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Squawk on the Street
Computers Hacked at Treasury Department, Top Tech Picks for 2025 12/31/24
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Hey, Fidelity, how can I remember to invest every month?
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With the Fidelity app, you can choose a schedule and set up recurring investments in stocks and ETFs.
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Huh, that sounds easier than I thought.
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You got this?
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Yeah, I do.
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Now, where did I put my keys?
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You will find them where you left them.
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Investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC Member NYSE SIPC.
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Market Moving Insight and analysis Join Jim.
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Cramer, David Faber and me, Carl Quintanilla on the opening bell hour of cnbc.
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C
Squawk on the Street Good Tuesday morning and welcome to the final squawk on the street for the year of 2024. I'm David Faber with Mike Santoli and Leslie Picker. We're post nine of the New York Stock Exchange. Carl and Jim, they're missing this big day, the morning off. Let's give you a look at futures this morning as we get ready for the final trading day. Did I mention that? I'll mention it again. As you see reversing things from a bit yesterday where at this time we were down, looking down sharply on the futures, not the case at this point in the morning. Our roadmap does begin with this final day of trading for 2024. It has been a record breaking year but the bulls as you know been stumbling to the finish line. December right now said to be a losing month.
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Plus Bill Ackman expecting the Trump administration to remove Fannie Mae and Freddie Mac from conservatorship, potentially making them private companies again.
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And the Treasury Department hacked by China in what it call major incident, the fallout ahead.
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C
All right, let's start with the markets. Of course as we wrap up the year would be the best set for best two years in a row since let's call it the late 90s, I guess. Mike yeah, you've been talking about that plenty. Of course as we set up for next year we've all been asking that question, can you make it three in a row with these kinds of returns for the broader market for the S.
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F
And P, I mean while in the late 90s it was the only time it happened really is when you had a 20, 25% back to back back gains and, and you actually repeat it for a third year in really four years. I think straight of 20% plus back then. I mean, I think the big takeaway is this market kind of owes you nothing in terms of historical returns. 25% total returns for current year. By the way, David, you might have been facetious saying that Jim and Carl were missing this today, but this is the most exciting day of the year. It's when the year to date charts and the one year charts are the same. I mean that's, it's kind of this beautiful synchrony.
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C
It's a, it's a special day for you.
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F
I'll be feasting on that all day.
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C
And into the long, into the evening.
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F
Yes, it'll be dark out here, but three years is the one time period trailing where the S and P looks like it's got more muted returns. It's 9.1% total return annualized. Not bad. We had a bear market in between like a 10 month bear market in 2022. So just because the market has been kind of overachieving in that way, it doesn't in itself mean, hey, game over. But I think it does mean, and a lot of people have said this, you have to kind of moderate your expectations in terms of what valuation expansion can get you from here.
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C
You do.
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Forecasts are okay for earnings.
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C
I know, Mike, it's funny when I listen to you and you referenced the late 90s. Of course you and I both were reporters through that.
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F
Yeah.
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And I remember similar conversations at the time. Valuations then, far higher in many ways. Obviously we were dealing with a seminal transition in technology, but we are now as well, potentially without a doubt.
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F
And you know, there's no ceiling that's like a literal ceiling on it. It. But what you do is you are at some point eating forward returns in the near term. I mean, even if you talk about, hey, 98, things look like they were out of hand, you still had a year and a half to go. That's absolutely true. But look at the 10 year forward returns from 98 to 08. Okay, you had a payback at some point. It just didn't really benefit anybody to start betting hard against the market in that moment.
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D
There were also a lot more stocks at that point in time.
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F
Time.
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D
A lot more IPOs at that point in time. We still have yet to see a real native AI company go public in that form. And so that's something that people are looking forward to in the forthcoming years as well. And how that kind of plays into. Well, it certainly plays into the retail investor interest. It plays into the M and A cycle, the flywheel effect there. But as that kind of next lever Alpha generation for 2025 is going to be an important component as well. Especially as we think about just the way this technology has propelled the stock market forward in the last two years.
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F
That could be no doubt about.
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C
No doubt. Although I mean back in the 90s we, you know, the low, we had such low quality IPOs along with of course some of the most important companies that we're still talking about today, be.
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It Alphabet, Amazon, literally hundreds of them in 1999.
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Yeah.
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And on average they like were. They were doubled in the first.
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Yeah, I had it. But by the end, by 2000, I remember I had a seven page thing with every name that they were all sure zeros basically.
