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Halftime Report
How Low can Stocks Go 3/11/25
00:44:13
Scott Wapner and the Investment Committee discuss the continued selloff and debate how low stocks can go after President Trumps announcing new tariffs today. Plus, the desk making some major portfolio moves as the market slides lower, they share their trading strategies. And later, Josh Brown gives an update on his ‘Best Stocks in the Market’ list.
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- [00:00]
Bank of America
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Ben Rizzuto
Hello, I'm Ben Rizzuto, wealth strategist at Janus Henderson Investors.
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Scott Wapner
Is a brighter future possible?
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Ben Rizzuto
At Janice Henderson, we think it is. We've worked to help clients achieve superior financial outcomes and fulfill our purpose of investing in a brighter future together. We never forget that this means our.
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Scott Wapner
Thinking and our investments are helping to.
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Ben Rizzuto
Shape millions of futures. At Janus Henderson, we're committed to helping you invest in a brighter future. Filled. To learn more, go to Janice Henderson.com 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, Carl, thank you very much. Welcome to the Halftime Report of Scott Wapner. Front and center this hour, the sell off stocks continuing to sink. Today, the president announcing new tariffs, nothing signed yet. We will debate and discuss all of it with the investment committee. Joining me for the hour today, Josh Brown, Bryn talking to Joe Chernova, Jim Lebenthal, Steve Weiss with us momentarily. As well as we check the markets today, we'll show you what's happening right now. There's your picture. S and P down 2/3 of 1%. It is the Dow down by 1% today. And the NASDAQ may be getting a little bit of a respite, but not all that much. It's still, as you see, negative. So, Josh, we're down 7.3% on the S&P since the inauguration. The Nasdaq's down almost 12 and Citi now becomes the very latest to downgrade US equities. They take them to neutral today and say they've been overweight since October of 23. Not anymore.
- [02:13]
Josh Brown
Look, I get it. You know, we're in a moment now where there's one big macro headwind that's affecting pretty much every stock. Whether it's affecting the companies themselves or just the stock, almost doesn't matter. We looked at some of the data on Tariff Talk. Just in the last earnings season, you had 259 companies in the S&P 500. So more than half specifically mentioned tariffs during their, their commentary. That's a record. The prior record was in 22nd quarter of 2018 where you had 185 companies mentioned in tariffs. So it feels much bigger than the last time the stock market had to contend with this issue about, about seven years ago. And I think when you break it down by sector, the industrials has the highest concentration of companies that are actively telling the street tariffs are going to be an earnings problem. Yet 55 industrial companies do this on their Q4 earnings call. Anyone want to guess what that's going to look and sound like as they start reporting earnings in the second half of April into May? It's, it's going to be way more than 55. So everybody knows that this is coming. It's going to be the big theme as we get into this earnings season. Even if it's a good earnings season, one of the two of the big problems that we have here, even if somebody waves a wand and makes all of this tariff talk go away, which I don't think it will, but even if you have this double whammy issue number one, you had an overpriced stock market relative to history. We went into this mess at 22 times forward. We've derated somewhat. Now we're 21 times forward. That would be fine if earnings estimates were holding up, but judge, they aren't. So we're hitting this moment where in Q1, 2025 earnings we will have seen a decline over the prior quarter, a sequential decline. That's after four straight quarters of earnings being higher and then higher and then higher. So it's a problem because of valuation and then it's a problem because of this degradation in the earnings outlook. Interestingly, analysts are not yet slashing Q3 and Q4 numbers. So it seems as though the market is still willing to bet on this second half earnings recovery if we can just get through tariff spring. The trouble becomes if that turns out not to be the case and you get a lot of guide downs in the next couple of weeks and then all of a sudden we're saying, okay, you got 2/4 of 20, 25 in the penalty box and then we start worrying about is Q4 in doubt. So yeah, that's what's happening here. And that's why I understand the move that Citi is making.
