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The Exchange
The Exchange 7/8/26
00:43:28
Listen to the day's top stories, the must reads & a whole lot more for today's modern investor.
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- [01:00]
Kelly Evans
You're listening to the Exchange. Here's today's show. Scott, thank you very much. The president says he may strike Iran again tonight and the markets are taking it somewhat in stride. We're well off the earlier session lows. Dow's down about 619 though one of our guests says that's a mistake, this relatively muted reaction. I'm Kelly Evans and welcome to the Exchange. An escalation on several fronts today on Iran with President Trump declaring the cease fire over and in Europe with Russia and Ukraine continuing assaults on each other and all of this happening against the backdrop of the NATO summit where the president just wrapped up a press conference. So let's start there this hour. Our Steve Sedgwick is live at the NATO summit in Turkey. Steven, recap for us a little bit of what we learned from the President. He's spoken quite a lot today. What's the temperature of the room as all of this has taken place and what else has happened in the past couple of hours?
- [01:56]
Steve Sedgwick
Kelly, I've had the pleasure of working with you for many, many years and it was one of the most extraordinary evenings I've had in my career. This evening I came into that press conference with the president really, really concerned that he was going to slate NATO, slate the allies, talk about pulling those troops back again and all other issues as well. But what we got was actually a president who said it was tremendous love inside the room with all 32 members and he even said nice things about Spain, about Denmark as well. And it was quite extraordinary how positive The President was considering how negative he had been about so many parts of NATO in the build up. But he was very pleased about the spending levels. He was pleased actually that the level of support from the room was so full hearted regards Iran as well. And I actually got a question into the President and I said, look, sir, the world has taken you at your word that the MoU is over, the cease fire is over, oil prices WTI and Brent up around about $7. What happens next? Is the MoU dead and are we going to see a resumption of the full scale conflict? The President didn't actually directly answer the question, but he did actually say that he thought oil prices were going to go down dramatically from here as well. So he didn't seem very concerned about the blip up we've seen today. He also talked about the nuclear capacity of Iran, said they would never have a nuclear weapon. And that was his key priority and was what he was working for going forward. But I have to say, considering the curveballs and the chaos that preceded this meeting, that was during this meeting, I thought it was a stunningly positive Donald Trump and positive for the North Atlantic Treaty Organization as well. I didn't expect to see that. And as I say, Kelly, I thought it was one of most extraordinary days I've had in my career.
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Kelly Evans
I'm so glad that you're there because I saw those headlines on the wire and I thought to myself, well, there must be more to the story. You look at the market reaction, which is still to some extent lower today, although not dramatically so. So just one more time. I mean, it's one thing for the president to, to kind of strike a more positive tone. It's another thing for, for that to, to indicate there's been a substantive development. I mean, does the takeaway from this then contra to everything that we've heard over the past 24, 48 hours, with his incendiary comments about Greenland again and his comments about Spain, is all of that out the window now?
- [04:19]
Steve Sedgwick
That is an amazing question and I don't know. But you know, we've had all this comment. I mean, I may pull all the US troops out of Europe, 80,000 troops, I may pull out more aggressively. And we've got this Pentagon review which Pete Hegseth started in June and is set to go six months where pretty much every NATO member is on trial for the support that the US Were to give it. But honestly, and I'll reiterate, he said every single person in that room was, was very positive. He said Even the people that I have had problems with previously. And I think he was alluding to Spain especially, said, no, it was really positive. And so no problems at all, no problems over Greenland, no problems on spending, no problems on Spain. Again, he says that and his words, there was a tremendous amount of love in the room. I wish the press could be in there. He said, no, no, the press can't be in there because perhaps we wouldn't all be speaking so freely. But he said, I listened to every single one of the other people, 31 nations, and it was incredibly positive. Kelly, I can't tell you how different President that is from the president we've heard speaking to the press over the last couple of days. He said, you remember, I don't even want to be here. I'm only here because of President Erdogan, who is a great guy and he was very, very complimentary about President Erdogan. And I have to say the big winner in this conference is probably the Secretary General, Mark Rutter of NATO as well. There have been some rumors that actually maybe he was going too far in his support for the US President and just trying to too hard to appease the President. But I spoke to, I've spoken to 14 world leaders today, Kelly, 14 world leaders, and everyone said, Mark Rush is doing a great job. And the president, Mr. Trump said, Mark Rutter, fantastic job as well. And for the leader of Naito to come away with that and with the president saying that after this conference, I think that is a huge win for Naito out of this conference.
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Kelly Evans
Steve, one more follow up to that, more of the implementation front with the two big conflicts still raging with the Strait of Hormuz that's not resolved by any means. I think the President was still looking for, for Europe to back him up more on that front if we need to reinstate flotillas or something like that, that's one issue. Russia is another big one trying again to kind of figure out if there's ever going to be a move that they make on NATO or on Europe. Is the continent ready to respond? Are we there to kind of help them with that? So on on those two topics, what? I guess we didn't hear anything specific out of the press conference just now, but we have to imagine that there's in fact a little bit more unity than feared.
