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Halftime Report
Rethinking the Risk of Recession 3/31/25
00:43:47
Listen to the Street’s top investors get to the heart of the action as it’s happening and help set the agenda for the rest of the day. Investment Committee Disclosures
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- [00:00]
Laura Castleton
For 140 years, 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@ multicare.org hello, I'm Laura Castleton with Janus Henderson Investors. Is a brighter future possible?
- [00:22]
Steve Weiss
At Janice Henderson, we think it is. We work to help our clients achieve.
- [00:26]
Laura Castleton
Superior financial outcomes and fulfill our purpose of investing in a brighter future together. We never forget that this means our.
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Steve Weiss
Thinking and our investments are helping to.
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Laura Castleton
Shape millions of futures.
- [00:37]
Steve Weiss
At Janice Henderson, we are committed to helping you invest in a brighter future. To learn more, go to Janice Henderson.com.
- [00:48]
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, guys, thank you very much. Welcome to the Halftime Report of Scott Wagner, front and center this hour right from post nine, the markets. Big week for your money. As you know, we trade it and debate it with the investment committee, tariffs, jobs and just about everything else. For the hour today, Joe Terranova, Jim Leventhal, Steve Weiss, Shannon Sokotia. We will check the markets here. NASDAQ was getting hit harder than it is now. And as Carl and Court were just saying, we have rallied off the lows quite substant. In fact, the Dow has gone green. As Joe, we try and figure out how much worse is it going to get? Has it gotten bad enough? Jeff DeGraaff, you just heard him, Renaissance macro. I mean, I like the sort of way that he looks at the markets in total and says sentiment's gotten to the point where it's bullish. At this point, we've just priced in a lot of negativity. Credit spreads aren't blowing out. Let's just like take a deep breath and really think about where we are.
- [01:58]
Laura Castleton
So I think potentially that means you could get a little bit of a bounce in the market similar to what you had after March 13th. But I think it's very obvious to me, Scott, the personality of the market has changed dramatically over the last eight weeks. And it's a personality that, while changing, has moved leadership away from offensive oriented stocks, semiconductors, technology, momentum, more towards a cautiousness, more towards a defensive nature, whether that's staples or utilities or even bonds themselves. So if I'm trying to identify where could I find momentum in the marketplace, I think the momentum I find in the marketplace is in the cautiousness. I do think right now the right strategy to have is not to feel as though you're on the power play, feel as though what you're trying to do is score the goal because you have a man advantage or a two man advantage. I feel like right now you have to approach this market from the standpoint of you're on the penalty, penalty kill and on the penalty kill your constantly defending. And I think that's the environment we're in right now. You could try and find opportunities in the equity market. I have no problem with that. But you better be sure that you're finding opportunities in the area that's away from semiconductors, the area that's away from technology. Because I don't think that offensive oriented type of ownership is right in this environment.
- [03:18]
Scott Wapner
Jimmy Kramer today said, quote, I can't think of a dumber day to buy just because of all that's going on. Deutsche bank says they could see a move down to 5250. You know, the 10 year has been pushing lower, gold's been pushing higher. Where does this leave us? As Megan Casella, you know, our own reporter at the White House says of the tariff plans and April 2 that they remain in flux.
- [03:43]
Joe Terranova
Yeah, that's not good. That's not good. That's the problem, Scott. I'm not comfortable. All right, I see the danger. All right. I like your analysis about the penalty kill and that would lead me to say, okay, well it's just a matter of time, kill the penalty and move on. But it's not, it's not, things can get worse. And it really comes down to. Look, the problem and the solution are the same thing. It's this tariff uncertainty. It's very specific what's bothering the markets right now. And if we get to big if, okay, if we get to April 2nd and there's some finality, okay, I'll feel better. But let me tell you what the bad scenario is and where the 5250 becomes like reasonable. Analyst estimates have hung in there for the full year earnings on the s and P500. I for one don't see how somebody like Delta Airlines at Bastion and I know we're going to talk about them later, we can talk about them in more detail. But they're the first to report next week. Right. I don't know how they can come out and still maintain their full year optimism. If big if, I'm looking at you, Scott. If the tariff uncertainty remains the way it is right now. I just, it's, it's very simple. The tariff uncertainty has to come down so everybody, whether you're a company, whether you're a consumer, whether you're an investor, can start planning accordingly. And I'll close on this. Let me be clear. I'm as, I'm as uncomfortable as I've been in years. At the end of the day, where my analysis comes down to is I don't think the president's stupid. I don't think he's crazy. I can't think of a rationale for driving the economy into recession, which is what continued tariff on.
- [05:12]
Scott Wapner
So I mean you get yields lower like they want, you know that that's a big deal that the treasury secretary has been talking about. You want to, if you want to get, you want to get rates down by a lot in a hurry, you let the economy weaken to a point where you hurt demand and you get a 10 year that's lower. I hear you on the way. That's a risky game to play.
- [05:34]
Joe Terranova
I like it.
- [05:35]
Scott Wapner
I know, but they kind of tell you. Are they telegraphing it?
- [05:39]
Joe Terranova
Well, I mean, look, we don't know is the answer. I mean, to me, four and a quarter on the ten year. Like let's be real, in the history of my life, four and a quarter is a low rate. The world can do just fine at four and a quarter if you're driving it, not you. If one is saying I need three.