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F
You know one consequence of that, Leslie, the lack of brand new exciting names to latch onto is you have this constant pile on of the same consensus thing. I mean the Palantir move is insane. I mean in terms of the trajectory of it for a company of that size, obviously Tesla, obviously Nvidia in the first half of this year and then people grabbed onto Broadcom and said that's the next one to, to move and it's worked fine. These are more mature companies obviously. But then you have kind of just the stuff that's been lying around. You know we talked about the quantum names which are kind of this silly section of, of the markets, pure spec and it's just really a name in the ticker and a shell. We can just trade it and trade and trade it and. Or you could do the leverage single stock, MicroStrategy, ETF, which is the thing.
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All those kinds of things as opposed to these IPOs of companies like a.
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Name and a story story and you had.
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C
Right. But Leslie, what also has been interesting about this particular time is, I mean xi Elon Musk's AI entrant, $6 billion they raised at a $50 billion valuation. I reported on that a number of weeks ago. If that was in the market, that would have been a huge story for us that day, if not for quite some time leading up to it. Databricks raised $10 billion recently.
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60 plus valuation.
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Right. So these names, and not to mention OpenAI which at some point perhaps when they figure out how, when they make their move to being a for profit company, maybe they go public one day long down the road, I don't know. But these are the big names and they're not coming to the public markets anytime soon.
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D
No, all the upside is being generated in the private markets, which is largely reserved for a certain type of investor, institutional investors, sometimes pension funds, endowments and the like. Now, next year, something to watch will be kind of the change, the potential change. This will take place in Washington. I know there are a lot of lobbyists that are wanting this of who an accredited investor is and that could democratize who has access to the private markets more so than they have currently. And then there's also this, this huge push in the alternative space to widen and broaden the scope of their retail investors as well. So a lot of interesting themes as we head into the new year. But of course, the S and P and NASDAQ coming off three day losing streaks and the S and P P on pace for its worst month since April. Our next guest says to expect higher volatility in the year ahead, underscored by known unknowns. Matt Orton, Raymond James, chief market strategist, joins us now with his outlook for stocks into next year. Matt, thank you very much for joining us. So volatility, we saw basically two spikes this year, one in August and one in mid December. In terms of volatility. If we do get higher volatility in 2025, how should investors be preparing for that now? Is it something where they should be opting for some kind of volatility hedge diversification, buying on the dips when they see volatility? What are some of the playbooks that you would advise?
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A
Good morning, Leslie. Great to join you on the last day of 2024. And I think when we have a higher volatility bull market, we're already seeing that play out over the past couple of weeks as we head into the end of this year. But the fundamentals underpinning this market are still very, very solid. I'm looking forward to strong earnings growth that's going to continue to broaden out cross sectors. And so I think when you have a strong fund fundamental basis for the market and the economy as a whole, I would be looking to use any sort of meaningful pullback in the market as a buying opportunity. I tell all of our clients, when you have those meaningful pullbacks, particularly the one that we had over the summer, you should be using downside opportunistically to lean into better diversifying your portfolios. I fully expect growth and value to both work pretty well next year. So there's an opportunity to maybe take some profits on your winners and make sure that you Have a portfolio that can better weather some of that volatility and also some cash that you can continue to deploy throughout the year.
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D
Despite the earnings growth that's expected next year, the market is still trading around 22 times those projected earnings above the 10 year average of 18.5 times. So what does that tell you about how much more upside or expected returns that investors can hope for from here?
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Yeah, you know Wesley, I don't have much of a concern about where valuations are. I get asked by clients all the time about whether or not this market is too expensive. And for a long time I've said it's not. And I think you can use the past 10 years, 20, 30 years. But the market and economy itself have markedly changed over that time period. The market has become growth year, part due to mega caps, also part due to just long term secular growth shifts that we're having. And as a result, you know, as the market has become growth year, you should be willing to pay a higher premium for it. And a lot of the companies that are more expensive have been delivering earnings. So I'd much rather own that growth with companies that are delivering solid free cash flow consistency with respect to EPS increases. And that's where I want to look. And I think that's almost where small caps are going, which is an area that I like a lot going forward. You know, small caps aren't all low quality companies. We're going to be seeing, I think an inflection with respect to earnings heading into next year. And they are trading cheap and I think they can support higher multiples, particularly relative to large caps. So there's definitely plenty of opportunity even if you're concerned about valuation.
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F
You know Matt, one of the elements of this rotation, or this hoped for rotation into smaller stocks or into the broader list of stocks or cyclicals over the course of this year has been a little bit of confusion about where we are in the cycle and what the character of this economic cycle is. One year ago, I think economists, the consensus was there's like a 40% chance of recession. It really was a very high level of concern about whether the expansion could continue. Obviously we climbed that wall of worry. The soft landing has seemed like it basically is manifest right now. We don't really have a similar level of concern right now. And yet we also don't have those kind of early cycle dynamics where you might expect things like cyclicals and riskiers and lower quality stocks to perform. So how do you navigate all that?
