Rally or retreat to end 2024? 12/17/24

Summary

Halftime Report: Rally or Retreat to End 2024? (12/17/24) – Detailed Summary

Introduction

In the December 17, 2024 episode of CNBC’s Halftime Report, host Scott Wapner delves into the critical question facing investors: Will the stock market rally or retreat in the final stretch of 2024? Joined by esteemed panelists Josh Brown, Stephanie Link, Kerry Firestone, and Brian Belsky, the discussion navigates through current market dynamics, investor sentiment, and strategic investment approaches to set the agenda for the remainder of the trading day.

Market Overview

The episode kicks off with a comprehensive overview of the current market landscape:

• Market Performance: The Dow Jones Industrial Average is experiencing a nine-day losing streak, the longest since 1974, primarily influenced by the energy sector downturn. Conversely, the S&P 500 has surged by 27.5% year-to-date, highlighting a stark contrast in sector performances.
• Retail Sales: Stronger-than-expected retail sales figures have provided a mixed signal to the markets, indicating robust consumer spending despite broader market declines.

Bank of America Fund Manager Survey Insights

A significant portion of the discussion centers around the recent Bank of America fund manager survey, which reveals a super bullish sentiment among investors:

• Record Low Cash Holdings: Investors are allocating a higher percentage of their portfolios to U.S. stocks, with cash reserves dipping to a three-year low of 3.9%.
• Global Risk Appetite: There’s a noteworthy increase in global risk appetite, reaching a three-year high, suggesting heightened confidence in international markets.

Notable Quote:

Josh Brown (02:22): "Global growth expectations just turned positive for the first time since the spring. It’s a reminder of the synchronized growth we haven’t seen since 2017."

Bullish Sentiment and American Exceptionalism

The panel discusses the pervasive theme of American exceptionalism driving investor behavior:

• High Allocation to U.S. Stocks: With record-high allocations to U.S. equities, there’s a prevailing belief in the resilience and superior growth prospects of the American economy.

Notable Quote:

Scott Wapner (04:36): "American exceptionalism seems to be the phrase of the moment as investors decide where to position themselves within the market."

Momentum-Driven Stocks and Sustainability Concerns

Brian Belsky raises concerns about the sustainability of the current market momentum, particularly focusing on stocks like Broadcom:

• Symbol Stocks: The rapid rise of Broadcom, driven by AI enthusiasm rather than fundamental earnings, raises questions about the underlying strength of the market rally.

Notable Quote:

Brian Belsky (04:29): "The momentum is so strong, it’s hard to see what derails it right now, but the enthusiasm around symbol stocks worries me."

Federal Reserve Policies and Economic Expectations

The panel anticipates potential Federal Reserve interest rate cuts, possibly influenced by the upcoming Trump 2.0 administration:

• Interest Rate Cuts: Expected rate cuts could further fuel market rallies by lowering borrowing costs and stimulating economic activity.
• Economic Growth Projections: The economy is projected to grow in the 2.5% to 3% range, supported by policies such as tax cuts and deregulation.

Notable Quote:

Scott Wapner (05:21): "The Fed is still in the nascent stages of a cutting cycle, which could have significant implications for the stock market."

Investment Strategies: Leaders vs. Laggards

Stephanie Link and Josh Brown advocate for a strategic shift from leading stocks to lagging stocks:

• Leaders: While top-performing stocks like Apple and Amazon have driven substantial gains, there’s a growing argument to diversify into underperforming sectors that may offer better value.
• Laggards: Identifying and investing in lagging companies such as Boeing, Target, and Rockwell could provide opportunities for significant upside as the market seeks balance.

Notable Quote:

Stephanie Link (08:38): "The winners will continue to win into the end of the year because portfolio managers are chasing benchmarks, while losers will continue to lose on tax loss harvesting."

Overbought Stocks: The Case of Apple

A significant highlight is the discussion around Apple’s stock status:

• Overbought Indicators: Apple's Relative Strength Index (RSI) stands at 92, making it the most overbought stock in the S&P 500.
• Fundamental Strength vs. Technical Concerns: Despite high RSI and frequent all-time highs, panelists debate whether this technical indicator warrants selling or merely signals strong fundamental backing.

Notable Quote:

Josh Brown (28:04): "I’m not adding to Apple at a 92 RSI, but I wouldn’t sell it either. The fundamentals remain so powerful."

Specific Stock Highlights and Recommendations

The panelists share insights and recommendations on various stocks:

• Block (Top Pick at Barclays for 2025):
  Josh Brown (37:41) praises Block for its technical and fundamental strengths, anticipating continued growth despite minor leadership uncertainties.

• Zscaler (Top Large Cap Pick at BTIG for 2025):
  Kerry Firestone (39:08) highlights Zscaler’s position in cybersecurity, emphasizing its potential as a laggard re-rating positively in 2025.

• EPAM Systems:
  Brian Belsky (39:54) discusses EPAM’s recovery from geopolitical challenges and its strong position in software consulting, making it a bullish investment.

• Walmart and Target:
  Steve Weiss (40:36) and Kerry Firestone (42:13) endorse Walmart as a core holding with robust performance, while Target is recognized for its turnaround potential.

• Trade Desk and Chipotle:
  Recommendations focus on Trade Desk’s strong secular tailwinds and Chipotle’s operational improvements driving traffic and margin growth.

Insights and Conclusions

The episode concludes with a synthesis of the discussions:

• Market Momentum: While the current market momentum is strong, driven by bullish sentiment and high allocations to U.S. stocks, there are underlying concerns about sustainability and overreliance on specific sectors.
• Strategic Diversification: Investors are encouraged to consider diversifying into lagging stocks and sectors that may offer better value and growth potential in the upcoming year.
• Technical vs. Fundamental Analysis: Balancing technical indicators with fundamental strengths remains crucial in making informed investment decisions.