- [05:53]
Scott Wapner
And a half, well, it's not enough like the long end. Right. They need to, they're, they're fixated on the deficit. They need to get the long end of the curve down. They want to get the housing market working again. It's been all but frozen. This is one way, Weiss, that you do that. Now, speaking of April 2, Tom Lee talks about it being a clearing event for stocks and there's a legitimate debate as to whether it will be. Of course, Goldman's Tony Pascarello in his latest note isn't so sure of that and he almost agrees with Joe in part. The quote is the big dynamics in the game have changed and it's not obvious to me that that April 2 will prove to be a clearing event. And he continues to say preservation of capital is the name of the game right now.
- [06:42]
Shannon Sokotia
Yeah, and that's what I've been saying for a while. Look, you know, last week, the week before we all came out, and I agree with that, with saying, okay, that's going to be a buy the news event because it's not going to be talking about the tariffs on Wednesday because it's not going to be as bad as People think but. And we referenced Brexit, we referenced the Trump election the first time around. We were so negative going into. And then bang, it turned. This is different. And I'll tell you why this is different. It's different because those were one off events. One, one instance events. Brexit. There was nothing following Brexit around Trump being elected. That was the election day that everybody was going to here. It's going to be an ongoing atrophy of the market. To think that they're causing this havoc. The administration has this great plan behind the scenes causing this havoc to drive rates down is ludicrous. Okay, Rates are coming down because people are going to hide in bonds. They're not. And it's not going down because they want to drive the housing market. They don't care about that. So I'm not saying that some of his policies aren't good.
- [07:53]
Scott Wapner
We mean they don't care about that. They do care about the economy.
- [07:57]
Shannon Sokotia
They don't care about it near term. They don't care about it near term. And if they do, I'm giving them the benefit of the doubt. Okay? I'm saying they don't care about near term. If I thought they were doing this before because they thought this would drive the economy, then I'd have a different attitude. But they do.
- [08:13]
Scott Wapner
They just think that you need to go through. I'm just telling you what they said. This is not my point of view. You need to go through the detox period so that you can come out stronger on the other side.
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Shannon Sokotia
So let's talk about detox period, period. Okay. The detox period is going to go on for a long time because there'll be ongoing uncertainty. So yeah, we'll get to periods where the market may rally because it gets oversold from some emotional moves in the short term, like Joe says. And I believe that. And could it be Wednesday? Could be Thursday. Sure. But on an extended basis. No. The economy is atrophying. The market will go lower, earnings estimates will be coming down. And again, I don't care if we go into recession or not. I do care economically, but I don't care about that dialogue, that narrative. What I care about is the direction of the economy, which is definitely going lower. So again, the policies, cutting bloat, great policy. I agree that we should cutting, you know, matching tariffs. I don't know if we want to match them exactly because there are reasons why there are higher tariffs. Great. But it's like being in, to go to a sports analogy, it's like being in the offensive, you know, coordinator, going through the game plan and running a play in practice, nine times out of 10 in practice, that play is going to be a touchdown, a pass. But when you get to a game, it's a toss up. Is it going to be a touchdown? Is it going to be incomplete or is it going to be an interception? My view is my call is it's an interception and that we're screwing up on the execution. It's going lower.
- [09:40]
Scott Wapner
Shan David Costin cut his price target again on the S and P to 5700 from 62. Also at Goldman, Jan Hozi as the economist there, 35% chance of recession. Now, Larry Fink in his annual letter, of course, the head of Blackrock, I hear it from nearly every client he writes, nearly every leader, nearly every person I talk to, they're more anxious about the economy than any time in recent memory. Of course, you recall as well Rick Reeder of Blackrock telling me just the other day that it's time to hunker down, that this level of uncertainty has just put a paralysis on the business and investing and consumer community.
- [10:27]
Steve Weiss
Yeah, clearly, Scott, there needs to be a shift in the focus. And I think the challenge is here is that, you know, that shift in focus probably doesn't come to us until, you know, June, July, when we really start to focus on taxes and the extension of the Tax Cut and Jobs Act. I mean, that is the second half of the year agenda item that President Trump needs to deliver. You talked about in terms of what the administration is trying to do. And actually I would argue a bit with Steve on that yields point. You know, if you think aboutif you listen to Treasury Secretary Besant, what he's trying to do is he's trying to alleviate some of the pressure from the fiscal perspective. He's trying to bring down that deficit. Tariffs can do some of that. But if you look at the three main pillars of that, that it's the interest expense, so therefore lower yields, it's defense, which, you know, trying to move out of some of these conflicts in which we have been quite involved. And the third thing is entitlements, and everyone knows that that's really difficult to touch coming into a midterm year in 26. And so I do think that coming back to lower yields, yes, that's going to be good for the consumer, but it's really around that interest expense and then lower oil prices. And so I think this uncertainty, Scott, the challenge is, is that whether April 2nd or it's April 10th or it's April 20th. What you really need to look for is you need to look for a more prescriptive approach in terms of tariffs coupled with a more prescriptive approach in terms of what's happening in Washington on the spending side, and then most importantly, looking for some of that stimulus stimulative activity in terms of the Tax Cut and Jobs act to come through in the second half of the year. This limbo period is going to be very challenging, but we continue to believe that the transmission of deregulation changes in some of these departments and some of the more pro business aspects of the new tax cuts could create that sentiment impulse that we're looking forward to drive gains in the second half of the year.
- [12:26]
Scott Wapner
The hardest time to buy, as everybody knows, and I just say it, I don't act on it, you all do. The hardest time to buy is when it's the worst, when the pain is the most acute, when the uncertainty is arguably the greatest. Scott, if you think that in the long run we're going to be better off and that we've already come down.
