Halftime Report: Your 2025 Playbook (Released January 2, 2025)

Overview

In the inaugural episode of 2025, CNBC's Halftime Report delves into the strategies investors should adopt in response to the S&P 500's back-to-back years of 20% returns. Host Courtney Reagan, alongside market experts Josh Brown, Joe Terranova, Liz Young, Thomas, and Jim Labenthal, provides a comprehensive analysis of current market conditions, potential opportunities, and inherent risks as the new trading year begins.

Market Snapshot

At the episode's outset, Courtney Reagan provides a mid-day market update:

• NASDAQ Composite: Up by 0.5%
• Dow Jones Industrials: Slightly higher
• S&P 500: Increased by approximately 0.3%

Despite closing five positive years in six, January's performance remained subdued, missing the anticipated Santa Claus Rally. Recent CNBC Probe coverage highlighted three critical factors influencing the market this month:

1. Jobs Report
2. Federal Reserve Meeting
3. Earnings Season Initiation

Courtney Reagan: "The last month obviously not as great as somebody expected that Santa Claus Rally gym did not show up." (Market Update)

Economic Outlook and Policy Uncertainty

Jim Labenthal comments on the U.S. economy's robustness and the factors introducing uncertainty:

• Economic Strength: Steady profit estimates for the upcoming year.
• Political Uncertainty: Post-January 20th presidential policies could impact markets.

Jim Labenthal ([02:23]):
"What presidential policies will come out after January 20th and what their impact will be. I think this is a healthier place to be and you can buy some of these dips."

He emphasizes that a degree of uncertainty can reset price barriers, fostering long-term growth despite short-term volatility.

Bank Sentiments and Market Trends

Liz Young highlights mixed signals from major banks:

• Bank of America (BofA): Optimistic about sustained bull market momentum.
• HSBC: Cautions against "buying the dip" due to expected market choppiness.

Liz Young ([03:38]):
"I think this is a healthier place to be and you can buy some of these dips. But I would expect there to be more bumps along the way, especially with yields at these levels."

She suggests that the current market positioning is more sustainable, advocating for strategic investment during price fluctuations.

Inauguration Day and Market Implications

Scott Wapner discusses the uncertainty surrounding the incoming administration's policies and their potential market impact.

Scott Wapner ([05:02]):
"I don't think the uncertainty is over. I do see a good year ahead on the back of the economy and the profit picture that I mentioned, but I think you could see a little bit lower before you go higher."

He advises investors to focus less on policy predictions and more on earnings growth disappointment as the primary short-term risk.

Investor Sentiment and Market Flows

Josh Brown counters UBS's optimistic view on investor concerns, emphasizing the importance of market flows:

Josh Brown ([07:17]):
"The majority of Wall Street was way underweight equities going into 2024... I think margins all of a sudden going to mean revert negative? I don't think so."

He highlights the influx of investments into ETFs and increasing 401(k) balances as positive indicators, advocating for long-term investment strategies over reacting to short-term market noise.

Sector Analysis

Technology and Artificial Intelligence (AI)

The panel extensively discusses the evolving role of AI in generating market alpha:

• AI Beyond Semiconductors: Expansion into software and emerging domains.
• Agentic AI: Focus on AI-driven efficiencies in corporate workflows.
• Recommended Stocks: Twilio, Datadog, DocuSign, Zoom.

Scott Wapner ([16:02]):
"We are beginning to see that artificial intelligence, the thesis surrounding artificial intelligence, now it's going beyond just the semiconductors... So four names. Twilio, Datadog, DocuSign, Zoom."

Josh Brown underscores the shift from beta chasing to alpha generation, emphasizing companies effectively integrating AI to enhance profit margins.

Josh Brown ([17:24]):
"The ROI is probably going to happen not with Copilot per se, but with agentic AI, where companies and workers are now managing chat bots and all sorts of agents on the web doing menial tasks for them."

Financials

Joe Terranova and Liz Young analyze the financial sector's resilience and growth prospects:

• Top Performers: Square, PayPal, Trade Web, MasterCard, American Express.
• Focus Areas: Payment processing networks, cryptocurrency holdings, and fintech innovations.

Joe Terranova ([43:03]):
"Square, PayPal, Trade Web... these are three names that have kind of been dormant over the last several years in terms of their performance. They've reawakened."

