Halftime Report: Positioning Your Portfolio for 2026

Date: December 31, 2025
Host: Frank Holland (in for Scott Wapner)
Panelists: Joe Terranova, Steve Weiss, Jim Leventhal
Specials & Reports: Courtney Reagan (retail), Steve Kobach (Apple), Mike Santoli (markets)

Main Theme & Purpose

Overview:
On the last trading day of 2025, the Halftime investment committee discussed how to position portfolios for 2026. The team debated whether recent market weakness signals a trend or is just holiday noise, how shifting fundamentals and sentiment factor into allocation, and highlighted rotation between sectors, Fed policy, and the future of companies like Apple and Berkshire Hathaway.

Market Recap & Setting the Agenda

• Stocks: Dow down over 120 points; S&P down 0.25%; Nasdaq and Russell also down.
• Key Question: Are recent red days a warning or "holiday noise"? Is the lack of a "Santa Claus rally" meaningful?
  • Frank Holland: "Is the recent price action a worrying sign for the bulls?" (01:14)
• Consensus: Recent weakness likely reflects low volume and holiday trading effects, not a deep signal for 2026.

Key Discussion Points & Insights

1. Assessing Current Market Weakness

• Joe Terranova ([02:11]):

  • “You have to look at the quarter in its totality ... There’s been a very clear pivot away from momentum names, high beta names, more towards a defensive positioning.”
  • Judicious allocation is crucial; the environment has shifted since the start of 2025.

• Steve Weiss ([03:46]):

  • Recent trading activity: “Means absolutely nothing. Zero. There’s no volume.”
  • Fundamental factors (policy, earnings, global events) matter more than calendar turns.

2. The Santa Claus Rally and Sentiment

• Weiss & Terranova ([03:46-05:40]):
  • The lack of a Santa Claus rally is not significant as investors “position earlier and earlier.” Seasonal patterns are well-known and thus arbitraged away.
  • Investors should focus on fundamentals, not calendar effects.

3. Fed Policy, Rate Cut Expectations, and Macroeconomics

• Jim Leventhal ([06:02]):

  • “I seriously hope we don't get three rate cuts... if we get three rate cuts it's because things are not going well.”
  • The U.S. economy is strong (citing GDP, labor data), and doesn't require immediate cuts.
  • Political uncertainty—especially around the Fed chair—is an underappreciated risk.

• Joe Terranova (joking):

  • “Jimmy just took himself out of contention for Fed chair.” ([07:24])

4. Portfolio Positioning and Sector Rotations

• Joe Terranova:

  • Cautiously optimistic for 2026 ([08:05]):
    • “You’re not going to have the tailwind ... of the Federal Reserve’s monetary support.”
    • Earnings growth expectations are very high; must allocate carefully.
  • On materials & discretionary: Would be cautious, given stretch valuations in winners like Carvana and Newmont ([09:59]).

• Steve Weiss ([11:03]):

  • New year is not a blank slate: “All that’s changed is the calendar. Right. The same themes are at play, the same headwinds, the same tailwinds.”

• Jim Leventhal:

  • Long-term investors should focus on signal (fundamentals & big-picture trends) and not noise (short-term sentiment or calendar-based moves). ([14:04])

5. Stock & Sector Spotlights

a) Energy

• Joe Terranova: EQT is his pick; momentum, strong cash flow, and tied to data center demand in Appalachia ([16:06]).
• Weiss: Cautious on traditional energy—“very, very difficult sector to make money in … you can make a lot more money elsewhere and save a lot of aggravation.” ([18:40])

b) Semiconductors & AI

• Nvidia: ByteDance order for $16 billion makes news.
• Weiss: TSMC is his pick—diversified customer base, strong growth, good valuation, main risk is geopolitics ([21:35/21:44])
• Leventhal: Qualcomm has diversified away from smartphones—now a data center, auto, and IoT play ([22:57])

c) Apple & the “Mag 7”

• Steve Kobach [24:09]:
  • Apple’s performance is underappreciated—especially since the U.S./China tariff deal.
  • AI/Siri upgrade rollout in 2026 is high-stakes—needs to drive new iPhone sales.
• Joe Terranova [26:12]:
  • Apple wins by “not playing” in the capex arms race—prefers perfection to innovation for its own sake.
  • “I expect a very good year for Apple in 2026.”
  • Keep exposure to “Mag 7”, especially Apple, Alphabet, Amazon.
• Leventhal [27:51]:
  • Owns less Apple than S&P weighting because of high valuations: “Apple trades right now about 33 times forward earnings … it’s just not priced at a level that I want to be even at market weight for it.”

d) Retail Recap (Courtney Reagan) [29:37]

• XRT (retail ETF) up 8% for the year—less than half the S&P 500’s gain.

• Discount/off-price and value retailers were major winners: Dollar General (+79%), Dollar Tree (+65%), TJX (+29%), Walmart (+23%), Tapestry (+96%).

• Department stores like Kohl’s (+45%) and Macy’s (+29%) were surprise winners, but outlook for 2026 is negative (UBS: “sell”).

• Losers: Target (–28%), Lululemon (–45%).