- [12:49]
Joe Terranova
Enough, sorry, you saw me jumping in on you there, because it's a great point. It's like one of the biggest points I make with clients. This is why you don't market time. I can't say this anymore. Clearly, getting the exit right is easy. Walking into 2025 and saying stocks are.
- [13:04]
Laura Castleton
Expensive, I'm going to get out.
- [13:06]
Joe Terranova
Sorry there was a cut in there. Okay. Just getting, getting out is easier. But getting in at a period like this, which is when usually maybe it's a, you know, buy the news on Wednesday, whatever it is, which is usually when the big days come, is hard to do. It's why I don't do it. So, Scott, even though I've been talking with concern earlier in this, in this session, you don't see me selling small caps, you don't see me selling Delta. I'm not going to try to do that because it is exactly the wrong time to be selling.
- [13:36]
Shannon Sokotia
So I don't know if I agree.
- [13:37]
Laura Castleton
What do you, what do you do to make the distinction between just saying, okay, we're just always going to buy the market anytime it's down because it always goes up, there's an answer versus where you began the show, saying, listen, I'm really concerned about what I see in front of me.
- [13:52]
Joe Terranova
Look, I am concerned and I'd be a fool not to be concerned. But the answer, the answer to your question is you have to be ready as an investor, not A trader. And I know you, Steve, you're an excellent trader, okay? As an investor, you have to be. You have to be ready to get through a downturn. And I've been saying this again and again and again. If you bought the s and P500, just the S&P500, in October of 2007, probably the worst time you could think of going into the great financial crisis, and if you held it through that and came out the other side and held it through everything, peripheral debt crisis, Fukushima, Covid, you'd have a nine and a half percent annualized return through to the current date. I mean, look, if you want to say that by market timing you can do better, that's great. But most people who market time do worse than that.
- [14:36]
Shannon Sokotia
There's a lot of difference. There's a difference between timing. So actually did very well in, you know, coming out of weight, but I didn't do very well until 2010 because I was short going into 2008. So I couldn't make the turn. I flattened out, but I couldn't make the turn. And the reason why I was short, because so many things were going on. Right. It just wasn't one event to make my point before. So there are some time. It's not called market timing. It's called preservation of capital. It's called controlling risk. So the market is now. It's been drunk on the Fed put for years and years. As a matter of fact, for a lot of years. And most of the years that a lot of people have been investing in the market, the Fed's in a different position. Okay, Fed's in different position because inflation going up and going up quite a bit is a real threat now, you know, Shannon can talk appropriately about, okay, we'll pay less, you know, in debt costs, federal government. But I would doubt that anybody I know has incumbents. My thinking that's taken that. How much are we paying, you know, to pay our loans, essentially federal government. How is that influencing my investment case? It hasn't at all. So to say it will affect it now is just. It just poppy.
- [15:54]
Scott Wapner
What about. What about the idea that the most powerful person on the planet, Right. Knows it, knows that he can flip the switch at a moment's notice.
- [16:10]
Shannon Sokotia
I think we're past the point in time where the market responds positively to that. And I think you're giving.
- [16:16]
Scott Wapner
What do you mean? Like if he.
- [16:18]
Shannon Sokotia
I think he's done it too many times.
- [16:19]
Scott Wapner
What do you mean? If there was a. If there's. If the tariffs, these reciprocal Tariffs are in flux, right as Megan Casella was reporting at the White House. What happens if they just aren't as punitive as everybody expects? What happens, what happens if the tariffs are more temporary than permanent? What happens if we start focusing on the good stuff stuff the deregulation and the tax cuts. You don't think the market's going to respond in an instant to that? And you don't think the President knows that?
- [16:48]
Shannon Sokotia
No, I first I don't know what he knows, what he doesn't know. Okay. So as I say, you're giving him more credit than I am. It's not Democrats, not Republican. It's just facts about what's going on. 200% tariffs one day later in the afternoon. No, just a joke. So when you take again it's not one isolated. So if there are one switch to turn on and that switch turns on for the rest of his term, meaning that no tariffs etc. Etc. Then buy it. Buy it with impunity. However, that's not what we're seeing. You don't think that what happened with signal feeds into investor confidence? You don't think what happened with Waltz feeds into investment confidence? You don't think what's happened with the third term feeds. All this feeds into Side point is.
- [17:30]
Scott Wapner
I just think clear. I think that tax cuts and deregulation and trying to get the deal market open feeds into it more.
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Shannon Sokotia
I don't.
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Scott Wapner
If you put them all.
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Shannon Sokotia
I don't because I think it's a very short term phenomenon.
- [17:44]
Joe Terranova
You have to make.
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Shannon Sokotia
Let me finish it. I think that the uncertainty stays, the uncertainty with entitlement stays, the uncertainty with Medicaid, Medicare stays. So you can't clear all that up and then you've got midterms which virtually every president loses the midterms. So that'll be a whole different issue to reverse some of this stuff. I don't see how regulation getting rid of it really helps. It's not going to help the oil industry, it's not going to help the banks.
- [18:10]
Scott Wapner
Why is it going to help the banks?
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Shannon Sokotia
Well, it will help the banks terms of buying back stock and that's my bet. But it's not going to help the banks in terms of them deciding and help is the wrong word. They're not going to decide we're going to open up our credit underwriting standards and make them lower.
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Scott Wapner
No, but they probably be able to the lend more. There'll be a more open and engaged deal market. What do you mean they won't? If they see an opportunity they're going.