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Ben Rizzuto
You know, you really have what essentially is a two pronged problem of both sentiment and maybe more substantially positioning. Let's do a new at noon because I have been speaking with people about what is happening in the markets today over the last several days and when all of it might calm down. And one issue clearly hitting the markets has been significant deleveraging from hedge funds as a result of the volatility we've all seen and the losses that have taken place in some positions. Last Friday night. Interesting. Well after the markets closed, not sure if all you saw this, Bloomberg reported that the multi strategy firm Millennium management had lost $900 billion on a strategy tied to index rebalancing. That's where you bet on companies that might be added or dropped from indexes. So that happened later in the evening on Friday night. But the fact that well known multi strats like Millennium and Citadel and other key players in that space typically use leverage to size up their positions and are now unwinding some trades has contributed, I'm told, to the substantial weakness that we've seen in the markets. And those I'm speaking with aren't sure that process is yet resolved. It's premature to declare it's over, one top executive told me this morning. So that's a key issue. Another one, and it's a big one, is the tremendous concentration of positions that we've seen among multistrat long only hedge funds and then of course retail investors in the Mag 7 and some of those go go Momentum names that have seen huge selling lately. The fact that all three cohorts are selling those names at the same time has only exacerbated the ugliness that we've seen in the market. So the question becomes what now? Well, several things I'm told are worth watching from here. Does the retail investor step in and buy the dip like they have most times in the past? Certainly handful of years, and rightly so, they were right to do that. We'll see. It's obviously too early to know all that. Does the market upset start to spill into the real economy? And was Delta's uncertain outlook today the very first signs of that? We'll have to wait and see what we hear from other companies as Josh was talking about as well. And finally, and maybe most importantly, I'm told, does the president who declared this weekend that he is not fixated on this stock market right now, decide that the pain of a market meltdown is too damaging and do a 180 on some of his policies? Today's tariffs would suggest otherwise. And the person I spoke with this morning said it was especially telling this weekend when Mr. Trump said he's not fixated on the stock market Right now, which follows Secretary Besant telling Squawk Box on this very network there is no Trump put. So Weiss, let me go to you with that. Multi strats long onlys got a lot of leverage, wrong side of some trades because of the unwind in the volatility that's happened and they continue to deleverage. And that's why the person that I spoke with today wasn't willing to say, you know what, I think it's over or it's coming to an end. It's impossible to know. But the likelihood is that that needs to continue for a bit more.
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Steve Weiss
Yeah. First of all, just a little insight into the multistrads. So they typically have their exposure to the market 10% net longer, 10% net short. Some aggressive ones will be 2020. So you ask how can they generate the returns that they generate? They generate by not putting one times leverage on, but by putting three to six times.
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Ben Rizzuto
That's right.
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Steve Weiss
So that's why the leverage impact and the deleveraging is so meaningful to the market. So in terms of, you know, in terms of what I see, look, you know, when, when commentators come on and say, hey, the, you know, the market hates and investors hate instability, you know, they need clarity. In my view, they've got absolute clarity. And the clarity that they have is that the administration doesn't know what they're doing.
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Ben Rizzuto
Let me just correct something I said too. When I was reading the millennium number, I said billion, 900 billion. It's 900 million M, not B. 900 million, my bad. Big difference. You get the point.
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Steve Weiss
Yeah, so. So there is absolute clarity. The administration just has no conviction name policy. They react to sound bites and to actions by others. Today being a perfect example, we're going to increase tariffs by 50%, not 25% because Canada is digging in. So those are damaging. So what he's doing, he's playing with the economy to satisfy his own, you know, whatever thought stream. Now, when you take a look at what people are concerned about, they see government employees being fired, so why not them too? So they retrench, they go into savings instead of spending. They see prices going up because, yes, they're going up. So what do they do? They say, we need more money to stay alive. We've got it. We can't spend on airplanes, we can't spend hotels, we can't spend on retail goods. Goods. So it comes down to necessities. Then on the other side, so that's a retrenchment. The condom economy is going lower. So what happens on the other side because of these tariff policies, as Josh is referring to the companies, then you're going to see prices go up. That stagflation that is the most damaging scenario for any market. And then you talk about the Trump put. And Trump doesn't care about the market. Well, he doesn't. He only cared about the market because it was going up and he claimed credit for it. Now it's going down. It's got nothing to focus on long term. The problem is the transition here is not short term. When you're on shoring, which is a trend that's been going on for 10 years, we've done all the work on numbers. It takes a long time. You can put up a fab now a semi plant. So all this could be a very, very tough period. Chambers of Trump put. I don't know what it could be. Could it be a complete divorce from Musk? He's already started that. But it's got to be showy and they have to stick with the.
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Ben Rizzuto
What do you mean he started that? He was said he was going to buy a Tesla today.
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Steve Weiss
The report. Well, okay, I'm just saying what he said. No, you're right, you're right. But the reports from the meeting with the Cabinet over the weekend or on Friday was that he gave the responsibility for cuts to the Cabinet secretaries and took it away from Musk, which is what he should have done in the beginning, essentially neutered them.
- [11:24]
Ben Rizzuto
Ed Yardeni was out today saying, and this was just before we came on the air, quote, the stock market vigilantes have spoken. They don't like tariffs. They don't like mass firings of federal workers. That's because they don't like stagflation. Right. The word that's being tossed around a lot. And they fear that Trump's 2.0 focus on these measures could cause a recession with higher inflation. Wolf today increases their recession odds. Goldman cuts its growth forecast. So the market is trying, Jim, to adjust to a new environment, one that it did not anticipate on election night. We showed you the fact that the major averages went up a bunch after the election because there was all the optimism about Trump 2.0. I'm not suggesting that there's not still optimism about Trump 2.0. It may just be pushed off later than people thought because of the volatility that we're currently seeing because of this trade war, which only seems to be escalating. If you judge the president's commentary today about Canada at face value, the market's trying to figure out what price is. Right.