Final Notable Quote:

Stephanie Link (24:04): "From a pure valuation standpoint, the equity risk premium has some friction. The Fed’s potential policy shifts could introduce additional uncertainty, impacting stock multiples."

Closing Thoughts

As the episode wraps up, the panelists emphasize the importance of strategic positioning and diversification to navigate the volatile market landscape. With the final weeks of 2024 approaching, investors are advised to remain vigilant, leveraging both technical and fundamental analyses to optimize their portfolios for potential market movements.

Conclusion

The December 17, 2024 episode of Halftime Report provides a nuanced examination of the current market conditions, investor sentiments, and strategic investment approaches. By integrating expert insights and real-time data, the discussion offers valuable guidance for investors aiming to navigate the complexities of the stock market's final stretch in 2024.

Transcript

[Scott Wapner]

Ryan Reynolds here from Mint Mobile. With the price of just about everything going up during inflation, we thought we'd bring our prices down. So to help us, we brought in a reverse auctioneer, which is apparently a thing Mint Mobile Unlimited Premium Wireless. How many?

[Josh Brown]

Get 30.

[Scott Wapner]

30. Get 30. Get 20. 2020. Better get 20. 20 better get 15.

[Josh Brown]

15, 15, 15. Just 15 bucks a month.

[Stephanie Link]

Sold.

[Scott Wapner]

Give it a [e-mail] switch.

[Kerry Firestone]

$45 upfront payment equivalent to $15 per month. New customers on first three month plan only. Taxes and fees, Extra speed slower above 40 gigabytes. In detail, what's your boldest, truly ambitious life goal? Everyone has one and everyone deserves a.

[Scott Wapner]

Way to get there.

[Kerry Firestone]

That's why State street offers a wide variety of ETFs to give all investors access to the market and the chance to reach their goals. Like with DIA, where you get 30 US blue chip stocks in a single trade. Wherever you're heading, getting there starts here with State Street.

[Stephanie Link]

Before investing, consider the fund's investment objectives.

[Scott Wapner]

Risks, charges and expenses. Visit ssga.com for perspectives containing this and other information. Read it carefully. DIA is subject to risks similar to those of stocks. All ETFs are subject to risk, including possible loss of principal. Alps Distributors, Inc.

[Stephanie Link]

Distributor.

[Scott Wapner]

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. All right, Carl, thanks so much. Welcome to the Halftime Report. I'm Scott Wagner. Front and center this hour, rally or retreat? What will stocks do over the final stretch of 2024? We will debate it with the investment committee today. Joining me for the hour, Josh Brown, Stephanie Link, Care, Firestone and BMO's Brian Belsky's back. It's good to have you with us. We will check the markets here. We're red across the board. As you know by now we had retail sales stronger than expected. The Dow is now down nine straight days, which would be the longest streak since 74. The issue with that though is that half of the decline over the stretch of losses is related to unh. So you know, it puts it into perspective, at least in what really has been a cap weighted year anyway as the S and P, Josh, is up 27.5% so far. And as we ask the question, what will the final two weeks bring? Bank of America today out with their fund manager survey. Max Americana, super bullish sentiment, record low cash, record high allocation to U.S. stocks and a three year high in global Risk appetite. So where does that take us?

[Josh Brown]

I want to give you some more superlatives from that survey because my mind was blown as well. Small cap over large cap. Expectations hit the highest level since May of 2021, which was a full blown bubble year for small caps, especially tech and spacs. Cash levels now at a three year low, 3.9% versus 4.3. Global growth expectations just turned positive for the first time since the spring. It's sort of reminding global profit expectations hit a three year high. It's sort of rhyming a little bit for me with 2017. And I don't know if you remember the shows we were doing in 2017, Judge, but the phrase that we repeated pretty much every week throughout the course of the year was global synchronized growth. We really haven't had that since. That's what this survey is screaming. They're even saying the most bullish catalyst for 2025 is somehow China growth acceleration. If you, if you even got a hint of that. I think it puts people in a situation where they're no longer second guessing the multiple on Nvidia and Apple and they're starting to think bigger. I like seeing people feel positive about global growth. We haven't needed it in the S&P 500 over the last couple of years, but it wouldn't hurt if we had it. And that's a really important, I think, sentiment shift.

[Scott Wapner]

What we do have, Kerry, is a belief in terms of markets and economy relative to everything else is American exceptionalism. It seems to be the phrase of the moment as to how investors are thinking about where they should be within this market. When I tell you that record low cash, record high allocation to stocks and you have a risk appetite in the market that you haven't had in the last three years, at least to the degree in which you do now, does that portend that we're going to have a rally still to come and not a retreat, even with some weakness over the last couple of days?

[Brian Belsky]

It's certainly very bullish, but the signs of the bullishness are somehow so extreme that it makes us a bit nervous. If you have a week that we've had in Broadcom where the stock basically goes up 40% not because its earnings were so great, but because so much money went into Broadcom. It's as if it is a symbol stock, a symbol of the enthusiasm about the market, a renewed excitement about AI, not in video, but just generally about AI. And it gives me a feeling that's meme like that. Oh my God. Here it's a stampede to get into this stock if that's what is fueling this market and not earnings or not what we're going to see out of consumer spending and about the economy as a whole. It worries me. However, this momentum is so strong, it's hard to see what derails it right now.

[Scott Wapner]

Well, Brian, I mean, what's, what's fueling it and funding it, if you will, at least according to bank of America. But I think a lot of investors would agree is the prospects of Trump 2.0. Right. And Fed still cutting. And we're going to be reminded of that tomorrow when they likely cut interest rates yet again, irrespective of whether they pause for a bit afterwards. They are still in the nascent stages of what is going to be a cutting cycle.