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Shannon Sokotia
To oh I think for the high quality credits that they will lend more but we've seen this cycle and loan credits have loan, you know lending have been okay in the environment but I do believe again that we will maintain high interest rates.
- [18:49]
Scott Wapner
Let's, let's kick around the idea also that you know the Nasdaq the small morning was horrific.
- [18:56]
Laura Castleton
Yes.
- [18:56]
Scott Wapner
It's still ugly. It's just not as horrific as it was. Nasdaq's been down 10% in one month. Okay. You haven't seen that in a long time in video. Is looking at a new closing low on the year Kramer's charitable trust is selling Alphabet. They did it at the open today because of competition in the search space from the chat GPT. The Gemini's the Grox quote Google search business makes up more than half of the company's total annual revenues is the main source of its profits. If there's long term secular pressure here, which we think there is, we do not want to own that stock. They obviously they had a more than 100% gain in it so they see an opportunity to take some profits to price target gets lowered there. Tech holds the key right now, don't you think?
- [19:40]
Laura Castleton
Absolutely. Tech holds the key. And if you think about where the SMH is right now relative to the August lowest, only about 3 or 4% higher. The same can be said about Alphabet, 3 or 4% higher. So look, I think setting the expectation for this year, I think the environment that we're in, you want to call it chaotic, volatile, a series of palpitations. I just think overall in understanding where we are, it's going to be a lot of the S and P looks like it's 5% higher. The S&P looks like it, it's 5% lower. And at the end of the day if you're chasing beta, if you're worried about the S and P, I think you're going to be very disappointed because I do think the magic seven are going to significantly underperform the other 493.
- [20:20]
Scott Wapner
The hedge funds are betting on that. I could tell you that last week, according to some data from Goldman Sachs, his prime book hedge funds last week ditched tech at the fastest pace in six months and the second fastest in five years. So there obviously is a de risking as it relates to these stocks. My I guess question is if you lose this and you continue a narrative of chaos, weak economy, possible recession, blah blah, blah, you can't possibly tell me that the rest of the markets, the Broadening trade is going to work. So what do you got? What do you have?
- [20:58]
Joe Terranova
Well, I think you're exactly right, Scott and I think so I'll go to your premise. I don't think you are going to lose this much more. More than you already have.
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Shannon Sokotia
Obviously.
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Joe Terranova
You already have. Look, many of us you talked about the hedge fund and we know that the hedge fund community had crowded trades into Mag 7. We saw it last August when the yen carry unwound. We heard about Millennium about a month ago. Concentrated, you know, when concentrated positions needed to be unwound for whatever reason, risk was coming down. That's where they went. But where I have more of an insight is into the private individuals, the retail investor and let's face it, after two years of mega gains in these mega cap stocks, many of them walked into 2025 saying few I made it, let's lighten up a little bit. I do think there is a little bit of just good old fashioned profit taking. And some may say if you look at Nvidia as a bellwether, okay, it's now only up 17% over the last 12 months. But over the last three years annualized 56%, five years 77%. There are major profits. People are a little worried right now. Some people are taking money out of the market. Even though that's not my call.
- [22:00]
Scott Wapner
There are bunch, as I said, it's working on a new closing low. It's at 105. It's down another 4% today by the way, Jefferies today, Shannon took the ax to tech targets across the board. Microsoft to 500 was 550, Meta to 725 was 810. Amazon to 250 was 275, Alphabet to 200 from 235. And they did the same for some other software names like Snowflake, Adobe and Salesforce. But the point is like there's a, there's a reality check going on from, you know, I don't know, hedge funds, strategists, retail, kind of everybody.
- [22:39]
Steve Weiss
Yeah, I guess the question I have Scott is, you know, do you think those price targets are being brought down because of a growth scare in the overall economic picture? Are those price targets being brought down because there is, you know, a question about capital allocation and the expansion of AI monetization to other companies? I think that's really the question.
- [23:00]
Scott Wapner
Earnings growth slowing.
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Steve Weiss
So if you're telling me is right, but is this the, is that the bellwether then for the rest of the market? I mean, I guess that's what you're saying is like, okay, that these are actually becoming down to more naturalized levels and perhaps like setting a different foundation for earnings growth. That to me doesn't indicate that there aren't opportunities in the other sectors, by the way, where both of which are actually positive this year. Financials. Financials, Health care. Both, both. Both positive year to date outside of the US Positive year to date. Em, Germany, uk, Japan. I mean, we're talking about, you know, this, this death knell if you're AN S&P 500 investor. Yeah. If you're in the passive benchmark, it's pretty hard right now because of the concentration. But if you've been lightening up to Jim's point and you have exposure in any, almost any other sector in the S&P 500 year to date, Scott, you're in positive territory.
- [23:59]
Scott Wapner
Fair point. I mean, yeah, staples are up 4%. I know energy has gotten a big lift. Health care, etc. More defensive areas of the market, there's no doubt about that. Speaking of, you know, the outside the US Trade, it's this what happened to US Exceptionalism idea. Is it still on the table? Many people think that the outside the US is just getting started. Like Citi, which talks about inflows into the European markets, that there's plenty of room for rotation further into Europe.
- [24:33]
Laura Castleton
Well, the composition of the European market is not tech heavy. We're talking about the tech industry right now evolving from two years of significant outperformance to a period of underperformance. And that's what I see in front of us. I see that for 2025. So it's only natural that you're going to look in other geographic areas and find markets that are not tech heavy, that are more focused on financials, more focused on other industries and they're going to perform.