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Steve Weiss
Well put.
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Jim Lebenthal
And the market's also trying to figure out what the probabilities of a recession are. There's no number that is printed in the Wall Street Journal or any other publication that says that what we can say is directionally the probability of a recession this year has increased over the past few weeks on the back of doge and on the back of the tariff uncertainty, you know, back and forth, whatever you want to call it. I think this is a moment in time, though. The market is totally ignoring, as it sometimes does, the other side of the equation. There are some positives that can may come out of this administration, such as lower taxes and lower regulation. I think if you're running a financial services industry right now, you're directly seeing that impact in the gutting, I'm going to call it the gutting of the Consumer Finance Protection Bureau. That's an example of deregulation that is going to help corporate profits now at this point in time. And it's probably, Scott, because of what you're talking about with deleveraging and institutions, hedge funds, etc.
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Ben Rizzuto
Which is a big deal, a very big deal.
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Jim Lebenthal
I completely agree. I strenuously agree, your honor, that it's exacerbating a situation. Without that, I think we might have a market that is looking at the negatives, which we can clearly see. Steve, you just excellently pointed them out. But it might balance that against some of the positives. And I would think that possibly as this leverage unwind finishes itself, which usually doesn't take very long. We last saw it in August. It lasted a month. We're three weeks into this downturn that there will be a balance between the positives and the negatives. The one positive I would want to focus on is profit growth. I heard Josh go through the quarter by quarter cadence.
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Ben Rizzuto
Yeah.
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Jim Lebenthal
I would look at the full year because I think most corporate managers are not going. Any corporate manager that I've ever spoken to does not focus on quarter.
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Steve Weiss
Sure.
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Ben Rizzuto
But the prospects of earnings growth going down at this point is much greater as we sit here and have this conversation than it is that they are going to increase. Therein lies the problem.
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Jim Lebenthal
I will allow me to paint the other side of the scales of justice, if I may.
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Steve Weiss
You have.
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Jim Lebenthal
You have just excellently done that. There is still 11% annual growth projected in S&P 500 profits. Now, I point this out because that's a condition in which corporations generally want to hang on to. Workers generally want to.
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Ben Rizzuto
I got you But NFIB optimism down today. Second straight month, high level. Okay. I'm just saying it's got to go. This wasn't the direction that people, many people thought it was going to go. Okay.
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Jim Lebenthal
I see both sides.
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Ben Rizzuto
The uncertainty index, its second highest level ever.
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Steve Weiss
Can I, can.
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Ben Rizzuto
I want to get Joe. Let me get, Let me get. Joe's take to Goldman's trading desk today suggests that rebounds are going to be selling opportunities, Joe, not buy. That goes to whether retail is going to step in and buy the dip. Not sure where the big money is feeling. Bank of America's trading desk says FOMO's gone. Fear is here and that retail is no longer filling the liquidity gap like it was before.
- [15:25]
Scott Wapner
Agreed. I think, you know, you basically touched on the center of the universe, and the center of the universe is sentiment and positioning. I understand we could talk about the trajectory of earnings growth and when tariffs might or might not be actually implemented, but you always want to focus on sentiment and positioning. And we have had over the last 60 days the most drab, dramatic shift in sentiment and positioning since the pandemic. Think about where we were 60 days ago. The US geographically was the best place in the world to invest. We were expecting an interest rate spike because of the tariffs. Guess what? The concern as it relates to the tariffs is actually a contraction in growth. The tech trade, the momentum surrounding that. So what is that all done? It's created an environment where now CTAs are net short equities. The Magic 7 is experiencing a 20% decline. We are at a moment this week where I believe that sentiment and positioning might allow for a tactical bounce, but it does not eliminate what we face in front of us over the next three months. And that's plain and simple. No, I don't think retail comes in and steps and fills the void. I think the real economy is impacted by what's going on. I think that you're going to see an economic control cooling. And guess what? I think the Trump administration arguably probably applauds that because it gets the Federal Reserve to move rates lower. Lastly, when do you get something positive as it relates to the macro? Probably in the summer for the tax bill. But in the interim, understand this is the environment. You're gauging where sentiment is, you're gauging where position it is. Because those might just be the two dominant variables.
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Ben Rizzuto
The, the concentration alone, Brin and the unwind of it is the biggest story in the market. John Spallanzani sends me an article that just moved as well. This is according to Bloomberg, some of Baillie Gifford and company's biggest funds have posted double digit losses over the past month. What were their big holdings? Amazon, Netflix, Cloudflare, among others. JP Morgan Chase's US Technology Fund. Franklin Templeton's Franklin Technology Fund also suffered losses of more than 20% over the past 30 days. Everybody was so concentrated in these names and now when the upset happens and the unwind and the deleveraging occurs, the results are on all of your screens almost all every day. Brin.
