The Exchange (CNBC) — October 15, 2025

Episode Title: Trade War Tensions, Big Gains for Small Caps and Luxury Lift

Overview

This episode of The Exchange, guest-hosted by Joe Kernan, dives into the prevailing trade tensions between the U.S. and China, the surge in small-cap stocks (Russell 2000), robust earnings from major banks, and a notable rally in the luxury sector. The program also features key discussions on the impact of artificial intelligence, strategic moves from technology giants like Apple, and commodities such as gold and silver reaching all-time highs.

Key Discussion Points

1. U.S.-China Trade War Tensions

[03:14 – 16:32]

Treasury Secretary Bessant’s Hardline Remarks

• Eamon Javers (Live from Washington):
  • Treasury Secretary Scott Bessant held his first-ever press conference, aiming to set the stage ahead of an upcoming Asia trip.
  • Bessant singled out Chinese Ministry of Commerce official Li Chenggang for "negotiating with incendiary language," suggesting he may have "gone rogue."
    • Quote:

      "Chen Gong negotiates with incendiary language and perhaps has gone rogue. He showed up uninvited in Washington and said, quote, 'China will cause global chaos if the port shipping fees go through.'" (Eamon Javers quoting Bessant, 06:25)

  • When asked if the U.S. wants China to remove Chen Gang, Bessant replied, "That's up to them."
  • Bessant alluded to "Wolf Warrior" diplomacy—an aggressive style formerly prevalent in Chinese diplomatic circles.

China’s Perspective

• Eunice Yun (Live from Beijing):
  • Contrasts the good cop/bad cop perception, noting real policy divergence usually lies between ministries and national security elites—not ministry-level autonomy.
  • Points to Chinese state media messaging: shift from “talking first” to “fighting first” in trade diplomacy.
    • Quote:

      "The language is, if forced to fight, China will fight to the end. For talks, the door is open. And the key element there is that the sequencing of the word fight and talk have changed." (Eunice Yun, 10:15)

  • China has expanded rare earth export controls and sanctioned companies involved in the U.S.'s shipbuilding revival.
  • These moves cue heightened friction ahead of the upcoming APEC meeting between Presidents Trump and Xi.

2. Stock Market & Small Caps Rally

[16:33 – 39:10]

Resilient Earnings & Market Positioning

• Joe Kernan, with Drew Pettit (Citigroup):
  • Despite trade-war distractions, major indices—especially the small-cap Russell 2000—are hitting all-time highs.
  • Strong bank earnings (Bank of America and Morgan Stanley) are offsetting macro uncertainties.
  • Drew Pettit anticipates continued earnings strength, but expects some profit-taking as “bull market behavior.”
    • Quote:

      "Taking profits on good news is healthy for a structural bull market." (Drew Pettit, 22:09)

  • Draws parallels to the post-pandemic rebound rather than the Tech Bubble of 1999, noting today’s growth is underpinned by real earnings.

  • Pettit recommends barbell portfolio: large-cap growth (NASDAQ) and small-caps (Russell 2000), citing Fed easing and policy tailwinds (deregulation, tax policy) as catalysts.

    “For the first time in more than eight quarters, you have real earnings growth [in small caps].” (Drew Pettit, 28:20)

3. Artificial Intelligence: Opportunity and Challenges

[39:11 – 48:40]

Fed Governor Chris Waller’s Speech

• Steve Liesman (CNBC):
  • Waller advocates letting AI disruption unfold, arguing that technological change historically creates more jobs and growth long-term.
    • Quote:

      “Policymakers should let the disruption of AI occur and trust that as in the history of technology, the long run benefits will eventually exceed the cost.” (Steve Liesman, 40:09, paraphrasing Waller)

  • Notes “winners and losers from AI,” with job transitions especially acute among college-educated professionals.
  • Warns about risks: fraud, disinformation, algorithmic bias, cybersecurity.

  • Supports U.S. model of innovating first, regulating later—contrasted with Europe's pre-emptive regulation.

    "The US approach of letting the technology develop and figuring out regulations later is superior to Europe’s." (Steve Liesman, 44:12, paraphrasing Waller)

Tech Sector Investment Frenzy

• Brad Gerstner (Altimeter Capital, via Squawk Box):

  • AI is developing at a pace “10x the speed of the Internet."
  • Companies and investors are moving urgently, fueling massive capital expenditures and deal activity in data centers and chip manufacturing.

• Paul Meeks (Freedom Capital Markets):

  • Expects AI investment and buildout to remain strong for at least the next few years—players have balance sheets and are chasing first-mover advantage.

  • Urges caution: the near-term may be overestimated, but AI's long-term impact could rival or surpass the internet.

    “Like with any technology, you may overestimate the near term and underestimate the long term.” (Paul Meeks, 53:28)

4. Apple: Navigating China & Global Supply Chains

[48:41 – 54:40]

• Steve Kovach (CNBC):
  • Tim Cook (Apple CEO) is in China, pledging investment—a move seen as balancing diplomacy and ongoing business needs.
  • At the same time, Apple is lobbying for manufacturing tax relief in China and shifting production of new products (Macs, AirPods, smart home devices) to Vietnam and India, seeking supply-chain resiliency post-pandemic and amid tariff threats.