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Steve Sedgwick
Yeah, yeah, I think so. I think you're right. And I think the turnaround in the language towards Kiev, towards Ukraine and towards especially President Zelensky is quite extraordinary. Look, none of our viewers can forget that Oval Office meeting, that lambasting from J.D. vance, from the press, from the President himself towards Mr. Zelensky when, you know, he didn't have a suit on, he was lambasted for that as well. And the President said the following words. You do not have any of the cards. You need to get out of this. You do not have any of the cards. Well, now Zelensky is taking the fight, of course, those refineries, taking the fight deep into Russia, isolating Crimea as well. And its drone technology is quite phenomenal. Drone technology, by the way, that European partners, the US and the GCC in the Middle east all looking at saying, hang on a second, we could use some of that technology from the Ukrainians so they've got more leverage there. But this is another headline. It looks like the president has given Mr. Zelensky even more leverage because there was a conversation that was held between Zelensky and the President about the manufacturing of Patriot missile capacity in Ukraine. Now, that is absolutely fascinating. And then if that is something that can happen, that is the, perhaps the biggest problem for Mr. Zelensky at the moment, a move towards solving that. His biggest problem is he can't shoot down ballistic missiles hitting Kyiv, hitting the key cities in Ukraine as well. And if the President has given ground on that and is now allowing Kiev and Ukraine to manufacture Patriots, and if that is the case, and if that deal does go through, that is extraordinary and maybe means that the President is actually giving Mr. Zelinsky what he needs to have a stronger hand, at least in negotiations and perhaps even, you never know, to push the Russians back from some of its territory.
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Kelly Evans
That's fascinating. We're going to talk a lot more about that this hour. Steve, really appreciate it. Thank you. Good to see you. Great reporting. Our Steve Sedgwick in Ankara, Turkey. Let's turn now to Fred Kemp. He's the Atlantic Council CEO and a CNBC contributor. Fred, I'm almost at a loss for words. Are we making too much of the happy vibes? Because to Steve's point, if this is legit, if the feeling in the room has actually managed to be somewhat fraternal and coming together, we could see big developments on the Russia Ukraine front, but may deal with that later. Does there need to be something more on the Iran question right now?
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Fred Kemp
So, Kelly, I'm not sure if you remember, but I was on Live with you when Zelensky went through this terrible meeting he had with Trump at in the Oval Office where Trump said he didn't have any cards. And I said well, look, this is geopolitics as reality tv. Let's wait for the next episode. Well, now we have the next episode and then we'll have to have another episode. But look, this turned out the way the, the Secretary General of Naito Marcuta wanted it to turn out. There is a unifying message. If you look at all the bad news that Trump has right now, whether it's the red card regarding the US Loss in Belgium with its sound victory and the US out of the, out of the competition, or whether it's Iran and the cease fire failing, there's good news in Europe right now. There's good news in the sense that the Europeans are delivering on the commitments they made at the Hague summit last year. That's in the Naito communique. It's actually happening. There are real capabilities happening. There are real deals happening. So it's not just, it's just not commitments any longer. There's a long way to go, but it's very, very good progress. You also have Ukraine with real battlefield gains and hit, getting very deep into Russian territory. The three hits on refineries and installations just today. And you saw Trump, of course, complimenting Zelensky in Ankara. So I think there are two things that are happening at the same time. Would Trump like to have Greenland? Of course he would. Is Trump frustrated with particularly Spain, but also on others on Iran? Of course he is. And he said those things ahead of the summit. But he also has reason to be satisfied. NATO has come in terms of defense spending, in terms of creating real capabilities and in terms of of Ukraine going forward. What Steve said about the Patriot Patriots being built in Ukraine, look, it'll take a long time before they will ever be in a position to actually build them in Ukraine, even if the decision has been made. Trump himself said he hadn't discussed it with the company that makes the Patriots yet. But what it is, it's just a signal that things are moving in the right direction. The US Is selling its weaponry to Ukraine. The Europeans are paying for. So we're not paying for it. But that will continue. And I'm sure that also must come as a relief. I think there are a lot of size of relief after that press conference, a lot of sighs of relief at this summit because it turned out, turned out about as well as, as NATO allies could have imagined.
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Kelly Evans
This might be the first time that I will ever see the following words from Fred, which is Trump seems to have heeded the advice of geopolitical experts and instead of lashing out so I have to, that's why I am sort of going there must be more to the story.
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Fred Kemp
Look, I think certainly something happened between his, his, his conversations, interviews, among, upon coming to, to Naito and coming to Ankara and after the summit. And obviously all the leaders in the summit are giving him credit which they should give him. His pressure on Naito is part of the reason or the large part of the reason. Putin's attack on Ukraine wasn't enough. It was all pressure on NATO allies that got their spending up to 3.5% of GDP, 5% if GDP if you also take into account defense related spending. He's also got the distractions of Iran. Is he upset on what happened with Iran and that he didn't get enough support from the Europeans? He is. But at the same time Secretary, General, Secretary General Mark Ruta is saying, look, there were 5,000, 4,000, 5,000 sorties out of European bases that helped you support Operation Epic Fury. And so these, this also keeps getting repeated to Trump. So it's, it's alliance management for sure, but the alliance is also managing Trump and I think they've done a very good job of it around this summit.