[Steve Weiss]

No, we agree with that and we agree with a lot what Kerry was saying. I think there is a very good chance that things are overheating, Scott. However, I do believe that based on our conversations with not only institutional investors, but private wealth investors, there was really, quite frankly, a wait and see with respect to the election. And I think the, given the fact that we've seen this buying frenzy, you know, we're not going to we like it when stocks go up. We like it when the skies are blue. However, there is a little bit too much bullishness here. At the end of the year, I think we can get stocks a little bit cheaper, but the bull market continues.

[Scott Wapner]

Where do you see that? Where do you think there's too much bullishness? Because like crypto continues to rally? Is that like, where, where do you think it's looking a little bit uncomfortable.

[Steve Weiss]

On the risky side of things? You know, we've never been believers in crypto. We've not played the bitcoin thing. I think there's a lot of different stocks to buy to take advantage of. You know, the stock market is the market of stocks. And I, and I worry about like one of the things that Kerry said, you know, all this money piling into Broadcom is because people are worried about Nvidia. So they like jump to another stock. And so I think that type of short term termism, quite frankly, worries me.

[Scott Wapner]

You think that short termism?

[Steve Weiss]

I do, I do. Because people are chasing performance at the end of the year and they're chasing the momentum like the bitcoin thing. Now again, we, we're, we're believers of this big giant secular bull market and we believed in this American exceptionalism trade for the last 15 years in ebbs and flows and we've been positioned accordingly. But on a near term basis we could see a bit of a pullback to start the year. And I think that's okay.

[Scott Wapner]

I mean some step look at Broadcom and say well their non AI business has bottomed and turned the corner and their AI related business is just getting started. That's not me saying that, that's Stacey Raskin and he's the preeminent chip analyst on Wall Street.

[Kerry Firestone]

Well, I've been saying for two years it's nice to finally get the respect. It's had a heck of a run though, Scott. 40% in a couple of days time. I mean the total addressable market or the serviceable addressable market which is what they're talking about at broadcom, something like 60 to 90 billion over the next few years versus 15 billion today. So it's three to four times the expectation. That's great. Numbers are going higher, that's great. But the reaction is really extreme. But to Brian's point, I think the winners are going to continue to win into the end of the year because you have portfolio managers chasing they're behind their benchmarks and the losers will continue to lose on tax loss harvesting. I mean we have been seeing it, you mentioned it in December. The equal weighted S&P 500 has underperformed the market cap weighted S&P 500 by 400 basis points. Value stocks are down 11 straight days, the most in its history.

[Scott Wapner]

It's the most since May of 2000. Just to put add some to what you're saying and I'll give it right back to you. In one month the Mag 7 is up 15%.

[Kerry Firestone]

It's nuts.

[Scott Wapner]

The 493 up 1% year to date growth up 38, value up 14. That's one of the most acute signs in this market of a still rising risk appetite.

[Kerry Firestone]

And unprofitable tech rose yesterday alone 6% on the day. I mean unprofitable tech, that's crazy to me. So I do think again the winners will continue to win into the end of the year. But I do think, I think it's time to look at some of the laggards which I have been doing and I will be adding to in the next couple of days, weeks, companies like Boeing. That's like my favorite 2025 story. Las Vegas, Sands, Target, Rockwell. I don't want to own all of the laggards into 2025 and I don't want to sell my technology as well. But I am looking for opportunity because I do think it should be. I don't know if it will be, but it should be more balanced next year if in fact the Trump administration can continue the economy to grow in the 2 and a half to 3% range, which in all likelihood it looks like it's going to.

[Scott Wapner]

I mean, you talk about where is risk appetite most evident? Nasdaq coming off another record closing high growth, crushing value Bitcoin above 108,000 earlier today as Steve Weiss continues to buy more of that. He joins us to tell us about that. You're just going to keep riding the momentum here?

[Gary Kaminsky]

I am, Scott. Right now we've seen momentum and expectation of what's going to happen in the next administration. But we've got Paul Atkins, who's pro bitcoin, pro crypto, that's going to be the new SEC commissioner once confirmed. And then we have scarcity. And then don't forget, you have to having where they cut the amount of bitcoin out there in half. And finally, if Michael Saylor keeps buying more bitcoin, keeps leveraging it, then we're just going to see it go higher. So look, I still don't see what the case is for bitcoin in terms of where are you going to use it, where are you going to send money? I'm not convinced to store value either. The only thing I'm convinced is that it will keep going higher because the momentum is going to take there. We see targets of 200,000 on the street. I recall two years ago, three years ago, we saw targets of 100, 150. And look, it took us three years to get there. So I think the direction can just be higher because of scarcity and a new, you know, cohort buying this. So I'm there until I'm not.

[Scott Wapner]

And I don't know when people think there's going to be some kind of upset that causes bitcoin to fall. You have any, like what, what would that be? You know, you could have a market pullback, which would be an obvious answer, but in the interim, you may have a market pullback. And yet people are treating bitcoin as some sort of safe haven play now because what was a speculative play is now deemed safe in some respects because you have such momentum in Washington behind it in ways you have never had.

[Gary Kaminsky]

Yeah, look, you know, I do think about what can go wrong, but right now I don't really see it unless momentum dies quickly. And then again with people like Michael Saylor not only buying bitcoin, but leveraging it and Leveraging it some more, potentially that's an issue. Now he's held on through, through decline. So I'm not really expecting that. But it is a risk asset and it's not a store of value. So they used to make the case that, you know what, it's not correlated at all. Reverse correlation or inverse correlation to other risk assets. That's just not true. So on some days like today, when the. But that's momentum. So, you know, I'm going to be very in tune with when the momentum dies. And I'm not going to hang it around and wait for that to, to reverse Weiss.

