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Halftime Report
Pause or Pullback? 8/21/25
00:43:24
Frank Holland and the Investment Committee debate whether we’re in a pause or pullback as stocks try to avoid a fifth straight day of losses. Plus, the committee share their latest portfolio moves. And later, Josh Brown adds Illinois Tool to his “Best Stocks in the Market,” he explains why. Investment Committee Disclosures
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A
A rich life isn't a straight line to a destination on the horizon. Sometimes it takes an unexpected turn with.
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Detours, new possibilities and even another passenger or three.
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And with 100 years of navigating ups and downs, you can count on Edward Jones to help guide you through it all. Because life is a winding path made.
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Rich by the people you walk it with.
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Let's find your rich together.
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B
Edward Jones, Member, SIPC For 140 years.
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MultiCare has been in Washington prioritizing long term solutions, partnering with local communities and expanding access to care. Together, we're building a healthier future. Learn more@mycare.org.
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D
I'm Scott Wapner and you're.
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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.
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D
All right. Thank you, Sarah and Carl. Welcome to the Halftime Report. I am Frank Holland in for the judge Scott Wapner front and center at this hour. Is it a pause or is it a pullback? Stocks are trying to avoid a fifth straight day of declines as tech turbulence it picks up and investors they're bracing for Fed Chair Powell speech at Jackson Hole. The investment committee standing by to break the whole thing down. We have here downtown Josh Brown, Jenny Harrington and Malcolm Etheridge. But first, quick check of the markets. Got to get to Malcolm's video. First quick check of the market markets. Right now you see a lot of red on this board down about a half a percent for all three indices. As we just mentioned, the S and P on pace for a fifth straight day of losses. The Nasdaq down about 3% over the last week. And really that's where we have to begin. Josh Brown right here to my left as you type. As you look for the latest data, we're going to hold off on your camera shot, searching, searching, searching for all the answers as we speak. All right. So is it a pause? Is it a pullback? We're going into Jackson Hole tomorrow. A lot of talk about what Jay Powell is going to say, what Tony's going to take and what that means for Fed rate cuts and investor sentiment. What is your take as we await for the that Jackson Hole speech?
- [02:04]
E
Look, obviously if Jerome Powell decides to come out and be super dovish, which is not my expectation, that will certainly change the tone and you'll see markets start to rip. I know there's like a camp out there that thinks that Powell wants to use this platform, ostensibly his final Jackson Hole address as Fed chair, to do some sort of like fiery politicized tirade about the importance of the independence of the Fed. It's. I just don't see it that way. I think the Fed is looking to cool the temperature down, the political temperature down, also the temperature of inflation. But I do think that you'll get enough dovish ness that it could be supportive of the market. I just don't think for investors it's really all that important. We've gone this long without a rate cut. Rate cut would be nice. I think rates are too high given the rate of growth in the economy and the state of the labor force. I think most people agree. So if they do 25 basis points and then another 25 or they do 50 and they sort of signal that's all that's needed. I just think that's a sideshow. The bigger story is whether or not this trade has legs into year end and if it's powerful enough to drag the rest of the market along with it. So far since the 4-9-low, that has been the story. Russell 2000 has actually outperformed the S&P 500 and the Mid caps are no slouch either. So it has been a market wide recovery from the worst of the tariff lows. We need that to continue in my opinion. And of course the only way it can continue is if these AI stocks are powerful enough to at least hang at current levels. I don't know that I need them substantially higher. The best clue that we'll get as to whether or not that's going to be sustained into the fall is whatever happens in reaction to Nvidia's number next week. I really think that's the next big thing on the calendar for the stock market after we get through the events of Jackson Hole.
- [04:06]
D
You know Josh, funny, so that you sound like you said most people don't think that we need a rate cut to move the market higher. You're actually echoing some sentiments. I was talking to Steve Sosnik from Interactive Brokers a short time ago. He says what are these rates restricted to? They're not restricted to the markets, they're not restricted to speculation, not restricted to private credit. So really he doesn't feel like a rate cuts needed to keep the rally.
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E
They're hurting the house, they're hurting the housing market.
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D
But we saw new highs after what a lot of people thought was a better than expected CPI because they thought that could lead into a rate cut, maybe 50 basis points. So why are so many people cheering for a cut if we don't need it?
- [04:37]
E
All right, I'll explain why only like 20% of people have a meaningful amount of exposure to the stock market. So the real story of wealth in this country, it's all tied up in houses. For 55% of households, their house is their biggest financial asset. And the reality is the housing market needs rate cuts. I would argue the best thing for the middle class of America would be more activity in the housing market. Not saying higher prices, I'm saying more turnover. Existing home sales have been horrendous for years now, and that's what's being held back by fed funds rate in the, in the fives and the high fours. We really need to see a situation where mortgage rates come down. We need to restart activity in the residential housing market. And until we do that, basically we're playing this game where the wealthy get wealthier because of their outsized exposure to the AI trade and to large cap stocks. And everyone else is sitting here like, I don't know, everyone's saying the economy so great, it's not great for me, we need to bring liquidity into the housing market. We need to lower rates for that reason. And by the way, I don't think bringing rates down by 50 basis points is going to be some like, calamitous thing for inflation. I really just don't think it works that way. So I think it's overdue. Just my opinion. I'm not on the committee, so who cares? But you asked me, what is it holding back? It's holding back, I don't know, 100 million American households that really would like to refinance.
