B (3:18)

Brian, what do you think about this? I mean this is going to be a stretch and right now strategists are going to kind of proclaiming on a median forecast basis that it will be another double digit percentage gain in 2026 as well. Do you feel as though this is justified given what the Fed has to deal with right now with the jobs market and inflation and given where the trade has gone and where it's come to since then?

C (3:43)

I think we have these, these ingredients and Jim started to hit on them. Earnings, clearly, you know, over the long term earnings drive returns, but you also have monetary and fiscal policy are moving in the same direction. And so to dig in on that, I do think that we'll have one, maybe two cuts. I agree with Jim. We should probably, we should probably stay, stay from there. But then also from the fiscal side with the OBB coming into the economy, no tax on tips, the depreciation, less regulatory control, especially over hurdles on the regional bank side. You know, and so you have these different ingredients on top of earnings and then you have gdp which we've got a very strong print and we can all dissect whether it's health care calls or what have you. But we know that data center build out is around 40 plus percent of GDP growth. I think that probably kicks up and is the same if not higher next year. So we have these ingredients where you continue to have a constructive stock market because of earnings and a constructive economy because of all the things I just walked through. So I think it's hard to be bearish, overly bearish at this point because of all of these ingredients that are coming together. And don't forget, Dom, midterms or next year, the White House is going to want to have a really good economy and not just for the rich, but for everybody. And so I think you're going to continue to see them really pushing hard on having a strong economy during the midterms.

B (5:09)

Kevin, let's bring into the conversation here. What do you think? Brin makes a number of good points, as does Jim, about what the potential, at least positive catalysts are for next year. Do we feel as though there are any cautionary signs we should be watching out for?

D (5:25)

Yeah, I mean, investing is easy. It just goes up all the time. Why would there be anything cautionary? But the reality is we have to worry about inflation because if we see rate cuts and it begins to resurface and reignite inflation, then the party is really over because we can't have a Fed and I don't think we will, regardless of who sits in the chair or how dovish we want to be. To Brent's point, to Jim's point, maybe we get one more cut next year whether we need it or not. But I think the idea that we're going to get rate cuts and a cycle continued of rate cuts is unlikely. And if inflation does spark back up, then it's not a rate cutting story, but instead a rate hiking story. So that's where my concern is. We talked about the trade. It's carried us for three years now. I think it can and will continue to do so in 2026, which is crazy when you kind of think about four years running. But, but the reality is that this, although everything's cyclical when it comes to spending, I think this is just a longer and stronger cycle with regards to AI and it benefits a broadening out into a lot of other sectors. So can the market continue without just blind optimism and a Fed cutting rates? Yes, I think being cautiously optimistic is the right way to go into the new year.

B (6:39)

Jim, I see you kind of nodding your head along.

A (6:42)

Well, you, you brought up to Kevin, you know, are there risks out there? And Brin was starting to touch on this when she brought up the midterm election. There are risks out there now. I feel like every year this time I say the same thing. Expect volatility in the year ahead. I definitely said it last year. And what do we get? The max drawdown, Dom, like 3% this year. So wrong last year. But consider, as I say it again this year, consider you've got two really big Supreme Court decisions coming up. I and if, as is expected, the Supreme Court rules against the use of the International Emergency Economic Powers act to institute tariffs, that's going to throw the markets and the economy into a little bit of a tizzy. Now it's a little bit of a tizzy and it should be temporary because there are other statutes that the president can use. But that trade policy uncertainty, Dom, is going to ramp up again. So that will probably cause some consternation. Then there is, of course, the Lisa Cook potential firing that the Supreme Court has not really tipped its hand as to which direction it's going to go in. But if she is fired or if the Supreme Court upholds that, President Trump can fire her. I mean, Katie, bar the door. He's going to fire anybody who doesn't cut interest rates. And to what Kevin was just saying, you know, cutting interest rates, we do it too much and we definitely will have an inflation problem.

B (7:58)

All right, so let's put all of that in context now with our senior economics reporter, Steve Liesman, because we brought up the Fed quite a bit in this first few moments of the discussion. Steve, you heard the conversation. I guess maybe we just want to know from your perspective just how much the Fed is going to be a driving force behind the market narrative in 2026.