Liz Young advises maintaining a focus on financials due to the expected friendly economic environment in 2025.

Liz Young ([45:21]):
"I think 2025 is expected to be a friendly environment for financials and even the traditional financials."

Energy Sector

Jim Labenthal and Liz Young discuss the energy sector's prospective growth driven by natural gas demands and geopolitical factors:

• Natural Gas Surge: Impact of Russia-Ukraine tensions increasing U.S. LNG exports.
• Key Companies: Cheniere Energy, EQT Corporation.

Jim Labenthal ([35:16]):
"Export terminals and the ability to export, export LNG is what's causing the price to rise. That doesn't look like it's going to stop anytime soon."

Liz Young remains cautiously optimistic about energy's role in 2025, noting potential benefits from inflation-driven demand.

Liz Young ([36:53]):
"If inflation starts to surprise to the upside again... I think energy is an opportunity in 2025."

Travel and Leisure

Panelists address the volatile travel sector, citing operational challenges and customer experience issues:

• Highlighted Stock: Vail Mountain (criticized for poor customer experience during operational strikes).
• Airlines: United Airlines noted as a top performer with momentum-driven investments.

Jim Labenthal ([41:23]):
"If you want to be in a travel stock, you darn well better give the experience that you're advertising because if you don't, you will get negative PR and you will get non-repeating customers."

Stock Picks and Recommendations

Top Picks:

1. Uber Technologies (Owned by Josh Brown):

   • Rationale: Potential as a demand aggregator in the autonomous vehicle era.
   • Quote:
     "They haven't even announced their buyback plans yet... I love the stock. I added to it on the recent slide." ([29:05])

2. EQT Corporation (Recommended by Joe Terranova):

   • Rationale: Proximity to data centers and natural gas demand.
   • Quote:
     "EQT is about to break out... it's one of the only names right now amongst large cap US stocks that is within spitting distance of a new 52-week high." ([33:07])

3. Applied Materials (Jim Labenthal's Pick):

   • Rationale: Positioned for mean reversion and sector rebalance.
   • Quote:
     "It may be mean reversion, but I'm going with it." ([45:52])

4. Starbucks and Nike (Future Opportunities):

   • Rationale: Historically strong performance despite recent downturns.
   • Quotes:
     "Starbucks has never had three consecutive negative years... opportunities get created." ([28:55])
     "Similarly, Nike hasn't had three consecutive negative years since 1980." ([28:55])

Special Topics

Artificial Intelligence Monetization

Jeremy Siegel (likely a misattribution in the transcript; context suggests Mike Santoli) discusses AI's tangible impact on profits:

Jeremy Siegel ([37:53]):
"The question is, where's the ROI? The ROI is probably going to happen not with Copilot per se, but with agentic AI."

Liz Young underscores the importance of software as the conduit for AI implementation, enabling companies to translate AI investments into profit growth.

Liz Young ([18:27]):
"Software is the conduit where companies can actually put that to work... a lot of it has been theoretical how things will actually impact profit."

Conclusion and Final Trades

As the episode wraps up, panelists share their final trades for the first half of 2025:

• Applied Materials (Jim Labenthal):
  "It may be mean reversion, but I'm going with it." ([45:52])

• Starbucks (Josh Brown):
  "I love the stock. I added to it on the recent slide." ([29:05])

• EQT Corporation (Joe Terranova):
  "EQT is about to break out." ([33:07])

The team emphasizes the importance of strategic investment, focusing on sectors and stocks poised for sustainable growth amid a backdrop of economic stability and technological advancement.

Notable Quotes

• Jim Labenthal ([02:23]):
  "A little bit of uncertainty... resets the bar that we can go higher from here."

• Josh Brown ([07:22]):
  "The flows will continue to come in... Just focus on what you personally want to accomplish as an investor."

• Scott Wapner ([22:29]):
  "2025 is probably about how do I generate alpha... We're beginning to see artificial intelligence... these are four names... I'm happy with all of them and would be most likely adding to each of those as they move higher."

Final Thoughts

The Halftime Report episode serves as a strategic guide for investors navigating the early days of 2025. By highlighting sector-specific opportunities, emphasizing the significance of AI in corporate profitability, and advocating for long-term investment strategies amidst market volatility, the panel equips listeners with the insights needed to build a robust 2025 investment playbook.