- [06:08]
D
Yeah, fair point. Main street and Wall street are not the same thing. Malcolm, I saw you kind of nodding your head. Do you agree with Josh's take that we don't need the rate cut for the market? At least maybe everyday Americans need it for more liquidity in the housing market where a lot of their wealth is.
- [06:20]
F
Yeah, I think Josh was over there searching for his copy of my notes when he was getting started there. But to the point about housing, I think it's interesting that we just got commentary from Redfin that we're seeing homebuyers walk away from houses, house purchases at a record rate. And so if you think about where I live, D.C. where a tear down starts at $1 million, it feels like an eighth of a point is the difference between getting that home and not. And so, yes, certainly for anybody who's looking at purchasing a house, potentially refinancing a house, rates are restrictive. And so when you talk about the stock market versus real estate. Yes, I agree. We don't necessarily need two cuts this year. One cut this year, who cares? Unless it's something massive, like 50 basis points each time or more. Not going to be additive to the AI story. Because realistically, Microsoft isn't going to borrow to spend $80 billion to build out data centers. Neither is Amazon, neither is Alphabet, neither is Matter, whoever else. And so the cuts don't really have anything to do with that story that's been really carrying the markets for the last year and change.
- [07:21]
D
All right, Jenny, I see you have your own notes in front of you. You're not searching for anybody's notes. You got your own thesis here. First, let's go back to what Josh was saying. Do you think the market needs a rate cut? And then if the market does need a rate cut, how do you explain some of the action we have today? We also got earnings from Wal Mart. They flagged tariffs. Yesterday was Estee Lauder. I mean, we continue to hear this tariff story from retail names.
- [07:39]
A
Yeah. So I think actually Josh completely nailed it. I wouldn't argue for a remarkable change. I know, right? I wouldn't argue with.
- [07:46]
D
Jenny, don't do this. We don't need.
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A
No, I'm just telling you, like, it doesn't happen often, Frank. So when it's there, I just need to be like, holy smokes, Josh.
- [07:54]
D
On a very special halftime.
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A
Oh, isn't that sweet. I should bring you flowers. But what I think, I don't think we do need a rate cut. I think what's happening in the market right now is neither. There is neither a pause nor a pullback. I think it's potentially just a consolidation and a reshuffling of leadership. So I like the way you said we need, we need the top 10, the Mag 7, the. I play to at least not crack up. And I don't see any reason they should. They do have some stretched valuations on that mix, but they also have truly spectacular earnings. So, like, maybe they just need to consolidate. And within that consolidation, maybe then there's a leadership, a leadership shift going on. So we see things month to date like health care and staples up 5%. It down a half a percent. That makes sense to me. The health care and Staples are trading at insane valuations like health care. Goldman put out a piece a couple of weeks ago and I'm going to misstate it a little bit, but it basically showed where valuations are, what decile valuations are relative to their 30 year average. Health care is in like the 0 decile of valuation compared to its 30 year average. It's just, it's just being treated as if there's no money ever to be made in, no earnings. Money should flow in there.
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D
We're going to get to health care in a minute. I think you're talking about the valuation of the broader market as well and.
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A
About, and about how there's leadership, leadership shift going on. So I think that's what's happening. And in that it isn't a pullback, it isn't a pause, but there's going to be movement. So we're going to have some ugly days. We're going to have some great days. You're going to see things that have worked stop working on a relative basis. But I don't think anything crumbles. I think this administration has said to us very, very clearly over the last four months that they will do everything they can to keep asset prices high.
- [09:33]
D
So by the way, is this one of the ugly days? I mean we did get Wal Mart earnings flagging tariffs is an issue. We saw higher than expected jobless claims, something that the market certainly reacts to on a week to week basis. By the way, Chris Larkin had trading over Morgan Stanley out with a note today saying that those higher than expected jobless claim claims they may be less of a story for the market than renewed, certain renewed concerns about tariffs driving prices higher. And then he goes on to say if the Fed appears to be favoring the inflation side of its mandate, well, the market could take a hit and obviously tomorrow we need a lot of clarification from Jay Powell. Do you agree with that? That right now the Fed's probably focused more on inflation or potentially more focused on inflation than job market? Let's not forget we had a downward revisions of about a quarter of a million jobs for May and June as well. On top of this hotter than expected expected jobless claims report.