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Bryn Talkington
Yeah, and I think also first of all, leave it to the hedge funds to mess it up for everybody. I think what, what a lot of you have said on the show is so accurate. But in terms of just like the dramatic shift of the mechanical trading that's happening, if you look at weekly put volume, we blew through 2020 and we're well above 2022 for last week. That's not retail, that's not asset management firms. That is to your point, Scott, earlier and Steve and Joe, this is like very mechanical, 100%. And so the severity and the deepness I think depends on the mechanics of the market. I think as it relates to the sell off of these companies, this is just the price of admission. And so to Josh's points about earned earnings decelerating, we knew in Q4 of last year that the Max 7 numbers were coming down by half, growing from 36% to I think down to 18, while the other 493 were actually accelerating. We need to see if those 493, the other names are going to actually start to accelerate, albeit at a lower level. But right now I feel like in a lot of these names, Price and fundamentals, Price usually leads fundamentals, Scott. That's a good gauge. Price is telling you the future with the expected future outcome. But I think in quite a few of these names, price and fundamentals have broken apart from each other. And that's like 2018 was a great opportunity. Trump was president, we had a terrible market, a ton of volatility, was a great opportunity to buy some names. That's the first time I bought Nvidia. I think 2025 is also going to be a really good year to tactically buy names on this weakness that I think is going to continue for the foreseeable future.
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Ben Rizzuto
Well, I mean, okay, let's just take in video for a minute. It's a good representation of the unwind that's happened in some of these trades. Nvidia lost $140 billion worth of mega market cap on Monday alone. And we had said last week in the midst of the big drawdown that a trillion dollars in market cap was almost wiped out of that name. It's down 28% off of its record high. Jonathan Krinsky suggests oversold. Yeah, it can always get more oversold. But if you're hoping for a good entry point, this is your chance in the markets overall, you take them to heart. Today you bought more Nvidia.
- [20:23]
Bryn Talkington
Yeah, I mean, I bought quite a few things. I think that this is where price and fundamentals have separated themselves because while Nvidia continues to be entrenched, I mean, look at Coraline, which is a private company that their whole business is around. Their whole business is around Nvidia GPUs. They just signed a four or five year deal with a $12 billion deal with OpenAI. This company is getting stronger. I don't know the PEG ratio, but it's very low because the earnings, the growth rate is still very high. The problem with the video today is sentiment. But what I know about sentiment is sentiment will change because the fundamentals of this company continue to get better and better while the price gets lower and lower. So I think it's a great opportunity to add to this name here. It just seems to me, it seems like a no brainer in the short term. Can it go below 100? Sure. But I think 12 to 18 months from now, this company is going to be meaningfully over $109.
- [21:15]
Ben Rizzuto
Joe, you told our viewers you were going to do it at the close yesterday buying Amazon. In fact, you did just that. You bought it at just under 194.
- [21:24]
Steve Weiss
Yes.
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Scott Wapner
So I'm being tactical and I'm not apologizing for doing so. I think this week there is an opportunity to get a little bit of a, a moderation in all of the short positioning and the bearish sentiment that's currently unfolding. One of the ways I want to do that is, okay, let's take a look at my personal exposure and where can I put some equity names into that exposure to kind of elevate my, my capture versus the S P itself? So I am underweight. The Mag 7. If you look at the ownership that we have in the Jyoti etf, we don't have Apple, we don't have Microsoft. Personally, I own none of the Mag 7. So Amazon is the one name that I have been waiting on. I've spoken on air at length about what I perceive to be their leadership cloud growth, their ability to expand even further into live sports Programming. And this company has showed when they want to accelerate the revenue growth, they can. You've got seven consecutive quarters of double digit revenue growth. That's something this company has not seen in quite some time. And I do believe because of the economy of scale that they have a degree of resiliency in a recessionary climate. So it's one of the names. I haven't done much lately. I bought some Amgen last week. This week I'm picking up Amazon. I'll take a look at maybe some other names and try and play this tactical bottom. I could be wrong.
- [22:49]
Ben Rizzuto
So we've checked Tesla every day within the A block of our program. We'll do it again. It's getting a little bit of a move today. Higher, but not much. And it's been almost a 50% drawdown. I mean, at one point it was a 50% drawdown from its last high. It fully retraced its move up to that high level. Dan Ives is out yet again today defending it. Adam Jonas talks about, well, could you go to 200 and then 800 maybe that's where this thing's going. Brin, you bought more of this name too?
- [23:26]
Bryn Talkington
Yeah, you know, I think that could you think of a company this size that has become so divisive and a company more, or CEO, founder more hated. And so when it goes to sentiment right now, this, this stock has all of those ingredients, a big run up in Q4. You have auto sales have been declining in the short term, you've got doge, etc. And so I feel that the bear case to ADAM Jonas's was 200. His bull case is 800. And I think that's what he was saying. For me, I thought the stock was too expensive at 4, 20, 30, 40. I sold calls, I've clearly closed those out. I think that down here I wanted to add some more expensive because I think the sentiment is just so terrible. And I know that psychology shifts all the time.
