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Trade War Tensions, Big Gains for Small Caps and Luxury Lift 10/15/25
00:40:38
Rhetoric ramps up in trade talks between the U.S. and China. The small cap names to buy now as the Russell 2000 hits an all-time high. Plus, LVMH has its best day in over 20 years.
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Introducing Fidelity Trader Plus. With customizable tools and charts you can access across all your devices, Try our most powerful trading platform yet@fidelity.com TraderPlus investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC Member NYSE SIPC For 140 years, MultiCare has been in Washington prioritizing long term solutions, partnering with local communities and expanding access to care. Together, we're building a healthier future. Learn more@ multicare.org that's right. That's right. Frank Day number two, welcome to the Exchange. I'm Joe Kernan in for Kelly Evans. Stocks are higher but off the highs now with trade angst. We're calling it getting trumped by strong earnings. Getting trumped. You like that. The small cap. Russell 2000, the standout today, hitting an all time high and on pace for the best week in nearly a year. Big bank earnings continues, continuing strong with bank of America and Morgan Stanley both topping expectations. And another day, another record for gold, up 5% so far this week and on pace for its 47th record close this year. Silver back to Hunt brother levels yesterday and uncertainty, a big driver into that trade. Which brings us to our first story, the growing trade tensions with China. Eamon Javers is live in Washington where Treasury Secretary Scott Bessant isn't pulling any punches, saying China will neither command nor control the US Eunice Yun is live in Beijing with the messaging coming from there. Eamonn, we're going to start with you. I heard a lot of the treasury secretary's comments this morning on I guess it was what squawk on the street, wasn't it? Or maybe it was money with Sarah Eisen this morning. It did most of those live, just like I watched the moon landing. But he had a press conference as well. Yeah, Bessen hasn't been making himself very available today. He held his first ever press conference at the treasury building today, which aides said was to get ahead of the trip that they have coming up to Asia at the end of this month. Now we got a potentially significant look, Joe, behind the scenes of the recent diplomatic breakdown between the two economies. And apparently a lot of it comes down to just one obscure official. Now, I asked Treasury Secretary Bessant about his comment to Sarah Eisen this morning, that interview that you watched in which he uncharacteristically singled out a lower level Chinese official, Li Chenggang of the Chinese Ministry of Commerce, who US Officials have been increasingly frustrated with as the talks go on. Besant said that Chen Gong negotiates with incendiary language and that perhaps he has gone rogue. And Bessen also blasted him as very disrespectful. He showed up uninvited in Washington and said, quote, china will cause global chaos if the port shipping fees go through. So I don't believe that China wants to be an agent of chaos. And maybe they used to have the Wolf Warrior diplomats, so maybe he thinks he's a wolf Warrior, we don't know. Now, I asked BESSON if the U.S. wants China to remove Chen gang from their negotiating team, and he replied simply, that's up to them. But. But it's notable, Joe, that Besant left the door open for exactly that. Back over to you. Maybe Eunice knows. But before we get there, Eamon, do you think rogue is something that happens a lot in the CCP under President Xi? I mean, wouldn't you think that he might have the implicit backing or blessing of President Xi? Yeah, I mean, the real question here is, you know, is this a on purpose sort of good cop, bad cop strategy on the Chinese side of the table? And that could be, but clearly Besant wants to point the finger at this official today, wants to single him out. You heard him mention the Wolf warrior ethos of Chinese diplomacy. That's a reference to a school of thought in Chinese diplomacy that their diplomats needed to get much more aggressive, much more confrontational, insulting even at times in their dealings with foreign governments. That was sort of in Vogue, you know, 10, 15 years ago in China that sort of dialed back a little bit. And Bessant here is sort of signaling that he thinks that this particular official is maybe beholden to an older school of thought in Chinese diplomacy that's no longer appropriate or relevant. We'll see if it has any effect. But fascinating to watch the diplomatic maneuvering here ahead of this trip to Asia. It is, Eamon. Thank you. Let's turn to Eunice Yun, who's in Beijing with the way it's all playing out in China. You know, Eunice, from the perspective of the Chinese, I'll bet you we've got our good and bad cops over here too, don't we? We've got like Navarro or Besant