Rising Rates and the Road Ahead for Stocks 5/15/25

Summary

Halftime Report: "Rising Rates and the Road Ahead for Stocks" (May 15, 2025)

Hosted by Scott Wapner and featuring top investors from CNBC's investment committee, the May 15, 2025 episode of CNBC’s "Halftime Report" delves deep into the current market dynamics influenced by rising interest rates, tariffs, inflation, and their collective impact on the stock market. The discussion encompasses a comprehensive analysis of economic indicators, corporate strategies, and political influences shaping the investment landscape.

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1. Market Overview

The episode kicks off with Joe Terranova setting the stage by highlighting the current market sentiment:

“We're mostly in the green. NASDAQ is red. And that a sight to behold because it hasn't been red very often of late. It's nicely above 19K. And you heard Carl say over 5,900 again on the S and P.”
[00:49] Joe Terranova

This juxtaposition underscores the mixed performance across major indices, prompting a deeper exploration into underlying factors.

2. Impact of Rising Interest Rates

Josh Brown expresses growing unease regarding the trajectory of interest rates:

“We don't have companies fighting for talent, we don't have these incredibly rising rents or wages or used car prices or some of the things that were the leading drivers of the inflation problem. We just survived. And it's just this kind of trade war uncertainty.”
[07:00] Josh Brown

He emphasizes the uncertainty surrounding future rate hikes and their potential dampening effect on stock valuations, particularly questioning the sustainability of the current market multiples.

3. Tariffs and Inflation Dynamics

Carl Quintanilla provides an insightful analysis of the recent Consumer Price Index (CPI) reports:

“The Fed doesn't actually cause that type of inflation. The tariffs caused that type of inflation and everyone knows it. And the Fed obviously can't fix it either.”
[02:08] Carl Quintanilla

He argues that tariffs, rather than Fed policies, have been a primary driver of recent inflationary pressures. Furthermore, Quintanilla anticipates that ongoing tariffs may lead to disinflation once their immediate effects subside.

4. Corporate Responses to Tariffs

The discussion shifts to corporate strategies in response to tariff-induced cost pressures, with Jenny Harrington analyzing Walmart's recent announcements:

“Today we heard, well, guess what? Over the next month prices are going to begin to rise. That was much different. So I think that rattled shareholders.”
[05:50] Jenny Harrington

Harrington contends that while companies like Walmart are maintaining market share through strategic pricing, the broader implications for profit margins and earnings outlook remain a concern.

5. Stock Market Valuations and Momentum

Joe Terranova questions the sustainability of the current market rally:

“Do we have the momentum to continue to go higher?”
[06:12] Joe Terranova

In response, Josh Brown voices skepticism about the market's current valuations:

“When you have higher than average rates that we're at and massive uncertainty, that to me does not support 21 times.”
[14:05] Josh Brown

Conversely, Carl Quintanilla highlights the resilience of major tech companies:

“It happens because of those earnings results. Now, what could be the monkey wrench is if all of a sudden you start getting disappointments on the employment data.”
[09:28] Carl Quintanilla

This exchange underscores the tension between optimistic earnings reports and underlying economic uncertainties.

6. Political Influences: Apple and Tariff Policies

A significant portion of the episode focuses on Apple's strategic shift towards India and the ensuing political friction with former President Trump. Steve Kovac elaborates on President Trump's public criticism of Apple's manufacturing decisions:

“Tim Cook smartly built the supply chain over in Asia to be maximally efficient from the raw materials and the processing of those materials to where the devices themselves are assembled.”
[27:10] Steve Kovac

This move is scrutinized for its implications on tariffs, supply chain efficiency, and investor sentiment towards Apple, which has seen underperformance relative to its peers.

7. Investment Committee Recommendations

The investment committee discusses several stock moves, highlighting both opportunities and risks:

• Cisco: Jim Leventhal and Josh Brown express optimism about Cisco's strategic positioning and share buyback programs as mitigating factors against broader market pessimism.

  “It's a stock that if you look at the chart you're going to say, is there something wrong here? So look, I am building the position because I see value there.”
  [38:24] Jim Leventhal

• Eli Lilly: Replacing UnitedHealth, which is embroiled in a DOJ investigation, Jenny Harrington confirms the decision to divest from UnitedHealth due to legal uncertainties.

  “We sold UNH out of the Momentum Fund basically 18 months ago.”
  [25:26] Jenny Harrington

• Toast: Carl Quintanilla and Josh Brown highlight Toast's robust earnings growth and market dominance in the restaurant technology sector.

  “They're now at 140,000 restaurants and other customer locations. They basically have the whole industry in a chokehold.”
  [37:10] Carl Quintanilla

• Ethan Allen: Emphasized for its strong dividend yield and North American manufacturing focus, making it resilient against international trade tensions.

  “Ethan Allen trades at 13 times earnings, has a 5.9% yield and has been on my dividend income screen forever.”
  [39:16] Josh Brown

8. Private Investments in Retirement Plans

The committee debates the introduction of private credit, equity, and real estate investments into 401(k) plans. Carl Quintanilla acknowledges the potential for higher returns but cautions against the high fees associated with these alternative investments:

“The bad part is I think for the time being the fees will still be so high and the types of funds that get in will not be the very top echelon funds catering to small investors.”
[42:52] Carl Quintanilla

9. Gold as a Hedge Against Fiscal Policy Risks

David Einhorn's bullish stance on gold is analyzed, with the committee recognizing gold's role as a hedge against aggressive U.S. fiscal and monetary policies:

“Gold is about the confidence in the fiscal policy and the monetary policy.”
[44:32] Jim Leventhal

Jenny Harrington recommends investing in tangible gold assets, such as Newmont Mining, over ETFs like GLD due to quality factors.