E (8:19)

Well, you know, I think I take my lesson from Jim and his comments there to watch earnings. I mean, I think earnings are going to be key and the GDP obviously is related to that, which is how big the pie is. If the pie is bigger, earnings can be bigger. But of course, some of the other comments that were made about the idea that AI is driving some large percentage of growth is one where the effects of growth will be, I think magnified or concentrated I think is a better word in that particular sector. But when I think about the Fed next year, I think about a tale of two halves of the year. When look at the probability outlook, for example, I see the Fed on pause in January, probably in March. That's what's priced into the market. Then you get into April and May and you start to see that first cut come in. But then when I okay, so that's one cut brings you down to like, I don't know, from 337. Then you look at the December 26th futures, you're going to go down by 60. Call it 50 basis points, 308 right now, 50 or 6. So really, two cuts baked in for this year. So not a whole lot expected here. And I think what's interesting, Dom, when I look at that chart, I don't see the market pricing in the new Fed chair coming in with both guns blazing. When it comes to rate cuts, it looks like there's a couple cuts built in, but not a whole lot. So there's some restraint built in. And that restraint could be, if you look at the next chart, which is gdp, you're not going to be cutting rates like you're going out of style if you're going to be running these kind of GDP numbers. I think the 4.3% number we did was probably higher than expected, but you're looking at potential growth next year probably in the two, maybe two and a half percent range. That is not a recipe for strong rate cuts, but it could be, getting back to Jim labenthal, a decent recipe for earnings.

B (10:06)

Okay, Steve, one of the other variables right now that is being talked about quite a bit as we approach 2026 is the idea that 2026 will be the year halfway, almost halfway through it, where we get a new Fed Chair, new leadership in that position. What exactly does that mean?

A (10:24)

Right.

B (10:24)

Have significance towards, with regard to not just the rate trajectory, but the overall macro backdrop that the Fed's going to have to navigate in those two halves of the year.

E (10:34)

So here's how I think about the new Fed chair. At the margin, a dovish Fed chair will mean at the margin, maybe another rate cut. I do not see at the margin, I do not see a new Fed chair coming in and basically doing the President's bidding and bringing rate cuts, rates down to 1% or 2% or some, some number like that. I just don't see that happening, no matter who it is. And the reason, Dom, is because, as you know, the Fed chair has a vote. The Fed chair, I don't know, herds the cats, corrals the cows, whatever you want to call it. But they only have one vote at the end of the day. And so a Fed Chair who's going to take rates so called off the reservation is not going to have the committee with them. And that's why some people are suggesting that the best choice for President Trump is somebody like Chris Waller, believe it or not. And the reason is because he has the best chance of really bringing the committee with him toward a more dovish stance, because he's part of the system now. Now, that may not be something that sits well with the President who wants somebody who's going to try to drive down rates. But if the result of that is to create resistance on the committee, then I don't think the president gets what he's after.

B (11:46)

Just how much, Steve? Just how much is the inflation story going to be one that percolates in 2026? We know it's taken a bit of a backseat in the last four to five months to a seemingly weakening, on the, on the relative basis, jobs markets. Does inflation become more of a threat in 2026 than it has been in 2025?

E (12:08)

That's an excellent question, and let me answer it from the position of perfect ignorance, and I'll tell you why domestic because we don't know what the inflation numbers are. We had those reports and they widely agreed, from the New York Fed to most investment banks, that those numbers were distorted to the downside because of some technical reasons inside of them that had to do with the missing month and some blanks that were filled in, not for political reasons, but that's just because of the way they did it. There might have been other ways they could have done it that were better and smarter and perhaps acknowledged it publicly before it happens. But in any event, we don't know what the inflation numbers are. We're not sure what they're going to be. So it is a major wild card. And if those numbers end up being worse than expected, for example, if more of the tariffs end up being passed along inside the goods sector and they spill over to the service sector, that's going to be another major limiting factor for the Fed. If they come down, though, if you think this through, let's say inflation does come back down to 2%. I don't think that changes very meaningfully the neutral rate or the Fed's need to get down much below neutral, which is where we started the conversation, 3%. So I think there's upside to rates if inflation is worse, but I don't think there's much downside to rates if inflation comes in and starts to behave as expected or hoped for by the Federal Reserve.

B (13:27)

All right. Asymmetric, it seems like. Steve Liesman, thank you very much for being here with us. We'll see you again soon. Have a nice weekend.

E (13:33)

Pleasure.

B (13:34)

All right, Jim, Steve brings up a number of interesting cross currents. Right. If you take a look right now at the oil and gas market, it is showing maybe some signs of flagging inflation. It's not much of a threat. There are some fundamental reasons behind that. But then you flip to the hard commodity side of things with precious metals and base metals, and they are setting Record highs for gold and silver yet again today. All of that on the backdrop of a seemingly supposedly weakening jobs market, which could be another factor. That's the reason why Steve answered the way he did. Right.