or. I mean, it's the same kind of thing, right? And people can go, well, it's him or her talking. Yeah. But I think that where we see difference of opinions playing out in the Chinese government, it's usually the ministries or the government versus the. The national security guys. So from the ministries themselves don't usually have a whole lot of independent decision making. So. So just based on what. What I see here and how things play out, I think it's quite likely that the Commerce Ministry is being allowed to have that kind of friction in the discussions with the Trump administration. I think what's also interesting here has been some of the messaging that we're seeing in the state media. So China, according to a very influential government blogger, has now changed its messaging from fighting first from talking first to fighting first. That was the conclusion of this one blogger who is linked to cctv, who said that the language around the Commerce Ministry has now switched to prioritizing fighting versus talking. So 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. So that could be one of the reasons why we are seeing the Chinese speaking much more aggressively now and angering the Trump administration with these new measures at a sensitive time only weeks before President Trump and President Xi are supposed to be meeting at apec. As you guys well know, in the past couple of days, the Chinese have come up with these new measures, expanding the rare earth controls, also sanctioning companies that are helping the US Try to revive its shipbuilding industry. So a lot of that could potentially be to kind of raise the stakes for the Trump administration. What also could be happening here is that the Chinese might be having a shift more broadly in their foreign and trade policy to look at leveraging their economic power in a much more assertive and aggressive way on matters that are important to the Chinese, not only to the US but also to other countries where they've had strained relations. And I'm saying that because the timing of what they're doing is also really interesting. Usually the Chinese government, before a big diplomatic event, doesn't actually want to rock the boat a whole lot. So the fact that they're coming up with this rare earths expanded control measure and also then layering on other. Other matters is. Is interesting from a timing perspective. Yeah, I was going to ask you about that. We got to go. Units. We'll see on. On squawk box. But it's almost. Maybe they were responding to what they thought. We weren't living up the parts of that trade deal that we, you know, or at least the structure of that we arrived at a couple of months ago. But we're blaming them, they're blaming us. But it certainly soured and we're feeling the effects. Eunice, thanks. Stocks were higher. Let's see where they are right now. Actually, we have the Dow just barely down. We have the S and P and the NASDAQ up strong earnings, overshadowing concerns about the U.S. china trade war. Though, as I just mentioned, Dow has turned negative. My next guest says he's expecting good earnings to continue, but that won't be enough to stop some profit taking. Joining me now is Drew Pettit, US Equity strategist at Citigroup. And Drew, I think I know where you're coming from. We've seen this movie before where things are going pretty good. You mentioned post pandemic where we had that unbelievable run up after the sell off and then back some other occasions where stocks get so far ahead of themselves. The earnings continues, there's growth, but it just might not be good enough to, to prevent some profit taking. Yeah, I think that's where we are again today, Joe. And the beauty of that is if you have a healthy bull market, you should have profit taking. So we think it's completely fine to enter a more volatile phase of the bull market and for investors to take some profits on good news when it's finally announced, just to give us a healthier setup into year end and to continue the bull market beyond year three, where we're at today. So again, taking profits on good news is healthy for a structural bull market. You said this is similar to that post pandemic rebound. And then I don't even want to mention the other time you said it was similar to the Tech Bubble, 1999. We don't want to say that, do we? I think this gets overblown a little bit. Look, when we go through this on our team, what really ended the tech bubble? Was it valuation or the fact that earnings in these companies were never going to live up to expectations? The difference is fair value. Today, if you discount what we in the street are seeing for earnings growth, you get to a fair value of about 6,600. When you looked at some of these other places in time, you know, the market, the forward expectations, the sell side, I would say even the buy side wasn't really there. Prices just ran way too far. So I think it's earnings driven now out of profitable companies. As long as we can live up