“We can't own GLD because of the quality factor. But Newmont Mining is the way we play it.”
[45:40] Jenny Harrington

10. Conclusion and Final Thoughts

The episode wraps up with a consensus on the nuanced market outlook. While certain sectors and stocks exhibit strong fundamentals and growth potential, overarching uncertainties related to tariffs, interest rates, and political influences temper bullish sentiments. The committee emphasizes the importance of diversification, strategic stock selection, and cautious optimism in navigating the evolving market landscape.

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Notable Quotes with Timestamps:

• “The Fed doesn't actually cause that type of inflation. The tariffs caused that type of inflation and everyone knows it.”
  — Carl Quintanilla [02:08]

• “When you have higher than average rates that we're at and massive uncertainty, that to me does not support 21 times.”
  — Josh Brown [14:05]

• “Tim Cook smartly built the supply chain over in Asia to be maximally efficient from the raw materials and the processing of those materials to where the devices themselves are assembled.”
  — Steve Kovac [27:10]

• “It's a stock that if you look at the chart you're going to say, is there something wrong here? So look, I am building the position because I see value there.”
  — Jim Leventhal [38:24]

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Key Takeaways:

1. Rising interest rates and persistent tariffs continue to inject uncertainty into the markets, potentially affecting stock valuations and corporate profit margins.

2. Corporate strategies, especially in tech giants like Apple and Cisco, are pivotal in navigating the current economic landscape, with shifts in supply chains and manufacturing locations attracting both opportunities and political scrutiny.

3. Investment strategies should focus on companies with strong fundamentals, strategic market positioning, and resilient business models to weather economic volatilities.

4. Alternative investments in retirement plans present both opportunities for higher returns and risks related to high fees and limited access to top-tier funds.

5. Gold remains a strategic hedge against aggressive fiscal and monetary policies, with tangible assets like Newmont Mining being preferred over ETFs for quality and reliability.

This episode of "Halftime Report" offers a comprehensive analysis for investors seeking to understand the intricate balance between macroeconomic factors and individual stock performances, emphasizing informed decision-making in a complex market environment.

Transcript

[Edward Jones]

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[Scott Wapner]

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[Carl Quintanilla]

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[Joe Terranova]

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. Carl, thank you very much. Welcome to the Halftime Report of Scott Wapner. Front and center this hour, the road ahead for stocks, how rising rates might impact what happens from here. We'll debate that and everything else with the investment committee. Joining me for the hour today, Josh Brown, Jenny Harrington, Joe Terranova and Jim Leventhal. We'll take a look at the markets today. We're mostly in the green. NASDAQ is red. And that a sight to behold because it hasn't been red very often of late. It's nicely above 19K. And you heard Carl say over 5,900 again on the S and P. You know, Josh, I know people are looking at rates. People I talk to are watching rates, you know, wondering how high they're going to go. Could be a problem for stocks. Chair Powell today at an event in D.C. talks about potential supply shocks. Everybody still watching the tariffs. Walmart was talking about price hikes. Retail sales barely rose last month. And yet the bias from these same people that I'm speaking with continues to be, you know what, stocks can, can still go up. Stocks can still go up from here for a while.

[Carl Quintanilla]

I think we just got a CPI report that might be the last of the team CPI reports. But I also think some of the weirdness that we'll see when we get the May number, for example, in the middle of June will be the type of weirdness that the market has historically looked. So we're going to have these like supply shocks for specific materials in certain industries. It'll be colored with anecdotal things alongside of the data. And the market's going to look at that and say, yeah, that's not great, but it's also not systemic. Rising inflation. It's not the fall of 2021 and the Fed probably isn't going to be put in a position where they have to act on it. The Fed doesn't actually cause that type of inflation. The tariffs caused that type of inflation and everyone knows it. And the Fed obviously can't fix it either. So that's where I land as far as like, is that the thing that the market has to worry about next? I actually don't think tariffs are inflationary. In the fullness of time, let's assume this 30% on China stays. And by the way, with a tweet, it could be gone tomorrow. But just hypothetically, I actually think that's a demand destruction machine and I think that ultimately you don't get incredibly high inflation as a result of that. You actually get disinflation eventually once you have those aberrant prints in the numbers themselves. So just looking, just looking at what we got, for example, on ppi, lower than expected month over month decline in trade services was the big reason why. Negative 0.5 month over month. So sequential, not year over year, trade services dropped 1.6%. So when you, when you understand the bigger picture, which is that we don't have companies fighting for talent, we don't have these incredibly rising rents or wages or used car prices or some of the things that were the leading drivers of the inflation problem. We just survived. And it's just this kind of trade war uncertainty. You realize this is not going to be a monster issue for the markets longer term. It might produce some scary days, but I just don't think that's the big problem right now.

[Joe Terranova]

Joe, you know, you, the tariffs, if anything, they scared consumers and are scaring consumers into changing their buying decisions. They bought, we learned from retail sales which barely rose, but they did rise in March. Why? Because people front ran what they thought the tariffs were going to be. And now on top of that, you're going to raise prices Wal Mart. And what do you think that's going to do to Josh's point to demand? Because Wal Mart today said that their price hikes could start later this month despite the deal with China. You own Wal Mart.

[Jenny Harrington]

I do. I thought the, the eco data today was the beginning of what we've been talking about, which is the deceleration in demand, a cooling for the economy. And I agree with Josh. I don't know necessarily that the casualty of persistent tariffs is a spike of inflation. I actually think it's margin compression for corporations and the risk is to the earnings Outlook. And I think we saw that and heard that today from Wal Mart. Look, I said yes, I think Wal Mart's $1 trillion company at some point, I believe it's a core holding. There was a lot of positive that was idiosyncratic to Wal Mart. E Commerce, very strong, long, okay. You had both revenue and profitability that was present this quarter. The problem was the commentary which was different than what we heard at the analyst day. The analyst day we kind of heard, well, okay, we're going to absorb a lot of the tariff cost.