- [24:13]
Ben Rizzuto
So we'll follow that. You know, in terms of momentum names that continue to melt. Josh, Reddit is coming off its worst day ever. That Stock is down 47% in one month. What do you do with something like that?
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Josh Brown
Well, I think position size is the key. When you have hyper momentum stock that doubles, you probably don't own as much of it as you did when you first bought it. So I think the people that, the people that had been relatively early to the trade in all these names, I throw Robinhood in that category. The stock's been smashed. I know Robin Second worst day ever.
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Ben Rizzuto
For that stock yesterday. Sorry.
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Josh Brown
Yeah, so look, here's what's going, here's, here's my perspective on this. Over the last couple of weeks I've been talking about almost anything but tech stocks. And that's not because I don't like tech stocks. It's because it's just not where the strength has been in the market for the most part. This sell off that's now in week three did not start from all time record highs for most technology stocks. There had been this kind of underlying momentum shift and I know we're going to talk about that later but like when you now look at where the real damage is. Mtm is down 5% year to date. Momentum is the second worst factor in the stock market behind growth which is down 8% year to date. And some of the darlings from that theme and yes, Reddit was one of those. Robinhood, Robinhood's off 46% from its high fast. Palantir off 35% from its high. Really quickly we did in video. Tesla to me is the most emblematic of the problem here. When Tesla, when post inauguration, I want you to think about this. Tesla was trading a 210 times trailing earnings. It had a market cap of 1.5 trillion. Tesla cut in half is now 113 times earnings. Who's the buyer? Like I, I understand it's not autos, it's robots, blah blah blah. Fine, compare it to the robot stocks. 113 times is still very expensive. So it's not clear to me who steps in here. It's 525 Brenda. Hang on. I mean, I mean institutions, if, if, if you love the stock, you probably already capital, if you're, if you, if you're a value manager, you're not looking at it yet but it's washed out to 25 RSI. So if it's going to bounce, it should bounce. Right now the problem is the chart. The trend is so fundamentally broken that I agree with Joe. You could get a 12% rally in Tesla because he comes out and announces a buyback or something. I don't think it lasts. I think they come in and sell that the people that still have to. So there are a lot of stocks like that and a lot of big market cap stocks and I think that that's what makes this moment very tricky. There's an old saying on the street, nothing good ever happens just below the 200 day moving average. I think that applies to the, to the NASDAQ 100 right now. And most of the names in there.
- [27:36]
Ben Rizzuto
All right, we'll take a quick break. We still have a lot to get to. We have more moves to discuss. We have more sectors to trade. And we're going to tell you about a really surprising new stat piece of data about 401k trading that I think you'll be interested in. We'll do it all when we come back.
- [27:57]
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- [28:55]
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- [29:29]
Ben Rizzuto
We need to trade some financial stocks because the group itself is down near 5% since Inauguration Day. A number of big names included in that slide. Morgan Stanley down near 20% in Citi 16. Goldman Sachs more than 15B of a 14 wells 14, JP Morgan 11 and a half. The private equity declines are staggering and you talk about positioning being offsides. Whereas there was a lot of optimism coming into this year in this administration about private equity stocks, realizations, deals, you name it. KKR is down 31% since the inauguration. Apollo's down 24%. Bryn Talkington buys both. Tell me more.
- [30:14]
Bryn Talkington
Yeah, I've been following these stocks a long time. We do a lot in the private markets. More, more on the private credit side. But these, both of these charts look like tech stocks and I just think that this is where Price and fundamentals have separated themselves. Both of them are growing revenues and earnings in the low double digits. You're going to continue to say, I hate this phrase, the democratization of alternatives. Nonetheless, they're going to continue to capitalize on that. And so I think this is a great opportunity when you get a sell off. I was excited to add to these names. I will continue to add to these names. These are initial positions throughout the year, as I do believe we'll continue to have volatility. But one, two years now, I feel these companies are going to be a lot, a lot more, a lot more expensive from a price.
- [30:57]
Josh Brown
Yeah, Josh, So here's the, here's the. I like these. These are great businesses. Here's the risk. If we're going to have a 2018 like year, the, the number one thing investors are not going to want to listen to is pitches about locking up capital and making loans to companies that need to be supported with credit in the private markets. So actually what ends up happening here.
- [31:25]
Steve Weiss
I don't agree with that.
- [31:26]
Bryn Talkington
I think it's just the opposite, Josh, because what happens in 2018. Let me take the equity markets anymore.