to that expectation, it doesn't have to end the same way. The bubble comparisons really, really are just made for tv. Yeah. And your point is that there's certain times where it's all about earnings growth and it even takes precedence over other things. You call them cyclical factors. And you're not saying earnings growth is necessarily going to disappoint but it's just, it's already in the stocks. Yeah, exactly, exactly, exactly, exactly. And the interesting thing about this cycle is we have disconnected from GDP. If we had this conversations in the 70s, 80s even, I would say coming out of GFC, it was all about the cyclical. Right now it's about the structural, the structural strong. But the structural is priced in. So again, you buy on dips, you sell on strength. That's healthy behavior in a bull market. So are you buying dips? If we do get the dips that you're seeing, you're buying. And you'd stick with growth, not value and even the tech side of growth? Yeah, it's funny, we'd actually pair it. We would buy growth. Large cap growth has really good earnings momentum. Those are visions, say strong up into the right. You buy on any weakness. The other area where we buying, where we are buying is small cap. And this is the place where it really has been left behind. We're just starting to talk about Russell 2000 all time highs. This is where we're seeing an inflection out of an earnings growth recession. And the macro catalyst finally to pair with that is the Fed easing. So barbell the portfolio, NASDAQ plus Russell, I think you actually get a pretty good ride in Q4 Fed eases. You don't think that the reason for the Fed easing or what could make it almost a slam dunk is a slowing economy? I mean the government's still closed. You didn't even mention that. Drew, I don't think you say anything about tariffs either. We obsess and then we don't obsess. Yeah, it's funny, the difference between now and when we were obsessing is the one big beautiful bill act and that becomes a big offset for tariffs. I know we're working through some, some concerns right now, but with tailwinds from tax in effect, the earnings growth recession behind us for small cap, so it's already working out of a negative place. Forget the macro. As long as we don't go into proper recession, you probably have upside in earnings still in small cap. For the first time in more than eight quarters, you have real earnings growth. And when you boil it all down, why would anyone buy a small cap stock, let alone the small cap index, is because you expect growth from those smaller companies. We haven't had that. We finally have that now. Yep. We're going to actually have a gentleman on a little bit later that's going to talk about, about this. So what's your point? On, on the bbb. So is it the obbb? It's the immediate expensing, it's the overall deregulation that we're seeing from the Trump administration. What else? So interest expensing more fully, immediate capex expense, both positive. And then again, where does it actually impact you more? It's not in large cap growth, it's actually down in small cap where you have more asset heavy businesses that have more debt. And on top of that there are already taxpayers that are not at minimum tax rates. So when you put it all together, that becomes a very important offset for any tariff pressure on margins you may have. So the point there is small cap, you feel that more. Finally again, something to be confident and happy about on the fundamental side down there. And again with Fed cutting and a little bit more floating rate debt there and spread still tight, even though we've had a little bit of credit weakness lately, it's a pretty good setup for small cap into next year. Okay, all right, Drew, Frank, you do Pettit with Citigroup. Meanwhile, Fed governor Chris Waller is speaking on artificial intelligence. Steve Liesman has the headlines. Waller's talking about artificial intelligence. Artificial intelligence isn't pretending to be Waller. Right, that's what you meant. I don't think, I don't think we can know, Joe. It could well be that it's all an AI speech, right? Yeah, but maybe, you know, he's not making much comment on monetary policy. But I think the importance here is to think about how much the Fed is thinking about this, that now Waller is giving a whole speech on it. It's been like a quarter to a third of all Fed speak to this point. And what the Fed governor says is that policymakers should let the disruption of AI occur and trust that as in the history of technology, that the long run benefits will eventually exceed the cost. He says history shows new technology leads to growth and to greater employment and that capital and labor are complements, not substitutes. He says the challenge for policymakers is to help workers and firms adjust so that the efficiency gains translate into higher wages and higher growth with innovation. He points out this issue of a time inconsistency. You get the cost first and the benefits