevens
Hey, Frank. A U.S. official tells NBC News there are early indications that the Azerbaijan Airlines flight that crashed over Kazakhstan yesterday was hit by a Russian anti aircraft system. The Kremlin has warned against such speculation about the flight, which was diverted for unknown reasons before crashing in Kazakhstan, killing 38 of the 67 passengers aboard. Investigators are still trying to determine what caused the crash. Author and former Democratic presidential candidate Marianne Williamson is launching a bid to become the next chair of the Democratic National Committee. In an announcement today, Williamson said that she she believed she could, quote, bring a level of expertise to the role. She joins a wide field of candidates, including former Maryland governor Martin O'Malley and the Democratic party chairs from Minnesota and Wisconsin. And Pope Francis made a visit today to one of Italy's largest prisons, opening his holy year at Rome's main prison with a message of hope to the inmates and involving them in the church's jubilee year, a tradition that goes back to 1300 and currently occurs every 25 years. Frank, back to you.
- [37:22]
Frank Holland
All right, Pippa, thank you very much. Our Pippa Stevens back at CNBC hq. Coming up next on halftime, the buyback boom. It's been a record year for share repurchases. Our Bob Pisani is standing by with why 2025. Could see an even bigger buyback blitz. More halftime right after this break.
- [37:42]
Scott Wapner
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- [38:12]
Bob Pisani
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- [38:45]
Frank Holland
And we are back on halftime. It has been a record year for buybacks and the boom is showing no signs of letting up going into 2025. Bob Pisani is following the money for us. Bob, happy holidays. Good to see you.
- [38:55]
J
Great to see you, Frank. As always. 2024 not only brought a record year for the S&P 500, but we are on the verge of a record year for executed buybacks as well. Let me show you the numbers. We don't have the full fourth quarter numbers yet, but we have estimates. And based on the estimates I'm seeing, we'll get about $947 billion in total executed buybacks this year. That is still a record for the calendar year, but it is shy of the fabled goal of $1 trillion. I don't think we're going to hit it, but we're awfully close here. So this historic trends with buybacks is going to continue into 2025 I think so. Remember something about buybacks. They're mostly concentrated in a handful of very large cap tech, bank and energy stocks. So the biggest buyback monsters here they are Apple $100 billion Alphabet Meta Nvidia also on the list. But you also see companies like Exxon on the list. They've been a big buyback monsters for years. Wells Fargo is on the list. JP Morgan's in the top 20 companies. So the top 20 are really the ones that matter. They executed about half of all of that $918 billion in buybacks in the 12 months ending in September of this year. And again we don't have the fourth quarter numbers yet. Also remember something Frank, Corporate America is also paying a 1% tax on these buybacks. So here's the estimate. S and p is estimating $8.5 billion in taxes on these buybacks is going to be paid in the 12 month period ending again September 2024. That's about 0.5% of the total operating profits for the S and P. So the way to look at it is these buybacks tax is costing corporate America about a half a percent of their total profits for 2025. The most important thing you all know, cash flow, cash flows remain strong for corporate America. So I anticipate at least in the first half of the year buybacks will remain strong after that. You get into some valuation questions Frank, that are very interesting for some of these companies. Apple of course with the highest valuation of anybody. Some question about whether they should keep buying back stock at these kinds of levels. But they show no sign at all of letting up. They have been reducing their share count for many years now, Frank.
- [41:04]
Frank Holland
All right, record year for buybacks, probably not going to hit that 1 trillion, but still a record year. Bob, thank you very much. Our Bob is on. Joe, going to come over to you. I mean Interesting stat, point 5% of profit. That's the only tax, you know, impact of these buybacks. But obviously buybacks generally push stock prices higher.
- [41:20]
Joe Terranova
Well you've got four mega cap names though that are 30% of the overall buybacks for, for 2024. And I don't think valuation is going to stand in the way of a company like Apple continuing to buy back their stock. I don't see why these mega cap companies won't continue in 2025 actually to buy back their stock. Apple has proven that they like to be a company that is allocating strongly to shareholders in the form of buybacks. They are less inclined to go out and do significant acquisitions and I can't see that changing in 2025. So I think the setup's a good one. But again, understand it's being funded by a narrow, isolated set of companies.