- [25:02]
Scott Wapner
You didn't even go through that. You didn't even mention the trade that you, you made at the top of the program to reflect your more negative view of buying more tlt, assuming that rates are going to continue to move lower.
- [25:12]
Laura Castleton
I said this, I said this to you a couple of weeks ago. And you said to me, really, so far, I think it's the year of the bond. I really do. And I think when you're talking about defending, the first thing that you want to look at is over ownership of bonds, whether it's taxable, fixed income or treasury itself. I think we are about to learn in the upcoming earnings season that there has been an effect from the volatility we experience in the first quarter. And I think that comes in the form of Capex pulling back. I think Capex intentions are not going to be as aggressive as they were. We've heard from companies like Wal Mart, Costco and others. They're building inventory. You have to be concerned that if the economy continues to contract further that they're going to be stuck with that inventory. So I don't, I don't understand how guidance can be overwhelmingly optimistic in the upcoming quarter.
- [26:02]
Scott Wapner
Guidance going to be bad?
- [26:03]
Laura Castleton
I mean, guidance is going to be bad. So if guidance is going to be bad, I think that's going to put pressure on the treasury market. And to your point earlier, I think the administration clearly believes that we are in an economic detox period, cleaning up from what they believe was an economy that wasn't in the right place.
- [26:23]
Scott Wapner
What is their true pain threshold? We're not, we don't know that yet. Was it 10% down? Maybe not, I don't know.
- [26:30]
Shannon Sokotia
But they can't, they can't control what the pain threshold is and what the outlook for CEOs will be. So, for example, go back to Google. We talked about search searches. It's not a secret, it's not today's news. They've been losing share in search. But the first thing that CEOs do, one of the first things, they look to hold costs steady before cutting. And that will impact enterprise spending, that will impact cloud spending. So you'll have a double negative with Google, you'll have the negative with Amazon, you'll have negative with Microsoft where they'll come out and say cloud growth, which had just recovered, really last two quarters, last two quarters that was reported is going to decline again. You know, I'm absolutely convinced of that because that's an easy lever to pull. So that's another reason to hit tech.
- [27:16]
Scott Wapner
Let's take a quick break. Coming back, we will do our calls of the day. And coming up later, we have our committee quarterly report as well. Winners, losers, the themes you need to know about. We'll do that later.
- [27:36]
Laura Castleton
Our state has changed a lot in the last 140 years. We know because Multicare has been here guided by a single making our communities healthier. That comes from making courageous decisions, partnering with local communities to grow programs and services and expanding health care access to those who need it most. Together, we're building a healthier future. Learn more@mycare.org.
- [28:08]
Scott Wapner
Explore the world's hidden wonders.
- [28:10]
Laura Castleton
On the Atlas Obscura podcast.
- [28:12]
Scott Wapner
A village in India where everyone's name is a song.
- [28:16]
Laura Castleton
A boiling river in the Amazon, a spacecraft cemetery in the middle of the ocean.
- [28:22]
Scott Wapner
Every day, the Atlas Obscura podcast will.
- [28:25]
Laura Castleton
Blow your mind in 15 minutes.
- [28:28]
Scott Wapner
You can find it on the SiriusXM app Pandora or wherever you get your podcasts. And don't forget to follow the show.
- [28:35]
Laura Castleton
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- [29:26]
Scott Wapner
All right, welcome back. Let's do some calls, Joe. As JP Morgan points out today, the fastest momentum unwind in some 40 years. Two worth. Two years worth of gains. Bye. Bye. When I think of momentum, I think of names like the Trade Desk. Target cut to 72 from 101. Wells still likes it. They reiterate overweight, but the Stock's at a 52 week low. Thoughts?
- [29:51]
Laura Castleton
We own it in the Jyoti ETF. I don't understand how someone could have an overweight on this. I'm sorry. And we spoke about this one month ago after they reported earnings, it fell from 120 to 80. At that time, Josh and I discussed it with Brian Belsky when it was 80. I said, if you have a risk management strategy, you have to move out of the name. I understand.
- [30:10]
Scott Wapner
You put it on a cell now.
- [30:12]
Laura Castleton
I can't get out of it. I can't get out of it.
- [30:14]
Scott Wapner
I know you can't.
- [30:15]
Laura Castleton
I can't get out of it.
- [30:15]
Scott Wapner
I know you can't, but you could tell the viewer to put a sell on.
- [30:18]
Laura Castleton
Okay, so, okay, so we're stocks down 50 something percent. Yeah, it is. And how low is low? It could keep going lower. So when we had the conversation in February when it fell from 120 to 80, everyone said, no, no, no, you can't sell it here. Really? Okay, now it's down to 54. I can't sell it here. What if it goes to 45 or better yet, what if it goes to 50 and it just basically stays sideways between 55 and 60 while the rest of the market carries forward higher? And I have the opportunity cost of missing out on Something else loving on.
- [30:49]
Scott Wapner
That list to top pick today at B of a 580is the price target. You have a new short seller, Muddy Waters. Add that to the list of shorts in the name. Speaking of stocks that have gotten destroyed, what about that one?
- [31:02]
Laura Castleton
So last week someone asked me the question about Applovin. Well your, your strategy went into app love and when did you do it and at what a price? We did it last July at $76. And I'm sitting here saying to myself, are we literally going to give back the entire profit on that before we're able to get out of it? And to put it into context. So there's AppLovin264. Do you know the 200 day moving average is down to 217. That's how much further this stock can actually fall. So I'm not going to sit here and defend the fundamentals. It was the technicals, it was momentum that took us into this. And by the way, just one other point on momentum itself. Momentum is something that you measure in the near term and in the longer term. And if you think about where we are in the near term right now, let's take as an example a 20 day moving average.