A (14:10)

I don't think we can answer the question right now as to what is inflation doing. We need more data. You just mentioned cross currents. That's exactly what we've got here. Let's add one more cross current to it that's on my mind, which is that the Fed has resumed expanding its balance sheet. Now, it's not doing that to be stimulative, it's doing it to keep the banking system in an ample reserves condition where you don't have to worry about short term funding requirements at the short end of the curve. But that is stimulative. And add that to the mix of what we're talking about, that it makes it very much a conundrum for the Fed. Right now we still don't have this answer as to whether the tariffs are a one time hit to inflation or something that's going to recur. I happen to be strongly of the opinion that it's a one time hit. However, consider what I just said a minute ago, Dom, about the fact that the Supreme Court may invalidate the tariffs as they currently stand. Which means these questions, which I firmly believe we can't answer definitively right now, are not going to be answerable probably for several months. And if I'm the Fed, I'm sitting here saying, listen, I've cut a lot over the last two years, we should just sit tight and see what happens.

B (15:17)

Hey, Kevin Simpson, I, in listening to Steve's comments, one of the things that kind of stood out to me was this idea that there is a good amount of at least interpretation as to what could happen in the coming months. Fed chair aside, economic data even then can still be interpretable. What exactly do you feel is the overriding narrative that we go into 2026 with? Is it going to be just a continuation of 2025 or are there things that could fundamentally change the entire story? To Bren's point, maybe it's the midterms, maybe it is something else down the line.

D (15:51)

Yeah, but I think if those fundamental changes exist, they're probably a second half story. I think we entered the year with the same playbook that we completed it. The one thing that I was thinking about when Jim was talking is with respect to the lag effect potentially that housing may play in this inflationary number because we're all scratching our heads wondering about its accuracy, where all the, the data will shake out now that people are back to work and we're, you know, we're getting some data. How pure it is, we're not sure. But I'm wondering if we might not just get lucky in 2026. And that's not an investment thesis. You don't bank a portfolio in luck. But there is the possibility that the lag effect on housing and rent equivalents and other things that go into these inflationary numbers could trend down and supersede some of the things that our eyeballs might be telling us from an inflationary standpoint. So I'm not sure exactly how it's going to play out. We're going to have to wait and see, as Jim said. But it would be interesting if that was to happen because then you have a really nice tailwind for 2026. Because as I let off the show, inflation is what scares me. And it's possible, who knows, we may get lucky.

B (17:04)

Hey, Brian, what do you think? Is it going to be one where you just kind of continue things in the first half of the year the way that they have been the last five or six months?

C (17:12)

Well, I mean, if we get a repeat of last this year. Well, hold your nose because April, April and May was, it wasn't too fun. I think that if you think about the cross currents or all just the different things that are happening, what's so important is think about if we get, let's say, two more interest rate cuts, how does that benefit all of us? Forget the stock market. First of all, we're issuing a ton of debt on the short term. And as we continue to roll that into lower rates, that is very meaningful on reducing the amount of interest we as Americans pay on, on US Treasuries. So that's number one, number two, rate lowering rates, that's incredibly beneficial for housing. And I think within the cpi, number the White House is definitely dead set on having oil prices stay in the 50s, which we can talk about that later, the impact on oil companies. But that's very good for inflation. And I think as we continue to see owner equivalent rents starting to come down as they should be, that's going to be really pressure on keeping cpi, I think, at bay. And so I don't think it's really about getting lucky per se. I think that we have these ingredients, especially that owner equivalent equivalent rent is such a big part of core cpi. We need that to come lower. And with lower rates you actually start getting the real economy, not just the Stock market economy, the real economy doing much better. And also from a midterm from an elective perspective, being able to get that interest lowered because rates and we keep refinancing on the short end. I mean that's very positive going into next year.

B (18:43)

All right, now that we frame the macro discussion, let's bring in some of the key moments during the course of the last couple of days that have shaped the narrative going into the year end. One of them is in video striking the biggest ever deal that it has in the acquisition of Grok with a Q, not a K, not the X, AI Grok, but Groq, another AI driven semiconductor company. It's Nvidia's largest deal ever. But it's not an outright purchase by Nvidia. It is a $20 purchase of assets at Grok with a Q and some key personnel, including the CEO and founder, a man who was responsible at Alphabet Google for helping to develop some of their semiconductor products tied to AI. With that in mind, I maybe will go to you Jim, on this. The Nvidia story I remember over the last couple of hours has been described as not even a drop in the bucket, a $20 billion purchase of assets and some movement of key executives and engineers to Nvidia. This is a big, big deal though in the, in the scheme of the entire air trade, or is it not?