- [31:33]
Josh Brown
Yeah, no, because that's a mirage. If Cliff Asness is watching, he's going to, he's going to pull his tie off and pick up a sledgehammer. The volatility exists. It just doesn't show up for two quarters because of the way they mark their portfolios. But I'm just speaking from a if. So we understand institutions are going to remain invested in private equity, private credit, no question. And from that standpoint, I think these businesses are fine. But if we think the earnings growth is going to be fueled by this democratization, I am telling you, based on conversations with a lot of people in the family office and RIA world, there's a, there's a question mark like, do I have enough? Do I really want to go down this road right now?
- [32:18]
Bryn Talkington
Yeah, I think, I mean, you and I are both in the same business, Josh, and I think we traffic in this space. I totally always appreciate your viewpoint. I think that all the people I talk to in the family offices, the RAs and individual investors, they're like, I don't have enough of exposure. I think what kind of exposure you have is very important. This is not a homogeneous asset class. It's incredibly distinct. I just think that these stocks have sold off so much. I know that they are a they're 2 and 20 model isn't great for investors. It's great for their balance sheet and So I wanted to own, instead of buying GP stakes stocks in a private equity firm, I can just buy the publicly traded version of that. And I think that will make money over time. It's really as simple as that.
- [33:00]
Steve Weiss
Yeah. So the analysis just isn't that easy. I think that prints right over time. Private equity. But. But what's in the stocks? Number one, the IPO market that was supposed to be open, you know, with Trump coming in the first half of the year. Now it's at least second half.
- [33:17]
Ben Rizzuto
Yeah. I mean with the volatility now, course, probably next year.
- [33:19]
Steve Weiss
Also, the analysis isn't that easy. For example, if you're in a private equity fund that has a disproportionate weighting towards health care companies and they're dependent on Medicaid, I can tell you that they're not going to do well. If you're a private equity company that has a weighting towards companies, industrial companies that are dependent upon tariffs, not happening, then they're not going to do well. So you got to look at what the underlying investment themes are and holdings in the private equity companies just can't buy them all and buy them because they're down. I'm not suggesting prints doing that, but that's the analysis.
- [33:56]
Josh Brown
Why do you guys think they're down? Why do you. Why do you guys think so the top six publicly traded private equity names, kkr, Apollo, Ares, Owl, Blackstone. Why do you think of all the financial sector stocks, they're A, down the most and B, they've lost $100 billion in market cap in seven weeks.
- [34:17]
Steve Weiss
Because so many people.
- [34:18]
Josh Brown
If my thesis is not the going thesis, what do you think is the reason why?
- [34:22]
Steve Weiss
I just told you that the IPO market, if you take a look, technology, okay.
- [34:28]
Josh Brown
So exits can be crushed.
- [34:30]
Steve Weiss
Josh, I'll finish answering your question number one. Number two, you had a lot of tourists in space that were attracted to the yields and they said, oh, what I own here, I know I've got a yield, but what's the underlying asset? So they didn't know what they own. Then they're hearing, but the IPO market being pushed out. They're hearing about the underlying portfolios not working as they should.
- [34:48]
Ben Rizzuto
All right, you grab a sip.
- [34:49]
Steve Weiss
I need.
- [34:50]
Ben Rizzuto
All right. And we need to take a break anyway. Actually, we're going to. We're going to have an update to Josh's best stocks in the market list as well. We do want to get the headlines too. There's so much news today as well. Angelica Peebles has that for Angelica.
- [35:03]
Angelica Peebles
Hey, Scott. US Envoy Steve Witkoff will travel to Moscow later this week, according to a source familiar with the plans. Reuters reports he will meet with Russian President Vladimir Putin. The trip comes as the US And Ukraine hold talks in Saudi Arabia today on ending the conflict with Russia. The Kremlin said today it expects the US to brief Moscow on the talks. The FBI is now part of the search for a missing American college student who vanished while on spring break in the Dominican Republic. Police say they are re interviewing people who are with Sadiq Shah Konanki before she went missing early in the morning at a beach in front of her hotel. The hotel said in a statement that her disappearance coincided with a power outage that prompted guests to head to the beach. And Manchester United today unveiled plans to build a roughly $2.5 billion, 100,000 seat stadium. It will be the biggest in Britain, even larger than Wembley Stadium, which is the home of English soccer. It's not yet clear how the club, which is currently $1 billion in debt, will pay for the stadium halftime. Report will be right back.
- [36:06]
Joe Chernova
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- [36:47]
Ben Rizzuto
Brings in over six figures, about $10,000.
- [36:49]
Steve Weiss
A month, over $500,000 since its beginning.
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- [37:17]
Josh Brown
10 seconds.
- [37:30]
Ben Rizzuto
Welcome back. We're going to get to some moves from Weiss in a minute, but what do you guys make of this Delta stuff today? Jim? Surprised?