- [10:20]
E
Yeah, look, my personal opinion is that the risk is to the downside, the risk is not to higher inflation. Inflation is now deliberate and systemic. So Wal Mart is talking about as they restock items, they're doing so at higher prices. And of course some of that has to be passed through to the consumer. Everyone understands how this works and they're saying this is not a thing that's out in the future anymore. Now we're depleting inventory of things that we had purchased six months ago and we're adding things at the new higher prices that are driven by tariffs. So yeah, it's a factor today and I think when you combine that with how difficult it is for college graduates right now, for example, to get jobs, how difficult it is to quit a job, get another one and get a wage hike, the wage growth is now basically gone at this point. So you have rising prices in the economy with slightly elevated CPI reports with no wage growth. So it's a recipe for consumer unhappiness, so to speak. So but again, which consumer got this K shaped situation where if you're a stock market American, meaning you've got seven figures between your IRAs, your 401ks, your brokerage account and maybe you work for a company that compensates you in part with stock options, this is the greatest economy in the world. Every month your net worth goes higher and your spending with abandon. If you're not a stock market American, meaning you're younger in your journey, you haven't accumulated a million bucks in a 401k, you don't have stock options from some technology company that hired you five years ago. You're not in the same reality. And those are the people that we have to pay attention to. So when Walmart reports pay attention. They beat on revenue but missed on earnings per share. The last time Walmart missed on earnings per share was May of 2022. It's fairly rare. Wasn't a bad report. They had a lot of good metrics within the report. But my God, we're going to ignore Target and we're going to ignore Walmart because they're not mega caps, because they're not in the AI trade. It's crazy. Pay attention. And when you do that, you realize the true risk is to the downside. And that's why I think the Fed should be cutting, not worrying so much about inflation, which quite frankly they can't even control anyway.
- [12:37]
D
All right, so right here we go to this banner right here. Is there more market choppiness ahead? Jenny, what's your take? A lot of notes out today, kind of some conflicting views. I want to read two of them to you. First, from B of A, the headline here slippery September for equities. They say September is the weakest month for the S and P. It certainly has been over the last 10 years. S&P pulls back about 2% according to their data, the S and p declined about 56% of the time on average. And they see the latter half of the month being riskier. Now it's B of A. We have our friend Tom Lee from Fundstrat. He says for those concerned about a trend failure, the one level to continue to watch carefully lines up with early August lows at approximately 6212. And until or unless he says this level's broken, dips should find support and begin to work their way higher into mid September. So literally Tom Lee taking the opposite position, are you seeing some market wisdom in either one of these takes?
- [13:25]
A
I mean they both could be right. Here's, I think, here's the challenge to responding to those. I had lunch with a client yesterday and he's a nervous guy, right? Most of my clients are kind of nervous or they want to be in a dividend income strategy. And he said it, you know, he gave the whole kind of macro outlook, more like the B of A outlook. And he said it could get ugly out there. And I said to him, define it. Is it the economy? Is it the s and P500? Is it the bond market? Is it the consumer? And then to Josh's point, which consumer is it? The high end consumer, you know, or that or the average consumer. And this is what's making it really challenging. So even in both of those comments, I look at a portfolio like what I manage, where it trades at about 13 times earnings, has a 5 and change 5 plus percent dividend yield. I don't think it is going to get too ugly for stocks that have been pretty ho hum year to date. I think it could get ugly for maybe the Nasdaq that still trades at a really premium valuation. It could get ugly for the top 10 or 7 stocks in the S&P 500 that are still far richer and have outperformed the other 493. So, so it's just hard to answer these questions right now because there's enormous bifurcation and the outperformance that that influences a comment like, you know, the market's up nine and a half percent and trading at 23 times is, is really concentrated in a tiny handful. So it's making this prediction and making looking forward super hard right now, even in the economy. Like which parts of the economy could it be referring to?
- [14:56]
F
I think it's dangerous too to keep worrying so much about the bogeyman lurking in the, in the closet when we consider the fact that it's one narrative that's really driving the stock market right now. It's AI or nothing else. And if you look back to 2023, we were supposed to have a recession in 2023. The stock market wasn't supposed to do well. All of a sudden, chat GPT shows up, Microsoft does like 50% or something for the year and everyone's like, oh my God, this is the best bull market of all time. Start taking shape here. 2024, we were supposed to get our recession. Stock market wasn't supposed to do well. Nvidia did a million percent in one year and all of a sudden here we go, the AI trade is still going. And if we're really in early innings, like anybody who continues to focus on, I will tell you then that should be what we're focused on. Not so much the day to day choppiness around things like, you know, are we supposed to be worried about the earnings coming from Walmart telling us what we already knew about tariffs being restricted?
- [15:51]
D
Right. Well, really quick, I mean, are we sure we're in early innings? We heard Sam Altman come out and say this whole thing might be a bubble. MIT came out with a study saying 95% of S& P companies. I don't really see a benefit when it comes to generative AI. Go ahead.
- [16:02]
A
So, so it's interesting dissecting the Sam Altman comment, right? What's the bubble he's talking about? Is AI. Are the AI businesses a bubble?
- [16:10]
E
No, he is the bubble. He's going to raise money in the private market at $500 billion. But that's, he's the bubble.
- [16:17]
A
So here's the thing, like I, I in and of itself is an extremely earn early innings. It might be in like, I don't know, the first pitch of the first inning in terms of how it changes the the world.
- [16:26]
D
I'm more meant to trade the value. These stocks have run up incredible.
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A
Stocks are insane. But you need to bifurcate those two out too. So there's the business and then there's the valuation. And I think the valuations are bubbled.
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E
Can I agree with Jenny now, please?
- [16:38]
A
What is happening today? Do you want to go out for lunch afterwards?