[Scott Wapner]

I appreciate it. Thanks for joining us. We'll follow it. I mean, it remains a big story and it's certainly captured the imagination of the American public, certainly on Wall street. Still to work on Main street, as Steve Liesman showed us in his recent survey. Josh, leaders lean in, laggards play. What do you think the best strategy is? Right. Steph says, okay, I've had enough of the leaders. I'm not saying, like, get out of them, but let's get into some of these laggards because it's starting to get kind of absurd with the outperformance from the top down.

[Josh Brown]

I like that idea. And just like listening to Weiss, you know that story of how behind bitcoin is, how behind bitcoin the administration is like, I feel like even that's gotten carried away and everybody understands it. And Saylor is on his way to accumulating like 3% of all the outstanding bitcoin. If we had talked about Bitcoin bullishly in 1718, it was still very controversial. And now it's just like, yeah, yeah, yeah, I get it, I get it. It's maybe a reserve asset and Trump loves it. Fine. So I do think that, you know, a lot of these trades that have worked so well throughout the course of the year, there's probably going to be a reversal at some point and it might last longer than a day. Like a week ago, we were having this conversation about a big momentum sell off and all of a sudden everybody was buying the value cyclicals. It lasted 24 hours. We could experience a version of that that goes on for a month. We've seen that before. So I think Stephanie is on the right track from an investing standpoint. Energy 11 times. Earnings materials 14 financials. Even with a huge rally this year, 16 times. So you don't have to be buying communication stocks at 30 or tech at 28. You have options. If you're trading though, it's different. If you're trading, you probably want to stay with where the momentum is and health care just ain't it. So I think again, we talk about this as a recurring idea. You have to know who you are and what you do in the market so that you don't end up taking the wrong train, a train that you don't know how to ride. And so for most people, for most people that have been successful in financials and in tech this year, like I wouldn't recommend, start throwing darts at oil stocks you know nothing about. Stephanie knows what she's doing. Majority people don't.

[Scott Wapner]

You see the street still, you know, getting all bulled up on these tech names. Alphabet Amazon Top picks for 25 at BMO Belsky Shop meta price target to 700 from 650. Our halftime headliner is with us now, Dubrovko Lakos. He is head of global market strategy. JP Morgan. It's good to see you, man.

[Stephanie Link]

Welcome back. Good to see you. Thanks.

[Scott Wapner]

So we began our show talking about this big appetite for risk, partly on the idea of American exceptionalism. Trump 2.0. Our economy is going to grow unlike anybody else in the developed world. It's already been so remarkable relative to others. You're going to have tax cuts, deregulation, you're going to pour more gasoline on what is an already robust fire burning underneath this economy. You mention it as well in terms of US Exceptionalism within your note, but you have one of the lower price targets on the street square that for me, you're looking for only 6,500 next year. Why?

[Stephanie Link]

So I think the story remains a positive one and especially for the U.S. i think rest of the world, we need to see how things shake out strong dollar higher for longer trade uncertainty. I think there's a lot of question marks we have around emerging markets and even various segments within Europe. For us, the big theme for next year is one of dispersion. And to me that means a lot of different types of rotations within the market, which means that you don't necessarily have to have the big four, the big five, the big six sort of leading the way up. And that's why we see upside. But we see a bit more of a broadening in terms of leadership. And you know that that's why to us it's, it's a positive story. But just I think the upside is a little more capped in terms of sort of the sort of the big cap names. But we do think there's a lot of opportunity for some of the Laggards to re rate higher.

[Scott Wapner]

Well, what do you think this last month has been about then, where the NASDAQ has once again distanced itself from, from the PAC. It's up 8%. I mean, it's crushing everything else.

[Stephanie Link]

So I think since, since the summer of this year you've had a broadening in leadership and now you had a bit of a reversal. So again, I think that basically what's happening is every sort of three to six months you'll have these reversals that are taking place. I think Tesla is obviously the center of this reversal here and I think is driving a huge percentage of the move in the, in the Big ten. But I think as you sort of think more broadly about 2025, I think there's a lot of opportunities outside of the Big ten.

[Scott Wapner]

Why are people going there now then? In anticipation of, of all of that?

[Stephanie Link]

I think it's just momo, just some of it is retail participation with respect to some of these names like Tesla. So for instance, we see a lot of option activity within a Tesla. Broadcom is also something where we've seen a lot of retail participation. So momentum, I think builds, builds, builds and then I think it starts to spill over into other areas.

[Scott Wapner]

But I mean it's, it's certainly far more than just Tesla now, as you said, the percentage, the percentage gained from the election for Tesla is unbelievable. But it's Amazon hitting a new high every day, every other day. Alphabet new high every day, every other day. Nasdaq at all time highs every day, every other day. Money continues to want to go there. Even when people suggest the broadening is going to happen, it's going to happen and it does. It just doesn't last long enough.

[Stephanie Link]

So I think there's, there was broadening into the election and briefly after the election, and I think the momentum crash. In other words, this broadening was pretty sharp. So I think you're just basically seeing some, some reversal of that. And I think as you sort of go into January, I wouldn't be surprised that you see some degree of bottom fishing that I would call. And in fact, when you look sort of historically, the value factor tends to do actually quite okay early in the year as people sort of place their bets elsewhere. So I think, you know, I think the broadening trade or the dispersion trade that I would call is something that still has room to run in 2020.

[Scott Wapner]

But why you want to sort of swim against what is a really strong tide in terms of being underweight, discretionary. When you mentioned what Tesla's doing. I mentioned what Amazon's doing. Tesla and Amazon are essentially carrying the entire discretionary sector. But if that's going to continue, why would I want to be underweight that area?