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Kelly Evans
All right, we will leave it there, Fred, unless you what might be then the next direction this goes.
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Fred Kemp
No, I think, I think it is worth watching Iran right now, that's what's moving the markets. That's what's what's on his mind. He certainly doesn't want to go into a full scale war, but he can't stand back when Iran hits things. So I think we're going to see a continued tit for tat with Iran without either side having any interest getting involved back in a full scale war again. So I think that we're settled now on Naito. We've got to watch to see if Ukraine can make more gains on Russia. This is a real weak moment for Putin. That's what I would be watching in the coming weeks. And of course I think the president's got much bigger fish to fry, much bigger issues. Also for domestic politics from, from Iran
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Kelly Evans
we seem to do this. Fred, when you come on, something kind of significant happens and I like that very much in this hour. So we'll, we'll, we'll leave it there and we'll see what comes next. But thanks for joining us again, Fred. It's good to see.
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Fred Kemp
My pleasure.
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Kelly Evans
Fred Kemp from the Atlantic Council. Now, while all this was taking place, we had a 10 year note auction at the top of the hour. I want to bring Rick Santelli in For that Rick, to see how it went at a time when yields have been back on the rise again.
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Rick Santelli
Yields are on the rise, which means if you buy in, you're actually getting a bit of a deal because the prices are going down as the yields are going up. And believe me, investors thought it was a good deal. This auction. 39 billion reopened tens. The primary auction was actually the second week in May. This is the second time we're adding. It's the last of the reopenings. The yield 4.58. The when issued yield was 3/4 of a basis point higher. So remember, lower yield is a higher price, higher yield is a lower price. In this instance, government was a seller and indeed they sold it at a higher price than the when issued market. So that's a good thing. And instead of tailing, which is the opposite, we call this stopping through and the A grade is deserved. And what's really interesting here is at a time where I haven't heard so many voices talking about the competition and issuance between countries, sovereigns, corporations, AI related build out debt being offered Amazon Metta that this auction like yesterday's three year went very, very, very well. And I think that's very important. And if you look at some of the metrics, the dealers took the least amount since January of this year and the bid to cover was the best. Meaning how many dollars chased every bit of securities was on the high side. The best since Sep of 25. Tomorrow's the last of 119 billion in coupon supply with 22 billion reopened 30s. But suffice it to say that all those out there that are nervous about investors having a belly full of securities, well the tenure seems to show that they have a bit of room for dessert. Back to you.
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Kelly Evans
It is all coming up roses. So far this hour we have peace at NATO or happy vibes. We have a great 10 year auction. All right Rick, thank you very much. Rick Santelli. See what happens with our next guest who has been warning that markets are too complacent about the chances of peace with Iran. Let's bring in Ariel Investments Vice Chairman Charlie Brinskoy. Charlie, don't fight the vibes. The vibes are good right now.
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Charlie Brinskoy
I don't get it, Kelly. I just think you all the market is looking at the Mideast and is looking at the Ukraine and is seeing prospects for peace. I don't see it that way. I don't think anybody's ever lost money by being too pessimistic about the prospects for peace in The Middle East East. And that's where I am right now with if you look at history, if you look at the 73, 74 oil embargo or the 7980 Iran Iraq War, we had effectively doubling and in some cases tripling of the price of oil and that and this, we still have 20% of the world's oil going through the Straits of Hormuz. We have Iran firing missiles at tankers. If one of those hits and blows up a tanker and there was US loss of life, I guarantee you we're going to have a very, very hot return to conflict in that area. So the market, you're absolutely right. The market up a minor 4 bucks or 5 bucks in the price of oil. The market is optimistic. I am not.
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Kelly Evans
Interestingly, the energy sector I think is now the top performer once again for the year. So even though the oil price has come back down, these are stocks that have still put up some really remarkable gains. One kind of tactical question, I get a lot when we talk about apa. You also like Slumberger, it's SLB now, Chevron, Barrick Gold. But on APA specifically, people sometimes ask me, why that one? Why not Diamondback, which has been such an incredible performer. You know, I'm just curious if you could talk through that a little bit
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Charlie Brinskoy
because it was by far the most out of favor from a valuation point of view. It was trading at last. When you and I start talking about this a year ago, it was trading at less than three times enterprise value to Ebitda. Trading right now, even after this spectacular run at only 6, maybe 7 times P E very negative. People think it has too much debt. It's still an investment grade company. It's still got triple B ratings from both Moody's and S and P. And very importantly, they have had some great discoveries off the coast of Suriname, in South America and off Alaska that when the big majors have not been spending as much on development, Apache has been spending and finding oil. And so they're going to have it the next couple of years.