come along with the disruptions. And the benefits take time. It's easier, he says, to see the jobs destroyed, but harder to see and forecast what jobs will be created. He points out no one would have seen, for example, the rise of a job called Influencer when TikTok came along. AI related job loss. So far, what he's seen is mostly being handled through attrition with very few businesses saying that they're laying people off because of it. And it's also being used to retrain employees. Layoffs are expected to increase because of AI. And especially, he points out, for workers with college degrees, quote, there will surely be winners and losers from AI. The Fed governor says he's hoping it delivers greater productivity. That's a big thing for the Fed. If you get it, the Fed can run at a lower rate. But he does point out some stuff that you talked about, Joe. Fraud, disinformation, bias and cybersecurity. These are potential threats from AI. And then an interesting thing, kind of stepping out of his lane, talking about AI regulation. He says the US approach of letting the technology develop and then figuring out regulations later is superior to Europe and Europeans regulating first. And he points out that's the reason why the US led Europe when it came to the technological boom in the 90s. Finally, Joe, there's a Barclays report out there that says AI investment may actually have peaked in the first half. One other thing out there, which is that Myron, the other Fed governor will be, is saying that the neutral rate could be higher because of capital investment from AI. Joe. Steve, I don't remember whether you were part of it, but last time that the Fed chair was going to speak, we said what should he say? We asked AI and it was beautiful. It was indistinguishable from what the chairman eventually, eventually did say. Joe, people don't know this, but large language models have been employed to discern and figure out and dissect Fed speak, I want to say for almost 10 years, I think, have been involved in figuring out Fed speak longer than almost any other area of the market. So this is not something new. That Fed speak is part of AI and that AI is being used in this regard. It's, it's something that you got to watch for. I'm struck by how much the Fed is talking about this. What I've not heard and what I was hoping for a little bit in this speech but didn't hear was how AI is going to influence monetary policy. If you get this big investment, this big productivity boom, that's going to change the outlook for the long run rate, it's going to change even short term rates. Steve, thank you. Do you have a monitor? You might want to stay tuned. I'm going to join Dom Chu in the C block at the telestrator. This is not. This. Yes, my shoes have just another day of cable, just another day of cable history that you're making as you do almost every day. That was my point. Thank you, Steve. Before we go to break, we want to, we want to take a look at stocks falling sharply to session lows now. The Dow are racing a 423 point gain. The S&P was up 1.2% at the high and the NASDAQ was up 1.4%. You can see that that's all in the past and we're looking at some red across the board right now. And the yield 10 year back above 4% coming up. Apple CEO Tim Cook is touring China this week, reportedly promising to boost Apple's investment in the country. But he's doing some things out of the country. Quite an interesting line that he's trying to walk. I think Kovacs going to be here. Plus, small cap stocks hit another all time high today with the Russell 2000 outperforming the major averages over the past week. We're going to look at some of the high flyers driving the action. The exchange is back right after this. 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What made you confident that you could do something that hadn't been done before? I have no fear of failure. Trailblazing women, changing the game. One of my favorite pieces of advice, think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself. Life is short and you just gotta think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and power players. New episodes every Tuesday. Wherever you get your podcasts. Another day, another aid. Just last hour, Metta announced it will partner with AAM to power AI recommendations across Facebook and Instagram. This comes after news that a group of investors, which includes Nvidia, Microsoft Xi and BlackRock, agreed to buy aligned data centers for $40 billion, I think from a private company. Altimeter Capital's Brad Gerstner telling us on Squawk Box earlier today he doesn't expect that deal making the urgency to go away anytime soon. AI is moving at 10x the speed of the Internet. Right. OpenAI got to a billion users. Right. Radically faster than Google did. It got to 10 billion in revenue radically faster than Google is. I think there's a sense for every company that wants to compete, whether you're a chip company like AMD or whether, you know, you're a