- [16:41]
E
I do. We're both busy, so, so we're all going.
- [16:45]
D
But you guys are paying.
- [16:47]
E
So it's definitely a bubble. AI Capex. Every Capex boom is a box bubble. They don't all end up with an 85% crash though. Not, not every bubble unwinds that way. And we don't know if it's 1997. Just because you say something's a bubble, you got three years left. It could get so much more extreme. So it's fine, it's a bubble. Everyone's going absolutely crazy with Capex spend. Look at the stock market, look at the leadership of the stock market on the year. It's utilities that's an AI trade. Those stocks don't do that. Outside of the AI, grid, investment, etc. Its financials, they have the return of the IPO, the return of M and A. Most of this stuff is being fueled by AI and then technology, communication services, that whole thing is is AI. That's the only story there is in the market. If you take that piece out, there's no way we run up 30% from the April 9th. No, not a chance. All the stocks that have driven that performance are AI related and even areas of the market like utilities, a normal person would look at that and say wait, utilities are the leading sector. That must be a really defensive.
- [17:53]
D
Just really quick. You mean industrials, right?
- [17:54]
E
No, utility stocks have been on fire all year.
- [17:57]
D
Yeah, but industrials are the leading sector.
- [17:59]
A
Utilities are up for 15 and a half percent year to date. Industrials are also up. 15 and a half is up 13 financials are up.
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E
What is driving that? It's all one story. It's this once in a lifetime boom in infrastructure for CapEx. It's literally building millions and millions of square feet. Transmission mechanism for natural gas, electrification. It's all one story. If you pull it out, you're Talking about a 2% GDP growth environment with no more rising wages for for people and declining employment figures. So you need this trend to hold up. I don't know how else to find phrase it.
- [18:38]
D
Well speaking of the trend though, really quick we can put this up. The S and P equal weight in the S and P month to date. If you look month to date the equal weight is outperforming the S and P market cap weighted by quite a bit. So Malcolm, you were saying right now the trade is leading things but actually right now it isn't. It's really the broadening of the market.
- [18:53]
E
Like the last two weeks.
- [18:55]
D
Well yeah, for two weeks is a.
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F
Long period of time you're making for me though, I'm worried about the boogeyman of the last two weeks or am I worried about the entire year where all of the names that occupy the information services.
- [19:07]
D
Why are we discounting the last two weeks? We're showing the chart right here. The equal weights up about one and a quarter the market cap because the argument is half a percent.
- [19:13]
F
Where are we in the first or second inning of the AI trade? The last two weeks is a blip on that radar.
- [19:19]
A
Right.
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F
So I'm really focused on where are we over the 10 year span as investors? Not so much focused on have we lost confidence for two weeks? That's really just profit taking from folks that, you know, have done really well this year. This year, at least since April 9th. And they have to figure out a place to put that capital and they haven't figured that.
- [19:37]
D
Is it possible investors getting, you know, quote unquote religion when it comes to valuation? Josh, I know you're not a valuation guy, but again, I was talking to Steve Sodnick from Interactive Brokers. He says he doesn't think investors are getting religion. They don't care. They're thinking about stopping into the temple, the church, you know, you don't care and just talking to somebody, everyone.
- [19:54]
E
It's a bull market. This is what religion.
- [19:56]
F
They're waiting on the next opportunity. Where is the place to deploy this capital? I just, I just raised cash by selling all my winners that I won really well since April 9th. What do I do with this cash? I haven't been given a compelling enough reason yet in the form of a pullback of 5% or more. And so I'm just going to sit on it until I have my opportunity.
- [20:14]
E
Do you think the person that buys, you think the person that buys the Circle IPO 100% or off its offering price on the first day is focusing on valuation? No, they think some other idiot is going to come along and pay another 100% higher the next day. It's. I think that's that you are referencing Interactive broke. Respectfully, valuation is not the game start.
- [20:41]
D
With respect.
- [20:42]
E
Respectfully, the leading factor this year is momentum.
- [20:45]
F
Ironically, I think we were all, all sitting here together the day of the Figma ipo, right? Do we think we've lost, do we think we've lost any momentum, any confidence in this market since we had a thousand people running around the floor here.
- [20:58]
D
Cheering, excited about that was an incredible day. Outside was even better. I think everybody here obviously walked outside. It was incredible out there. What's changed is we have Jay Powell tomorrow and then what is it five days from now we have Nvidia earnings, which two inflection points the market may be in five trading days.
- [21:13]
A
You know, let me say something. So I had a conversation this week too with a new client who actually called in from seeing me on tv. And it's interesting because this guy has managed his own portfolio his whole life and it's all in the high flyers. It's all Microsoft, Amazon, Nvidia, blah, blah, blah, blah, Blah. He's late 70s and he's like, you know what? I just feel like I've made too much money, I've gotten too Lucky for too long and he's legitimately changing the whole portfolio over to a dividend strategy. I've heard a lot of that lately. Whether it's an older guy like this one or my friend's son who's a younger guy who works at one of the, I wouldn't want to say it, but like one of the super high tech companies that we mention all the time who's just saying I'm too nervous. This stock shouldn't be up 400%. These, these numbers are just too high. And it's just that simple. People feel like they've gotten.