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Kelly Evans
How would you describe the energy situation right now? Because just yesterday literally we learned that Saudi Arabia was cutting prices on its Asian bound crude again, which is usually a sign of too much supply in the market. We saw this during COVID So we have a market where there's this real bottleneck in the Strait of Hormuz and yet the overall situation is one in which oil is pretty plentiful. And in the US our exports are way up. I mean our energy independence, if you could call it that has really only grown. What does it all mean for, for the energy producers in this country?
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Charlie Brinskoy
Ultimately, a couple of things. You're absolutely right about the change in us now being one of the world's largest exporters. That was great policy. All came about from fracking and horizontal drilling. And we are now no longer going to get an embargo against us because we are supplying so much of the world's oil and gas that matters. But what is not true is that we're awash in oil. We have taken down strategic reserves all across the world. Strategic reserves are at the lowest levels they've been at, in, in probably two decades. And people have been counting on, have not been buying back to fill those strategic reserves because they've been optimistic that we were going to get an end to the conflict. If this thing drags on, people are, we're going to start, we are consuming more oil than we're pumping right now and that is going to lead to tight supplies, in my opinion. And with oil heading north.
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Kelly Evans
Interesting. And so that, you know, that's a recipe possibly for higher prices. And, and I guess, yeah, go ahead.
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Charlie Brinskoy
One more quick point. Don't underestimate the impact of data centers and their requirement for energy. The energy that is going to make the electricity that's going to run data centers around the world is not going to be solar. It is going to be petroleum based, natural gas based. And demand for those products is going to spike over the next three to five years. We are not going to have enough solar and wind to, to cover it. And so it is going to come from natural gas principally.
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Kelly Evans
All right. Well, certainly the trade recently had been sell energy, buy some of the consumer stocks and there's a bit of a rethink in that today for sure. Charlie, good time to check in with you. Thanks so much.
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Charlie Brinskoy
Thanks, Kelly.
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Kelly Evans
Charles bobrinskoy Coming up, biotech taking a breather today along with the rest of the market. But our next guest says this breakout to record highs is only the beginning. Michael Yee will tell us what he thinks. That catalyst will be next. Plus, oil prices are back on the rise. Does that renew pressure on markets like Korea and Japan? That discussion coming up on the Exchange.
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CNBC Announcer
This is the Exchange on stage. CNBC.
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Boris Head Commercial Voice
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- [21:45]
Fred Kemp
You're welcome.
- [21:46]
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- [21:50]
Schwab Commercial Voice
trading at Schwab is now powered by Ameritrade. Unlocking the power of thinkorswim. The award winning trading platforms loaded with features that let you dive deeper into the market. Visualize your trades in a new light on thinkorswim desktop with robust charting and analysis tools all while you uncover new opportunities with up to the minute market news and insight. ThinkOrSwim is available on desktop, web and mobile to meet you where you are. It's built by the trading obsessed to help you trade brilliantly. Learn more@schwab.com trading Thursday, July 16 CNBC
- [22:22]
CNBC Announcer
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- [22:36]
Kelly Evans
welcome back. And amid signs that the chip trade is stalling out, looking for its footing, let's put it this way, investors have been looking elsewhere for signs of momentum. One such area is Biotech. The IBB ETF up 16% this year and up 51% over the past year. Despite the recent rally, our next guest still sees significant upside, citing dealmaking as a big tailwind in 2026. With the year on track to become the largest ever for M and A targets, let's bring in Michael Yee, the senior pharma and biotech analyst at ubs. It's been a while, Michael. It's good to see you.
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Michael Yee
Well, it's great to see you. Maybe it's been a while because the sector's been tough. Something to talk about.
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Kelly Evans
It's been biotech winter. Can that be a term kind of like with bitcoin? So what's gotten the animal spirits going again?
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Michael Yee
Well, it's a great, it's a great question. And it all started about six months ago, you know, coming out of the last few years of your biotech winter, you know, where drug pricing was a big problem. Capital markets were closed. Nobody wants to touch a biotech stock. You know, we had the drug pricing deals that were removed at the end of the year. The Trump deals that you saw with all the pharma companies that really unlocked a huge uncertainty about the industry. And we know what's going to happen there, that there's not going to be any changes. But really what kicked off the sector and what kicked off the XPI to an extreme technical breakout was all the deal making Pharma, which has more than $100 billion of patent cliffs over the Next couple of years has gone on a deal making tear. We have record M and a of $96 billion of deals that have happened this year. Pretty much seven or eight deals, almost one or two a month. And all of these pharma companies are telling us that there's going to be more, Abbie is going to do more deals, Lilly's going to do more deals and many of the other pharma companies, which are patent clips, need to go out and buy more biotech companies. So we continue to see that as a driver to the space and we continue to see upward trajectory of these stocks.