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Yeah, it's such a great point, Mike. And I think what's confused so many investors and many of our clients alike is that you basically thrown their traditional book of economics right out the window. And I think that's because we've never had zero interest rate policy persist for such a long time. And we're exiting an unprecedented monetary environment regime along with high fiscal spending. And so I think you can't expect a lot of those long term economic theories to work out in the short term. Long term, sure, I think we're going to revert back to that, but I don't think we're there yet. We're still working through fiscal largesse. I think that's still going to support the economy moving forward. We're moving into an environment where the market and investors are hoping for a better regulatory regime moving forward, which I think benefits financials, benefits smaller companies. So I wouldn't focus so much on what the market should be doing relative to what economic theory tells us. I'd be looking at the fundamentals, talking to management teams, listening to what they're saying about the state of their consumers and about their growth going forward. And when I put all of that together, I get a pretty optimistic picture, which is why, going back to where we started with Leslie, I think we can use Downside opportunistically because nothing right now is telling me about this whole mosaic that when we see downside, something more pernicious is lurking in the background.
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D
All right, Matt, thank you very much and happy New Year to you.
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A
You too. Thank you.
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C
Well, still to come, Bill Ackman expecting the Trump administration to remove Fannie and Freddie from conservatorship that sent those stocks up. We'll discuss this, give you some of the details at least. As for regards his plan, let's give you a look at futures as well. Of course, we get ready to open here less than 18 minutes from now for the final trading session of the year. And we are looking for an up open a lot more squawk in the street. Straight ahead.
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Hey, Fidelity, how can I remember to invest every month?
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B
With the Fidelity app, you can choose a schedule and set up recurring investments in stocks and ETFs. Huh.
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F
That sounds easier than I thought.
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B
You got this?
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D
Yeah, I do.
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C
Now, where did I put my keys?
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You will find them where you left them.
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C
Edu Bill Ackman posting on X yesterday that he expects President Elect Trump to remove Fannie Mae and Freddie Mac from conservatorship. That would mean they became private companies again and that post did send shares of both stocks up. Kind of nice to mark up your book at the end of the year, isn't it? Mr. Ackman, in putting out that post on a very low volume day. That said, it's not without specifics, certainly, and possibility. In fact, our viewers may recall any number of times leading up to the election I had mentioned that one of the key trades for those who believed President Elect Trump would win was buying the preferreds of Fannie and Freddie. Not as much the common where there is a lot more risk, but the preferreds. And we can go back to it there. Well, there he's talking about an IPO in 2026, what they could raise, how they would meet the capital standard. And listen, they got close in the last Trump administration, Treasury Secretary Mnuchin and others, the fha, FFJ had a plan, they were moving towards that. They didn't quite get there. And you know, I've mentioned a number of times when John Paulson was considered for treasury, perhaps his $4 billion face ownership of the junior preferreds there. That's been a big trade for Paulson. It's been a big trade for Ackman as well. And it's paid off. You can see what's happened just since the election as a result of the expectation perhaps that in the second Trump administration you are going to see another effort made. But when it comes to the specifics of it, that's where you can sort of differ a bit with what Ackman is saying in terms of his plan because he believes that the government will be willing to after everything it's received. Remember there was this third Amendment that allowed for basically the sweep of all profits to the Government and it's been an enormous amount of money, hundreds of billions. But he says that would satisfy the 190 billion that the government put up for the senior preferred they were getting paid 10% on. But that's not clear. The government might still say hey that because the third Amendment, the Supreme Court by the way agreed with it. That went to the Supreme Court. They said no, it's fine, it was legal. They may say no, you still owe us 190 billion. So you could see a common offering but a lot more of that common going to the government to satisfy their continued claim under Ackman's plan. He says they're satisfied already and in fact there's a surplus as well. That could be the way they approach it. Just don't know.
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D
So there was a CBO report from just a few weeks ago that said that the just the overall operations of Fannie Mae and Freddie Mac have improved over the last four years since the last time they conducted kind of an indoor in depth research into them in 2020. And they said that the, the two have enough funds, they are able to raise enough funds to allow both of the GSEs, the government sponsored entities, to repay the treasury for its roughly 190 billion in outstanding preferred shares. You know, we'll see if that's true or not. But to your point about Ackman tweeting this at the end of the year, year to date, returns 10.5% through Dec.