[Joe Terranova]

We didn't hear that today.

[Jenny Harrington]

Today we heard, well, guess what? Over the next month prices are going to begin to rise. That was much different. So I think that rattled shareholders. Absolutely. I'm maintaining my position because I think they have market share and it's got the right type of market share to have in an economic environment that I think we're looking at the next 90 days which is one where demand declines.

[Joe Terranova]

Okay. So that sort of sets the scene for the market. Okay. The S and P Jenny is up more than 18% from its closing low on April 8, 25 day trading period. The index has only done that five other times going back to 1970. That big of a gain in that short of of time. Where do we go from here? Do we have the momentum to continue to go higher? We are but 4 plus percent from a new high on the S and P. For somebody who's been kind of cautious on the overall environment, I haven't heard from you, I don't think since last weekend's agreement to roll back the tariffs. What do you think now?

[Josh Brown]

So I'm more uncomfortable now than I was even last week.

[Joe Terranova]

How is that possible?

[Josh Brown]

Because. Exactly. Because of what you laid out. When, when everybody's positive, when everything looks good, that's when things might not be. When you might have topped out. So we're trading at 21 times. However you cut it, however you cut it, tariffs have brought more uncertainty into our world. Right. Supply chains are messed up and all the good numbers that we just saw come out in earnings. Those are all reflective of a world order that's stale. Right? That's three months ago. That world order is stale. Things are changing and so I don't know what lies ahead right now. I don't know. I don't know what's happening with interest rates. I don't know if we're going to be at 5% on the 10 year or 4%. I don't know what inflation is really going to do. Like we can Speculate, but we really don't know. So when you have, when you have higher than average rates that we're at and massive uncertainty, that to me does not support 21 times. But then when you ask me, like, what do I do? Well, here's the irony. Maybe I'm still fully invested, but I'm comfortable with my portfolio because it trades at about 13 and a half times. It pumps out a 5% plus dividend yield. So that brings me comfort because that's more certain and less risky on a valuation perspective than the broader market. And that's, that's, for me, a hard thing to reconcile. Like, how am I uncomfortable with the broader market but comfortable with what I'm in. But I don't love that. I don't love this market.

[Joe Terranova]

I don't see how you can be more negative today than you were last week. Just given the.

[Josh Brown]

I don't like rollback up so much.

[Joe Terranova]

The rollback of. That's a fair statement, by the way. The market is up a lot. Some suggest maybe, maybe too much. I mean, Steve Cohen yesterday at the SON conference said stocks could retest their April lows and still sees a 45% chance of recession. He also said when he was answering the same question, if you would have asked him a week ago, he might have given a different answer. Kind of. To my point, the trading environment seemed far different a week ago than it does today. Today, not despite the move in the market today.

[Josh Brown]

It just seems like a nonsensical return to the AI trade. Right? To what we had all of kind of 2024. It just seems like people have thrown out the fact that there are real risks, that it is a different world. And they're saying like, hey, let's just go back to what worked. I was listening to.

[Carl Quintanilla]

Is it nonsensical, though? Those are the, Those are the companies that comprise the bulk of the market cap in the S and P. And they had stellar not only earnings reports, but spending guidance.

[Joe Terranova]

They did.

[Carl Quintanilla]

They did. With the exception of Alphabet Guy and Tesla, they did.

[Josh Brown]

All right, let me rephrase. They didn't have stellar earnings reports. Given where some of their multiples are.

[Jim Leventhal]

Wait, wait, wait, don't.

[Carl Quintanilla]

Given the fact that it was Wednesday.

[Jim Leventhal]

I mean, something big happened this week. And don't lose sight of it. All right? Saudi Arabia Humane, the company that the sovereign wealth fund is putting together there, the spending that they're going to be doing on AI is actually tremendous. And I'm not somebody who drinks Kool Aid. All right, I did. We'll talk about Cisco later. But I listened to the conference call last night, and I can tell you it's not just Cisco. It's Cisco talking about working with Nvidia, working with others on hundreds of billions of dollars of incremental spending on AI on data centers in Saudi Arabia. And let's just face it, we weren't talking about that a week ago. It just wasn't anywhere on anybody's radar.

[Josh Brown]

But didn't you need to believe it's 100% true?

[Jim Leventhal]

But we just. It is true. It's true.

[Jenny Harrington]

We recalibrated back to the consensus expectation coming into the year for tariffs.

[Josh Brown]

Fair enough.

[Jenny Harrington]

30% was the number coming into the year. Everyone said, okay, the rate for China will be 30%. We're back to 30%.

[Carl Quintanilla]

So why shouldn't we met a Meta. Metta. Meta came out that. It came out and confirmed its spending plans for the year. So did Microsoft. And the big thing that you don't have is the reason to say the reason to say this. This more. This rally is a false rally. And it still might turn out to be. The Q is one of 25%. The S and P went up 18. So for those keeping score, a 25% rally in the NASDAQ is an incredible rally. And it doesn't happen randomly. It happens because of those earnings results. Now, what could be the monkey wrench is if all of a sudden you start getting disappointments on the employment data. I think that's the bigger risk than inflation, than interest rates. The unemployment data so far is not falling apart. And so long as people have jobs, this thing can continue to levitate. It's very frustrating. I was. I was as bearish as anyone on this desk in April. And then you know what happened? Meta comes out, Microsoft comes out, even Apple comes out. It's just not as bad as people thought it would be. You got an initial claims number today of 229,000. Right on the number as far as what the estimates were.

[Jim Leventhal]

And do you think I'm asking this literally? Do you think companies really want to let people go right now when the trade policy uncertainty, which you've pointed out, Jenny, is coming down? I think this is the point where companies are saying it could get a lot brighter. The fog. We talked about the fog, Scott. If the fog is lifting, companies want to have their employees in place. They don't want to let.