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Kelly Evans
You know, the big narrative in kind of pharma or biotech the last couple of years has also kind of been about the weight loss drugs. It's been GLP1s and GLP3s and a little bit of this and a little bit of that. And this incredible move towards Lilly becoming $1 trillion stock and so much more. I mean that's really been the predominant narrative. And yes, we're reminded that other companies, Bristol Myers for instance, doing quite well on the side through a J and J. Same same kind of story. So is there one kind of overarching explanation for what's now driving this, this dealmaking cycle or is it a lot of little things?
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Michael Yee
Well, of course I think it's a lot of things combined to make, you know, three or four tailwinds that are of course driving it. Obesity and all of the money coming into Lilly and others is certainly helping. I think the macro environment of course is helping. And I think the deal making of course really tells everybody that there are great drugs out there. Pharma needs to go out and acquire them. If I find great biotech companies that have a great promising drug that looks to be a blockbuster, there are big pharma companies out there to acquire you and your stock can go up 20, 50, 100%. There definitely is a lot of money flowing into the space. The space has been under owned, as you call it a biotech winter, I call it a biotech four years. And I think that these animal spirits really can take this sector higher. Not everything is about, you know, hyperscaler, capex upgrade cycle. There are obviously other great stuff going on in the space and biotech is one of those.
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Kelly Evans
Yeah, I take your point. I think it is an important one that the what happened was also just the backing off of some of the regulatory threat from Washington because remember that could come back back on the scene. Look at some of the early signs for the midterms that who knows if that comes back onto the scene. But for right now, we've kind of cleared those hurdles. A couple of names that you like. I mean, you talked about Lilly, Vertex again, haven't talked about that in a while. Merck, Revmed, I mean, that's the one that got the standing ovation on the pancreatic drug. Is that right?
- [26:31]
Michael Yee
That's absolutely right. Revmed is a stock we definitely think can, you know, have good prospects and move higher. The drug is not yet approved. There's a lot of talk about a great label and I'm predicting significant numbers next year. In the year ahead, there's going to be a lot of use of that in pancreatic cancer. So that's going to be a huge drug. So that's another one that we definitely think is great prospects next year.
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Kelly Evans
We're showing NBX as well, Kodiak and Cogent, more to discuss. It's fun again. No, Michael, thanks very much. Really appreciate it.
- [27:02]
Michael Yee
Very good. Good to see you guys.
- [27:03]
Kelly Evans
Michael Yee of UBS. Coming up, Apple expanding its Broadcom partnership in a $30 billion deal, its largest manufacturing commitment ever. Is this Tim Cook's swan song or a sign of more to come under the incoming CEO? That's next. And we also want to show you President Trump moments ago departing the NATO summit on Air Force One after that surprisingly conciliatory press conference at the end there. More coming up on the exchange.
- [27:35]
Keith Landsford
This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Landsford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monitoring monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts.
- [28:04]
CNBC Announcer
Thursday, July 16, CNBC Sport and Boardroom Join Fanatics Fest for Game Plan groundbreaking ideas shaping the future of sports and entertainment. Request your invited CNBC events.com/game plan.
- [28:19]
Kelly Evans
Welcome back. Some Apple news today, the company expanding its relationship with Broadcom to the tune of $30 billion. Mackenzie Sagalos has more in tech. Check Mackenzie Kelly.
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Mackenzie Sagalos
This is really about Apple trying to lock down more of the chip supply chain at home with this expanded Broadcom partnership, now its largest U.S. manufacturing commitment to date. Broadcom shares 6% higher on the day, their sharpest rally since February. Now as part of the deal, Broadcom will produce more than 15 billion US made chips for Apple at its manufacturing site in Colorado, including custom silicon products for multiple generations of Apple devices. CEO Tim Cook said this morning that it is another step toward building an end to end silicon supply chain in the US For Broadcom. This gives the company a fresh roll in Apple's chip stack. Apple says the deal is for components that help its devices connect to WI Fi and Bluetooth, and it's not giving much detail beyond. But Bloomberg's reported that part of the work is tied to Apple's first dedicated AI server chips. We'll see if anything materializes on that front. Apple framing this $30 billion headline number as part of the $600 billion that it's already pledged to spend in the US and it's putting 1.5 billion directly into Broadcom's Fort Collins site as part of this arrangement. One question now, though, is whether the US can staff all of this. One estimate says this skilled chip labor gap will potentially disrupt buildouts underway across the country.
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Kelly Evans
Kelly, a big deal and more to come. Mackenzie, thanks very much. Appreciate it. Mackenzie. Seagallos to contestant now for the CNBC News Update.
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Contessa Brewer
Contessa Brewer Kelly, thank you very much for that. It may not be the end of the road for President Trump's attempts to end birthright citizenship, even though the Supreme Court ruled against him. Republican House Speaker Mike Johnson is reportedly exploring whether to bring legislation to the House floor as a way to counter that ruling. Basically, according to Politico, the speaker's proposed legislation would end the ability of pregnant women legally to enter the US to gain citizenship for their children. If that were to pass the House, there's little chance it would overcome the Senate. Filibuster searchers off Pakistan's coast today recovered the wreckage of a copy cargo plane that disappeared on approach to Karachi yesterday. The search for five missing crew members, though, continues. That plane reported a navigational system problem just before it lost contact with air traffic control. And Emmy nominations were announced this morning in Los Angeles with HBO series the Pit leading the pack with 25 nominations. Fellow HBO series hacks received 24 nominations, the most ever for a comedy series. The Emmys are September 14, but there you've got, you know, a show about saving lives, Kelly. And the other about saving careers.