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F
24 for Ackman, for Pershing, for Pershing Square.
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C
So this helps. And by the way, this is, I mean it already has helped and it helps even more. You're right. I know a number of, of portfolio managers who certainly have gotten a great deal of performance out of this trade. It was seen as a key one going in if you thought Trump was going to win. But again to your point, how they treat that 190 billion is the key. How much if in fact you do get this ipo, how much common goes to the government, how much dilution. That's also more dangerous.
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F
The key was also aside from, from whether it satisfies the claims of the government backstop is on a forward going basis whether these companies will require earnings, an explicit backstop from the government or just that much more capital.
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C
Right.
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That's, that's the piece of it that has never been resolved. No.
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D
And it'll take years by the way to IPO this thing.
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C
Yeah, I mean he's saying 2026, which would seem to be pretty quick. That's, that's pretty maybe they can just take up the plan they had underway already, but it's going to be Scott Besson's issue potentially as an incoming treasury secretary as well, and we'll be following it closely. Speaking of Treasuries, the US treasury saying it was breached by Chinese hackers in a major cyber incident. We're going to have details after the break. Let's give you one more look at futures. We get ready to begin the final day of trading here at the New York Stock Exchange for the year 2024. Looking for an up open cash flow crunch?
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D
Welcome back. U.S. treasury officials saying Chinese state sponsored hackers broke into the department systems earlier this month in what they are describing as a major incident. Emily Wilkins joins us now with the latest.
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Emily hey Leslie. Well yeah, the U.S. treasury said that a state sponsored Chinese hacking operation was able to access the desktop computers of treasury employees through a third party software, according to a letter seen by cnbc. That letter goes on to say that the hackers were able to access certain unclassified documents that were on those computers. The software company Beyond Trust said in a statement that the case involved a remote support product and said no other products were impacted. In a statement, Beyond Trust said they notified the limited number of customers who were involved and it has been working to support those customers since then. They also say in the statement that no other Beyond Trust products were involved. Law enforcement was notified and Beyond Trust has been supporting the investigative efforts. Beyond Trust also said they disclosed the incident on their website when it happened in early December and Since then, they have provided updates as they've looked into what happened. A Treasury spokesman said in a statement that treasury takes very seriously all threats against our systems and the data it holds and says over the last four years the treasury has significantly bolstered its cyber defense and we will continue to work with both private and public sector partners to protect our financial systems from threat actors. Guys, of course, this is not the first time that we have seen state actors hack into U.S. systems or target government employees. And I think at this point we're still waiting for additional information on what, if any, type of information or type of data they might have gotten from this potential hack. And of course, a larger question, I think, as to the future of cybersecurity here in the US Guys.
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C
Yeah, Emily, the. Yeah, the Chinese are unrelenting when it comes to cyber espionage, whether it be treasury, whether it be the salt typhoon hack, which continue, we continue to learn about into telecommunications networks and listening in on telephone calls. Amazing stuff and will obviously be a key consideration for the incoming Trump administration as well. Emily, thank you. Emily Wilkins, Opening Bell just a few minutes away here. Don't forget, you can catch us anytime and anywhere by listening to and following the Squawk on the Street Opening Bell podcast. We'll keep an eye on energy prices. Of course you can see Nat Gas is pulling back. This is after what was a huge surge yesterday, had been up as much as 20%. Of course, there have been some forecasts that say in a couple of weeks things are going to get very cold in the northeast part of the country, for example. Also some questions about the ability of Russia to continue to ship gas to certain parts across Ukraine, believe it or not, which I didn't even know that that was still something given.
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Yeah.
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What's been going on for three years.
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Sort of a leftover deal.
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C
Yeah, a leftover deal that may ultimately come to an end. And then of course that means perhaps Russian gas won't find a home in some way and limited more pressure on the US to produce and therefore an export. But a pullback today.
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F
Yeah, definitely a pullback. It's a dramatic move on from the early 2024 lows. But I think it's fascinating if you just look at a really long term chart. These are not challenging levels in terms of expense under $4 for, for natural gas. I mean you were above it. You know, you're at five plus 25 years ago. You know what I mean? So the domestic production story remains very friendly. So this, this is on the one hand beneficial for Gas levered energy stocks, they benefited yesterday. On the other hand, it's not really inflationary, obviously still pretty low on a nominal basis.
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C
Here it is, the opening bell, final time for the year. Take a look at the real time machines back at our headquarters. Here's the big board kind of Hitler celebrating its 10th year. Times Square's New Year's Eve celebration with the Nasdaq. It's Times Square alliance doing the honors. They are as well getting ready for the big ball drop in Times Square.