- [31:47]
Scott Wapner
Right.
- [31:47]
Laura Castleton
Because that's a good reflection of the near term. Right now 38% of the S&P 500 stocks are above their 20 day moving average. At the low in March that figure was 20% percent. So that kind of just tells you I don't know if we're necessarily in the place where we're completely washed out just yet. On momentum as the factor.
- [32:10]
Scott Wapner
Yeah, I mean there are, there are a ton of names in the market that are down well more than 20%.
- [32:15]
Laura Castleton
Deckers.
- [32:16]
Scott Wapner
Why people like Josh made the case the other day that don't talk about the bear market as if it's something that we might get into. It's already here for a great portion of names within the market.
- [32:28]
Laura Castleton
And that's why, look, I want to own equities. I will own equities, but I'm going to own equities. Focusing on number one, are they quality? Number two, I'm going to be a little bit cautious. I'm going to be a little bit defensive because the only momentum I see in front of me is in the cautious nature.
- [32:44]
Scott Wapner
I got a name on that list. Weiss. Netflix right outperform Evercore. 1100 is the price target. That's what they say in the event of a recession. Netflix is 799 AD supported offering might be the single greatest entertainment value in the land. In the land.
- [33:02]
Shannon Sokotia
Yeah. Look, I haven't really touched my Netflix lately. I still think it's a unique asset with and they're a winner in the category. But obviously it's not immune from going down. So it has gone down. It's down, you know, almost 10%, but less than of all the other tech stocks you think of. So I still like it. I'm not adding to it here. There's some point I will add to it. But right now, frankly, I hate losing money so much. I'm in Joe. I'm in Jomo mode, not fomo. So I'm there for the joy of missing out. To quote my friend Ali Weisberg, he coined that. I love it. That's where I am. So, look, I Hope gets to 1100, hope it gets there tomorrow. I just don't think it's likely.
- [33:44]
Scott Wapner
All right. Bertha Coombs says the headlines for us this hour. Hi, Bertha.
- [33:47]
Laura Castleton
Hi, Scott. The bodies of three of four American soldiers who went missing in Lithuania last week have now been found. US Army Europe and Africa public affairs.
- [33:59]
Steve Weiss
Office said today that search and recovery.
- [34:02]
Laura Castleton
Operations for the remaining fourth soldier are ongoing. Soldiers were conducting tactical training in the country when their armored recovery vehicles sunk in a heat bog.
- [34:14]
Scott Wapner
A trial is set to begin today.
- [34:16]
Laura Castleton
Over the $600 million class action settlement connected to the 2023 train derailment in East Palestine, Ohio. Norfolk Southern says the rail car owner.
- [34:28]
Steve Weiss
And the chemical manufacturer should share the.
- [34:30]
Laura Castleton
Cost of the settlement, claiming that they are partly responsible for the crash. The trial will not affect the terms of the settlement itself, but rather who writes the checks. And in California, a rapidly growing fire has forced thousands to evacuate. According to Cal Fire, a wildfire in eastern California that ignited on Sunday has spread to at least 1250 acres. Now, the National Weather Service has said a high wind warning for the area today, which could further spread the fire.
- [35:06]
Steve Weiss
Hate to see that.
- [35:06]
Laura Castleton
Scott, back to you.
- [35:08]
Scott Wapner
All right, Bert. Thank you. Bert comes straight ahead. Active investing, picking up steam this year. Papa follows that action in today's ETF Edge Halftime. We'll be right back.
- [35:28]
Laura Castleton
Explore the world's hidden wonders on the Atlas Obscura podcast.
- [35:33]
Scott Wapner
A village in where everyone's name is a song.
- [35:36]
Laura Castleton
A boiling river in the Amazon, A spacecraft cemetery in the middle of the ocean.
- [35:42]
Scott Wapner
Every day, the Atlas Obscura podcast will.
- [35:45]
Laura Castleton
Blow your mind in 15 minutes.
- [35:48]
Scott Wapner
You can find it on the Sirius XM app, Pandora, or wherever you get your podcasts. And don't forget to follow the show.
- [35:55]
Laura Castleton
So you never miss an episode. Check out the all new CNBC Sport podcast where sports business and investing collide from media deals to team valuations, private equity moves and more. Catch the biggest business stories on the CNBC Sport podcast. Listen on your favorite platform. Thank you.
- [36:27]
Scott Wapner
All right, we're back. Papa Zani has today's ETF edge. Bob, we're talking about active management today.
- [36:32]
Laura Castleton
Yep, all time record. Scott. The market volatility this year has corresponded with a rise in active ETFs. Last week, active ETF assets under management surpassed $1 trillion. That's the first time ever. It's now about 10% of ETF assets. Let's talk about that with Matt Bartolini. He's head of Spider America's research at State Street. They run the world's largest ETF. That's the Spider S&P 500. Matt, good to see you. 30% of the inflows into ETFs this year have been into active funds. This is another record. Is this rise in active stock ETFs in general correlated to the recent volatility in the markets or is there something else going on?
- [37:10]
Scott Wapner
I think it's a little bit of something else.
- [37:11]
Laura Castleton
I think it just speaks to the versatility and flexibility of the ETF structure.