A (19:52)

Well, $20 billion free cash flow for Nvidia in the upcoming year is projected to be 160 billion. 160. I mean that's an incredible number. Year prior it was around 95 billion. So you can see that they're growing so fast that they raise this question of what are they going to do with the cash. I mean, I don't want them to start giving a dividend or buying back shares. I think this is wise and I think it can continues what they've been doing for several months, several quarters now of investing back into the ecosystem to make sure that the ecosystem in which they're such a key player is healthy and thriving. There's a side note here that I think is worth mentioning, which is that this is one of those so called aqua hires. And one wonders if they're doing this because they never could get antitrust approval to actually acquire the company. So they do this license and hiring some of the key people to kind of get around that. That's been a trend within technology. I'm not sure how long the government's going to let that sort of be gotten away with, but they're doing it for now. Ultimately though for the next year feel quite positive about Nvidia. The multiple. I'm not looking right now around 26 times forward earnings, something like that. Growing earnings per share at roughly that level. So getting a peg ratio of 1.0 on the beating heart of the trade. Yeah, I'm in this.

B (21:06)

Hey Brin, Jim makes a good point here because there have been a number of folks on Wall street that have said that at that multiple, Nvidia is not exactly expensive compared to the rest of the market. So is this a trade within video that still has legs in 2026?

C (21:25)

Of course, of course it does. I mean forget Nvidia versus the rest of the market. Just in video from a P E relative to its leg self over the last five to seven years, it's really trading about a 30% discount to its median P E if you want to, if you want to look at that. But to me, I know it's fun for everyone to say this is their largest deal, which maybe is factually correct, but really to me their largest deal was back in 2019 with Mellanox. Nvidia was what, 85, $90 billion market cap and they did a $7 billion acquisition which I think was one of the most important acquisitions they have done. When you, you look in hindsight, I think what's also key is, you know, this tells me as an investor across different. I, I mean we are game on with a hunt for talent because obviously getting someone so spectacular like Jonathan Ross and team to be able to be part of Nvidia now and I will say also with the, with, with what GROK is doing, they actually don't use drams. And I know we've talked, you look at Micron with time happening to happening with DRAM prices. This also gives I think the IP for Nvidia which does use a lot of dram, another vertical to actually have a trail of not using DRAM because they use zero at Grok. And so I think this is just a great pickup on talent. It continues to say that, you know, in Jensen's playing chess very well. And I just think this continues to be a company that fundamentals, technicals, momentum, etc. It's just a high quality company and that's why it has a $4 trillion market cap.

B (22:55)

Hey Kevin, I also wonder whether or not there is this kind of broadening out trade that could happen beyond just the Nvidia trade. One of the places that we want to look at is this broadening out in financials as well. We know that Deal making has been on a tear so far this year. There have been a number of superlatives with regard to just how much M and A IPO activity there has been been compared to the past few years. But one of the places that has not participated as much in this deal making space in the boom has been in private equity. Some of those big private equity sponsors, the big, the big, at least companies behind some of those trades have not done all that well this year. Is dealmaking going to be something that you have to watch in 2026 as well?

D (23:40)

Well, I'm excited about the prospects of dealmaking for 2026. You know, the access to capital markets through private equity. It's not something that I'm investing in personally in our portfolios. So we take a more traditional route. Goldman Sachs, JP Morgan are our two biggest holdings in the space. And if we think of a broadening trade, Dom, it's already happened. I mean Goldman's up 61% this year, JP Morgan's up 40% on the year. So these are trading better than some of the Mag 7 names. And I fully expect, expect 2026 to be a much better year, at least from the rumblings that we're all hearing about with some mega IPOs, certainly very, very exciting. But deals like we're talking about with Gronk and Nvidia, mergers, acquisitions, IPOs, all of this play perfectly into those names and they don't trade at very high multiples, they're not expensive stocks. Now I realize it's a different level set of PS and in the financials, but I would be very enthusiastic and I am personally on our names and our allocation for next year.

B (24:41)

Hey Brin, you own many of these private equity sponsors. I wonder if you've been at all disheartened by what you've seen in the price action or do you feel this is due for a turnaround in 2026?