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D
The confetti before the confetti this evening.
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C
Yes, confetti before the confetti, of course, as we begin our final trading day. A lot of cheers here, Mike. Not sure where you want to start this morning in terms of coming off obviously, obviously a down day. Yesterday though we did make progress as the session continued off the low.
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F
Somewhat interesting dynamics yesterday you were down about 1.6% in the S and P at the lows in the morning, kind of clawed back, still were down 1% or more to trade. Straight trading sessions are pretty rare in the final stretch of the year. The theme over the last couple of weeks really since the fed meeting on December 18 has been more stocks down than up. A very tough time for the market to gather up any upside momentum yields. Even though they pulled back yesterday, 10 year treasury is still above 4 1/2 percent. Now that was the level that was surpassed the day after that Fed meeting. So I don't think the Fed outright slammed on the brakes for the rally. The bull market brought the expansion into threat. But I think that the investor base has a little bit of misgivings about whether this rhetorical turn toward the hawkish side, fewer cuts next year maybe just raises the chance of some kind of policy mistake. I don't think the markets are trading outright as if, oh, we're in trouble, but they're essentially saying we have a shorter leash. The Fed's going to be a little bit more vigilant. And if you think that the weakening of the softening up of employment conditions has been something to be concerned about, if these late cycle anxieties are going to become more evident, then the Fed might be seen to be a little bit, you know, hurting that situation and keeping rates a little too high. Now again, that's all surmise about how the market's been behaving. We've spent 10 of the of the trading sessions since the election. I was just looking today inside the gap up in the S and P. That happened the day after the election. Right. So you had this Big pop once the election result was clear on November 6th. So that big move on the chart, you've kind of been spending a lot of time in there figuring out, out if that's okay. It's like 5850. On the downside would be the threshold that said, okay, maybe we're going below that range. We haven't done that. Now the market's getting also a little bit oversold. More stocks down that up more new lows than highs going into next year. Maybe that's a decent setup for a little bit of a, of a relief trade maybe if you get more of a bid in Treasury. So yeah, again it's at the end of a really strong year. You don't to make too much out of this softness. But I think some people are on alert for weather. In fact, equity exposures were already high. Not a lot of people needed to buy more. And so if we weren't going to ramp into year end, more likely to be lightening up than adding.
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D
But at the same time sentiment is very high. You had that BA fund manager survey showing record excitement around stocks, 57 record highs for the year and the s and P500. And it sounds like at this point you just have this kind of tug of war between momentum and excitement over just this sea change in potential regulation and potential policy shifts in 2025 versus the reality check of what those policy changes might actually mean for companies, what it might mean for the economy. And the markets are trying to figure it out.
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F
There was a period, especially right in the immediate blush after the election, where you could just decide your preferred policy priorities and when they were going to get done and what it was going to mean for the economy and earnings, some deregulation. And now maybe as we get closer, it's seeming a little bit more cloudy in terms of, you know, the order of things. Obviously the budget fight didn't really clarify this idea that there's going to be some efficient policymaking machinery in, in Washington. So you know, to the extent you were hinging on that, I guess that's, that's become a little bit less favorable. But again, I think directionally everyone seems okay. You know, economy seems still well clear of true recessionary levels. Earnings for the majority of stocks headed higher, rates are up, but not necessarily at punishing levels. All that stuff means that the market should actually remain relatively well supported. But you know, again, the starting point is pretty elevated here.
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C
Yeah, it's always interesting when you look back at the year, the things that you had expected and Perhaps didn't. If I told you a year ago that electricity, electricity providers were going to be one of the best places to be and that Constellation Energy shares we're going to do a lot better than Constellation Brands.
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F
Remarkable.
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C
You, you might have wondered what I was talking about, but that's been the case. I mean, you know, the. We knew I coming into the year, but perhaps we hadn't yet focused as much on the power deficit that may come into play, the need for it and therefore the performance of stocks like that up 93% percent because they own they're the largest owner of nuclear in the country. And that is there are recommissioning going on. There's discussion, of course, of new plants, if only we could make them as quickly as China seems to be able to. But nonetheless, seen as given this enormous potential deficit if we don't actually produce a lot more power in the country on the other side of the Constellation Brands, by the way, terrible. Nobody's drinking alcohol. I don't know what's going on with these young people. They're not drinking.
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D
I don't know what they're doing.
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C
I think they're getting hot, but I don't think they're drinking very.
