Halftime Report: The Future of the Rally (Released July 18, 2025)
Hosted by CNBC's Scott Wapner, "Halftime Report" delves into the intricacies of the current market landscape with insights from top investors Jenny Harrington, Steve Weiss, and Kevin Simpson. This episode, recorded live on July 18, 2025, tackles the sustainability of the ongoing market rally, impending earnings reports, valuation concerns, and strategic trading moves amidst geopolitical tensions.
Market Overview
Scott Wapner opens the discussion by providing a snapshot of the current market performance. Both the S&P 500 and Nasdaq reached record highs earlier in the day, albeit with fractional gains towards the close. In contrast, the Dow Jones Industrial Average witnessed a slight pullback of approximately 0.3%.
"First quick check of the market, the S&P and Nasdaq hitting record highs earlier today. Right now, fractional gains for both the S&P and the Nasdaq. Take a look at the Dow though, pulling back about a third of 1%."
— Scott Wapner [02:07]
Sustainability of the Rally
Jenny Harrington shares a cautious outlook on the rally's longevity amidst potential headwinds.
"There’s just too much that's potentially weighing on the broader market. Tariff uncertainty, valuations that are already stretched, consumers showing signs of cracks."
— Jenny Harrington [02:29]
She believes that while individual companies may experience significant volatility during earnings season, the overall market rally is likely to plateau, potentially ending the year with a 6-7% gain, a moderate expectation compared to previous years' substantial increases.
Valuation Concerns and AI Influence
Scott probes into the elevated valuations of major indices compared to their five-year averages.
"S&P right now trading about 22 times its five-year average, NASDAQ at about 27.5, five-year average around 25.5."
— Scott Wapner [03:36]
Steve Weiss attributes the market's tolerance for high valuations to a new generation of investors accustomed to continuous market growth, partially fueled by advancements in artificial intelligence (AI).
"It’s not AI; it's that a new cohort of investors are used to markets only going up."
— Steve Weiss [05:30]
Earnings Season and Potential Market Impact
With approximately 20% of the S&P 500 set to report earnings in the following week, the panel discusses the potential impacts on the market. Steve Weiss emphasizes that the anticipated tariff extensions could pose downside risks, though he remains optimistic due to the market's valuation insensitivity.
"The market's been valuation insensitive. I don’t see how we end up up 14% on the year. I don't think we have another 7% in the second half."
— Jenny Harrington [03:36]
Furthermore, the panel examines opinions from UBS and Bank of America, highlighting the need for earnings growth to underpin future market gains rather than mere valuation expansions.
Assessing the Bubble Risk
Addressing concerns about a potential market bubble, Kevin Simpson downplays the notion, citing broader participation from sectors beyond mega-tech and AI, including industrials and financials.
"I don’t see it as a bubble. 2023 had seven stocks with no breadth, but now it’s more diversified."
— Kevin Simpson [07:29]
However, Jenny Harrington acknowledges pockets of froth within specific high-growth stocks like Palantir, trading at 175 times earnings, emphasizing disciplined stock picking to navigate these areas.
"There are pockets of froth out there. That's why I like being a stock picker right now because you can avoid the pockets of froth."
— Jenny Harrington [13:32]
Strategic Trading Moves
The panel shares their approaches to managing high-growth, high-volatility stocks amidst earnings season:
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Covered Calls on Netflix:
- Kevin Simpson explains writing a covered call on Netflix ahead of earnings to hedge against potential declines despite the company beating revenue and earnings expectations.
"We wrote a covered call for a 12, 40, 45 strike with one week expiration, netting a $45 profit in a few hours despite the stock dropping 5.9%."
— Kevin Simpson [32:45] -
Repositioning Apple Holdings:
- Steve Weiss discusses liquidating Apple shares at $247.50 due to perceived overvaluation and reinvesting once the price dipped to $209, achieving a 20% real return through option premiums and dividends.
"We liquidated Apple at 247.5 when it was too pricey and rebought at 209, netting a 20% real profit."
— Steve Weiss [26:55] -
Home Depot Covered Calls:
- Kevin Simpson shares writing another covered call on Home Depot after being called away at a premium, adjusting the position to 3% weighting in the portfolio to manage rate concerns.
"We replaced a 5% position with a 3% weighting, believing rates are still a bit high and anticipating a longer-term recovery."
— Kevin Simpson [37:50]
Geopolitical Tensions: Tariffs on EU Goods
A significant portion of the discussion centers around the potential imposition of 15-20% tariffs on all European Union (EU) goods by President Trump, as reported by the Financial Times.