[Stephanie Link]

So I think discretionary is a funny one because depends how you sort of define discretionary. And I'm not sure that an Amazon just sort of checks the box of discretionary. There's other sides to an Amazon, but.

[Scott Wapner]

That'S where it is though.

[Stephanie Link]

It is, it is. Right. But I'm thinking discretionary more in terms of the traditional discretionary retail consumption related stocks. I think that's the area that to us just doesn't have the best risk reward. And there are some exceptions like the airlines where we as JP Morgan remain very bullish on. But there's other segments I would say of the market, you know, including financials and banks that we think have more upside, that are more isolated and more sort of protected from potential tariffs and trade uncertainty.

[Scott Wapner]

Gary?

[Brian Belsky]

Yeah, so it sounds to me as if there's, there's two ways to talk about this. One is you're talking about more of what the stock market is doing with good information. We have good, good information and we have a good economy. Scott is saying, hey, there's a really good economy. Everything's why would you fight it? And you're saying, well, maybe you don't have to fight it, but you don't have to keep participating if the price is too high because value caring about the P E doesn't matter until it does.

[Scott Wapner]

You think the valuation does matter. Is that, that's what Kerry is alluding to?

[Stephanie Link]

I think at the market level it's on the high end of the historical range and I think where valuation is the richest by far is within a specific segment of the market which is called quality. Quality stocks are trading at the highest premium, I want to say, ever, ever on a relative basis. So people are basically, they have loaded up into these, call it secular growers. And that's, that's another reason why I believe there's opportunity elsewhere. Josh, that sort of fits the dispersion theme.

[Scott Wapner]

You want to weigh in?

[Josh Brown]

Bravo. Do you, do you think that a rally in non quality or a rally in deep value, cyclical or a rally in small cap is sustainable past like at most a couple of months is the reason why market participants are crowding into quality because it's just a more durable theme and you don't have to try to catch the next sector rotation every few weeks because for my perch, that's what it seems like is happening even if you look at the, the global, let's say the global 100 stocks, the best, most high quality companies in every country around the world look better than the overall international indices. It just feels like people are tired of trying to anticipate the next low quality rally. They just want to be in the more durable theme and leave it alone. Own. Is there some like veracity to that approach? You think that's what's going on here?

[Stephanie Link]

Look, I think what you're saying is something that's been happening for many, many years. I think IWM is not on the long momentum side. It's something that works as you said. I agree with you. You know, for a period of 2, 3, 4 months and then it stops working. Right. And money generally secularly continues to go into these, call it semi oligopolies and the secular winners or these winners that continue to benefit from secular tailwinds. But I think we're now at a point where positioning and valuation spreads are again quite extreme that I think warrants some kind of call it shorter term mean reversion or dispersion. And I do think that a lot of the tactical. Yes, tactical, correct, yes. I'm not saying that this is a one year play, but certainly a few months play. And I do think that a lot of the policies that will be hearing more about from the new, from the incoming administration in 2025 I do think stand to benefit some of these other areas that are less bid up and that are quote unquote laggards. And again, you don't have to buy low outright low quality. I think there's a lot of QUARP and GARP out there that has value on its side but still has relatively decent fundamentals. So sort of an in between.

[Scott Wapner]

You mentioned at the outset the idea of higher for longer, which I think people are getting their arms around. Fewer cuts, obviously smaller ones. We're not going to get 50 again unless we have a problem and then obviously that portends bad things for the stock market. T. Rowe today is talking about 6% on the 10 year being possible. First of all, you expect a cut tomorrow, I would assume. Yes.

[Stephanie Link]

Our house call is for a cut tomorrow and then a skip.

[Scott Wapner]

Okay, so they, they, they cut, they pause because if rates remain elevated but growth is stronger than we thought, is that okay?

[Stephanie Link]

I think it's okay for the economy, I think it's okay for fundamentals. I think it's less okay for the multiple. So going back to the question you asked me earlier, why 6,500. And why not 7,000? I think part of the reason is because we don't know how the disinflation story is going to continue to play out in the coming months. And we don't know if the Fed is going going to deliver on all the cuts that are still being priced.

[Scott Wapner]

In earnings deliver though good enough that it offsets whatever worry we have about that.

[Stephanie Link]

So again, I think it's okay for fundamentals, but I think from a pure valuation, if you think about the multiple thing about equity risk premium, I do think that sort of has some friction. If you believe that at some point in the coming months, there's a chance that the Fed opens up the doors, I'm just saying, to a potential hike. And again, they don't even have to hike. They can just mention it and financial conditions start to tighten.

[Scott Wapner]

Why would they do that?

[Stephanie Link]

I mean, because of a strong economy. That's it. A lot of the numbers that we're seeing continue to surprise to the upside. So then you add in animal spirits, you add in the wealth effect. This economy is doing well. And if anything, I think if there's room for a surprise economically, I think there's maybe some more room for surprise to the upside and to the downside. And so the question is how does the Fed respond to that and then how does the multiple respond to that? So again, not a negative for fundamentals. And if anything, if you look at fundamentals earn earnings expectations for next year, I think that 65% of earnings growth, growth expectation for next year is coming from just 20 stocks. So I think there is room for a lot of other stocks to sort of surprise to the upside, earnings wise. But again, multiple I think can be a bit of a different story.

[Scott Wapner]

All right, well, we'll leave it there. It's good to see you again. Good to see you coming by and sitting on our set. That's to Bravo Lacos of JP Morgan. He's the head of global market Strategy. Coming up, it is the most overbought stock in the entire market right now. You probably own it. We'll tell you what it is. We will debate what to do with that next.