- [21:58]
E
The market is. The market is correcting this in real time though. Pull up a chart of Palantir guys, give me like six months. So they put up an earnings report that was one of the crazy, like the craziest, best earnings report I've ever seen a company come out with. Like every metric was explosively higher.
- [22:16]
F
Look how.
- [22:16]
E
Stop. Look how fast. Look how fast they took away that post earnings pop. It's gone in three days, right? Figma is down huge from that opening day pop. So is Core Weave, so is Circle Bullish. Like a lot of these IPOs, we talk about them the day they happen to your point, and then a week goes by and they give up so much and we just stop talking about them.
- [22:38]
F
$16 billion sitting in SPAC companies waiting to be deployed right now.
- [22:43]
E
Right.
- [22:43]
F
The wave is not.
- [22:44]
A
Billion dollars is like the tip of my finger. You know, it's just, it's nothing. It's a lot, it's a big number. But it's also nothing in the context of the overall market and what influences it. But let me put the button. So. So Palantir, you know, releases those earnings. They're extraordinary. And it's still trading at 155 times earnings and people are at 400% in the last year and they're like, you know what? This simply makes me nervous to have what was 5% of my portfolio now 20%. And people are getting nervous. Like, you know, our microsor, our meta position in our clients portfolios is huge. Again, it just keeps getting huge. And at some point you just say, hey, let's take half a percentage percent off, let's take a little off. And I think that psychologically is going on very broadly.
- [23:26]
D
We got to, we got to move on. But I'm not sure. Not proven my point, Josh, I mean I'm looking at, by the way, Palantir trades at 210 times forward earnings and as you mentioned, good earnings. Report, nothing really changed. And all of a sudden the stock's declining, it's down.
- [23:37]
E
It doubled into the earnings report is my point. And then it had. You know what happened on earnings day? The last remaining growth fund managers that don't own it was like, oh, my God. Yeah, you know, I have to buy this. And those are the buyers.
- [23:50]
A
And you know what? If your manager did that, you should fire them.
- [23:53]
E
But. But who do you think is the buyer?
- [23:55]
D
Speaking of buyers, we got to move. Malcolm, you're making some moves in the financial space. What moves you making and why?
- [24:01]
F
Yeah, so I just initiated positions in Carlisle and also Blackstone. This is a trade specifically made following the executive order that came out. So this is a buy the tweet, sell the news kind of a scenario where distribution has really been the problem in the PE space, the private space altogether. I've been getting out of private positions for the last year on behalf of clients. The space has just become so crowded that it makes me nervous to the point that you guys are talking about with the public markets. But I was actually looking for an opportunity to still capitalize on that trade. And so Carlyle and Blackstone are two companies that are most likely to benefit from. From retirement plans starting to incorporate these types of funds into their retirement plan offerings, into their target date funds and everything else. And so, as JB so succinctly put it the other day, why be an LP when you can be a gp? I think that makes a ton of sense. And so this is an opportunity to capitalize on that next wave, that transition that's coming from the private markets.
- [25:02]
D
I'm not going to say we have.
- [25:04]
E
We almost had a furniture malfunction function.
- [25:06]
F
I gave him props, and he almost.
- [25:08]
D
Fell off his head.
- [25:09]
E
I almost fell.
- [25:11]
D
Jb, I never even heard of that.
- [25:12]
E
I mean, I'm in. I'm in Carlyle Group, too. And Malcolm, I couldn't agree with you more. We actually, we ran a study a couple of weeks ago for my website where we looked at a market cap weighted basket of the 10 largest private equity private credit firms. So Carlisle, Blackstone, KKR, Aries, Apollo, they're all in there. And it turns out $100 invested in those stocks over the last three years on a market cap weighted basis turned into like $260, whereas $100 invested in the Bloomberg PE index only turned into $112. So basically, the stocks of the companies selling the funds have drastically outperformed the products that they sell. I don't know what will happen in the next Three years. Maybe that's unfair. Fair. It's not that big of a window. But generally speaking, I agree with what Malcolm saying. I want to be invested in these companies because we've just unlocked a whole new category of investor for their funds and I think it's going to work all right.
- [26:11]
D
Near term, though, I want to go back to what Malcolm was saying, that he's actually helping some of his clients unwind their private market positions. Isn't that some of the reason for some of the weakness in some of these names? Carlyle is actually the outlier. But some of the other names we talk about in the alternative investment space have been weaker because a lot of investors, according to the Journal at least, are worried that they're going to have to sell their older positions at a less than ideal price. So what you're doing, it seems like they're doing at the same time trying to unload some of those positions. Are you worried that's going to be weakness for these stocks longer than just the short term?
- [26:39]
F
I think the focus has been too heavily placed on the transaction fees that these companies earn any time the success fees is the term looking for that these companies have any time they exit the these positions instead of and that makes them cyclical. And you should really be focusing on the assets under management fee that these companies get to collect just for managing these funds. So about 75% or something for Carlyle specifically of their revenues that are coming and getting returned to their shareholders are in the form of assets under management fees. So the success fees don't matter nearly as much. Yes, it's great when they have those liquidity events that lead to that. I don't know what the uncaptured deal flow dollars are that are sitting in those opportunities that are looking to be liquidated. But the moment they have those liquidity events, yes, that'll be great. That's additive to the, to the story, but really it's the AUM fees that these companies collect just for managing those.