- [37:16]
Scott Wapner
And the type of strategies that can be provided now in this type of format.
- [37:20]
Laura Castleton
Because it's really not a lot of just sort of deep rooted fundamental active strategies.
- [37:25]
Scott Wapner
There's a lot of different types of approaches within the active ETF market, like.
- [37:30]
Laura Castleton
Ones that can manage volatility, like ones that can seek higher income opportunities, like ones that are more cash plus type vehicles. So I don't think it's a result of the market volatility. I think these are secular changes and trends that we've seen play out over the last few years and are now being accelerated.
- [37:46]
Scott Wapner
This year more investors are becoming comfortable in using active ETFs in their portfolios.
- [37:51]
Laura Castleton
So when I think of active management, most of us do I think of old fashioned stock picking like Cathie Woods Ark Fund. But you're saying that's not entirely what's going on. There's other kinds of active management, people seeking protection against losses or people seeking income, for example. That's considered active management, right? Yeah, they're using an active construct. So filing under exemptive reliefs that give.
- [38:14]
Scott Wapner
Them the ability to be active for.
- [38:16]
Laura Castleton
That flexibility, or they're doing it because.
- [38:19]
Scott Wapner
It maybe is a better way to.
- [38:20]
Laura Castleton
Approach a certain type of marketplace.
- [38:22]
Scott Wapner
So for instance, the number one category.
- [38:24]
Laura Castleton
That has had the highest amount of flows this year is the ultra short bond category. That's a category that's trying to eke out more returns over cash. And you can actually find some real.
- [38:34]
Scott Wapner
Good inefficiencies by using securitized products and.
- [38:36]
Laura Castleton
Not just owning sort of your T bills or whatnot. So the ability to use active in some markets is because of the flexibility.
- [38:43]
Scott Wapner
And then again, some of these constructs.
- [38:45]
Laura Castleton
They'Re really rules based and they're only being active in terms of when their.
- [38:49]
Scott Wapner
Trading strategies would kick in. So it's not that sort of similar.
- [38:52]
Laura Castleton
Historical, you know, 30 stock portfolio active that a lot of people think about. So there's, this is a good point, big inflows into active fixed income because investors are flocking to these ultra short funds. Now is this because the yields are in the 5% range? I mean, what, why, why is there suddenly a big interest in ultra short active management? Well, this is where there is a.
- [39:13]
Scott Wapner
Little bit of recency bias to the market volatility.
- [39:16]
Laura Castleton
Like you mentioned on the first question.
- [39:17]
Scott Wapner
I think you're starting to see some.
- [39:19]
Laura Castleton
Folks go into that space just to.
- [39:21]
Scott Wapner
Sort of hide out during this period.
- [39:22]
Laura Castleton
Of pretty sizable market volatility within equities where a lot of investors are also have a lot of concentration into.
- [39:29]
Scott Wapner
So I think part of it's that also.
- [39:30]
Laura Castleton
But to your point, your yields are looking pretty good at this point as.
- [39:33]
Scott Wapner
Well in that 5% range.
- [39:35]
Laura Castleton
And that active sort of flexibility can maybe get you a little bit more from that perspective. Okay, much more coming up on how to play active ETFs. That's coming up 1:10pm Eastern Time on ETF Edge. Todd Sohn, head of ETFs for Strategus Nature Race from the ETF Store, will lay out the active ETFs in the fixed income and equity space with the greatest inflows this year. We'll name all of them. That's coming up on ETF edge.cnbc.com Scott, back to you.
- [40:00]
Scott Wapner
Good stuff, Bob.
- [40:01]
Laura Castleton
Thanks.
- [40:01]
Scott Wapner
Look forward to that. Coming up, we have the halftime quarterly report. What's working, what's not. It's been a volatile month, as you know. We'll document it next. All right, last trading day of the first quarter, we want to go through some winners and losers. Let's do winners, let's do some. Alibaba's up 54% in the quarter. Amgen's up 20 and Uber's up 19. What do you think? So the best name of that group, the one you have the most confidence in, as we turn the Page here.
- [40:36]
Laura Castleton
I like what I'm seeing from the healthcare sector. I want to be specifically clear on something. I am not bearish. I am cautiously bullish and that's the reason why I own some Treasuries, some taxable fixed income and I'm going to other places, not technology like health care.
- [40:52]
Scott Wapner
So you don't sound cautiously bullish at all. But anyway, go ahead. Okay, you sound cautious.
- [40:56]
Laura Castleton
I'm cautious for sure. But I want to own stocks. It's just the type of stocks that I want to own. I don't want to own the stocks which are on the losers list like Zoom, like Doc.
- [41:07]
Scott Wapner
You saw like Amazon, Amazon.
- [41:09]
Laura Castleton
Unfortunately look, I bought Amazon two weeks ago at 194. I wish I didn't buy it. I bought it personally, okay? I wish I didn't buy it. I'm not going to get out of it now because the ETF owns it. We'll see what the ETF does it, what the rules affect at the end of April and I'll do something at that point. But I'm not going to buy it two weeks ago and then sell it ahead of that.
- [41:28]
Scott Wapner
Jimmy, I mean Oracle and Adobe have not worked in the quarter. Berkshire has which we talked about, we know about energy and Exxon has an MP. Materials is up 50 some odd percent. But what about the software names Oracle and Adobe? I mentioned earlier about Jefferies taking a bunch of price targets down in that group.