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Kelly Evans
Well said. The winner with viewers sometimes it's one both in the same Contessa. Thanks very much, Contessa Brewer. Coming up, the president not just shifting the narrative on Iran and NATO today, he also made a policy pivot on Ukraine and Russia as that conflict escalates. We'll talk through the investment implications next
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CNBC Announcer
as the country celebrates 250 years, some of the nation's most influential business leaders joined CNBC to reflect on what drives American enterprise.
- [31:39]
Michael Yee
If I had to describe American enterprise over the last 250 great years in
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Steve Sedgwick
one word, I would say optimistic.
- [31:47]
Kelly Evans
The word that comes to mind is innovation.
- [31:52]
Steve Sedgwick
Daring
- [31:55]
Victoria Greene
America.
- [31:56]
Kelly Evans
250 years. To me, this is the story of reinvention. It would be relentless possibility. This country is adaptable, it is agile, and it is enabled. If I had to sum up 250 years of American enterprise in a single word, it would be openness. Open to ideas, openness to immigrants.
- [32:20]
Charlie Brinskoy
Incredibly ambitious
- [32:23]
Kelly Evans
people have come to this
- [32:24]
Steve Sedgwick
country, no matter who they were, and they could make their way.
- [32:27]
Kelly Evans
And that opportunity, possibility is what makes America very different.
- [32:33]
Michael Yee
I think it would be together.
- [32:36]
Steve Sedgwick
I think the DNA of the country is built on entrepreneurship, the opportunity for people to be. We bring ideas, the freedom to be able to pursue those ideas.
- [32:48]
Scott Cohn
It's been an amazing run for our country. And when I look ahead, that same opportunity is ahead of us. But we have to come together as people.
- [33:03]
Kelly Evans
Welcome back. President Trump making some news on Ukraine and Russia today, saying in his meeting with Ukrainian President Volodymyr Zelensky on the sidelines of the NATO summit that the US Will give license to Ukraine to produce Patriot defense systems. This comes as Ukraine has intensified its attacks on Russia, including on its oil infrastructure. European diesel and natural gas are higher after those strikes. Our next guest says the equilibrium in the war is starting to break down. For more, let's bring in Marco Papich, macro and geopolitical strategist at BCA Research. Great to see you, Marco. A lot of momentous things happening today, it seems, but let's start with this one. And where, where is your perception of where we're going from here?
- [33:41]
Marco Papich
Well, I think that for about three years, this conflict has been in some form of an equilibrium where, you know, Russia was simply not willing to throw its full weight behind the conflict. Remember, they only mobilized once, in December of 2022, and yet their efforts were incapable of improving on their territorial acquisitions. So the conflict has been stuck, the market moved on. I mean, the last time I saw any asset basically trade off of Russia, Ukraine, any major asset was in September of 2022. But that's no longer sustainable because Ukraine has developed drone capabilities to the point where they can impact Russia in a significant way. And so Russia has had to counter that by increasing their targeting of civilian infrastructure in Kiev and other major cities. And so I do think that that equilibrium we've been in for three years, is breaking down.
- [34:32]
Kelly Evans
And so do you expect the US to apply more pressure and through the form, for instance, of more severe blockades or, or sanctions tactics on Russian oil to cut off its revenues?
- [34:44]
Marco Papich
You know, I'm not sure what is going to happen. I actually think that the tail risks on both sides of the distribution are rising. So there is a chance that Russia decides to give up on its last goal, which is to conquer the north, north western portion of the oblast of Donetsk. They may just simply say, look, what we told you in Alaska is no longer something we need. We're ready to negotiate a ceasefire. That's the one option. The other option is that Russia does mobilize, does actually increase the pressure on Ukraine because what's happening from Russian perspective is no longer sustainable. So it's either one or the other. I don't think this is in the hands of President Trump. This is really in the hands of President Putin. And he's the one that's under pressure because the equilibrium has broken in a way that impacts Russia negatively, not anybody else.
- [35:35]
Kelly Evans
So you're saying that the momentum is now behind Ukraine?
- [35:40]
Marco Papich
I would say that the ability of Ukraine to impose pain on Russia has increased, but no, not on the ground. Ukraine also remains completely incapable of changing the reality on the ground. On the frontline, both sides are absolutely stuck. And I think a lot of investors overstate the importance of drones. I mean, they're epically important, but they're not going to conquer territory for you. That is not what they do. They impose costs, particularly on powerful. I mean, we saw that with US and Iran and we're seeing that, of course, with Russia in this conflict. But no, Ukraine is not going to conquer more territory. If you're asking that, they don't have the means to do that. So the situation on the ground continues to be stuck. But from a pain perspective, Russia's under a lot of pressure right now. And that's what's happening with some of the European energy markets you referenced. They're responding to the fact that Russian capability to refine fuel is, is really being hurt.