• Mixed analyst calls for 2026: Nike is Jefferies’ top pick on turnaround; On Holdings is one to “short” for some, “buy” for others.

• Leventhal on Retail [31:51]:

  • “Brand matters in retail ... you have to pick the winning brands.”
  • “On” is a winner now, but “I’m more likely to rent than to own long term.”

e) Berkshire Hathaway & Buffett’s Retirement [35:03]

• Frank Holland: “Since Warren Buffett took over as CEO, stocks up 5.5 million percent.” [35:22]
• Leventhal:
  • “What a great investor. What a great human being ... using common sense when making deals.”
  • New management (Greg Abel, Ted Wexler) is capable, but “there’s no way they can live up to Buffett and Munger.”
  • Still likes the fundamental value of underlying businesses.
• Terranova:
  • Buffett set up the new team well—huge cash pile, no concentration risk, plenty of flexibility for future opportunities ([36:10]).
• Weiss:
  • Now a “show me” stock; the “Buffett premium” may wear off, and he’d prefer an S&P+Nasdaq combo ([36:46]).

f) Market Perspective & Outlook (Mike Santoli) [37:54/39:13]

• “The secular bull market ... is kind of in its latter throws now.”
  • Market cycles alternate between periods of above/below-average returns.
  • No big reckoning likely in the short term, but the runway for superior returns is narrowing.
  • AI’s transformative power is real, but “we may have front loaded the investment benefits.”

Notable Quotes & Memorable Moments

| Timestamp | Speaker | Quote | |-----------|---------------------|-------| | 02:11 | Joe Terranova | “A clear pivot away from momentum names, high beta names, more towards a defensive positioning.” | | 04:02 | Steve Weiss | “What I take from the last few days of trading is absolutely nothing. Zero. There’s no volume.” | | 06:02 | Jim Leventhal | “I seriously hope we don't get three rate cuts... if we get three rate cuts it's because things are not going well.” | | 11:03 | Steve Weiss | “All that’s changed is the calendar. The same themes are at play, the same headwinds, the same tailwinds.” | | 14:04 | Jim Leventhal | “The signal is what a long term investor is going to focus on ... the sentiment is noise.” | | 16:06 | Joe Terranova | “People that are buying energy right now are seeing the underperformance and the cheap valuation...” | 21:44 | Steve Weiss | "Taiwan Semi ... agnostic. It could be the new Alphabet chip, it could be a Meta chip, it could be an Amazon chip, it could be Nvidia chip. It's being made at Taiwan Semi, chances are." | | 24:09 | Steve Kobach | "Apple Intelligence is being given away for free ... it has to be so good and so amazing that people ... have to go out there and get a sense of FOMO to buy the new devices." | | 27:51 | Jim Leventhal | "Apple trades right now about 33 times forward earnings ... it's just not priced at a level that I want to be even at market weight for it." | | 29:37 | Courtney Reagan | “The retail ETF, the XRT, it gained 8% this year. That is less than half the growth of the S&P 500.” | 35:22 | Jim Leventhal | "What a great investor. What a great human being. ... Now, having said all that, the ERA comes to an end. We've got to decide what to do next." | | 37:54 | Mike Santoli | "The secular bull market ... is kind of in its latter throws now ... within the next couple of years." |

Timestamps for Key Segments

• Market and sector overview: 01:14–03:28
• Santa Claus rally & sentiment: 03:28–05:40
• Fed policy & macro risks: 05:40–07:24
• Portfolio allocation/positioning: 07:24–14:04
• Energy sector picks & debate: 15:48–20:52
• Semiconductor (TSMC, Nvidia, Qualcomm): 21:04–23:55
• Apple’s AI strategy and Mag 7 outlook: 23:55–28:42
• Retail review & 2026 playbook: 29:27–32:51
• Berkshire Hathaway & Buffett legacy: 35:03–37:28
• Big market cycle call (Santoli): 37:54–40:32

Final Trades & Calls

• Adobe (Leventhal): Underperformed but earnings strong, “stock is starting to respond.” ([43:55])
• Alibaba (Weiss): Remains undervalued, story should play out in 2026. ([44:10])
• Goldman Sachs (Terranova): Strong prospects for 2026. ([44:24])
• Other calls & analyst moves: FTAI Aviation, Twilio, Citi, Robinhood ([41:15–43:44])

Overall Tone & Takeaways

Cautious Optimism, Focused on Fundamentals:

• All panelists stressed the need for “cautious optimism” going into 2026.
• The market environment is getting tougher—less monetary support, demanding earnings expectations, and rotational leadership among sectors.
• Fund managers are re-emphasizing defensive positioning and selectivity—especially after three strong years for stocks.
• Investors are reminded: Ignore short-term noise, focus on fundamentals and structural trends like onshoring, data center demand, and the AI build-out.
• Big regime changes, like the end of the Buffett era, create both uncertainty and opportunity.

For Listeners Who Missed the Episode:
If you’re allocating for the new year, consider what really drives your holdings—earnings, policy, and secular trends—not just seasonal patterns or the calendar. While equities may have juiced much of their returns, there remains upside for selective, well-valued plays in key themes (AI, infrastructure, cautious cyclicals). Stay alert, stay nimble, and as always, mind the signal, not the noise.