"President Trump is pushing for a 15-20% tariff on all EU goods, with car tariffs remaining at 25% despite EU's push for reductions."
— Megan Casella [43:48]
The panel assesses the market's reaction to these developments, noting a downturn across all major indices as investor sentiment remains cautious amid escalating trade tensions.
Sector and Stock-Specific Insights
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Meta (Facebook):
- Jenny raises concerns about Meta’s potential overspending despite increased cash flows from the "Big Beautiful Bill."
"The key is whether Meta remains financially disciplined while leveraging incoming cash flows for growth, especially in AI investments."
— Jenny Harrington [20:33] -
Tesla:
- The panel discusses Tesla’s competitive edge in the EV and autonomous driving sectors, considering challenges from Waymo and regulatory uncertainties in China.
"Tesla has a different risk profile, and while we’re not expecting monumental gains imminently, it remains a pivotal stock in our portfolio."
— Kevin Simpson [19:25] -
American Express:
- Despite reporting record cardholder spending, Amex's stock dipped 3%, prompting Jenny to highlight the broader consumer income disparities impacting the stock’s performance.
"High-end consumers are still thriving, but mid-tier consumers are experiencing financial strain, reflecting in mixed stock performance."
— Jenny Harrington [39:34] -
Verizon and IBM:
- Verizon is viewed as a stable, income-generating asset with a 6.5% dividend yield, while IBM is lauded for its integration of Red Hat and expected earnings growth.
"Verizon serves as a bond equivalent with steady dividends, while IBM’s Red Hat integration is yielding impressive EPS growth."
— Jenny Harrington [46:03]
Headlines and Regulatory Updates
Silvana Hanau from CNBC HQ briefs listeners on notable headlines impacting the market:
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January 6 Lawsuit:
- A federal judge dismissed a lawsuit aimed at revealing FBI agents' identities involved in the January 6 cases, citing lack of retaliation intent from the DOJ.
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El Salvador-Venezuela Prisoner Exchange:
- Negotiations are underway for El Salvador to release over 200 Venezuelans in exchange for U.S. citizens and permanent residents, though the Trump administration has yet to comment.
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House Republican Probe:
- A House Oversight Committee probe investigated alleged lies by Biden administration aides, with testimonies invoking Fifth Amendment rights.
"House Chairman James Comer accused former President Biden's deputy chief of staff Annie Tomasini and others of lying to protect themselves."
— Silvana Hanau [35:15]
Conclusion and Final Trades
As the episode wraps up, the panel discusses final strategic trades:
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Raytheon Technologies (RTX):
- Steve Weiss sees a bullish outlook driven by robust demand in aerospace repairs and a significant backlog.
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McMoRan Copper:
- Jenny highlights McMoRan Copper's strong free cash flow yield of 15%, anticipating continued production growth.
-
Sarepta Therapeutics:
- Angelica Peebles reports a 26% decline in Sarepta's shares following FDA scrutiny over its gene therapy's safety profile, impacting investor sentiment negatively.
Key Takeaways
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Market Caution: Despite record highs, concerns over stretched valuations, tariff uncertainties, and uneven consumer strength suggest a tempered outlook.
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Strategic Hedging: Active portfolio management through covered calls and disciplined stock picking helps mitigate risks in a volatile market.
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Geopolitical Risks: Escalating tariffs on EU goods pose significant risks to market stability and investor confidence.
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Earnings Focus: The impending earnings season, with a substantial portion of the S&P 500 reporting, will be pivotal in shaping market trajectories.
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Sector Diversification: Balancing high-growth tech stocks with stable dividend-paying securities like Verizon ensures portfolio resilience.
Notable Quotes:
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"There’s just too much that's potentially weighing on the broader market." — Jenny Harrington [02:29]
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"It's not AI; it's that a new cohort of investors are used to markets only going up." — Steve Weiss [05:30]
-
"There are pockets of froth out there. That's why I like being a stock picker right now because you can avoid the pockets of froth." — Jenny Harrington [13:32]
-
"We liquidated Apple at 247.5 when it was too pricey and rebought at 209, netting a 20% real profit." — Steve Weiss [26:55]
-
"President Trump is pushing for a 15-20% tariff on all EU goods, with car tariffs remaining at 25% despite EU's push for reductions." — Megan Casella [43:48]
Conclusion
In this episode of Halftime Report, the discussion underscores a cautiously optimistic stance amidst a complex market environment. Investors are encouraged to remain vigilant, leveraging strategic hedging and disciplined investing to navigate potential headwinds. As geopolitical tensions and earnings season unfold, the panel advocates for a balanced and informed approach to sustain growth in the second half of the year.