[Carl Quintanilla]

There was a big scary headline on CNBC.com and elsewhere about Microsoft's mass layoffs. Dude, they're laying off 6,000 people. 3% of their workforce. It was this huge splashy headline everywhere. Goldman Sachs lays off 3% of its people every year. Like the unemployment situation has not changed. And from my perspective, if we say we're in a consumer driven economy, if we say the consumer is 70% of GDP and that part of it is holding up, yes, I know there's trade downs. I know the lower income or more pressured by higher price. I understand all these things. Tell me when we get a shock to the labor market and I'll tell you when it's time to start saying all of this. These, all of these expectations are going.

[Jenny Harrington]

To fall apart to get back to where you want to, where you think the market should be to get there.

[Josh Brown]

What if we are to.

[Jenny Harrington]

No, you're not there. Because sentiment is not aligned with where prices, nor is positioning. And that's why the Nasdaq's up 25%. Because Nasdaq was the casualty of the market selling that we saw earlier. Everyone moved to the sidelines in those names. Now you're rebuilding positions. You're gradually, gradually getting sentiment up to where it needs to be for you to realize the reality of where you think the market is. We've got to be sitting on the desk and we say, okay, now positioning's full. Sentiment is overwhelmingly bullish.

[Joe Terranova]

Bullish.

[Jenny Harrington]

No one believes we're going back to the place we were in early April. And then you get your moment.

[Josh Brown]

I hear you. But like I think you guys are all presuming that me not being bullish means that I think the market's going down.

[Carl Quintanilla]

I'm not bullish. I think we're in a range. I'm with you.

[Josh Brown]

How does the rally go higher? How does it.

[Joe Terranova]

My question back to you was, I don't see how you can make a case today that we're worse off than we were a week ago. Even when tariffs have come down as significantly as they have, you can be annoyed at the process. I get we're in such a politically polarized universe.

[Josh Brown]

But the worst off is on valuation. How do you go from 21 times to 23 times?

[Joe Terranova]

Well, you. But last week. But a month ago you would have said that earnings are not going to be good, we're not going to get any guidance. There's no way that. Yeah, but it wasn't, it turned out not to be. Right. That's my point.

[Josh Brown]

Okay.

[Joe Terranova]

Guidance was way better than people thought, including you. Earnings were way better than people thought, including you.

[Josh Brown]

No, I thought earnings would come in as expected because that was already baked.

[Joe Terranova]

In no, they were better than expected. They were better than expected.

[Josh Brown]

Fine. But we're still at what, 11% earnings growth year over year. I don't get how we go from a 21 times multiple to 23 times because I still don't think fundamentally the world is better off before it was before April 2nd. That's my problem.

[Carl Quintanilla]

Why is it necessary for us to get to 23 times earnings?

[Josh Brown]

Because how else do you go up 10%? Right? That, that's 10% growth. You need multiple expansion.

[Carl Quintanilla]

No, if you have earnings growth.

[Josh Brown]

Earnings growth is already baked in. That's the thing. The earnings growth is already baked in. On April 2nd the market was down 4 and at 4 and change percent. Now it's up on the year. What's different? Well, the earnings growth came in to still put us on Track for the 11%, 12% percent earnings growth year over year. Right. You have a multiple that's back to where it was. And I don't see the world as better now than it was before.

[Carl Quintanilla]

I don't think it's better now. I just, I just agree with Judge that I don't think it's more uncertain. If we could argue is it less uncertain? I would say probably not. Look at. So Wal Mart comes in, they say we're going to maintain our full year forecast, we're going to cut Q2 and we're going to remove Q2 forecast. And that's not great.

[Josh Brown]

No, but they're also saying the tariff, the impact of the tariffs have yet to be felt. And that's why I'm saying this is reflecting a stale world order.

[Carl Quintanilla]

I think we all agree that the impact of the tariffs have not been felt. I think every one of us agrees with that. But that's.

[Josh Brown]

And we have no idea what it's really going to feel coming.

[Jenny Harrington]

Now listen, you had dispersion in the earnings. It wasn't isolated to technology communication services. And here's the interesting part. So Josh said he's not bullish and obviously I think we're going to make a run at the old all time high.

[Jim Leventhal]

I do.

[Jenny Harrington]

That's what momentum is telling you. But here's what's interesting about that. I was asked this on a call yesterday. Well, what happens next?

[Carl Quintanilla]

Yeah, I agree.

[Jenny Harrington]

Do you break out from there?

[Jim Leventhal]

I'm not so sure. You might be trapping. You know the answer. When I think you might set a new high from here, people FOMO comes in and it comes in hard.

[Jenny Harrington]

That might be a trap.

[Jim Leventhal]

You might be right, Jenny. From a fundamental point of view, but don't mistake that you start seeing headlines of a new all time high.

[Carl Quintanilla]

You know what the number one category of either ETFs gaining assets last month? T bills. So to your point, like if you start printing new highs, without a doubt there's a component of the investor class that's under invest.

[Joe Terranova]

I just feel like, I feel like some of you guys and people in general are missing part of what's happening here in that you're going to start hearing I think less and less about tariffs and trade and more and more about taxes.

[Jim Leventhal]

Absolutely.

[Joe Terranova]

And deregulation and the kinds of things that are going to be a boon potentially for this market, not an anvil on the shoulders of this market.

[Jim Leventhal]

I think you're exactly right. And you know, look, you and I usually like to argue. I mean you want me to buy United Healthcare right now and we can start an argument. No, I was kind of wishing you.

[Joe Terranova]

Still owned it today, but that's so mean. He knows I'm kidding.

[Carl Quintanilla]

I know you're not kidding. Yeah, I don't think you are.

