Halftime Report: The U.S. Exceptionalism Trade (03/25/25)

Release Date: March 25, 2025 | Host: Scott Wapner | Contributors: Josh Brown, Stephanie Link, Jim Leventhal, Rob Seachon

Introduction

In this episode of CNBC's Halftime Report, host Scott Wapner delves deep into the ongoing discourse surrounding the U.S. Exceptionalism trade. As markets navigate uncertainties related to tariffs and the broader economy, the panel of top investors—Josh Brown, Stephanie Link, Jim Leventhal, and Rob Seachon—explore whether the once-booming U.S. market remains a lucrative investment avenue or if the tide is shifting in favor of European and other international markets.

U.S. Exceptionalism Trade: Current Landscape

The discussion kicks off with an examination of the U.S. market's performance year-to-date. Stephanie Link observes, "S&P, believe it or not, doesn't feel like it is only it's down less than 2% year to date" ([02:30]). Despite lingering uncertainties around trade policies and economic growth, Link maintains an optimistic stance on the U.S. market's resilience and potential for growth beyond the tech sector.

European vs. U.S. Market Valuations

Concerns about shifting market sentiment are highlighted when Oppenheimer notes that European stocks are poised to outperform the U.S. by the largest margin ever this quarter. Link counters this by asserting, "I think US is still a place to be. There's plenty of value out there beyond tech" ([03:50]). Josh Brown adds a contrarian perspective, emphasizing that the valuation gaps between Europe and the U.S. are not yet fully closed and cautioning against prematurely abandoning the U.S. market. He states, "I would not advise people, yes, go chase Europe, but this notion that oh, the rally's over, go back to the Mag 7, I think in the fullness of time that's going to look ill-advised" ([05:00]).

Mega-Cap Stocks and Market Dynamics

The focus then shifts to mega-cap stocks, which have significantly influenced the Nasdaq and S&P indices. Scott Wapner highlights the mixed market picture, attributing it to gains in mega caps while acknowledging broader economic concerns. Rob Seachon discusses tactical moves within mega caps, particularly Amazon and Nvidia, emphasizing their relative valuations and long-term growth prospects. He notes, "They are going to play an attractive combination of relative valuations and dominance and durable long-term growth" ([22:19]).

Apple's Struggles Amid U.S. Exceptionalism

A critical segment of the discussion revolves around Apple’s challenges, especially its deteriorating sales in China. Stephanie Link elaborates, "Apple did nearly $24 billion in sales in China in that big December quarter in 2022. It was 18 and a half billion that same period last year." ([17:03]). The delay in launching Apple Intelligence in China and heightened competition from local brands like Huawei have pressured Apple's growth. Jim Leventhal adds that while Apple is an exceptional American company, its reliance on the Chinese market poses significant risks, stating, "If my investment thesis is primarily on China, I'm not that comfortable right now." ([19:02]).

Data Center Bubble Concerns

The conversation shifts to concerns about a potential bubble in data center investments, sparked by comments from Alibaba Chairman Josiah. Stephanie Link counters worries about a data center bubble by emphasizing the ongoing and growing demand for data infrastructure. She argues, "We have 11,000 around the world, we have 5,400 here in the States. You have to get at least double that just to meet up with the demand." ([24:13]). Jim Leventhal concurs, suggesting that while there are sensitivities, the fundamental demand for data centers remains robust.

Strategic Stock Picks and Portfolio Adjustments

Rob Seachon and Jim Leventhal discuss strategic stock additions, focusing on companies like Amazon, Nvidia, and Lockheed Martin. Seachon highlights In Video's strong position in AI chips, projecting significant revenue and cash flow growth. Leventhal emphasizes the value in Lockheed Martin, noting its diversified portfolio of defense products and attractive valuation metrics: "Lockheed Martin is a provider of those around the world at 16 times earnings, 3% dividend yield. I'm going to add to it." ([38:40]).

Real Estate and Consumer Stocks

The panel also examines the real estate sector, particularly homebuilders like Dr. Horton and Martin, which are trading at attractive valuations despite recent disappointments in orders. Stephanie Link points out, "All you need is interest rates to come down and 30-year fixed to come closer to 6 versus 7," suggesting a potential rebound in the housing market as interest rates stabilize ([39:47]). Additionally, Chipotle is discussed as a value buy despite its high forward P/E ratio, with Link noting its mid-single-digit same-store sales growth and strong unit expansions ([40:50]).

Ride-Sharing Sector and Future Prospects

The episode also touches on the ride-sharing industry, with a focus on Lyft's recent volatility and strategic moves. Stephanie Link updates listeners on Engine Capital's stake in Lyft, clarifying the investment to be around $50 million rather than the initially reported $500 million, which tempers some of the stock's gains ([49:27]). Josh Brown speculates on potential acquisitions, suggesting that giants like Amazon or Tesla might consider buying Lyft to bolster their delivery and autonomous vehicle capabilities ([46:46]).

Concluding Insights and Future Outlook

As the episode wraps up, the panelists share their final thoughts on the U.S. Exceptionalism trade. Josh Brown remains optimistic about balanced portfolios incorporating both U.S. and international equities, while Stephanie Link underscores the importance of strategic stock selection in navigating market uncertainties. The consensus suggests a cautious yet optimistic approach, emphasizing value investing and readiness to capitalize on market corrections.

Notable Quotes

• Stephanie Link ([02:30]): "I think US is still a place to be. There's plenty of value out there beyond tech."
• Josh Brown ([05:00]): "I would not advise people, yes, go chase Europe, but this notion that oh, the rally's over, go back to the Mag 7, I think in the fullness of time that's going to look ill-advised."
• Jim Leventhal ([19:02]): "If my investment thesis is primarily on China, I'm not that comfortable right now."
• Stephanie Link ([24:13]): "We have 11,000 around the world, we have 5,400 here in the States. You have to get at least double that just to meet up with the demand."
• Jim Leventhal ([38:40]): "Lockheed Martin is a provider of those around the world at 16 times earnings, 3% dividend yield. I'm going to add to it."

Conclusion

The Halftime Report episode on the U.S. Exceptionalism trade offers a comprehensive analysis of current market dynamics, emphasizing the enduring strength of the U.S. market amidst global uncertainties. The panel underscores the importance of strategic stock selection, value investing, and balanced portfolio allocations to navigate evolving economic landscapes. As global markets continue to shift, the insights provided by CNBC's top investors serve as a valuable guide for both seasoned and novice investors seeking to optimize their investment strategies.