C (24:53)

Yeah, well, I mean I bought KKR and Apollo this year, so I'm up 15% on both of them. So the entry level matters. And I think that when you look into next year in 2026, I think both Apollo and KKR the basket probably as well. But those two in particular are going to continue to have double digit fee related earnings, are going to continue to raise capital. And if the IPO market and just transaction markets, to your point, Don, the M and A market gets a little bit more robust, especially with lower rates, that is incredibly positive for these companies. So instead of just playing small cap or the traditional ways to say when the economy is growing. I like owning these two names in particular. I think if you, if you time them right as an entry point, you can have really wonderful returns.

B (25:39)

All right. The broadening out of something we'll hit on throughout the course of the show today as well. All right, thank you guys very much for that. We're going to have a lot more here to come. Now, if the shoe fits is another one. Brent is talking about the dip in two retail stocks that are both down double digits so far this year. Those names and the debate after this break. Halftime is back in two. The heaviest metal credit card of all time, rumored to be one of only.

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E (27:30)

All right, we're.

B (27:30)

Back on the halftime report with some big retail moves from the investment committee. We're going to start with Bryn Talkington. Bryn, you just bought Nike and on holdings. So let's start with the Nike trade and why.

C (27:42)

Yeah, so if you've heard me before, I really don't buy retail names. The investor's so finicky. I've listened to the Nike call the last two quarters. I think Elliot Hill, who stepped up as the new CEO is on track to turning the company around. Obviously the stock got hammered after they actually had very good earnings but the China numbers were a pure mess. And they talked multiple time about, you know, just margins from tariffs, margins from tariffs. So I just think this company needs to just get incrementally better. Elliot Hill on the call and I really recommend people listen to it made the change this quarter. He said all geographical reports are now going to report directly to me. I think that's really specifically on China so those direct reports in those local countries can have more autonomy in terms of branding and footprint. And I just think this is a company that if you look at the US market running was up 20%. We have the World cup numbers are strong. They're focusing more on women. I think with skims and Caitlin Clark next year they just need to get equally incrementally better. I think the stock could be a 75, $80 stock. So I bought it. I think it's cheap here. It's great to see Tim Cook and the other board member buying shares as well. And I just don't think everything has to go right. And finally I wanted to have some exposure with both ON and Nike. I do think if, if the Supreme Court goes against Trump on ieba, these retail, these retail stocks will fall after that report. So I wanted to have some exposure in case that does happen. I think that's a good way to play the other side if SCOTUS goes against the Trump IA tariffs.

B (29:16)

It's an interesting view to have a kind of hedged outcome there. Although I will point out that we had Jeffries analyst Randy Koenig on just a couple hours ago who has a buy rating on Nike and an outright sell rating on on. So how do you reconcile that particular, particular thesis against the fundamentals he's seeing with why you still want to own on?

A (29:37)

Well, I don't understand why he has a sell on. I mean there's so many things to like about it. Including in the last earnings call when the CEO basically, I mean I would characterize him as breathless in terms of what he saw the demand for ONS products and particularly in the all important holiday season. So I expect the upcoming earnings report will be pretty darn good. And add to that that this is a stock whose multiple.

C (29:59)

Multiple.

A (29:59)

It's really grown into its multiple. I think roughly a year ago it was trading at 60 times forward earnings. Now it's trading at around 29 times earnings. It's a hot product, It's a hot stock. So I'm pretty comfortable with my ON position. I think Nike is very interesting as well. And Bryn, I Think you're going to be right on it. I'm not ready to pull the trigger yet because to use Bryn, your own term, these retail stocks can be finicky. And I think you want to, you know, just me personally, I want to wait to see the uptrend developed before pulling the trigger in Nike. I kind of have these echoes in my head of Starbucks and, you know, when Brian Niccol came in and the stock popped and since then has given everything back. I mean, these retail turnaround stories, they can work, they can take time and they can be difficult.

B (30:43)

All right, Britain, what do you think?

C (30:46)

Oh, I totally agree. Right. I mean, I agree with everything Jim said. And so, so I could, I could be wrong on this. I just think that we're at this moment in time and I really think to me, this, the Supreme Court decision for whether it's restoration hardware on Nike, if that goes against the White House, these stocks will do. Well, they've all talked about the tariffs and so, you know, I don't really understand why it's national security to have tariffs on Nike shoes. That being said, it'd be a mess economy economically to make those refunds. And so I just think the putting those together of that exogenous catalyst, which I think would be positive for both of these names. Plus, I like Elliot Hill. I like his energy on the call. And so we'll see. You know, I'll be in this, these stocks, both of them, probably the next six months. These definitely aren't my biggest positions, but I just think they were worth giving them an at bat.