- [29:30]
F
For sure. Yeah, yeah, it is amazing. And that's also in the context of, you know, just sort of consumer branded goods just not being a strong part of this market. I mean that's been, if anything that's a bullish thing and meaning that they're truly defensive stuff food and beverage, you know, the kind of paper products, all that stuff has really not done anything. To the extent the consumer staples sector is working at all this year, it's because of Costco and Wal Mart. Walmart, because there's another one.
- [29:56]
C
Wal Mart shares up over 72% for the year.
- [30:00]
F
I would just look at the momentum ETF for the S and P and Costco and Wal Mart are like in the top eight, you know, because that's just the way the math works. If you, if you within a sector, if you show that much momentum, you're going to get in there.
- [30:12]
D
Well, it also kind of speaks to the psychology that you mentioned earlier on in the show, which is that the, you know, those names that do tend to work in a specific sector kind of just get all the attention, get all the flows and then continue working from there. Yeah, you know, I mean it was.
- [30:28]
F
The case without a doubt before the election or maybe let's say before mid year in banks where it was like JP Morgan just consuming all the oxygen in the group now there's been a little more catch up, it's been a little more diversified. Of course Goldman and the rest have, have come on along as well. But yeah that's, that's been this very much a feature of this markets kind of a winner take most attitude across.
- [30:50]
D
A lot of different buying one or two like the top one or two in a specific market going from there. Speaking of banks, there's this interesting dynamic and the FT kind of did a deep dive on this between the FDIC and blackrock and it's over this whole issue related to the concentration of ownership in banks particularly among those like BlackRock and Vanguard that own passive stakes, State street as well. The state streets technically have banks. It's regulated a little differently. But the FDIC has put forth some new rules which would be a little bit more patrolling over those who have passive stakes in banks to make sure that they do keep them passive. And this is a bipartisan perspective that they want essentially to make sure that the concentration of ownership of investor ownership in banks doesn't get to the point where they are influential in things like you know, maybe on the right it would be things like ESG on the left it would be also potentially ESG and other issues. And so they put forward these rules and they're going back and forth with BlackRock and they now have this deadline of January 10th to give to BlackRock to essentially accept these proposed measures for greater oversight if they're going to own more than 10% in bank stock. Now this largely applies from BlackRock for smaller community and mid sized banks. Those are the ones where they own about 39 banks that have, they have a more than 10% ownership. And BlackRock's perspective is like look, if you put these onerous rules on us you're going to make bank investing less attractive. We are not going to want to do it but the government says well you need to comply with with these rules so we can ensure that you are truly passive. Since you and some of your peers wield all of this concentration in the sector that is critical to the economy. Kind of an interesting dynamic.
- [32:40]
F
Yeah, for sure. I mean it is interesting how the concept of passive has evolved in multiple different directions for a while. Do want to say there is a definite effect here of buying the laggards. So the January factors, it's commonly referred to is that you know, small cap operations performance but more specifically laggards leading. So I have the worst performing stocks in the S and P on a year to date basis ranked Walgreens Intel Moderna, Celanese, Estee Lauder, almost all the more than 1%, most of the top 50 worst performers of the year are being scooped up. Things like Mosaic in the materials area. So that's just some of the mechanical stuff that you might actually see happen around the turn of the year. Tax loss selling is finished up. And so you know, some of these, even though calendar year shouldn't matter that much in terms of how you treat a portfolio and how your returns get, get, get reaped, this, this stuff does tend to matter because of the tax year effects and the performance year effects.
- [33:32]
D
Yeah, I was going to say also that's kind of when you mark your performance and share with your clients. So you need to make sure that, you know, it is looking the best that it possibly can. As made evident by what we were talking about earlier with Pershing Square.
- [33:44]
F
Yeah, yeah.
- [33:46]
C
Although Fannie and Freddie I think down now actually a little bit.
- [33:49]
F
Yeah.
- [33:49]
C
So much.
- [33:51]
F
Yeah.
- [33:51]
C
But you can try your best to.
- [33:53]
F
Yeah, people do what you can to.
- [33:54]
C
Put up some performance numbers in terms of marketing.
- [33:57]
F
Yesterday they were slamming the buy button on Fannie. Weren't thinking fourth quarter 2026 IPO. Like it was much more like somehow getting saved January 20th. Yeah, yeah.