- [41:45]
Joe Terranova
I think Oracle is caught up in the whole AI mega cap tech sell off. I think that at its valuation and for what it does, I really like it. I said this on air about a week ago that you know it's a hybrid here you do get the AI trade but you also get the basic software, the database software that goes with it. So I like that on Adobe. Look, I continue continually scratch my head on why this stock outperforms on the earnings call and then just gets sloppy afterwards. I see tremendous value here. I don't think the competitive picture is as dire as people say. I'm going to stick with it.
- [42:17]
Scott Wapner
Weiss Health Care names in your book are up. The space has done well. Vertex, United Health, we know about Vertiv, right? The momentum names have gotten crushed. Mega caps like Alphabet have two Taiwan semi chips have been in a tough spot. But what about Vertex and unh, yeah.
- [42:32]
Shannon Sokotia
Vertex, I'm not up. Mark may be up on it but I'm not up on it. I bought it late. Unh. Look to me that's just, that's the gold standard of being a defensive company. Now there's obviously a regulatory cloud above it, but I still think the stops stocks inexpensive. I do believe they do good things. I mean I've had claims tonight as well. But overall they provide a great service which is insurance, medical insurance. So I'm still there.
- [42:57]
Scott Wapner
Quick break. Santoli, he'll give us his midday word next. Senior markets commentator Mike Santoli here at Post nine for his midday word. We're searching for something within this market to sort of hang on to, right?
- [43:19]
Laura Castleton
Yeah, for sure. And you know, it's a matter of whether, you know, we keep thinking we might have gotten one of these moments where it's kind of so bad, it's good so much of it. The market market is down. Sentiment is so sour. You know, it'd be interesting to see once you have a full day's worth of trading data to say, okay now we're going to figure out if this retest of the lows from this morning.
- [43:38]
Joe Terranova
Was on less intensity, whether it really.
- [43:41]
Laura Castleton
Does fit the description of what you'd.
- [43:43]
Joe Terranova
Want to see for a revisit to an old low. I do go back to what we.
- [43:47]
Laura Castleton
Were saying after two and a half weeks ago, the s and P500 goes down to 5,500 bounces from there, which is to get it below there sustainably, you probably needed the hard data to get a good deal worse in a hurry. We'll see if that's still the case. So I think you could respect exactly how the market responded here. You got this opening flush on a Monday. The thing is it's really defensive stuff leading. It's low volume that's up today. The NASDAQ 100 still down 1%.
- [44:16]
Joe Terranova
So the broken stuff has not been.
- [44:18]
Laura Castleton
Repaired at just that there's an offset within the market.
- [44:20]
Scott Wapner
I mean the jobs report is obviously beyond the tariffs of April 2nd is looming really large. I hard pressed to think that's going to be some great report. I mean given all the uncertainty that everybody's been talking, you would think if.
- [44:34]
Joe Terranova
It is, it would be kind of.
- [44:35]
Laura Castleton
Dismissed as fluky and we'll get jolts on Wednesday, maybe set up the the Friday number. But yes, the market craze, reassurance, the economy's hanging in there. We'll see if we get it.
- [44:44]
Scott Wapner
Yeah, I'll see a closing bell. It's Mike Santoli. We're back with finals. Next biggie coming up. Closing bell, 3:00 Eastern Time. That man right there, Tom Barkin, the Richmond Fed president is going to join me for a CNBC exclusive interview Steve Liesman's going to be here, too. Looking forward to that. Chris Verone, Stacy Rasko, John and Chris Heisey going to join as well. Shannon, what do you got for your final trade today?
- [45:16]
Steve Weiss
Although not one of the seven sectors that's positive this year, industrials are only down a little bit and offer some opportunity in a cyclical rebound.
- [45:23]
Scott Wapner
All right, thanks so much for that. Steve Weiss to your Treasury.
- [45:26]
Shannon Sokotia
It's a good place to hide. I agree with Joe's view that rates are going to go lower.
- [45:31]
Scott Wapner
Okay.
- [45:31]
Joe Terranova
Farmer Jim, I'm with Shannon on industrials and defense stocks are part of the industrial industrial sector. Lockheed Martin. I feel at this point there's an awful lot of bad news priced in. And I'm also very happy to see Joe's final trade because I was debating whether I should use that. Tell us, Joe.
- [45:45]
Laura Castleton
Well, energy prices about to be higher for the year. Figure out why. I'll leave that to all of you. That's difficult to do, but ExxonMobil, that gets you the energy exposure that you need.
- [45:55]
Scott Wapner
You got a quick comment on that?
- [45:57]
Joe Terranova
Go where the strength is clearly there. It's 7% off at all time high.
- [46:02]
Scott Wapner
That is a strong sector. All right, I'll see you on closing bell, 3:00. The exchanges now, you've been listening to CNBC's halftime report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.
- [46:19]
Laura Castleton
All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of cnbc, NBC Universal, 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 andor 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 halftimereportdisclaimer Explore the world's hidden wonders on the Atlas Obscura podcast.
- [47:04]
Scott Wapner
A village in India where everyone's name is a song.
- [47:08]
Laura Castleton
A boiling river in the Amazon, a spacecraft cemetery in the middle of the ocean.
- [47:14]
Scott Wapner
Every day the Atlas Obscura podcast will.
- [47:17]
Laura Castleton
Blow your mind in 15 minutes.
- [47:20]
Scott Wapner
You can find it on the SiriusXM app, Pandora, or wherever you you get your podcasts. And don't forget to follow the show.
- [47:27]
Laura Castleton
So you never miss an episode.