B (31:36)

All right, Shoe wear showdown in 2026. All right, thank you both very much for that. Let's get the headlines now with Steve Kovac. Steve. Hey there, Dom. A major winter storm. It's heading to the Northeast already forcing cancellations of more than 80 flights so far this morning. The National Weather Service says the storm moving from the Midwest will hit the Tri State area this afternoon just in time for a commute. Heavy snow is predicted for much of the New York, New Jersey and New England areas. And there's an ice storm warning in effect for nearly a million people in Pennsylvania. Also, Waymo is considering weathering whether or not to add Google's Gemini AI Chatbot to its robotaxis. That's according to a researcher who has dug through the code on Waymo's app. The assistant is said to be able to answer questions, manage certain functions like climate control, and reassure riders if necessary. Waymo telling TechCrunch it's always tinkering with new features to improve the experience. And the Trump administration will lay out its plans for the new White House ballroom at an information presence presentation next month to the National Planning Commission's review process. It will be the first time commissioners get to question the White House's controversial plan after the East Wing was bulldozed earlier this year. Dom, back over to you. All right, thank you very much, Steve Kovach with the headlines there. Up next here, another move from the investment committee. Kevin Simpson's adding to an aerospace and defense name that's having its best month in more than two years. That name in the mystery chart when Halftime returns after this. Hi there, it's Andy Richter, and I'm here to tell you about my podcast, the three Questions with Andy Richter. Each week I invite friends, comedians, actors and musicians to discuss these three where do you come from, where are you going, and what have you learned? New episodes are out every Tuesday with guests like Julie Bowe and Ted Dance and Tig Notaro, Will Arnett, Phoebe Bridgers and more. You can also tune in for my weekly Andy Richter call in show episodes, where me and a special guest invite callers to weigh in on topics like dating, disasters, bad teachers and lots more. Listen to the three Questions with Andy Richter wherever you get your podcasts. The heaviest metal credit card of all time, rumored to be one of only.

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The new power move? Let's be completely honest. Are you happy with your job? The fact is, a huge number of people can't say yes to that. Too many of us are stuck in a job we've outgrown or one we never wanted. But we stick it out and we give reasons like what if the next move is worse? I put years into this place, and maybe the most common one. Isn't everyone miserable at work? But there's a difference between reasons for staying and excuses for not leaving. It's time to get unstuck. It's time for Strawberry Me. They match you with a certified career coach who helps you go from where you are to where you want to be. Your coach helps you clarify your goals, creates a plan and keeps you accountable along the way. Go to Strawberry Me coaching and get 50% off your first coaching session. That's Strawberry Me Coaching. Welcome back to the Halftime Report. Let's get another move from the committee. This time it's Kevin Simpson. You bought more Dow component Boeing. Why?

D (35:18)

Yeah, this is a stock that has gone through a horrific experience. I mean, multiple years of just one piece of bad news after another. And I think that the turnaround story is no longer in the equation. I really think that they've turned the page, that they're in a position now to really take advantage of what's a defense story and aerospace story. They're not like, going crazy with the deliveries, but they're certainly ramping up. They're worrying about efficiency and safety, which I think is really, really important. Globally, we're seeing aerospace increase and activity increase, and the ability for them to meet these deliveries in a timely fashion with good profit margins just makes it a very exciting story moving forward. Now, you always have to pay attention because they've. They've gotten and well deserved a kind of a bad rap here. But I'm looking at this over the next three years and saying this is a position where we're going to see profit margins, earnings efficiency and good management carry this stock much, much higher.

B (36:20)

All right, that's a good way to get into aerospace and defense stocks overall because they're having a strong year. The ITA, that's the iShares ETF attracts defense contractors, is pacing for its second best year ever on record. And Jim, you're a Lockheed Martin owner, so take us through your thesis on the defense trade.

A (36:38)

Yeah, well, it has not had a good year, Dom. And about a month ago on the show, we were going through the favorite names for 2026 that had underperformed in 2025. Lockheed Martin was my pick based on a number of things. As I said at the time, 2025, Dom, was an annus horribilis for Lockheed Martin. You had Elon Musk punking them in a tweet. You had a big classified program charged, and then they lost the F47 to Kevin Simpson's Boeing. But as I look forward, they are making the F35 as fast as they can. That is highly in demand across the world. It's the best fighter jet in the air right now. The missile systems business is growing gangbusters for unfortunate reasons, which is that we live in a hostile world. Put on top of that that the charges should be behind them. The valuation is really quite attractive. And I like Lockheed Martin now after a really terrible 2025.