[Kerry Firestone]

Support for this program is provided by Chevron. The anchor offshore platform is utilizing breakthrough technology to enable us to produce oil and natural gas in the US Gulf of Mexico at pressures up to 20,000 psi. A new industry benchmark, Anchor is part of Chevron's plan to produce 300,000 net barrels of oil equivalent per day by 2026 in the US Gulf of Mexico, home to some of our lowest carbon intensity producing operations. That's energy in progress. Visit chevron.com anchor hey, I'm Ryan Reynolds.

[Scott Wapner]

Recently I asked Mint Mobile's legal team if big wireless companies are allowed to raise prices due to inflation. They said yes. And then when I asked if raising prices technically violates those onerous two year contracts, they said what the are you talking about? You insane Hollywood. So to recap, we're cutting the price of mint unlimited from $30 a month.

[Steve Weiss]

To just $15 a month.

[Scott Wapner]

Give it a [e-mail] Switch $45 up.

[Kerry Firestone]

Front payment equivalent to $15 per month New customers on first three month plan only taxes and fees extra speeds lower.

[Silvana Henao]

Above 40gb Details 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 at capella. Edu.

[Scott Wapner]

Welcome back. Apple hitting another record high today and according to our data team at CP cnbc, it is the most overbought company right now in the S&P 500 with a Relative Strength Index RSI, something Josh talks about all the time. Of 92, it's posted 25 all time closing highs so far this year. The question is Josh, if that's something that you look at and tell our viewers to pay attention to in the way we should think about what to do with stocks, what do I do with that?

[Josh Brown]

The message of Apple is whenever Warren Buffett is selling something you want to be buying with both hands. JK Love you Warren. All right, what's going on here is absolutely remarkable. They obviously had a product cycle this year with the new phone. Did not get like, did not get the critics to be blown away by any of the stuff stuff they did. They're slowly rolling out AI features. They put like this image playground app on my phone yesterday. Fine, I guess I'll try it. The iOS 18 refresh was a disaster. I heard the all in guys trashing that last week. It really just hasn't been a great year for headlines at Apple. But the fundamentals remain so powerful. I think it was like enough for this stock to continue to be accumulated. It also doesn't hurt that we're shattering every record on the books for ETF inflows Apple's in every etf. It's in the dividend etf, it's in the shareholder yield ETF buyback etf. They're a leader in Capex, they're a leader in R and D. It's in the Tech ETF. It's in every index, Dow, S&P, NASDAQ, XLK. So when you have money pouring into ETFs and this is the largest or second largest holding throughout the course of the year plus the buyback like it's not crazy to understand why this thing has been melting up. I don't think at a 92 RSI it's a great purchase. So I'm not like adding to it. But would I sell it with a gun to my head? I probably still wouldn't. So I think a lot of people are where I am with this stock and that's just what it is.

[Scott Wapner]

So you read it more of a potential bad sign of getting in or buying more but not necessarily a bad sign that you need to worry about it turning down because it's so overbought.

[Josh Brown]

If you own it. If you own it for the last I'm in this stock literally forever. I can't even tell you what price it would have to get to for me to feel it. So I wouldn't be shocked if we saw a 10% correction in Apple to start off the year as money rotates. Keep in mind the RIA channel is $7 trillion. You know what RIAs do in January? Okay. They rebalance. Any form of rebalancing at any large wealth management organization is going to involve selling Apple. You have to understand that if you don't understand that you don't work on Wall street, you don't belong here. So 100% you're going to see selling come out in this name. But how extreme is that selling really going to be? Are people like walking away from the stock? Absolutely not. So you have to be willing to endure that correction if and when it happens. If you're going to be long this.

[Scott Wapner]

Name and most people are carry client calls you up later. Right? And it's like, look, I was watching Halftime and I saw you guys talking about Apple being so overbought. Stock's been up and I'm up a lot in it. What are we doing about it? What should we do about it?

[Brian Belsky]

Yeah, well, I think that there are a couple of important factors. One is what's the tax hit? And many of our clients are taxable. Most they care about paying capital gains stocks like Apple, it doesn't matter where we bought it, it's all a big gain right Right now. So to the extent that people say, oh, we thought it was a 4% position and now it's a 5 and a half percent, I understand the rebalancing point that Josh brought up, but also there is the tax hit and I honestly think that since most people are underweight, these names, they are underweight Apple. And the idea now to continue to be underweight is less attractive because the rest of the market has done so little for people.

[Scott Wapner]

I mean, to give you an idea of what we're talking about, Steph, Right. You don't, you don't own Apple anymore. But at 92 for a stock like Amazon, which I think is more like 77ish, nice run. Yeah, it's an incredible run, but it's not 92. But how do I think about the types of overbought stocks and what I want to do with them as we approach the end of the year and make the turn?

[Kerry Firestone]

Well, as you know, I sold Apple because I made 40% in four months time. And I didn't think, and I still don't think that this version of the iPhone is going to be the super cycle from. I definitely think in the out years it will be. But next year I think it might struggle and I think it's ahead of itself and it took some gains. But what I did do as a portfolio manager, since I'm underweight a 7% weighting in the the S&P 500, I made Amazon huge. It's a huge position, my largest by far. So that if it does participate, if it does outperform, I'm not going to get hit by being quote unquote short Apple because I don't own any Apple against my bench. So it's a little technical, but quite frankly I like Apple. I mean, excuse me, Amazon much better than Apple because I think there's a lot of ways that they can win. It's retail, they're taking share, it's aws. We all know about the cloud and it's accelerating. Advertising never gets talked about. They have huge amount of cash. I think they're going to announce some sort of a dividend or a bigger buyback. And yeah, it's expensive at 35 times, but it's at 14 times EBITDA and historically it's traded at 17 to 18 times. And so I still think there's upside. I still want to own the behemoth in the discretionary sector.