[Jim Leventhal]

That is pretty show stopping funny. But you know Scott, somebody said to me today, what if things go right. Think about this for a second. Next year's earnings estimates on the s and P500, $300 a share to the point, Jenny, that you're making. I mean we're at 20 times that. But what if things go right? What if the tax bill is stimulative? What if the Fed cuts rates? These are just, these are just what ifs. What if the tariffs are as you were saying at the beginning of the show, one shot, you're done. You get the price level reset and you move on. I mean, well, there's one of two.

[Carl Quintanilla]

Things are so riddled with exemptions at this point. That's why I think the market will see through aberrant data in the next set of CPI PPI prints because almost, if almost everything is exempt, it almost doesn't matter if iPhones are exempt. Like what do people spend money on. On if there. If we start doing carve outs for automakers. I don't think that's the story. The story is, is the slowdown for real? Goldman Sachs was saying we think we'll see 4.7% unemployment. Then there's a deal on Saturday. I don't even know what the deal is. Goldman comes out and says just kidding, more like 4.5%.

[Joe Terranova]

Right.

[Carl Quintanilla]

All the recession calls start getting moderated. We think there's definitely recession now. We think this may be a Recession. My opinion, so long as the consumer continues to spend and so long as the consumer continues to be employed, every other data point we're following doesn't really matter. And I understand people say employment is a lagging. Okay, it might be a lagging indicator, but it's literally the best indicator we have.

[Jim Leventhal]

Lagging for three years.

[Jenny Harrington]

Get the recession call. So are you saying that we might escape without the growth scare over the next three to six months?

[Carl Quintanilla]

That's the thing, I don't know. How do you get a growth scare when the largest companies in the stock market are defensive? So this is the thing that people haven't. I think I'm living in the year 2030. This is. And I don't, I don't like to brag about my insights that much. Sometimes I do. This is the thing that nobody has figured out yet. Do people cancel Netflix in a recession?

[Jim Leventhal]

No.

[Carl Quintanilla]

Do people throw their iPhone in the garbage because the services cost them too much money?

[Jim Leventhal]

No.

[Carl Quintanilla]

Do people stop any of the behaviors with Uber and Uber Eats with Spotify? Is any of that pro cyclical or is the entirety of stock market market cap now defensive services that people will not abandon? They will, they will stop doing almost everything else before they stop with their digital devices and the way they spend their day scrolling through text, tick tock, etc. So if that's the market we're in, we might have to accept the fact that we just don't have as cyclical of a stock market anymore. The economy is still cyclical, but the stocks, we're not investing in economic conditions, we're investing in corporate profits.

[Joe Terranova]

Speaking of in Netflix, another all time high today. Their ad tier now has 94 million monthly active users reiterated outperform at Evercore and Josh Brown Capital.

[Carl Quintanilla]

That's what I'm saying dog. And if so, I want you to think this through with me. If people aren't canceling YouTube TV subscriptions and they're not throwing away their iPhone because of the cost of the services and they're not cutting off Netflix or if they do, they downgrade from premium tier to ad sponsored tier and actually Netflix makes even more money in that case. If that's the makeup of the stock market and companies like. Do you remember how important Alcoa used to be?

[Jim Leventhal]

Oh come on.

[Carl Quintanilla]

The bell went. No, but do you remember Jenny? I know you remember 1980, 20 years ago, Alcoa report first because it started with an A. Guys, kids in the audience, I swear to God this is real. And we used to say as goes Alcoa so goes though, because the stock market was so cyclical. Now it's like this oligopoly of tech companies that are consumer staples.

[Jim Leventhal]

I think you're defensive. I think you're pulling your punch. Don't just talk about Uber or Netflix. Go out to a generic steakhouse in New York City on a Tuesday night. Packed, I mean and all of us go out. You know what I'm talking about. Every high end restaurant is packed.

[Carl Quintanilla]

That's the K shaped nature of the economy. So a whole other discussion but where.

[Jim Leventhal]

Do the profits come from? And I'm not trying to be heartless. Where do the profits come from?

[Joe Terranova]

Can I ask you back to. You had mentioned Cisco a little bit earlier. I just want to do a couple things before we take our first break. Because you bought more of this stock. They beat, they upgrade, upgraded to overweight at Wells. I know I took kind of a hard, hard turn but I want to get that in before we take our break.

[Jim Leventhal]

So I already talked about the macro implications of it. Let's talk about the stock implications. I think the direct analogy here is Oracle. I want everybody to think about Oracle. Three, four years ago it was a mid teens multiple. Nobody cared too much. It was a database software company. Then they got into Oracle cloud infrastructure and the stock took off and the multiple went to the low 20s. I suggest to you, I submit to you that that is what's going to happen with Cisco and it's happening right now. It's been happening over the last year. Josh, I ask you to take a look at it. This is a stock that should be trading in the low 20s and it's trading at about 16 and a half times. It's buying back shares like crazy. It's got a good dividend. And most importantly the fundamental drivers there are growing their business. They are beating, beating, raising. There's nothing negative to say about this.

[Jenny Harrington]

Fundamentals are remarkably strong. And what's going to happen now? We identified it at the end of April as finally becoming a quote unquote momentum trade. Yeah, you're going to see a lot of funds follow suit and begin to acquire this company based on momentum itself. We're in from April 30th. I thought the report was excellent and there is obvious I spent on network.

[Carl Quintanilla]

Cisco is a really great example of the point I'm trying to illustrate. The way we used to think about that stock is it's effectively a call option on gdp. If global economy is growing faster than normal, Cisco will have more orders. If the global economy is Slowing Cisco will have less orders. I think the stock at least has broken out of that paradigm and they're now thinking about Cisco as you guessed it, a more defensive version of of its former self. It's no one's going to stop their Internet usage. This is the most no business. Oh it's an economic slowdown. Everybody use the Internet 20% less. So it's not going to happen.