- [27:30]
D
We got to move on. All right. Coming up next on Halftime, a new chapter in the streaming wars. Disney debuting a flagship ESPN app just in time for football season. We're going to get the committee's take. And then later, Josh Brown has his best stocks in the market. He's focusing on one big industrial name he recently added to the list. Halftime's back in just two minutes. Road trips are all about the sights.
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- [29:24]
G
A number of other companies are exiting their linear business completely, meaning they're selling off the channels that serve the linear television ecosystem. We're doing the opposite, actually. We're combining them, which gives us the ability to aggregate both subscription fees and advertising on both sides and essentially end up with a business that's actually larger and more impactful than it would be if we were to separate them completely.
- [29:52]
D
So that was Disney CEO Bob Iger, speaking exclusively to CNBC's David Faber. Disney betting big on combining its linear and streaming assets as the company launched ESPN's new flagship streaming app this morning. Jenny coming over to you. You own Disney.
- [30:05]
A
We do. So I think when we hear things like this, it sounds really exciting. It sounds cool. People like, oh, should I look at Disney? And it's a good time to consider the difference between a good story and a valuation based investment thesis. So first of all, this isn't new news, right? It launched today, but the investors have all known about it for a long time. There's a reason Disney's flat today because it actually doesn't change change the investment thesis. What we're hearing today doesn't change the investment thesis whatsoever. If we look at just the numbers, I don't know that this is if this is actually accretive or good for earnings. I think it's just kind of already expected and in there. And then when we look at the valuation of the company, here's what we've got. We've got a stock that's trading at 18 times earnings and has EPS growth in the next few years expected to be 18%, 10%, 11%. That's a pretty nice matchup of earnings growth and valuation for a company that's nicely diversified. You know, they've got the theme parks, they've got cable, they've got movies. Everything's doing pretty well. So we love this. But this ESPN thing has zero impact on our investment thesis.
- [31:05]
D
Did you watch the interview? There was one part when Faber asked them both about their ability to get price pricing power going forward. And I mean, it didn't sound like they had a lot of conviction about the ability to upsell. Especially today on a day where Apple's increasing the price of its Apple plus subscription service. What did you make of that, by the way? The Stock's down about 3/4 of 1%, which I do think is a bit surprising.
- [31:25]
A
Not really. I mean the market's down half a percent, so it's more just kind of in line with the market. But you know, Disney's not great at issuing and they're not bad at it. They just actively and intentionally don't do it. They're not big on issuing guidance so of course they're kind of, kind of hedge on that. And I don't see why, I don't see why it would be accretive to earnings. So like right now cable companies are paying about $10 for ESPN. Theoretically this would be $30. So theoretically that would be higher. But what we think it really might do is just highlight the value of having a Cable subscription at $70. So people say, well, you know, I can get just ESPN for 30 or if I buy the cable subscription, I get like the whole package. Now you all know I'm like the least sport sports lover out there. I don't follow sports at all. But my partner Greg does. And as Greg says, if you're a real sports person, if you really love sports, you're not going to get just, you're going to get a whole package.
- [32:17]
E
I think the salient thing is if you're watching multiple leagues and you need to watch every game, it doesn't matter, right? You're going to pay for it. And if you're under 40, it's not even cord cutting anymore. It's very highly likely that you never even had a cord to cut. So it's interesting there aren't going to be any NFL games left on broadcast. They're all going to be on different streaming apps. That's just the new environment we're going into. This seems like a very high priced entry into the market for non sports fanatics, just people who want to casually check out, you know, some games each week. I'm not sure what the uptake rate will be, but I do think it'll benefit the idea of bundling. So I do think that maybe they start for the standalone app and then it introduced these bundles and new ones in the future that are at lower price points. Play around a little bit with how much of this is ad supported? You know, obviously everything sports is ad supported just by its nature. So it's going to be a while before we know what this really means to Disney's economics. But I would argue at least they're trying something.
- [33:20]
A
I agree with that. At least they're not resting on laurels and they're trying to be forward thinking.
- [33:24]
D
All right, moving on. Disney shares pulling back about three quarters of 1%. Time now for our headlines with Silvana Hanow back at CNBC hq. Hey, Silvana.
- [33:32]
C
Hey, Frank. Good afternoon. Ukraine's president cast doubts today on Russia's intentions in ongoing peace talks after Moscow launched nearly 600 drones and 40 missiles at the country overnight. Ukraine said most were intercepted, but at least one person was killed and 50 others were hurt. The blitz came as the Associated Press reported Secretary of State Marco Rubio will host European countries in a call today to discuss future security, security arrangements for Ukraine. 14 million people were in the US illegally in 2023. That's an all time high, according to a report from the Pew Research center as a reason for the jump in numbers. The report cited people who entered the the country with the hope of being granted asylum. Despite the increase, the number is lower than President Trump's estimate of 21 million back in March. And California Democrats can move forward with Governor Gavin Newsom's redistricting plan. The state Supreme Court rejected a request from Republican state lawmakers who argued the Democrats bypassed a rule requiring lawmakers to wait 30 days before for passing new legislation. The state legislature is set to vote on the plan today. Frank, I'll send it back to you.