- [36:35]
Kelly Evans
I know that you say one kind of area responding to all of this is are the European defense companies. We were talking about Patriot missiles. That's more of a, I think rtx, Lockheed and Boeing all might be involved on that front. So some American firms, but some European defense firms as well, because the President otherwise had really struck a more constructive tone at the end of this NATO summit, seemed pleased with the progress they're making on defense spending and there is still a lot more to come if they're going to get to 5%.
- [37:02]
Marco Papich
So there I would say that we're in dangerous territory and it's counterintuitive. European defense stocks may be rallying. But if we do get one of the tail risk distributions I just referenced, which is a positive one, so like a right tail risk, Russia is Kry's uncle. The question is, what will that do to defense stocks? I think for sure they will go down. Now I personally think that's a buying opportunity because I cannot imagine a world where Europeans make a mistake for the third time in the last 20 years. Some of your viewers may say they're going to make that mistake, but I don't see them becoming complacent like they did after Russia invaded Georgia in 2008. After Russia invaded Ukraine the first time in 2014. I think this time they get it. And the reason that I would be buying defense companies in Europe on any dip is because I do think they're going to move procurement away from American. So I don't think America got what he wanted. Europe spending 5% of GDP on defense. From an investor's perspective, sure, whatever. That's great for Europe but from how you allocate your dollars, I don't think you should be buying American defense companies. Companies, you know, Europeans are going to spend on European companies and there's going to be a huge shift in procurement decisions that will favor the European names. And so that's what I think will drive further alpha in this space.
- [38:24]
Kelly Evans
Well, that is point. Well, it's a continuation of, I know your long running theme about the end of globalization here and kind of the Balkanization and a positive for some of those firms and maybe for the continent overall. But an important warning there as well. Marco, really appreciate it. Thanks for making the time.
- [38:40]
Marco Papich
Absolutely. Any time Marco.
- [38:41]
Kelly Evans
Poppich coming up, Memory ETF DRAM under pressure again today though, fighting back into positive territory. Shares of SK Hynix and Samsung down about 4% overnight. Weighing on the Kospi but the US names like Sandisk and Western Digital, those are showing a little bit more traction. Leading the S and P earlier in the session. Before paring gains, we will trade these, I'm going to use the word volatility capital. They've earned it when the exchange comes right back. Energy is once again the best performing sector of the year. Today's oil move is no doubt part of that. It's up 22% year to date. Industrials are third best actually about 16% higher tech is in the second spot today as well. The Mag 7 previously the leadership group that's about flat year to date. Our next guest has some ideas about how to put play this seeming rotation. Victoria Greene is the chief investment officer at G Squared and a CNBC contributor. Welcome. And where, where are you looking?
- [39:37]
Victoria Greene
Where.
- [39:37]
Kelly Evans
Where's the fresh energy in the market coming from or you know better than anyone, sometimes you just got to stick with tech. It's what lead us out.
- [39:45]
Victoria Greene
I don't hate tech. I don't hate chips. I understand memory may need to rewrite anything that goes up 200% in six months. You cannot be surprised if it rerates a little bit. So none of this is necessarily shocking. I don't think anybody rolled out of bed after 4th of July and said oh my goodness, memory stocks are pulling back. But I don't think anything's broken there. And look at what's happening with Broadcom and Nvidia. Nvidia is cheaper than the markets. You're looking at some of these old, old school chip names now that kind of fell out of favor in the first half. It was all about like sandisk and Micron and everything else. But now you have Broadcom with their deal with Apple. You have Nvidia trading below the S and P multiple. One of those lowest multiple.
- [40:20]
Kelly Evans
Stephanie Links was talking about this earlier but it's a lower multiple than Hershey. I think it was trading 17 times or something like that. Which she seems to agree with you and think that's just ridiculously cheap.
- [40:28]
Victoria Greene
It is ridiculously cheap. And if you remember the last time mag7 got cheap it was remember when Metta was a value stock back in the bear market of 2022. We're starting to like some of these names. I tend to like the Nvidia's of the world and the Apples of the world best because they're a little bit Capex light right now. So if you want to kind of hedge that hyperscaler risk, that Capex risk, look for people, we call them the rocks stocks, the receiver of capital and they are actually getting paid. So as some of the spending continues to work its way through the system, we are seeing like nothing is wrong with the video, nothing is wrong with Broadcom. The demand is there. You know you love what the Broadcom is doing with Apple. That diversifies away a little bit from the AI. But margin was 67%, a record high margin. So I look at some of this old tech and I like it.