B (37:30)

All right, so a possible turnaround there for LMT. All right, thanks very much, guys. Still ahead on the show, the commodities conundrum oil is heading for its worst year since 2020 now while the metals momentum remains in full swing. All of that is playing out. So how is the committee playing all of that commodity space? We have that trade when halftime returns after this. Welcome back. It's been a mixed picture for commodities so far this year. Oil is heading for its worst year since 2020 while natural gas is pacing for its fifth positive year out of the last six. Brin, you have a lot of ownership when it comes to oil and gas. So take us through what's going on in your mind with regard to the oil and gas trade.

C (38:09)

Well, I think I talked about a little bit earlier around inflation is that the White House is dead set to have at least one specific component that directly affects, you know, Americans is oil prices and gas prices. And so I think we're going to continue to have 50$50ish oil. Obviously Nat gas has, it's gone up quite a bit and relates to oil, I don't think we're going to see a ton of EMP players really doing extra drilling because also like wages are up so they have a lot of inflationary costs while while their oil prices are still in the 50s. And so I think from this play, like I own Energy Transfer Viper Energy, both of those have very nice distribution yields between 8 and 10%. And so I think if you just have a pure capital appreciation play within energy or that commodity space, especially around oil, it's probably going to be another, another lean year. But these by the way, are very cheap companies.

B (39:07)

All right, Jim, what's the best way to play oil and gas?

A (39:09)

Well, I'll answer that question directly. I think the first stop for anyone in the energy patch should be ExxonMobil. If you want to go with Chevron, Texaco instead of ExxonMobil, that's fine. But one of these super major integrated oils that hits all along the production and refining and distribution process which ExxonMobil and Chevron Texas are the top of the list. Well, attractively priced, good dividend yields, buying back shares, all that sort of stuff. But Dom, I feel like you let into this, we were talking about it in the commercial break. Did you use the word conundrum?

B (39:41)

I did use commodity conundrum because there is a conundrum.

A (39:44)

How can oil be down, whatever it is, 20% year to date and many of these stocks like ExxonMobil are up on the year. That's a conundrum. And to what Brent was just saying, yeah, there's a lot of pressure on oil to the downside, we hear a lot about the glut that's coming as OPEC continues to open the taps. But what if that's wrong? Well, what if demand picks up? What if OPEC pulls back? I mean, what if. And Bryn, you made a very good point, so I'm not arguing with you. But what if oil actually goes up to the mid-60s? What happens to these stocks then? I'll tell you what. With the little amount of love that they've had this year, they probably go meaningfully higher.

B (40:19)

All right. The reason why I brought up conundrum specifically is because it is a great word, but it's because of what's happening not just with oil and gas on that side of things, but with the precious metals as well. So let's go to that because, Kevin, you have made a move with regard to the precious metals space in some equities specifically tied to gold and silver.

D (40:38)

Yeah, I would say Agnico Eagle is a stock that we've enjoyed owning all year. The thing's up 130% year to date. So keep in mind that this is a trend and a momentum play off of gold. But also when you're in the miners, Dom, you get the efficiency effect. So when oil is cheap and if labor is not overly expensive, then their profit margins increase, their free cash flow goes up. You get a modest dividend. They've had strong, strong dividend growth over the past five years. Their free cash flow for the past 12 months was $3.5 billion. To put that into perspective, three years ago it was 500 million. So if you believe in the gold play, the gold complex, and I think that trade will continue in the beginning of 2026. Owning the miners gives you exposure there, but with a little bit of diversification away from just the pure commodity play. So a really exciting name for 2025. And heck, if it does 25% of what it did this year, it'll be a win for next year.

B (41:38)

All right, there you go on the metals and the oil and gas trade. Thank you guys very much. Up next here, a cautionary signal for cryptocurrency. The strategy shift from one of the biggest players in that space. That could spell more volatility ahead. Mackenzie Sagalas joins us and has all the details coming up after this break. Bitcoin prices under pressure again today. Just a hovering maybe around 87,000 right now, down 20% over the past three months. Mackenzie Segalas joins us now with a potential cautionary signal for crypto bulls heading into 2026 Mac, what can you tell us?

C (42:12)

Hey, Dom. So the structural buyers that were supposed to put a flow floor under Bitcoin are stepping back strategy. The biggest corporate holder of BTC just this week disclosing that it's stockpiling cash instead of adding to its position. They liquidated $750 million in shares to add to a newly formed reserve for dividends and debt payments. That fund didn't exist a month ago and now has $2.2 billion in its coffers. And the spot Bitcoin ETFs aren't picking up the slack. Flows have been net negative for five consecutive trading days. So now you've got thinner liquidity, the reliable buyers on the sidelines, and more speculative retail as the marginal bid. Which means that every downdraft is hitting harder. Now. The next potential forced seller event hits January 15th. MSCI decides whether to boot strategy and other crypto heavy companies from its indexes, arguing that they look more like investment funds than operating businesses. JP Morgan estimates that could trigger up to nearly $9 billion in passive outflows from strategy if other index providers followed their lead. And it's not just strategy. Feeling the pressure. The broader digital asset treasury trade is unwinding. Bit mine immersion, the biggest Etherium treasury play, backed by Tom Lee, is down more than 80% from its summer highs.