- [34:49]
D
Our Savannah now back at CNBC hq. Savannah, thank you very much. All Right. Coming up next, Josh Brown is ready with his best stocks in the market. He's got a new name on that list that's in the process of a big breakout. That reveal coming up right after this break.
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B
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And we're back on halftime. We're back with Josh Brown's best stocks in the market. Josh, you have a new name that you're adding to the list.
- [36:00]
E
Yes, Jenny. Dividend Duchess, Are you. You know what dividend aristocrats are, right?
- [36:06]
A
I do.
- [36:06]
E
Joshi, am I distracting you from something?
- [36:08]
A
No, I was actually checking out what the yield on Illinois tool. Oh, sorry. I jumped the guy.
- [36:13]
D
I can't work with brand new.
- [36:15]
E
All right. Dividend Aristocrats are stocks in The S&P 500 that are raising their dividend every year for 25 years. For 25 years or more. Okay. Do you know what a dividend king is?
- [36:26]
A
Yes.
- [36:27]
E
50 years or more. There's only 69 dividend aristocrats in the S and P. There are only 55 companies in the S and P that have raised their dividend every year for more than 50 years. And Illinois Tool works is one such company. Most of them are, believe it or not, Midwestern industrials, which I don't know what the reason is, but ITW is the ticker. This name popped up on the best stocks in the market list. And I think it's part of this kind of, like, overall rally in industrials that we talked about before in the A block. And I think it might be a little bit premature. It hasn't quite broken out yet, but we wanted to highlight it because you've got a moving average crossover this week. Golden Cross 50 day, getting above the 200 day. Clearly the buyers are in control of the stock. And if it should break out, I think you would probably be looking for that. To happen somewhere around $272.75. There really are no sellers overhead. You had a little bit of a rally last November. Maybe you have to wrestle with that level, but I think it'll break out. And if you're an investor, you can kind of prematurely bet on that breakout. In the Meanwhile, you're getting 2.6% dividend yield. And if you intend to stay in stocks for a very long time, again, dividend king continue continues to, to raise that yield. So we like the stock right here for traders, maybe give it a bit, let it actually break out. But I think it should be on people's radars.
- [37:53]
A
Yeah. And I think, I think it's an interesting time where we can highlight the difference between a dividend growth company and a dividend income company. So S&P 500 overall has a dividend yield of about 1.4%. Yeah, this is 2.6%. So it's not really that high. If you really need income, this isn't where you find it. I, I always say look at the dividend aristocrats as a quality screen because what you have there are really, really, really high quality companies. When a company is paid for 25 years, much less 50, you know that they have incredible control over their business, over their cash flows, over competitive position. Great.
- [38:25]
E
Yeah, great, great.
- [38:26]
A
But don't expect to go into it and just start minting cash from dividend income.
- [38:30]
D
All right. What's your general take on industrials? I know you have a lot of industrial exposure, Jenny. I mean, I'm just looking at the list you're through. Grumman, General Dynamics, UPS, United Rentals, etc.
- [38:38]
A
Well, you can tell from the list that you just read off that there's no consistency. So I'm not saying I want to buy industrials overall. I'm saying within the industrial segment there are compelling companies. So there's really nothing similar between Northrop Grumman Carrier and. And Illinois Tool Works. Yeah, any Illinois to work. They're different. It just is. It goes back to our earlier part of the conversation. Conversation where we're talking about AI stocks sucking all the investor dollars up and all the focus up. So you have lots of other companies that have been relatively ignored and in that sector you can find compelling valuations coupled with decent earnings growth. If you don't mind, you know, taking a pause on the high flying growth stocks, you can get into these with a decent little yield and a nice valuation. So yes, I don't have like a broad theme on them. I just Think that there's opportunity in the sector.
- [39:26]
D
All right. Josh's the best stock in the market. Illinois Tool Works Ticker itw. All right, coming up here on Halftime, Made in America. A new $3 billion drug manufacturing plant's about to open up in North Carolina, and it may have come at just the perfect time. Our Angelica Peebles is standing by with that story right after this break. Stay with us. And we are back on halftime. Five years and $3 billion later, a new drug manufacturing plant is just about to open up in North Carolina. Our Angelica Peebles is live on site with all the details. Angelica.
- [39:58]
C
Hey, Frank. Well, pharma stocks are getting a little boost today after the US clarifying that its trade framework with the EU calls for capping tariffs on drugs from the EU at 15%. That's well below the 250% that President Trump has been threatening for pharmaceuticals. And the EU is a major hub. Nearly half of the branded injectable drugs originate there, versus 17% in the U.S. now, that could start to change with new manufacturing plants like this one. So we are standing in the microbiology testing lab at Fujifilm Biotechnologies new facility. These analysts over here, they are making sure that every single ingredient being used is sterile and isn't contaminated with things like mold or bacteria. Now, this facility officially opens just a few weeks with Johnson and Johnson and Regeneron as the first. Customers in the second phase won't open for another three years. But already half that space is claimed and there is still room to double the footprint depending on demand.
