Squawk on the Street (CNBC) Podcast Summary

Episode: Computers Hacked at Treasury Department, Top Tech Picks for 2025
Date: December 31, 2024
Hosts: David Faber, Mike Santoli, Leslie Picker (with segments featuring Emily Wilkins and guest analysts)

Episode Overview

This final 2024 episode of "Squawk on the Street" delivers a robust rundown of the year's market performance, outlooks for 2025, major policy developments, and top tech investment ideas. Anchored from the NYSE floor, hosts David Faber, Mike Santoli, and Leslie Picker are joined by market strategists and analysts to assess key trends for investors—including volatility expectations, tech sector momentum, money flows, hacking incidents at the U.S. Treasury, and ongoing debates over Fannie Mae and Freddie Mac’s potential exit from conservatorship.

Key Discussion Points & Insights

1. Market Retrospective: Record Year and End-of-Year Dynamics

• Stock Market’s Strong 2024:
  • The S&P completed one of its best back-to-back years since the late 1990s, though December shaped up to be a losing month (01:05–02:02).
  • End-of-year chart alignment (“when year-to-date and one-year charts are the same”) is described as a “beautiful synchrony” by Mike Santoli (02:55).
  • Recognition that after such strong consecutive years, “the market kind of owes you nothing in terms of historical returns” and expectations for 2025 should be tempered (03:01).
  • Forward return data: Last three years gave a 9.1% total annualized return, despite a 10-month 2022 bear market (03:01).

"I think the big takeaway is this market kind of owes you nothing in terms of historical returns. 25% total returns for current year."
— Mike Santoli (02:23)

2. Parallels with Late 1990s Market Manias

• Hosts draw comparisons to late 1990s valuation surges and mass IPOs, noting today’s tech-driven market lacks the flood of new public names seen then (03:34–05:12).
• Big tech momentum and retail investor enthusiasm are focused on large, mature companies (Nvidia, Tesla, Palantir, Broadcom) rather than fresh IPOs, creating “a constant pile on of the same consensus thing” (05:27).

3. AI, Private Markets, and IPO Deserts

• Discussion of massive capital flowing to private AI giants (xAI, Databricks, OpenAI) with $50–$60B+ valuations—yet “they’re not coming to the public markets anytime soon” (06:19–06:59).
• Hints of regulatory and structural efforts to democratize access to private markets for regular investors in 2025 (06:59).

4. 2025 Market Outlook: Volatility, Valuations, and Rotations

• Guest: Matt Orton (Raymond James), Chief Market Strategist (08:20–12:53)
  • Expects greater volatility in 2025; recommends using “meaningful pullbacks” as buying opportunities for diversified portfolios (08:20).
  • Sees opportunities in both growth and value stocks—advises caution but not alarm about stretched valuations, especially as “the market has become growthier” (09:36).
  • Small caps highlighted as an overlooked category with upside potential as growth broadens out (09:36–10:44).
  • Challenges with macroeconomic predictive models due to “an unprecedented monetary environment regime” (11:29).

"You basically thrown their traditional book of economics right out the window...I’d be looking at the fundamentals, talking to management teams, listening to what they're saying about the state of their consumers.”
— Matt Orton (11:29)

5. Fannie Mae & Freddie Mac: Privatization Prospects and Ackman’s Bet

• Ackman's Expectation: Posts that the Trump administration will end Fannie and Freddie’s conservatorship, causing the stocks (especially preferreds) to spike (13:19–14:33).
• Complex Path Ahead: Government may or may not agree that it has been repaid for prior bailouts, meaning any IPO could result in significant dilution or government ownership—timelines cited for a possible 2026 IPO (16:54–18:31).
• CBO Reports & Portfolio Manager Strategies: Improved GSE performance, but ultimate direction and structure unresolved (17:02–18:29).

6. Treasury Department Hacked: Cybersecurity Spotlight

• Chinese Hackers Breach U.S. Treasury:
  • State-sponsored Chinese hackers accessed U.S. Treasury employee computers through a third-party software vulnerability (20:06).
  • Accessed unclassified documents; company BeyondTrust quickly contained and disclosed the breach, working with law enforcement (20:16–21:39).
  • Ongoing questions about the affected data’s sensitivity and the broader risks of persistent cyberespionage against U.S. agencies (22:00).