- [34:08]
C
I mean, again, they've already been to us. If you got in prior to the election, you are very happy regardless because of the possibilities certainly that we've talked about many times with privatization of, of the two GSEs. We'll see. It's certainly something to be focused on in 2025. Let's also turn to technology in 2025 because we know we'll be focused on that. Our next guest predicts the sector will be up 25% in the new year, spurred by the AI revolution. Some of his top picks are Nvidia Micro, Microsoft, Tesla and Palantir. He's Dan Ives, Wedbush securities analyst. Dan, welcome. For the final time this year, I'm sorry you're not here. I am fairly certain in saying that you were the most frequent guest on CNBC during the course of 2024. We greatly appreciate that and even more so the fact that you largely have been right, Dan. You're going to be wrong one of these days, but it wasn't this year. Why don't you think, think it will be next year as you continue to be so incredibly bullish on so many different names in technology?
- [35:09]
H
No, thanks so much for that. It's been, been awesome to be on, you know, the whole year. Look, to me it's all about Hand holding investors through this revolution and I think we're looking in our opinion this is still only the second inning of the nine inning game. And everything we see from all of our spending is about the multiplier. For every dollar spent on Godfather, Bai, James and me on those chips there's a 8 to $10 multiplier across the rest of tech. Which is why I continue to believe that tech stocks are going to be up 25% into next year. And it's only 10pm in this AI party that goes to 4am Right.
- [35:49]
C
And you've been saying that for some time. I think you may have moved us an hour later. I'm not sure along the way.
- [35:54]
H
It's start up at 9:00pm now.
- [35:57]
C
Okay, it's 10:00pm you know Dan, there is this question as to are investors going to start to demand to see a real return from all the investment that's been made, the hundreds of billions frankly that will have been invested and will be invested in the coming year as well by the hyperscalers for example. Do you think that demand will be made and will it be met?
- [36:21]
H
Well that's, that's been the big question. I think we started to see that inflection point with the messy of Palantir because I think if you look at Palantir, that was the first one, the use case that we started to now see these things play out across enterprise then Salesforce, that was a huge moment what we saw from Benioff in terms of that last quarter. I actually think software is going to be the key. I think the use cases are expanding across the board. I mean we have use cases and enterprise businesses that we're talking to up 5x in terms of deploying AI and what I ultimately use cases even over the last six months and I think that is going to be the key as this all plays out. 2 trillion of CapEx CapEx next 3 years fighting that is going to be tough and that's what I continue to say. The bears can find AI in the spreadsheets. I get it. These companies have to execute but execution has been there. Now the going to be about the rest of tech. That's why we laid out those are the top 10 players that we see for AI in 2025 in terms of.
- [37:22]
D
Enterprise AI in particular. You think the two best software plays are Palantir and Salesforce. What are some examples of software companies that you are more doubtful of their AI potential?
- [37:33]
H
I think Adobe, you'd have to be a little more doubtful in terms of you know what they can do I think obviously is still a huge potential. You know I think when you look at I think IBM's had a lot of success but to me it's really who the ones proving it out. It's Palantir, it's Salesforce, I think it's MongoDB, it's Snowflake. I think Oracle is having a huge renaissance of growth. And then you're also going to see with Kahn Donna dftc, you are going to see M and a skyrocket across the tech. These big tech players are going to get stronger and they're going to get bigger and I think that's going to be a huge theme that plays out across 2025 as a strong get stronger.
- [38:14]
F
Dan, just tell me why I shouldn't be concerned if I own Palantir, that it trades at 50 times sales and that the insiders have been selling hundreds of millions of dollars worth of stock in the last six weeks and it's gone vertical and they keep trying to goose it by getting into different for an index. It just feels like a very promotional situation for an admittedly strongly positioned company that just seems like it's become a little bit of a cult.
- [38:40]
H
Yeah, look Mike, I definitely bull bear debate, it's almost reached hassle like sort of emotional bull bear debate on Palantir but to me it's really about, it's not about in the next year in terms of what this thing's trading at. I view it as compound here be the next Oracle, the next Salesforce. If that's true, and I believe that's true then then this is a name that goes much higher from here in terms of what you're talking about. I think that's why you got to focus on AIP as they prove out this sort of enterprise use cases. And can this be something that expands to ultimately 30, 40% of this overall revenue? I think that's the key but I don't get too caught up in some of the the noise. I just focus on all of our checks and that's why Palantir, the haters they hate as a teenager, as a stock despise is a senior citizen and I think this is stock that has potential to be three digits and higher.
- [39:37]
C
Finally Dan, I'd love to end on Microsoft because and again as I said you've, you know, you've been right to be bullish and so many of the names that you've been behind have had great years. Microsoft does not it's trailed certainly Mega cap tech. It's trailed the S and P. It's only up less than 13% for the year. Why are you positive on the stock going into 2025?
