Halftime Report: Momentum’s Miserable Week (February 21, 2025)

Hosted by Scott Wapner and featuring CNBC’s top investors, "Halftime Report" dives deep into the current state of the markets, dissecting recent downturns in momentum stocks, evaluating economic factors, and discussing strategic portfolio moves.

Introduction

Scott Wapner [00:00]:
“Front and center this hour, the week that momentum cracked from Palantir to Robinhood, Walmart and so many other stocks. We will debate what that means for the bull market's next leg.”

In this episode, Scott Wapner sets the stage by highlighting a significant rollback in momentum-driven stocks, including notable names like Palantir, Robinhood, and Walmart. The discussion aims to unravel the implications of this downturn on the broader bull market trajectory.

Momentum Factor Analysis

Bryn Talkington [01:18]:
“When you see Palantir grab Robinhood way over even their 20 day moving average... it just shows you it's so overstretched.”

Bryn delves into the concept of momentum as a market factor, explaining that stocks like Palantir and Robinhood had surged beyond sustainable levels, leading to their recent declines. He emphasizes the importance of not chasing overextended stocks and trusting in market corrections driven by fundamental principles.

Jim Lebenthal [04:51]:
“These stocks all went up based upon momentum in fundamentals and not based upon momentum in earnings.”

Jim expresses concern that the recent rally in momentum stocks was more about market sentiment than actual earnings growth, suggesting that this discrepancy may signal broader market malaise.

Stock-Specific Discussions

Palantir and Robinhood:

• Bryn Talkington [02:00]: Highlights Palantir’s impressive yet volatile growth and advises caution against chasing such high-flying stocks.
• Jim Lebenthal [06:03]: Compares the momentum in Palantir to that of other overhyped stocks, questioning the sustainability of their valuations.

UnitedHealth:

• Scott Wapner [17:56]: Points out UnitedHealth’s significant market cap against ongoing DOJ investigations.
• Jim Lebenthal [17:11]: Defends UnitedHealth, arguing that criticisms from figures like Bill Ackman are reactionary and that the company remains a strong performer.

Walmart and Consumer Discretionary:

• Jenny Harrington [09:01]: Discusses declining consumer sentiment and weak retail sales impacting consumer discretionary stocks, despite the market’s resilience.

Macroeconomic Influences

Geopolitical Tensions and Tariffs:

• Scott Wapner [06:57]: References Ken Griffin’s concerns about tariffs and geopolitical tensions with the Trump administration, Europe, and Ukraine, contributing to market uncertainty.
• Jenny Harrington [10:25]: Explains how her investment strategy adapts to ongoing disruptions by maintaining asset allocation while adjusting investment timing.

Deregulation and Economic Outlook:

• Steve Weiss [12:00]: Highlights the impact of deregulation and tax cuts on earnings growth, projecting a 13% year-over-year earnings increase for 2025 as a market supporter.
• Jim Lebenthal [16:20]: Discusses the benefits and risks associated with current economic policies, advocating for a cautious approach and cash retention amid uncertainties.

Warren Buffett’s Cash Reserves:

• Steve Weiss [22:40]: Speculates on Buffett’s substantial cash holdings, suggesting he is waiting for market corrections to deploy his capital effectively.
• Jim Lebenthal [24:09]: Offers insights into Buffett’s potential strategies, including investments in European markets and preparations for future opportunities.

Portfolio Moves and Strategic Adjustments

Jenny Harrington’s Moves:

• TSLX Purchase [26:24]: Buys 6th Street Specialty Lending (TSLX) for its high dividend yield and strong management team.
• Realty Income Swap [27:59]: Exchanges Triple N for Realty Income to enhance portfolio quality and yield, citing better tenant creditworthiness.

Steve Weiss’s Adjustments:

• ExxonMobil and Wind Acquisition [29:24]: Adds to positions in ExxonMobil and Wind, viewing them as undervalued despite recent performance.
• Alibaba and Chinese Internet Stocks [31:36]: Invests in Chinese tech firms like Alibaba and PDD, believing them to be safer amid U.S. market uncertainties.

Jim Lebenthal’s Stance:

• Uniform Strategy: Emphasizes maintaining strategic positions in key sectors while managing risks associated with political and economic shifts.

Crypto Insights

Bryn Talkington [38:57]:
“Longer term, this is a crypto that people absolutely buy the dip.”

Bryn discusses Bitcoin’s recent stagnation, comparing it to gold's performance and suggesting that Bitcoin remains a viable long-term investment for those willing to weather short-term volatility.

Jim Lebenthal [39:45]:
“I don't believe [Bitcoin] has any utility. It’s purely a momentum trade.”

In contrast, Jim expresses skepticism about Bitcoin’s fundamental value, viewing it solely as a speculative asset without intrinsic utility.

Defense Sector and Market Forecasts

Defense Stocks Downgrade:

• Jenny Harrington [34:58]: Maintains a long-term bullish stance on defense stocks despite recent downgrades, anticipating increased global rearmament needs.
• Steve Weiss [35:27]: Agrees, predicting that European nations will compensate for any U.S. defense budget cuts, particularly in key programs like the F-35.

Market Resilience and Strategic Positioning:

• Steve Weiss [40:42]: Discusses trimming positions in high-performing tech giants like Amazon and Alphabet to rebalance portfolios and invest in undervalued stocks like Applied Materials and Adobe.
• Jim Lebenthal [36:37]: Highlights strategic exits from stocks like Deere, citing fair valuation and limited growth prospects despite past performance.

Headlines and Quick Updates

Angelica Peebles [33:06]:

• National Science Foundation’s workforce reclassification violating labor contracts.
• Pope Francis’s health updates.
• Ford’s recall of over 240,000 vehicles due to seatbelt issues.

Market Flash with Mackenzie Segalis [37:53]:

• Block’s (formerly Square) sharp decline post-earnings miss and competitive pressures.
• Upcoming Nvidia earnings report and its potential market impact.

Conclusion

Scott Wapner [43:36]:
“All opinions expressed by the Halftime Report participants are solely their opinions...”

As the episode wraps up, the panelists offer final strategic moves, emphasizing the importance of sticking to long-term plans amid short-term market turbulence. They highlight investments in defensive sectors like ConAgra and UnitedHealth, reinforcing the episode’s overarching theme: navigating market uncertainties with informed, strategic decisions.

Notable Quotes:

• Bryn Talkington [01:18]:
  “Gravity is immutable... when you see Palantir grab Robinhood way over even their 20 day moving average... it just shows you it's so overstretched.”

• Jim Lebenthal [04:51]:
  “These stocks all went up based upon momentum in fundamentals and not based upon momentum in earnings.”

• Steve Weiss [12:00]:
  “Earnings growth for this year, 2025, is projected to be 13% year over year... deregulation is real.”

• Jenny Harrington [10:25]:
  “We follow the process... play around a little bit with the pace of timing.”

This episode of "Halftime Report" provides a thorough analysis of the current downturn in momentum stocks, explores the underlying economic and geopolitical factors at play, and offers strategic insights for investors navigating a volatile market environment.