- [37:38]
Jim Lebenthal
Yes, yes. I mean, here's the thing. Obviously the headlines look terrible. Demand plummeting, demand softening, all this sort of stuff. We do have to remember that for the quarter that we're in right now, demand is still, revenue is still going up 3 to 4%, which by the way, dovetails with passenger counts. The problem is whether this is a harbinger of something else worse to come. This is where you've got to make your decision whether there's a recession coming or not. If this is a growth slowdown, which by the way, take a look at a four year chart of Delta Airlines, okay, It does this. It has these jumps and then it comes down and then it jumps higher and higher. Actually, if you look back over the last last three years, the stock has been an outperformer. I'm choosing that time frame because it cuts out the pandemic effects. But that will continue only if there's not a recession. Now, I said earlier today that the chances of a recession have increased. Still not my base case. But I'll tell you, Scott, and I want you to hold my feet to the fire on this, I know you will. That if I come on a week, a month from now and say, hey, you know what? Now a recession is my base case, you can't own Delta at whatever the price.
- [38:41]
Scott Wapner
I disagree with that. And I disagree.
- [38:42]
Ben Rizzuto
Joe. You own it, right?
- [38:44]
Scott Wapner
We own it. We own, we own Delta, we own United Airlines. But it's consistent what you're hearing from everybody, the consumer facing companies like Wal Mart, like Kohl's, it's the uncertainty surrounding what's ahead over the next several quarters. And I don't know if we need to use the word recession, Jim. I just think it's the economic contraction, Joe. The economic contract.
- [39:03]
Jim Lebenthal
Hang on just one second, let me finish my thought.
- [39:05]
Scott Wapner
There's. There's two things to think about. The economic contract. Traction changes consumer behavior and more importantly, the wealth effect changes consumer behavior.
- [39:14]
Ben Rizzuto
That's why I said yesterday it's just a word, recession.
- [39:18]
Jim Lebenthal
Let me just respond. Because the stock isn't moving.
- [39:20]
Ben Rizzuto
Because the stock isn't moving this way. Because Ed Bastian said we're having a recession, he gave his outlook, which was fairly uncertain for, you know, the slowdown he sees coming.
- [39:31]
Jim Lebenthal
He also.
- [39:31]
Ben Rizzuto
Slowdown is enough to see a stock off 8%. And more than. Much more than that over larger periods of time.
- [39:38]
Jim Lebenthal
Well, no, over. Over the last three years, which is.
- [39:40]
Ben Rizzuto
I'm not talking about. I'm not talking about three. Three years or three years. Three years is irrelevant.
- [39:45]
Jim Lebenthal
They kept their guide.
- [39:46]
Ben Rizzuto
Three years is irrelevant.
- [39:47]
Jim Lebenthal
Don't know why you say that, but I don't care. The guidance is intact for this year.
- [39:51]
Ben Rizzuto
Okay, if I own the stock today, do I, do I give a darn that it's up over the last three years, if I. If I bought it recently.
- [39:58]
Jim Lebenthal
The point that I'm trying to make, and I'll see if I can make it clearer, is that during those three years, you have had increases. Then it comes back down to meet the s and P500 return. Then it increases again. You know, we did this, you and I and Josh, in July of last year. They reported earnings. Stock went. No, the stock. I'm in the middle of the thought. The stock went down. You guys told me I'm an idiot. The stock's never going anywhere. Then it goes up. Okay, then it comes down. Then it goes up again. It just come down again. And my point. Point being, which I'm going to stay true to, is that if this is just a growth scare, which I suspect it is, then you can look for another higher high in the months to come. Disagree with me if you want, but that's what the pattern has been, and I think the pattern will continue.
- [40:38]
Steve Weiss
Can I say the reason why the last three years don't matter as much? They matter. If you owned it then, of course, because you still would drink through a fire hose from pandemic demand that got booked out a large, you know, way a large number of years in advance. You're not seeing that. I think you've satiated a lot of that demand. Number one. Number two.
- [40:58]
Jim Lebenthal
I got to jump.
- [40:58]
Steve Weiss
Number two. Jim, I let you finish. Just sit tight. Okay. Number two. Number two, Retail is slowing down. Retail is slowing down. Just your number three. Look, you're. To Joe's point, you're going to save money. Plus government employees. If you've got a lot of exposure to government police, which aren't a unique huge part of spending, they're not going to be flying as much. They're not going to job.
- [41:19]
Jim Lebenthal
Just the fourth verse of the consumer is going to give up when student loans restart. The consumer is running out of stimulus payments. I mean, over the last three years, this is not the first time we've had a growth scare. If you want to make the case that this.
- [41:32]
Steve Weiss
As an investor, Jim, I make the.
- [41:34]
Jim Lebenthal
Case that this is the real thing, that's fine. You can make that back. I'm not taking.
- [41:37]
Steve Weiss
Okay. Is the filibuster done? As an investor, I choose to look forward and see what could happen versus what has happened. And resting on my laurel.