[Josh Brown]

So Cisco is the reason that I can be kind of like negative and you know Debbie Downer and worried about the future but still fully invested. So we've owned this for years in our discipline growth strategy. The the thesis has always been it's returning to a growth company. It should re rate. But this is why I can be uncomfortable with a 21 times multiple on the market and comfortable being invested at 15 and change times here. So that's how I marry. That's how I marry my pessimism.

[Jim Leventhal]

It's very infrequent that you can identify the pivot point. It's happening right now. The multiple is rerating and it should it's happening right now.

[Josh Brown]

I'm so grateful we were early.

[Joe Terranova]

Let me move on. And just one more thing before we take the break. I just want to clean up the situation in UnitedHealth real quick. You know the in terms of what the committee's doing because we do have some moves but you a move you know about the stock at this point it speaks for itself. Okay. Now there's a DOJ probe into possible Medicare fraud. That's the new news of the day. And what's been a miserable week and the trajectory of this stock over the last month or so at least has not been pretty Mizuho today on UNH said there's some risk that the name gets removed from the Dow. So that's a big deal. I mentioned the move. Steve Weiss is fully out essentially making the point to us he was unable to join us today but making the point that this criminal investigation changes things. Stephanie Link we reached out to for obvious reasons she has defended this stock repeatedly has bought more at times of weakness today telling us that she wants to two but is not not yet and she's not doing anything today so just want to get that in there. By the way, Eli Lilly added to UBS Top Picks list it replaces unh. Joe, give me something real quick on that before I bounce.

[Jenny Harrington]

So we sold UNH out of the Momentum Fund basically 18 months ago. Eli Lilly remains a core holding. It literally trades like a biotech and there's another company that's marching towards a trillion market cap.

[Joe Terranova]

Okay, we will take that break. Coming up, President Trump versus Tim Cook. Well that took a new turn. Tell you exactly how bring you the sound. We got some committee moves coming up too after this break.

[Halftime Report]

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[Joe Terranova]

All right, welcome back. We're watching shares of Apple today as its China Shift begins with Foxconn's $433 million chip deal in India. Speaking of India and Apple, the president calling out Tim Cook for the third time in some four days over the company's India plans. Steve Kobach joining us now with these latest remarks you make of this.

[Steve Kovac]

Yes, I want you to take a listen to what the President said earlier today because he was calling Tim Cook out publicly again and a little bit more forcefully and specifically than he has before. Take a listen. I had a little problem with Tim Cook yesterday. I said to him, tim, you're my friend. I treated you very good. You're coming in with $500 billion.

[Carl Quintanilla]

But now I hear you're building all over India.

[Steve Kovac]

I don't want building in India.

[Carl Quintanilla]

You can build in India if you want to take care of India because.

[Joe Terranova]

India is the highest, one of the.

[Steve Kovac]

Highest tariff nations in the world. It's very hard to sell into India.

[Carl Quintanilla]

And they've offered us a deal where basically they're willing to literally charge us no tariff.

[Steve Kovac]

So, Scott, look, that is not the outcome the President was looking for. Of course, two weeks ago, during Apple's earnings, they painted a kind of new picture of, of what its supply chain will look like now. The plan is iPhones sold in the US Will be sourced from India, while other products like Macs, AirPods and watches are going to come from Vietnam. Meantime, China will supply the rest of the world. So far, though, no commitment from Apple to make iPhones in the United States, which is seems to be the goal of this Trump administration. Now, India iPhone production has been ramping up significantly since the pandemic when supply chain slowed down due to China's COVID lockdowns. It's been ramping up again in response to tariffs. Still, they need a lot more capacity in India to produce the approximately 65 million iPhones sold here in the United States each year. All that's why Trump now says he has a problem with Tim Cook and Apple and the public pressure campaign he's been on all week. Remember, Cook and Apple have made a ton of overtures to Trump and his administration. Cook's personal $1 million donation to the inauguration fund, showing up behind President Trump as he was sworn in, building a new factory to make servers in Houston. All of that. But despite that, Apple shares have been underperforming its peers. It's the only Mag 7 stock still negative since Liberation Day on April 2, down about 5% since then. Cook has also been credited for managing the relationship with President Trump in the first term better than his peers. But it doesn't seem to be working out so well this time. Don't think Trump's going to be happy until he can hold up an iPhone. That's Made in the usa, Scott.

[Joe Terranova]

Well, then he's going to be unhappy for a long time, more than likely because the idea that Apple is going to actually manufacture an iPhone here in the United States seems far fetched at best.

[Steve Kovac]

Yeah, far fetched is exactly what it is. I mean, unless you want. There have been so many analysis of this, Scott, about how much it would cost to make an iPhone here, and that's because Tim Cook smartly built the supply chain over in Asia to be maximally efficient from the raw materials and the processing of those materials to where the devices themselves are assembled. That's why they're able to put out so many iPhones that they do. India is becoming another source for them to do that. But to bring all of that overseas, bring all of that somewhere in the United States, would create just an enormously expensive iPhone. So if he does want to hold up that USA made iPhone, it's going to cost like what, 3,000 bucks or something like that. So, yeah, it's just not in the cards here. And the question now becomes Tim Cook kind of in the crosshairs of the President because of this issue and how he can mitigate that situation going forward.

[Joe Terranova]

Yeah, Steve, thank you. Steve Kovac with the latest. Josh, you know, is this a literal sideshow and an irrelevant, relevant in the big picture, or is there legitimate political risk lurking for this company?