B (43:26)

Dom. All right, Mackenzie, so Gallos, thank you very much for that. Let's turn to you, Brin. You have a bunch of exposure with regard to this kind of particular theme here. Do you? Are you worried for 2026?

C (43:38)

No, I mean with, with these, with crypto currencies, they are not for the faint of heart. You have to hold your nose, buy low. There's always going to be volatility. I mean, I haven't dug into it, but from what Mackenzie was saying and what I read, it seems like a very smart thing that strategy is doing to build up their coffers because they do have a very complicated, you know, financial structure. And so to me, that from a strategic strategy perspective, that seems to be smart, smart finance. From the other ones, I don't know if it's weak because of Japan. I don't know. You don't really know. Price always follows or narrative follows price. I just think this is like part of the cycle and this is where we'll say the tourist capital will get out and people that want to own these at classes. Long term, I will say on Etherium, you're going to continue to hear about the tokenization of real world assets. A Moody, a bank in Europe. JP Morgan's tokenizing some money markets. You're going to continue to see that. And a lot of that is built on on ether. And so I think from an actual application, ether is going to have a lot more stuff to talk about with those real world assets being tokenized.

B (44:44)

And we could go more into the whole idea that Visa and US Dollar coin and Solana is also in the headlines these days as well. All right, enough on the crypto trade there. Thank you guys very much for that. Coming up on the show, we've got health care's hot streak. The sector is leading in the fourth quarter, but is the recent rally sustainable for that big, big key sector? We're going to debate that trade coming up next. Welcome back to HALFTIME report. Let's talk health care now is showing some new signs of life over the past few months. So do you stick with this trade into the new year as part of the broadening out? Kevin, I'll go to you first for this health care. Are you a buyer?

D (45:21)

Yeah, absolutely, Dom. I mean, we've started to see it already here this quarter, December specifically. I really feel like what's most exciting about health care, pharma, biotech is just the growing customer base. You know, you look out, I live in Florida. You think about the landscape of the baby boomers all requiring medicine, procedures, you know, whatever it may be as we age. And I just feel like it's a trade, somewhat like energy that's been pushed to the sideline here for the past couple of years. And this is absolutely a time that you want to be looking at these stocks, especially heading into 2026.

B (45:57)

Kevin, what's your favorite one really quickly?

D (46:00)

Gosh, Eli Lilly continues to be the behemoth, but we've been recently adding to Merck and I think there's a story there post keytruda.

B (46:08)

Gotcha. Jim, what do you think about the health care trade?

A (46:10)

I think it's a wide space and you've got to choose where you want to be in it, Dom. And I really think the pharma, the biopharma space is where you want to be. I think there are stocks that have developed into really great blockbusters. Eli Lilly comes to mind, the ones that I own that I really like. AbbVie, AstraZeneca, Vertex. I think you can look at the regenerons in the Amgens. Now, having said this, I think there are other parts of health care that you just don't want to be in. UnitedHeal, the managed care system, still a.

B (46:36)

Lot of pressure there. All right, the healthcare trade in a nutshell. Thank you guys very much. We got final trades coming up. Keep it right here. All right, welcome back guys. Time now for the final trades. Kevin Simpson, starting with you first.

D (46:47)

My final trade is Visa. Amazing holiday spend, record free cash flow and a clean balance sheet.

B (46:53)

All right, Bryn Talkington, GPI Q.

C (46:57)

One of our favorite growth covered call ETFs, outside of Kevin's, of course. That has a 10 and a half percent distribution, yields only 30 to 60% covered, gives you good equity and income, total return.

B (47:08)

All right, and you, Jim Crh.

A (47:10)

Not too many people know about this company, but they will more and more. It's just been added to the S&P 500. It's an aggregates and materials company, high performer and I'll bet it is the subject of window dressing into year end.

B (47:22)

All right, that does it for us here. We got the Dow currently down just about 100 and some points, about 1/4 of 1%. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.

C (47:41)

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B (47:44)

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C (47:46)

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B (48:15)

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