"This is not the first time that we have seen state actors hack into U.S. systems or target government employees. 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."
— Emily Wilkins (21:39)

• Prospective focus for the incoming administration (22:00).

7. Fed Policy, Market Sentiment, and “Winner Take Most” Flows

• Market shows some late-year weakness but remains supported by overall solid economy, elevated earnings, and high levels of sentiment (24:44–28:23).
• “Winner take most” flows evident in market: top performers within each sector continue to attract additional investment (e.g., Costco, Walmart in staples; JP Morgan in banks) (29:27–30:50).
• Discussion of new rules for passive ownership stakes in banks (FDIC & BlackRock) and how this affects investment strategy for large institutional holders (30:50–32:39).

8. Tech in 2025: Bullish Forecasts & Top Picks

• Guest: Dan Ives (Wedbush Securities) (35:09–41:23)
  • Predicts tech sector will be up 25% in 2025, “spurred by the AI revolution”; sees current progress as just “the second inning of a nine-inning game” (35:09).
  • Top picks: Nvidia, Microsoft, Tesla, Palantir, with enterprise AI and cloud use cases driving revenue growth (35:49–37:33).
  • On Palantir: Despite frothy valuation and insider selling, believes it could become another Oracle or Salesforce (38:14–39:36).
  • On Microsoft: The street “massively underestimates Azure numbers” and AI-related enterprise revenue (39:57–41:23).

“It's only 10pm in this AI party that goes to 4am. Right.”
— Dan Ives (35:49)

“Palantir…the haters they hate as a teenager, as a stock despise as a senior citizen and I think this is a stock that has potential to be three digits and higher.”
— Dan Ives (39:36)

9. Retail Real Estate’s Comeback

• Field report (Diana Olich):
  • Retail real estate, especially open-air shopping centers, enjoys surging demand post-pandemic, driven by low supply, rising rents, and demographic shifts (Gen Z spending) (42:06–44:36).
  • Sun Belt regions and select REITs (e.g., Federal Realty Trust) cited as names to watch.

Notable Quotes & Memorable Moments

• Market Chart Enthusiasm
  “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.”
  — Mike Santoli (02:23)

• Perspective on Market Valuations
  “As the market has become growthier, 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.”
  — Matt Orton (09:36)

• Bullish Take on AI and Tech
  “For every dollar spent on godfather AI chips, there’s an $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.”
  — Dan Ives (35:49)

• Palantir’s Upside—Despite Warnings
  “…Palantir, the haters they hate as a teenager, as a stock despise as a senior citizen and I think this is stock that has potential to be three digits and higher.”
  — Dan Ives (39:36)

• Chinese Cyber-Espionage
  “The Chinese are unrelenting when it comes to cyber espionage, whether it be treasury, whether it be the salt typhoon hack…will obviously be a key consideration for the incoming Trump administration.”
  — David Faber (22:00)

Important Timestamps

• [01:05] Opening: Recap of markets and record-setting year
• [08:20] Matt Orton (Raymond James): Volatility Outlook for 2025
• [13:19] Bill Ackman’s Fannie Mae/Freddie Mac comments and Wall Street reaction
• [20:06] Emily Wilkins: Details on the U.S. Treasury Department hack
• [35:09] Dan Ives (Wedbush): Tech in 2025, AI revolution, Top stock picks
• [42:06] Diana Olich: Retail Real Estate resurgence post-pandemic

Final Takeaways

• Markets: After a remarkable 2024, expect moderation and higher volatility; investors should diversify, strategically buy pullbacks, and manage expectations for returns in 2025.
• Tech: AI remains the primary driver for tech optimism, with select names (Nvidia, Microsoft, Palantir, Tesla) poised for further gains, though risks of overvaluation persist.
• Policy/Regulation: GSE privatizations, new rules for large investors in banks, and ongoing cyber risks all have potential to move markets and influence sectors in the new year.
• Real Assets: Retail real estate—especially open-air centers—is staging an unexpected comeback, mainly in high-growth regions.

This episode provides plenty of nuanced market analysis, actionable insights, and enthusiasm for tech and innovation, while also emphasizing the importance of caution, diversification, and staying informed about non-market risks (like cybersecurity) in 2025.