- [41:08]
Kelly Evans
But in other words I'm not Hearing you come here and say, yeah, you know, I'm, I'm in consumer discretionary industrials, financials. I mean I know you do a
- [41:16]
Victoria Greene
little bit of everything, but I'm just,
- [41:16]
Kelly Evans
just saying you're, you sound like you have highest conviction still in kind of this leadership area. I like the phrase rocks receivers of capital. That one I hadn't heard that. Are rocks the new Mag 7?
- [41:27]
Victoria Greene
I think so. I think there's worry about a capex spending and obviously kind of worry with the Amazon or the Samsung news and you're going to get jerked around a little bit. But AI is continuing to expand. We want to have those people want the industrials, we want the stocks, the tech stocks. We want to be a little bit in utilities and power and infrastructure because even without AI, we needed more power and infrastructure anyway. A lot of our infrastructure is extremely old. Most our power lines are over 50 to 70 years old. They need to be replaced and upgraded anyway. So we look around the world and say we like these investments. We think they're going to have extreme cash flows continue for the next 12 to 18 months because we do not see AI as dead. We see this adoption is finally gaining mainstream traction. You're going to have enterprise AI adoption. You're actually having companies, companies move beyond just the chat bot to how do we really do this? And all of a sudden they're realizing, oh, this is a lot of tokens. To replace a human is a lot of tokens. That is wonderful for all these companies that are going to have the chips and the servers and the infrastructure and the networking. So the nuts and bolts and receiving of all of this investment, that's where
- [42:28]
Kelly Evans
I want to be still like we're talking about to Diamondback or to APA with Charlie Brinskoy. You're a fan of Faye or Diamondback. Devon, you also like some of the health care space. Unhappy JNJ again with Michael Yee. That was our discussion as well. I mean there's an area that's actually shown some nice traction.
- [42:43]
Victoria Greene
Yeah, health is alive for the first time in a long time. Health is having some leadership. It's also a really good hedge. I look at health and saying if you want to get defensive and it's not necessarily a bad time to play a little bit of defense here. I'm not super thrilled like throwing into high multiples, you know, things like that right now, a little bit of defense and value is not a bad place. Just in case this Iran thing lingers a little bit longer. Again, health care is one thing that people have to pay for, you're going to pay your health insurance premiums, you need medications, you're paying for that. If you need a band aid, you're going to pay for that.
- [43:09]
Kelly Evans
Or you're happy to pay. If it's a life saving treatment or something, you're kind of happy to pay for that. We didn't plan this coordination either. If you're not on, if you're on the radio, we are in the exact same shade of flamingo pink here. Victoria, thanks very much. Victoria Green. Victoria Pink, no, Victoria green. Coming up, 2026 marks the 20th year for CNBC Top States for Business. This year's winner shall remain a mystery for now. But our Scott Cohen is already there. And we always get you in the kayak. Scott, this is like the classic. I should know by now how to tell from like the algae behind you where you are to drum up excitement and show off what we're calling the cone drone. Scott, what can you tell us?
- [43:49]
Contessa Brewer
That's right.
- [43:51]
Scott Cohn
So, Kelly, yes, as you know, every year the Top States production team puts me in a boat or some sort of watercraft. I have not yet fallen out. Will this be different? We'll tell you coming up next. And another diabolical hint about where I am. It's America's top states for business. The exchange continues.
- [44:16]
Kelly Evans
What do North Carolina, Virginia and Texas all have in common? They've each been named CNBC's annual Top State for business at least three times. Could one of them get a fourth and reclaim the title this year? Or will a new victor emerge? Scott Cohn is in the winning state with his diabolical hint. Number three for us. And more about this year's methodology ahead of tomorrow's reveal. Scott?
- [44:40]
Scott Cohn
Thanks, Kelly. One of the things that we're looking at very closely this year, apropos of this is water infrastructure is the most important category. But we always want to make sure that we're checking and monitoring the right things. And of course, with all of the boom and data centers, we're looking very closely at power and water, also looking at permitting and things like that. But it's just one of ten categories of competitiveness. And yeah, every year for all these years, at some point somebody decided let's put cone in a boat. We've done rowboats. We did a motorboat. I think last year we did a paddle boat. We seem to always come back to the kayak, which I am the most dorky in. Anyway, let us give you yet another Top States diabolical hint where am I? This next diabolical hint is, I think my favorite changemaker. Changemaker? What could that possibly mean? Think diabolically. Try and get into my head. It's not pretty. Topstates.cnbc.com you can read more about our study and tomorrow you'll be able to see where your state ranks when we reveal where I am on Squawk Box tomorrow morning and then the entire top state study in this, our 20th year.
- [45:54]
Kelly Evans
Kelly well, I am terrible at these guesses, so I will leave it to our very, very smart viewers who are already sending in some good suggestions. Scott, thank you. It's good to see you safely. It's just beautiful. I always just like seeing the green and the water. It's so peaceful. Scott, we'll see you tomorrow. Scott Cohn that's it for the Exchange. Thanks for watching. Power Lunch is up next with the Fed minutes. They are very exciting this time. After the break. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.
- [46:28]
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