[Scott Wapner]

Is this sign for you of the excess that you were talking about when you see something as overbought as the data team says that Apple now is.

[Steve Weiss]

No, because we don't sell things on technicals. We buy and sell on fundamentals.

[Scott Wapner]

Scott, are there fundamental, are there. The fundamentals are behind this move higher, as we said.

[Steve Weiss]

Well, I think what's behind this move higher quite frankly is liquidity. I think people are chasing liquidity at the end of the year because they quite frankly don't know what else to do. So they're continuing to own these big stocks, number one. Number two, there's a difference between owning and trading. We're not traders, we're owners. We've owned the stock on behalf of our BMO clients for 12 years. I think this is a juggernaut. And so when there's two, there's two.

[Scott Wapner]

Rules to happen with lack of like fundamentals behind it. Are you telling me there's fundamentals behind the last 13% in a month?

[Steve Weiss]

I think there's fundamentals to owning this stock and it's cash. They have more cash on the balance sheet than several developed countries. Number two, they're buying back stock. Number three, they're paying dividends. Number four, you can make a value component to this, you can buy a growth component. And lastly, here's the rule to Apple. Never bet against the US consumer and never bet against Apple, period.

[Scott Wapner]

Mic drop. All right. See, I knew I'd get you going. Said come back at you a couple times. Silvana now has the headlines. Hey, Silvana.

[Kerry Firestone]

Hey, Scott. Good afternoon. The White House is asking Congress to passed legislation that would give federal, state and local governments more power to address drones that fly in U.S. airspace. Now that's according to National Security Council spokesman John Kirby in an interview on NBC's Today Show. Sources tell NBC News members of the House Intelligence Committee will receive a closed door briefing today on the DRO sightings. The Federal Trade Commission passed a rule today banning junk fees in hotel and event ticket prices. The rule will require ticket sellers as well as hotel and vacation rental sites to add charges such as service fees to the advertised price instead of tacking them on at the end. The Biden administration has tried to crack down on hidden fees, but businesses and corporate industry groups have challenged the new rules. And New Jersey lawmakers are considering changing a lot. Make underage gambling no longer a crime. Instead, it would be subject to fines between 500 and $2,000. Money from the fines would be used toward prevention, education and treatment programs for compulsive gambling. Scott? I'll send it back to you.

[Scott Wapner]

Silvana. Thank you. That's Sylvana Hina. We'll do calls of the day next. One of Steph's newest buys, top pick at one firm. One of Josh's recent buys, top pick at another firm. And everybody's playing because I got calls on stocks that you have, too. We'll do them next. Ryan Reynolds here for Mint Mobile. You know, one of the perks about having four kids that you know about is actually getting a direct line to the big man up north. And this year he wants you to know the best gift that you can give someone is the gift of Mint Mobile's Unlimited Wireless for $15 a month. Now you, you don't even need to wrap it. Give it a try.

[Kerry Firestone]

@Mintmobile.Com Switch $45 upfront payment required, equivalent to $15 per month. New customers on first three month plan only taxes and fees, extra Speed slower above 40 gigabytes on unlimited. See mintmobile.com for details.

[Silvana Henao]

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 at Capella. Edu.

[Scott Wapner]

Welcome back. Calls of the day. We begin today with Block. It's a Josh name and it was just named the top 20255 pick at Barclays. Tell us more.

[Josh Brown]

Yeah, look, this is a situation where the technicals got me into the stock, but the more I look at the fundamentals, the more I understand why it's finally rallying. I would also point out when this stock hit my list of best stocks in the market, it did so along with a lot of other names in the group. PayPal, which is about 91, looks like it wants 100 so far, is breaking out. Robinhood has already broken out, one of the big winners of this year. A lot of these stocks have been left for dead since 2022. But what happened was even though nobody was interested in owning them, they continue to find ways to grow, Block included. The one negative here is Jack Dorsey appeared in a photograph at a conference last week. He looked like somebody going undercover or like in almost like a Halloween costume. But then part of me feels like if he's comfortable enough to be rolling like that with a Satoshi Nirvana T shirt and open toed shoes. Maybe the quarter is shaping up to be a really good one. So I'm gonna stick around. We'll see what's gonna happen. But technically the stock looks really good.

[Scott Wapner]

Up as we speak. Steph Zscaler, we said you bought it last week. Top pick at BTIG for 2025 price target to 238. And they of course reiterate a buy there. It is their top large cap pick into 25. And they like it in part because it's controversial.

[Kerry Firestone]

It is. It's down 9% on the year when its peers are up 40 to 50%. I am a huge bull on cybersecurity. I think it is bigger, yes, bigger than AI. CTOs are spending two places. AI because they're learning about AI and what it means for their businesses and cybersecurity because they can't wake up one day and lose their business. And so the momentum is huge. I think you're going to see massive consolidation perhaps. Maybe Zscaler is one of them. In the meantime, they beat. They raised. Operating profit was up 50% and the stock fell 7%. So as I mentioned, it's in a laggard. I think it's going to be a good 2025 story.

[Scott Wapner]

Okay, Kerry. EPAM systems upgrade overweight Barclays price target to 90 from 250. Macro uncertainty is dissipating. That is part of their bullish narrative behind this stock.

[Brian Belsky]

Well, we agree with that. We bought EPAM a year or so ago because the stock had been terrible. It was really hit for two reasons. One, so many of its consultants. It does software consulting has a focus on AI but so many of their consultants were in the Ukraine. It made it very difficult to do business as the war was raging. Those consultants have moved. So we've dealt with that problem. The next was that no one wanted a software stock. Everybody only wanted stocks. And that now is finally turning around and their business is getting better.