[Carl Quintanilla]

So during the first Trump term, we used to have a daily angry tweet from the White House at a corporate leader and the stock price would have a huge negative reaction to that. It was pharmaceutical companies like Pfizer and it was tech and it was automobiles. And everybody had to just kind of accept like these landmines are going to be part of the environment that we trade in. And the more you don't react, the better off as an investor you'll be. I don't think anything's changed with that dynamic. The simple fact is India is one of the most tariff heavy countries in the world and for the very simple reason that they're a developing nation and if they didn't erect tariffs, the west would have come in and completely taken over their entire economy. So they protected industries, they protected specific companies, they protected specific investments that they thought it was in their national interest to do that. And to a large extent they still believe it's in their national interest to do that. Trump seems to be able to sort of get past that. He's got a good relationship with India. Does he want more and more press releases about Apple shifting from China to India? Definitely not. Defeats the purpose. But here's a very simple fact. There's only one product that Apple is manufacturing at scale in the United States currently, today. That is the Mac Pro, not the MacBook. What I'm using here, the desktop. And that is the very high end version of the desktop. It's an expensive product to begin with. They make it in Texas. Can they do more things in that fab in Texas or elsewhere? 100% sitting. If you're an Apple shareholder, you're not rooting for Apple to throw its margins away and start trying to build, you know, AirPods in Manhattan. I think what you're saying is just do some more press releases, like make a few more things. And I think Tim Cook is smart enough to understand that's exactly what he needs to do and he will.

[Jim Leventhal]

Yeah. And let's just think about what if the President gets a lot of what he wants? What if we're manufacturing a lot of other things in America? Are there really going to be enough workers, are there going to be enough resources to be building iPhones, which they shouldn't be in America? You're absolutely right. As you started, I thought about seven years ago the Boeing Air Force One tweet, you know, sent the stock down for a couple of days. Leaving all the other Boeing issues aside, it was a complete, you know, it was a complete canard. It meant nothing.

[Joe Terranova]

All right, let's get the headlines now with Silvana now. Hi, Silvana.

[Silvana Henao]

Hey, Scott. Good afternoon. The Supreme Court today allowed the mother of a black man killed following a routine traffic stop in Houston to pursue an excessive force claim against the police officer who shot him. In a unanimous ruling, the justices faulted a lower court for focusing only on the moment force was used in 2016 and not the moments leading up to it. Now, this means the civil rights lawsuit filed by Ashtein Barnes mother can move forward for now. A Wisconsin judge pleaded not guilty today to federal obstruction charges for allegedly helping a man evade immigration authorities in her case. Courtroom lawyers for the Milwaukee County Circuit Judge Hannah Dugan say she's innocent. On Wednesday, her lawyers filed a motion to dismiss, claiming she has judicial immunity for official acts. The trial is set for July and two researchers have concluded a copy of the Magna Carta Harvard University bought for less than $30 is actually a rare version from 1300 issued by Britain King Edward the First. That's one of the researchers estimates that this copy is worth millions of dollars, though Harvard says it has no plans to sell it.

[Scott Wapner]

Scott?

[Silvana Henao]

Wow. Talk about return on investment.

[Joe Terranova]

Yet it's like 27 bucks. I think I read they paid Silvana. Thank you, Bona. And now up next, the new addition to Josh Brown's best stocks in the market. We have more committee moves still to get to and I'll tell you why. David Einhorn, what has has him still believing big time in gold.

[Halftime Report]

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[Steve Kovac]

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[Joe Terranova]

We'Re back another addition to Josh Brown's best stocks in the market. What'd you just add?

[Carl Quintanilla]

Toast was added. And this is a stock I already own and we've talked about a lot on the show. So I don't want to go crazy here, but this name just took out its 2024 high of 43. Has not traded above that level level since Thanksgiving of 2021. The story here is very simple. The technicals look great, of course, but the fundamentals are really, I think deserving of a little bit of a spotlight. They're now at 140,000 restaurants and other customer locations. They basically have the whole industry in a chokehold. That's a 25% year over year increase. The last time they reported earnings, 31 annual revenue growth and the profitability, this is the thing that people said, oh, they're giving away the handheld equipment. They'll never get to profits, blah, blah, blah. Profitability margins have increased significantly 20 and a half percent to 25.9% as of latest quarter, just over the last couple of years and trending in the right direction. So I'm long the stock already I'm in It as an investor investor, not a trader. But the fact that it's hit the best stocks in the market list, breaking out as it is, I think lends itself to people that want to try to capture the momentum of that short term breakout as well.

[Joe Terranova]

All right, you can, by the way, catch that group of stocks that Josh has, his best stocks in the market. You can go to cnbc.com Josh Brown, you can get all of that and I hope you do that. Let's do a couple moves. Jimmy, you bought more Lockheed.

[Jim Leventhal]

Yeah, well, because I think it's undervalued. I think it's been knocked down for several months on perceptions that the F35 isn't going to get the orders that it frankly already has. It has a tremendous backlog. I will say I'm a little worried. I was talking about Cisco earlier and buying into Strength. This is a stock that if you look at the chart you're going to say, is there something wrong here? So look, I am building the position because I see value there. I think it's a great company developing great products. But the chart does look a little terrible. So Scott, that gift that I didn't give you in UnitedHealth Care, you may have a new one.

[Joe Terranova]

Jenny, you have a new buy in front of me. Ethan Allen, etd, right.

[Josh Brown]

Brand new for the equity income strategy. First of all, if you're going to buy this, put a limit on it because it's really small. Earlier Josh said this is all so long as the consumer continues to spend. And even though I'm not terribly optimistic and I, I don't know if the bull market rages, I am perpetually optimistic that the consumer will continue to spend. So Ethan Allen trades at 13 times earnings, has a 5.9% yield and has been on my dividend income screen forever. But I think the reason it's different now is because I think they might actually have a competitive advantage in a way that they haven't before. 70% of their products are manufactured in North America. Sorry, 75%, 40% in the U.S. a lot of their, a lot of their cost of their goods are actually sourced too. So like their wood all comes from the US that is not true for their competitors. Most of their competitors source a lot from China. Here's the real kicker, zero debt. So while their competitors, like Restoration have been expanding and growing like crazy and taking up all the market share that's been fueled by huge borrowing. These guys have zero debt. The CEO has been there forever. The vast majority of the compensation comes from that dividend. So it's well covered, well protected. They just announced earnings. Earnings weren't great, but they still should earn $2.14 this year on a $54 dividend. So the dividends well covered.

