Halftime Report: The Fate of the Rally – December 20, 2024

Published on December 20, 2024

Introduction and Market Overview

Halftime Report kicks off with host Scott Wapner introducing the theme of the episode: analyzing the sustainability of the current market rally and assessing any significant changes over the week. Joining Scott are investment experts Stephanie Link, Kevin Simpson, Jenny Harrington, Surrot T, and CNBC’s senior economics reporter Steve Liesman.

Fed Policy and Economic Projections

A crucial part of the discussion centers around recent comments made by Austan Goolsbee, the Chicago Fed President, suggesting that the policy rate remains below neutral and hinting at potential rate cuts down to 2%. This perspective contrasts with previous hawkish sentiments from other Fed officials like New York Fed President John Williams.

Steve Liesman elaborates on Goolsbee’s stance, stating, “I think the market learned today is there are two sides to this trade” (02:09). This indicates a shift in market expectations regarding the Fed’s future actions.

Stephanie Link probes the implications of these comments, questioning the clarity and reliability of the Fed's projections. Scott Wapner adds, “What we did learn is they're focused on inflation first and foremost” (03:32), highlighting the Fed's priority in controlling inflation despite positive consumer indicators such as personal income and spending growth.

Stock Market Reactions and Investment Strategies

The conversation shifts to the market's response to the Fed's signals. Despite a generally positive economic backdrop, the market exhibited volatility influenced by conflicting Fed messages. Kevin Simpson discusses his investment strategy amid this uncertainty, mentioning selective buys in lagging stocks like Morgan Stanley and CrowdStrike, though he refrains from selling during broad market downturns.

Stephanie Link expresses her anticipation for more decisive investment actions, especially in lagging sectors, but notes a lighter trading activity than expected. Tony Pascarello from Goldman Sachs concurs, emphasizing the importance of risk management over short-term trading.

Index Recomposition and Its Impact

Bob Pisani delves into the significance of index rebalancing, highlighting the addition and removal of companies from the S&P 500 and NASDAQ 100. The inclusion of firms like Apollo Global Management and Workday underscores the growing influence of index-based ETFs on trading volumes and stock valuations.

A notable example is Palantir, which shifted its listing to NASDAQ to secure a spot in the NASDAQ 100, demonstrating the strategic maneuvers companies undertake to benefit from index inclusion.

Year-End Report Card: Winners and Losers

As the episode progresses, the panel reviews the performance of various stocks over the year. Kevin Simpson presents a report card, highlighting winners such as Nvidia, United Airlines, and GoDaddy, which have shown significant gains. Conversely, sectors like pharmaceuticals and certain industrials have underperformed, with companies like Merck facing downgrades.

Surrot T discusses his selective approach, favoring stocks with strong fundamentals like Delta Airlines over underperformers like United Airlines. The emphasis is on balancing high-performing investments with strategic holdings to mitigate losses.

Final Trading Strategies and Year-End Outlook

In the concluding segments, the panel shares their final trading strategies for the week. Key moves include:

• Freeport: Surrot T and Tony Pascarello advocate for adding to positions in materials stocks, citing long-term potential despite recent downturns (44:27).

• Columbia Bank Shares: With a 5.3% dividend yield, Kevin Simpson recommends holding due to its attractive yield and stability (44:34).

• Procter & Gamble: Highlighted for its strong dividend growth, making it a reliable pick despite recent pullbacks (44:38).

The discussion wraps up with a cautious yet optimistic outlook. Mike Santoli provides his midday word, noting that while the market has experienced significant volatility, recent data has allowed for a reevaluation of growth prospects without drastic rate changes. He observes, “the market just seized on that” (37:14), indicating investor confidence in the Fed’s current trajectory.

Conclusion

The episode concludes with well-wishes for the holidays and an invitation to listeners to tune in for future episodes. The panel underscores the importance of strategic patience, diversification, and staying informed amid evolving market conditions.

Notable Quotes:

• Steve Liesman at (02:09): “I think the market learned today is there are two sides to this trade.”
• Scott Wapner at (03:32): “What we did learn is they're focused on inflation first and foremost.”
• Stephanie Link at (05:02): “I was expecting somebody to come in here today and say, you know what, I bought that because that was down a lot.”
• Tony Pascarello at (06:23): “The expectation of easier money was incremental fuel for equities.”
• Mike Santoli at (37:14): “The market just seized on that.”
• Kevin Simpson at (24:33): “TripAdvisor announced that they're buying in Liberty Media shares. That whole overhang is gone.”

Key Takeaways:

1. Fed Policy Uncertainty: Austan Goolsbee’s comments suggest a more accommodative Fed stance, introducing uncertainty but also potential opportunities for rate cuts.

2. Market Volatility: Conflicting signals from Fed officials contribute to market volatility, impacting investment strategies and stock performances.

3. Index Influence: Index rebalancing, driven by the rise of index-based ETFs, significantly affects stock valuations and trading volumes.

4. Selective Investing: Emphasis on strategic buying in undervalued or lagging stocks coupled with holding high-performing investments to balance portfolios.

5. Year-End Strategies: Focus on dividend-yielding stocks and materials sectors poised for long-term growth despite short-term setbacks.

For those who missed the live broadcast, this summary encapsulates the pivotal discussions and insights shared by the panel, providing a comprehensive overview of the market's current state and future outlook.