- [41:00]
E
Customers are coming with very high interest.
- [41:04]
D
Because of the concept, because of they can see what we are building. This is a facility you have to remember.
- [41:10]
E
If you look at a bioreactor like.
- [41:11]
D
20,000 liter, and you add that up.
- [41:14]
E
We have 16 bioreactors here that all together could make perhaps 50 million doses.
- [41:22]
D
Of medicine in one year.
- [41:25]
C
Now, these aren't cheap investments, so we'll have to see if today's update changes anything. Frank?
- [41:31]
D
Yeah, we certainly will have to wait and see. Angelica Peebles, great reporting all day live from North Carolina. Thank you very much. Jenny, want to ship gears just a bit? You own Regeneron, obviously, you know, a biotech company. What does this story make you think about that company and its ability to produce in the U.S. yeah, so.
- [41:46]
A
So kind of like Disney. There's no impact whatsoever on our investment thesis because of this. It's nice, you know, maybe it ends up being beneficial, but it doesn't impact the numbers. So when you look at Regeneron As a standalone company, you see a Stock that's down 50% over the last year, 15% year to date. Why? Because they had like some really bad news news on one of the drugs in their pipeline. But the rest of their pipeline is enormous. Trades at 14 times earnings as a 7% free cash flow yield. This isn't one of our dividend payers. This is actually in our disciplined growth strategy. And the earnings growth ahead should be 6% next year and 14% the year after that. So maybe producing more in the US Ends up being good. But at this point it doesn't impact the investment thesis standalone. The investment thesis argues for a company that's well valued with decent growth ahead.
- [42:28]
D
All right, shifting gears once again just broadly about health care. Malcolm, how are you viewing that sector right now? We have seen a rebound in recent days. I know you guys said two weeks isn't that long. Rebound's been about 10, 12 days. Yeah.
- [42:39]
F
I think health care is still for me personally a tough sector to make money. And we talked about all the sectors that are really leading right now. There's not a lot happening right now as far as AI is concerned that's going to impact that narrative. Obviously that is a sector that is ripe to be disrupted by AI. AI, I would love for a lot more tech to be invested in in that space, but I think that's probably a second or third wave coming for that trend talking health care specifically. But today it's just a tough place for me to invest given all the other places I could allocate capital, financials, technology, etc.
- [43:13]
D
Health care sector up about a quarter percent right now on a day where the major indexes are lower. Coming up next, we got Mike Santoli joining us with his midday work. We are back right after this break. And we are back on halftime to your markets. Commentator Mike Santoli joining us now with his midday word. Mike, just put everything in perspective. Right now we look like we're on pace for the S and P to close lower for I believe it's five straight days now. What do you make of this action in the markets?
- [43:38]
G
Yeah, so it's a streak we haven't seen since the turn of the year. Now the magnitude of decline is really nothing to to really get too concerned concerned about. Right. We're just a little bit over 2% off of record highs. You also have this real mixture under the surface. So it's not an all inclusive decline. In fact, the equal weighted S and P is about flat on the week so far. So the market realizes we came in August, a bit overbought, over concentrated. You know, tech had this historic run for four months. Probably need to rebalance and let some parts of the market cool off. So far the market's trying to get away with rotation as opposed to more of a broad shakeout. We'll see if that if that works. So far. Coloring within the lines. I will note enough excuses, just not take on more risk with Jackson Hole. Nvidia next week. August, September, seasonality to your note yield. Keep an eye on it. We're at a post 8-1-high. So basically reduced perceived expectations that Powell is going to ratify that cut next month.
- [44:37]
D
All right, I'm going to summarize your word chill. It's not that big a deal right now. At least not until tomorrow. All right, Mike.
- [44:42]
G
Pretty much a constant for me.
- [44:44]
D
Mike Santoli with his bid day where that's true. You're a very chilled out guy. Final trades. They're coming up on halftime. We'll see how chill these three will be. Stay with us. And we're back on the Halftime report with final trades. Malcolm Etheridge.
- [44:57]
F
I'm going to go servicenow. It's down about 17% for the year. Also about 25% off its 52 week high. But I think it's become a victim of its own success. So it's probably creating an attractive entry point.
- [45:07]
D
Jenny Harrington.
- [45:08]
A
Okay. Bristol Myers, five and a half percent dividend yield. It is paid a dividend for 55 years straight. Not an aristocrat because it hasn't raised it all those years. Still a great stock.
- [45:17]
E
Josh Brown, happy all time high today to Live Nation. Also shout out to Troy Rashad and Ian Dunlop at earn your leisure for Invest fest this weekend. Major investor event. We wish you the best.
- [45:29]
D
Sending shout outs. That's how we're ending the show.
- [45:30]
E
That's how I do now.
- [45:31]
D
That's going to do it for halftime. The exchange with Morgan Brennan starts right now. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays.
- [45:43]
E
At 12 Eastern only on CNBC.
- [45:48]
B
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.comhalftimereportdisclaimer. is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals, like business management, strategic planning, and effective communication, and you can apply these skills right away. A different future is closer than you think with Capella University. Learn more@capella.edu.