- [39:57]
H
Yeah, and that's one I think others have sort of joined. When you look at Google and you look at Amazon in terms of the hyperscaler, a lot of it is, it's all the work we do talking to Microsoft partners. I think as these use cases and all these cloud deployments start to come through, I think the streets massively underestimate Azure numbers and I think ultimately what AI is going to do. I believe this could be 10, 15% incremental revenue over the next 12 to 18 months. I actually think Microsoft is probably one of the most mispriced on large cap. It was Google, but I think going in 2025 that's why it's a table pounder along with the Godfather via gentle Nvidia. And I think 4 trillion will be on the horizon for Apple, Microsoft and of course for Nvidia too.
- [40:42]
C
All right, but wait. Mispriced. So it's mispriced because people are underestimating the, the opportunity that they still have. Even though Copilot's been out for a year and it doesn't seem to at least be grabbing a lot of people, you know, in terms of enthusiastically responding to it.
- [40:59]
H
I think they are underestimating what this is going to do their enterprise business as the, as the use cases actually deploy. You're in Microsoft in the Della's backyard in terms of enterprise AI use cases. And as that comes through, I think we sit here a year from now, this has a 5 in front of it as a stock and this will be the name that I think is really kind of proves it out along with the rest of the software.
- [41:23]
C
All right, well the good news is I know you're going to be back really soon for me to ask you about it again. So Dan, thank you. Have a happy new Year. Enjoy. Dan Ives from Wedbush before we head to break, let's give you a quick look at the bond market. Check out how Treasuries have been faring this morning. Of course, reminder, by the way, the bond market is going to close at 2pm today, so a bit earlier than usual. 4.5 to 5 is where we stand on the 10 year. Obviously down in the yield from where we ended the week last week, but up over the last month or so let's call it, as you look at the spread, 4.54 to 2 over the two year we'll be Right back.
- [42:07]
F
Turning now to real estate, where a former laggard is making a big comeback and could be the darling of 2025. Diana Olich joins us now with the latest on that. Hi, Diana.
- [42:17]
E
Hey, Mike. Retail real estate has seen big demand coming out of the pandemic. Vacancies are low and rents are rising. In Q3, investment volume in the sector was up 49% compared with Q2, according to a new report from JLL that was driven by a rise in high value transactions. JLL also said the recent Fed interest rate cuts are anticipated to stimulate even more activity in the coming months. Leading the subsectors open air shopping centers like this one, where we are with the high highest leasing rate of all shopping center types at nearly 46%. Their vacancy rate is on the lower end at 5.3% versus closed in malls at 8.7%. I spoke with the CEO of Kite Realty Group, a neighborhood shopping center reet about why he's seeing this recent surge in business and value.
- [43:09]
A
It's both for practical reasons, for shopping to get goods and services, but also socializing.
- [43:15]
F
And I think after Covid, people put.
- [43:18]
A
More value on that aspect of their life. So open air shopping centers have had a great resurgence. There's very little supply. That's also an important factor. People aren't really building these things that much.
- [43:30]
E
Kite is concentrated in the Sun Belt, which also happens to be where demand for open air shopping centers is strongest. Now this center here in Maryland is owned by Federal Realty Trust, another REIT stock to watch in the coming year. Back to you guys.
- [43:45]
F
Diana, you mentioned that, you know, this anticipated decline in interest rates from the Fed might be kind of boosting some of this activity. I just wonder, given that we're not really expecting that much in terms of further cuts, whether it feels as if, you know, the group might actually be a little bit restrained.
- [44:05]
E
Well, it might be because as you said, we're not going to see as many cuts as were expected. But we did see two cuts already and you see the boost in the numbers that we just showed you. But it's not just the Fed cutting rates. It's more about demand coming back, people wanting to be outside shopping again. Gen Z is a big driver of this, as they'll tell you in the sector. And so they are seeing more demand in general. And again, the biggest issue is supply. There just isn't any. They're not building a lot of these types of centers. And so with supply so low and demand rising, that's why they're doing well.
- [44:36]
C
Diana. Thank you. Diana Olek in Maryland somewhere. We're going to take a quick break here as we keep an eye, of course, on the market as we end the end of the year. Few hours from now, you can see the S and P is up a little less than a quarter of 1%. We're back in three.
- [44:54]
F
You've been listening to the Opening Bell on CNBC.
- [44:56]
B
Squawk on the street all opinions expressed by the Squawk on the street participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, or 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 Squawk on the street 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 Squawk on the street disclaimer, please visit cnbc.com squawkonthestreetdisclaimer Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning, and effective communication, and you can apply these skills right away. A different future is closer than you think with Capella University. Learn more at Capella Eduardo.