- [42:02]
Frank Holland
All right, there we go. Coming up next on Halftime Year end Report card, look at Bryn's winners and her losers as we close out the year and how she's playing those same names into 2025 halftime. Back right after this. And welcome back. It's our, it's time for our halftime Year end report card. We've already graded Josh, Joe and Jim Bryn. It is. Let's start with one of your big winners, Palantir.
- [42:28]
Bryn Talkington
Yeah. So obviously it's been a great year for Palantir. Went into the name around 24, had no expectation in any universe that it would end at 82. I think from a revenue to earnings, this is the most expensive stock in the market. Next year before earnings, I'm going to reduce the position. I know I'll probably, probably get a lot of hate from some of the Palantirians out there. Love the name. Long term, they're growing revenues and earnings around 30% for next quarter. I think that probably increases, but I still think the stock is way ahead of itself. There's a lot of options activity in this as well. So when we get to the new year, I'll be reducing part of the position just from a, I think a rational perspective.
- [43:14]
Frank Holland
All right. But we also have to talk about one of your losers. Losers. This year BHP down more than 25%.
- [43:20]
Bryn Talkington
Yeah. So I'm sticking with this, I'm sticking with this name, bhp. If you don't know, it's an Australian based commodity company. They do coal, copper and iron and I'll just say China. China, China. The stock is down from a price return 27%. It's got around a 6% yield. So it's a 21% total return. So I'm going to keep it. They're one of the best in the space. If we get any recovery in China, Albemarle BHP fcx. These will all be beneficiaries. So I'm going to keep it as like a contrarian trade next year and not, not give up on the name just because the price didn't go in my favor.
- [43:55]
Frank Holland
All right, looking at shares of BHP pretty much flat today. Coming up next on halftime, the big debate. What's the next stop for Bitcoin? 200,000 or 50k? The surprising new results from CNBC's Delivering Alpha survey. They're coming up next. Welcome back to halftime. Bitcoin is holding just below that 96,000 level. And our Delivering Alpha surveys shows 57% of participants, they believe bitcoin is more likely to fall to 50k before it rises up to that 200k mark. Josh, want to start with you. What's your take?
- [44:33]
Josh Brown
Well, never a dull moment in bitcoin and I would not rule out the possibility of a deep correction just because that totally squares with the history of how this thing has acted. It goes from moments of calamity into moments of euphoria and then switches back. And it's really hard to know in advance when that might happen. I'm invested in bitcoin since before it broke 3,000. I think I was the first cast member of Halftime Report to come on the air and say it. I've never abandoned it. But I'm also not a nutcase. I guess I'm kind of like middle of the road bitcoin sort of aficionado and that's where I'll stay. But yeah, I think it's going to be an exciting year, especially if there is a strategic bitcoin reserve building on the coins the government already owns, which I think seems really like likely.
- [45:25]
Frank Holland
All right, bring you on the iShares Bitcoin Trust ETF. Kind of tracking the actual asset today down just about 3%. Your view?
- [45:32]
Bryn Talkington
Yeah, well, well, just to build on what Josh says, we actually can't have a bitcoin strategic reserve without congressional approval. So I actually give that actually a low probability. I think there's a bunch of other stuff on the table. So I think that actually doesn't happen. I think you could see it was technically at 65,000 before floor to the original question, it goes to 200,000. But I think volatility has been the price of admission. But if you've been a long term holder, wow, you've just made a bunch of money against all of the bears. So I'll say long term bullish, short term volatility, don't think the bitcoin strategic reserve happens in 2025.
- [46:10]
Frank Holland
I mean if you're a short term holder year to date doubling pretty much. Final trades they're coming up on halftime. Make sure you stay with us. Time for final trades on halftime. Josh, you're up first.
- [46:26]
Josh Brown
Starbucks around 90 bucks a share. I think it's a steal. I'm adding to it.
- [46:31]
Bryn Talkington
Bren Uber I think the Tesla wins. Uber fails. The narrative fades. They announced a buyback, they've barely gotten started and finally it's got really strong support at all around $61.
- [46:43]
Jim Leventhal
Jim we've all discussed how this is a silly time of the year for trading, so go with the tried and true Berkshire Hathaway.
- [46:50]
Joe Terranova
B. Joe one of the several software names that picked up in the last month. Twilio performing well.
- [46:55]
Frank Holland
Alright, let's do it for halftime. Happy holidays everybody out there. The exchange starts right now. You've been listening to CNBC's Halftime Report, the podcast you can always catch us live weekdays at 12 Eastern only on CNBC.
- [47:12]
Bob Pisani
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.