- [41:46]
Ben Rizzuto
Okay, well, we're going to take a quick break. We still have Josh's best stocks in the market list. I want to tell you about that 401k information as well. We'll do it next. Well, it's not all bad news in this market of late. McDonald's new all time high Monday Gilead near an all time high. Otis Worldwide near all time high yesterday as well. Why do I bring them up? Because all three were on Josh's best stocks in the market list recently. What say you now?
- [42:21]
Josh Brown
Well, one of the things that I try to bring to the show is ideas that maybe we're not talking about every day because they're not in the Mag 7 but they have really great technical setups and the fundamental drivers that have given them those technical setups. And all three of these names have been rallying into the tariff stuff and have not sold off. And I think that's really important. McDonald's is up 6% year to date. It's flat over the past week where everything else got killed. It's up 5% over the past month since I brought it to the show. This is a company that reported earnings in February. 56% gross margins, 46% operating margin, 32% net profit margin with 5% earnings growth expected this year. 8% next year. They want to be in this name. We could do Otis. This is with 4% of a 52 week high.
- [43:13]
Ben Rizzuto
God, no. I was to say we don't. I want to move on and get some other stuff. I just wanted to mention those stocks doing well. They were on your list. I'm going to move on.
- [43:23]
Josh Brown
Okay.
- [43:23]
Ben Rizzuto
You appreciate you but I got to move on because I got to get this stuff in. You sold Dick's Sporting Goods twice. You sold Uber, you sold Vertiv and you sold the Kwebs and pdd.
- [43:32]
Steve Weiss
Yeah.
- [43:33]
Ben Rizzuto
So look, you're raising a lot of cash lately.
- [43:35]
Steve Weiss
I have the last couple of months. Look, when you're, when you're in this environment with my outlook on the market that you get rid of the trade, you get rid of the positions that you're not attached to. They're relatively new. Could be a new position become tax. That was the case. Dick's. I've been selling out of it when the retail news started to hit lost. You know, I'd say a nice percentage on the, on the investment, but you can't own it in terms of Vertiv. Vertiv I had sold already because of their exposure to China. I'll be back in Verve. It's still overvalued terms. Uber, that was also already gone.
- [44:12]
Ben Rizzuto
All right, all right. We will take that break and we'll come back and talk about. So much for set it and forget it on your 401k. We'll explain more next. All right, welcome back. 401k trading activity hitting a four and a half year high during this sell off. Josh, we thought you'd be interested in this. This is according to Alight Solutions 401k index. The last three weeks have been particularly busy. They say above normal trading. On 10 of the last 14 trading days. 401k investors have been transferring money from equities to fixed income. Inflows went to bond funds, stable value and money markets. And outflows came from target date funds and large cap US equities. So much for set it and forget it or sit on your hands and just watch.
- [45:01]
Josh Brown
I think this is a consequence of the fact that the market sell off is directly due to politics. Most people in this country do not pay attention to the day to day movement in the market but they are glued, glued to political news whether it's the cable networks or their Facebook page. And I think it's just unavoidable for people to be experiencing a lot more uncertainty now than they have been for a few years. And that directly translates into them feeling the need to de risk their retirement portfolios. Hopefully this isn't the start of a longer term trend and it sort of fades away because I do not endorse this sort of activity.
- [45:39]
Ben Rizzuto
Yeah, I thought you'd have a strong opinion. Of course when you move out of one asset class into another, no one rings the bell and says it's time to go back or move around again. But I appreciate you. Final trades are next to show you the market here. The Dow Jones Industrial Average now down by more than 640 points. Disney, McDonald's, Apple, IBM, Nike, Verizon's getting hit hard today. Those are among the biggest losers out of that group of 30 stocks. We'll keep our eyes on that obviously as we take you through that last hour today with the Wharton School's Jeremy Siegel. So we're looking forward to speaking with him today through all this market volatility. Bryn, what's Your final trade?
- [46:23]
Bryn Talkington
Cows Pacer Cows owns 100 highest free cash flow yield stocks on the Russell 1000 Timeless strategy that I think will be timely this year.
- [46:31]
Ben Rizzuto
Josh.
- [46:34]
Josh Brown
Netflix the first to turn way too oversold. Has nothing to do with tariffs.
- [46:39]
Ben Rizzuto
Weiss Meta.
- [46:41]
Steve Weiss
I'm not really in the mood to buy any stocks but market will bounce.
- [46:44]
Jim Lebenthal
This one I like Farmer Jim Vertex Pharmaceuticals.
- [46:47]
Ben Rizzuto
All right, Joey.
- [46:47]
Scott Wapner
Interactive Brokers.
- [46:49]
Ben Rizzuto
All right guys, I'll see you at the closing bell. Three o'clock. The exchanges 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.
- [47:05]
Bank of America
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 find you'd.
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Joe Chernova
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Josh Brown
Get out there and do it.
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