  • Apple’s latest device launches feature hardware updates, but the company lags in delivering on AI integration promises—an area of disappointment.

    “They really whiffed on this one in a significant way [AI rollout]. I haven’t seen Apple make a big promise like that in a long time and just completely failed to.” (Steve Kovach, 53:55)

5. Small Cap Focus: Speculation and Opportunity

[54:41 – 59:39]

• Chris Retzler (Needham Small Cap Growth Funds):

  • Russell 2000’s all-time high is partly driven by speculative, unprofitable names, but the setup for small-caps is improving due to:

    • Rate cuts (Fed easing cycle)
    • Policy tailwinds: Big Beautiful Bill (tax reform), deregulation, and capital markets strength (debt/equity access, active M&A)

  • Names highlighted:

    • Generac (data center backup generation)
    • Badger Meter (water metering, infrastructure)
    • Adtran (rural broadband buildout)

    “We are in a cycle now of rate cutting, and there will be a point at which money market rates will drop low enough that money is going to have to flow in to the equity markets. We think that it’s going to find a home in small caps.” (Chris Retzler, 56:41)

6. Luxury Sector: Surprise Comeback

[59:40 – 01:02:40]

• Robert Frank (CNBC):
  • LVMH posts best stock performance in 20+ years (shares up 12%) after Q3 sales growth surprises despite prior declines—sparking an $80 billion increase in European luxury market cap in one day.
  • Sales rebound in China (+2% in Asia ex-Japan), and U.S. (+3%).
  • Fashion and leather goods: slight decline; watches, jewelry, and Sephora: strong upturn.
  • LVMH CFO notes improvement in China, but real estate crisis and youth unemployment remain challenges.
  • Luxuries like champagne saw a U.S. sales boost, partially attributed to possible tariff-avoidance buying.

7. Bank Earnings: The Investment Banking Boom

[01:02:41 – 01:06:00]

• Leslie Picker (CNBC):
  • All major U.S. banks (“the big six”) beat both top and bottom line.
  • Investment banking was the standout, with a revival in M&A and IPOs.
    • Bank of America CEO Brian Moynihan:

      “It was a good quarter, highest non-pandemic related quarter we've had. … The pipeline is full, our customers are active, they're looking at deals, and the momentum has been building.” (Brian Moynihan, 01:03:36)

  • Private equity (PE) activity not yet reflected—when PE reengages, could further unlock revenues.
  • Regulatory expectations: Rollback under current administration, resulting in easier conditions for banks and further sector rallies.

8. Commodities: Gold & Silver at Highs

[01:06:01 – 01:10:00]

• Jeff Kilberg (KKM Financial):
  • Gold sets new records (+150% over three years; current price >$4200), buoyed by:
    • Geopolitical risk
    • Central bank buying as inflation hedge
    • Investors seeking tangible value (vs. crypto)

    • “With the relative strength at an all-time high … I don't really see a ceiling short term. $5,000 is a target.” (Jeff Kilberg, 01:07:15)

  • Silver also surges; demand dynamics differ from gold. Silver’s up 80% YTD.
  • Gold favored for its tangibility; central banks prefer it over bitcoin or other intangibles.

Notable Quotes & Memorable Moments

• On China-U.S. Trade Discord:

  • “I don't believe that China wants to be an agent of chaos. … Maybe they used to have the Wolf Warrior diplomats, so maybe he thinks he's a Wolf Warrior, we don’t know.” (Eamon Javers, quoting Bessant, 06:39)

• On Market Froth vs. Earnings Reality:

  • “The bubble comparisons really, really are just made for TV.” (Drew Pettit, 24:49)

• On Artificial Intelligence Policy:

  • “It’s easier to see the jobs destroyed, but harder to see and forecast what jobs will be created.” (Steve Liesman, 41:21, on Waller’s speech)

• Luxury Market Revival:

  • “European luxury stocks adding $80 billion in market cap on the back of those LVMH earnings.” (Robert Frank, 01:00:17)

• On Gold’s Relentless Run:

  • “Who in their right mind is going to sell a gold future here at 4212?” (Jeff Kilberg, 01:08:26)

Timestamps for Major Segments

• Trade War Tensions: 03:14 – 16:32
• Stock Market & Small Caps: 16:33 – 39:10
• Fed AI Speech & Tech Investment: 39:11 – 54:40
• Apple’s China Strategy: 48:41 – 54:40
• Small Cap Rally Analysis: 54:41 – 59:39
• Luxury Sector Surge: 59:40 – 01:02:40
• Bank Earnings Beat: 01:02:41 – 01:06:00
• Gold & Precious Metals: 01:06:01 – end

Conclusion

This episode of The Exchange provides a panoramic view of the current crossroads in global markets—where geopolitical tension, monetary policy, structural economic change, and sector-specific rebounds all converge. The show’s original fast-paced and insightful tone reinforces both the urgency and complexity of the issues at hand, offering viewers a detailed yet accessible window into Wall Street’s daily drama.