[Scott Wapner]

Belsky Rapid with Wal Mart. Target does bump by six bucks, 111 from 105. Jeffrey says it's their top pick for 20.

[Steve Weiss]

Yeah, we're over. We're underway at consumer staples as a sector but you got to own Costco, got to own Walmart in your core and large cap money. We've been buying some Target in our value portfolio but Walmart is the clear leader there.

[Scott Wapner]

All right, we'll have more coming up after this break. More stocks we didn't get to just now and also some more committee stocks on the move. Welcome back. Take a look at shares of trade desk. Let's show that stock, please. Reiterated by it truist today. They say it's a favorite. We think it's a favorite of Josh Brown's 2 price target to 155. They're talking about strong secular tailwinds. Josh.

[Josh Brown]

Yeah, I'm in this thing close to 100. I'm rolling my stops up as I hold. It has not broken down technically yet. The fundamentals look. Look great. This thing is a Scotch bonnet. I don't really know why you would get off here. So what I'm going to try to do is trail this thing with a weekly look back each Friday just to make sure that the uptrend is intact. And if it breaks, I probably won't second guess it too much. I'll probably take a profit. But if you're not familiar with the story, this is a good time to get up to speed because they're going to have an amazing 2025 from a fundamental standpoint. You're probably going to want to keep the stock on your monitor.

[Scott Wapner]

Okay. Highs of the day. We'll keep it on ours for sure. Chipotle staff, top pick at RBC. Price target to 75. They like the operational improvements. They like that. That it's driving traffic. They think there's upside to margins.

[Kerry Firestone]

The stock is still down 6% from its June high when Brian Niccol left to go to Starbucks and I took advantage when the stock fell. It's the first time I ever owned Chipotle because it's always been so expensive. It's still expensive, but they're going to do a 6 comp, probably a 6 traffic. They have pricing power, great operational execution. So I'm sticking with it.

[Scott Wapner]

Baker Hughes. Josh, back to you. Top picket Wells overweight price target 49 from 42.

[Josh Brown]

You know, again, this is one of the strongest stocks in the group. This was originally on best stocks in the market list from a technical perspective. But it's not an accident that these names keep popping up on people's top pick list. These are the names that have the fundamental momentum as well as that tailwind in the oil sector. There really aren't a lot of stocks that look as good as this one. And there's a reason we don't have to speculate on which oil company is going to have the the most profitable year. What we know is that Baker Hughes is going to be involved on the service side in pretty much everyone's business, and they're going to benefit on this climate that we're heading into of just bigger, more increased drilling and services activity. So I would stay long this name and I plan to Salesforce carry they.

[Scott Wapner]

Host their Agent Force 2.0 today Marc Benioff CEO is going to unveil an improved version of their flagship AI product.

[Brian Belsky]

So it seems as if Salesforce has firmly moved into the category of it is a beneficiary of AI not being competitively hurt by AI and Benioff has done a very good job. The last quarter was good. I think the momentum is back in the stock. It's at an all time high roughly and we continue to own it.

[Scott Wapner]

You got something quick on Starbucks for me which today is called Undervalued at B of A. The stock has not done well satisfaction.

[Steve Weiss]

The least not the last month or so but over the last six months it has.

[Scott Wapner]

Well, I mean it's down 3% year to date.

[Steve Weiss]

We bought it. Well, we bought it in May as a contrarian purchase in our value portfolio which you need to own some contrarian stuff in value. We bought a little bit more about a month ago. We think this is an excellent turnaround prospect for next year.

[Scott Wapner]

Alright, we will take a quick break. The setup is next. We have breaking news from the auto business. Phil Lebeau has the details for us. Hi Phil. Hey Scott. This is a report out of Nikkei that has an impact for both Honda and Nissan. Take a look at shares of both companies which we should report are at 52 week lows right now. But the stocks are moving higher on a report out of Japan that Honda and Nissan are considering a merger. A merger that likely, likely I should say would be facilitated by the Japanese government. I've talked with some people in the industry over the last couple of weeks about the state of things in terms of the Japanese automakers and Nissan is not in the best shape right now. It has so much capacity. It needs to rationalize that capacity has a number of other issues. So it makes sense on a certain level that perhaps, perhaps Honda would merge with Nissan. But again this is just one headline from Nikkei out of Japan that this is a possibility. That's all we have at this point. Way too early to say that there will definitely be a merger between Honda and and Nissan. Scott, market market likes Nissan certainly a little bit more as it relates to those talks. Phil, thank you, I appreciate that. Phil LeBeau on that really interesting report will certainly follow it for the rest of the day. We'll take a break, we'll come back and we'll do finals next closing bell Today, Liz Ann Saunders and Adam Parker will join me, and I hope you will as well. 3:00 Eastern Time. Josh, give me a final trade if you would, please.

[Josh Brown]

Baker Hughes, going higher.

[Scott Wapner]

Thank you, Mr. Belsky.

[Steve Weiss]

Raymond James, financial RJF.

[Scott Wapner]

Okay. Kerry Firestone, WABTEP.

[Brian Belsky]

It's electric. It's all sorts of electric vehicles and rapid transit and transportation. Rail cars.

[Scott Wapner]

Okay.

[Kerry Firestone]

Electrification. How about that?

[Scott Wapner]

Okay, Good word.

[Kerry Firestone]

That's the word Boeing. I mentioned it earlier. I think this is a great setup for 2025, your favorite stock.

[Scott Wapner]

You said for next year.

[Kerry Firestone]

It is.

[Scott Wapner]

All right, we'll see how that develops and I'll see you on the closing bell. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.

[Silvana Henao]

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 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 at Capella Eduardo.