[Carl Quintanilla]

I think it's a cool place to watch their strategy.

[Josh Brown]

Okay. If you're being serious about that, they actually use it so you can go online and design. You had one of those stocks. Yeah, one of those stocks where you could go online and feed your room in and it can populate the whole room and you can say, hey, show me a gray couch. Show me a purple couch, whatever it is. And that's a, that's an interesting smart way to use AI but it's not completely unique to Ethan Allen. That's what all those furniture companies are doing.

[Jenny Harrington]

Troubled by the environment. And you think consumers are going to buy furniture?

[Josh Brown]

Well, I think that to some degree everyone's still going to buy furniture. Just no, but I think they actually have the opportunity to pick up massive market share because. Because I think they might lose competitors. Right. And so if, if we said, let's say before, we thought there would be 8% earnings growth ahead, let's cut that to 4%. But Ethan Allen could have higher earnings growth because they're going to lose competitors. When you're importing from China and you had really low tariffs before and now they're only 30%, that stinks. And when you have debt maturing because you borrowed and borrowed and borrowed to build enormous amounts of stores and now you can't really refund that, you can't, you know, redo your debt at a low rate, you have problems. So I think they're going to lose competition.

[Joe Terranova]

We are going to take a break. And we come back. Private investments inside your 401k. The biggest 401k plan provider yet says it's happening. Is it good or bad for your retirement plan? We will debate that next. All right, welcome back. 401k giant empower will start allowing private credit, private credit, private equity and real estate investments into some retirement accounts later on this year. It's the biggest plan provider yet to offer those investments. They align with Apollo, Franklin, Templeton, Goldman, Neuberger Berman, Pimco Partners Group and Sagard. What do you think about this? There's an overwhelming demand for access from retail and the every person to get a piece of alts.

[Carl Quintanilla]

So at my firm, we manage about 300 million worth of 401k assets for planned participants. Most of the of the wealth management customers who are business owners are responsible for these 401k plans at their companies for their employees. And I'm sympathetic to the idea that there are asset class returns that should be made available to regular people that aren't currently. And what better place to do something like private equity or private credit than in a 401k where you really have the long time horizon and you could actually see sit and own something for seven years and let it play out. So that's the good part. The bad part is I think for the time being the fees will still be so high and the types of funds that get in will not be the very top echelon funds catering to small investors. So I like the idea. I'm not just not jumping into it personally because I don't think the costs will be low enough to justify what the returns could be even in the best case scenario.

[Joe Terranova]

The partnership fund, since you bring it up, are likely. This is according to the Wall Street Journal by the way are likely to charge fees ranging from 1 to 1.6%. That's going to folio balance annually. The average target date mutual fund is about 0.28%. To your point, the spread between got.

[Carl Quintanilla]

To come down and it will Jimmy, got to take.

[Jim Leventhal]

Yeah, I do. I mean first off, we know why the private why this is happening, right? The private equity firms, the alternatives are running out of endowments and sovereign wealth funds to fund their new funds. So they've got to find new sources. That's fine. These are still valid investments. My comment to follow on with yours Josh, is that these are not necessarily for the IRA because of the tax efficiency. These are so long term why not have these outside of your IRA and have the less tax efficient high yield bonds short term trading funds in your ira?

[Joe Terranova]

All right, quick break.

[Jim Leventhal]

Or for one case, sorry for one.

[Joe Terranova]

K. All right, we'll take a quick break, come back, we'll do finals. And Einhorn on gold. Gold is about the confidence in the fiscal policy and the monetary policy. And since we bought gold in 2008 or so, it's been very clear to me that the U.S. fiscal and Monetary policies are both too aggressive and put and create a risk. I was David Einhorn yesterday with me at the SON conference and Greenlight. Wow, they're off to a great start this year. Almost 12% net of fees through April in part because of a big bet on gold that continues to work and he clearly remains bullish Joe on that. Remember Gundlock telling me gold's going to 4000 rethink you're playing it through equity.

[Jenny Harrington]

Yeah. And you've got a pullback right now to the 50 day moving average. I agree. I think gold's going a lot higher. Newmont Mining is the way that we play it for the viewers. Just own glass gld. Just own gold outright. We can't own GLD because of the quality factor. Looking at revenue growth that obviously doesn't exist with gld. But Newmont Mining is the way we play it.

[Joe Terranova]

It's been ripping its lowest level today obviously since April 10th. But gold's up. Know the direction that it's been going. Join me closing bell. By the way, Chris Harvey of Wells. He's had the highest target on the street and we'll find out where he thinks stocks are going from here. Now that we feel like the environment may be better than we thought just a week ago.

[Jim Leventhal]

Finals Farmer Europe Adobe has just crossed above the 50 day moving average. It's an ugly chart, but I think this one will have legs.

[Jenny Harrington]

Joey Microsoft continues to be the best Mag7 in the market.

[Josh Brown]

All right, Jenny Kinetic back down on the price of oil 7% dividend yield.

[Joe Terranova]

Thank you.

[Carl Quintanilla]

And Josh Brown, Kinsale Capital. This is an investment of mine. Long term investment. They have their annual general meeting next week.

[Joe Terranova]

All right, good stuff. Look forward to seeing you in a couple hours on the closing bell as we see where this market ends this day. 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.

[Edward Jones]

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 earn a business degree on your terms at Capella University. Our flexpath format is available in select programs and lets you learn on your schedule. A different future is closer than you think with Capella University. Learn more at Capella Eduardo.