frontier model like Anthropic, like now is the time. So it's going to be, it's going to continue to. For more on what's next for tech and AI, let's bring in Paul Meeks, head of technology research at Freedom Capital Markets. If you just add things up, Paul, it's just like really exciting. It's not all Bs either. We've talked in cheese with some of these things. What we asked Gerstner earlier today was, sounds great. Is the money going to be there that we're hearing about to build the energy for these data centers to buy the chips? I mean, companies are giving each other money to buy things from each other. It's all, it's all a little bit strange. I agree, Joe, it is strange. And I live through the Internet bubble, so I know how it works out on the other end. But I will tell you this, that the spending, even though it's very aggressive, I do expect that it'll continue for several years because the folks that are spending the money have the balance sheets and the cash flows to mostly fund it. And they all, to a man, have said in their public commentary that they see the first mover advantage in the nuclear arms race to be absolutely critical. So they will continue to do it. Yeah, when we get out three, four, five years, then I'm starting to get a little bit more skeptical. But I do expect this to continue apace for the next couple. We've seen big capital expenditures, capex expenditures, building out other things in the past. And no one, I don't think could have, I guess, predicted how powerful the Internet would be in every part of our life. Is that promise at least equal with AI that we saw at the end? And even maybe two or three times that? It's staggering because all we're doing now is just spending all this money to build it out. The payoff is going to be huge. Like with any technology, you know, they may overestimate the near term and underestimate the long term. I do feel that in the long term AI will at least be an Internet type of build out and follow on, if not bigger. When your guest this morning says 10x that seems to be a little bit of a stretch to me. But obviously it is well worth doing and they will spend heavily because they think that it's important to spend heavily at least through. Let's get through 26, 27. Scott Bessant this morning said it means more jobs in the end, like every other time we've had transformative technology. I don't know. Leave that. I agree with you. You think about more jobs, right? One of the things that these economists have always said when it comes to this particular topic is when you increase productivity, which it will, you increase folks wealth. If you increase their wealth, then it's good for all. But there were going to be some jobs just like when the Internet came into play. That will take some jobs to the woodshed. Right? You think about software coding. Do you need a software developer? Do you need a person in the telephone center when you have agentic AI? No. So I would say if you're a college student, you know, make sure that you're in the right area. It is blind to say that everyone's going to benefit. I think the treasury secretary has that wrong. I mean we could all be wealthier and things could be more productive. But I'm thinking UBI and I'm thinking, I don't know, work is what makes life worth living. Right? I mean I don't want to not have to work anyway. Paul, thank you. Appreciate it. Best with you, Joe. Okay. All right. Staying with tech. You can tell me whether we're all going to have jobs to the Apple's Steve is here. Apple smartphone shipments seeking a small uptick in China. That market rebounds. And CEO Tim Cook visits the country this week. Steve Kobach has more for today's tech check. And off camera we were talking he's making some nice investments in China, but it's the same time that he seems like he's diversifying out of that. That's exactly what's going on. And today, Joe, we're seeing this another one of Tim Cook's tours around China in the middle of a pivotal year for Apple's business in that country. Yeah, sure, he got that custom made Labu boo Which sent shares of Pop Mart soaring yesterday. Look how cute that little guy is. But look, he's also there to play politics and promote Apple's iPhone 17 lineup. And this is Tim Cook really playing it both ways. To your point, Joe, wooing customers and politicians in China while working on the side to shift production out of the country after lessons learned during the COVID pandemic lockdowns and President Trump's tariffs this year. Now, for example, state media reporting this week Cook promised new investments in China, though did not give many specifics there. And over the last several hours, more evidence Cook is moving away from China. Reuters reporting Apple is lobbying to change a tax law to get a break on manufacturing equipment there. And Bloomberg reporting yesterday that upcoming gadgets like a new security camera and tablet for controlling smart appliances is going to be made in Vietnam. And by the way, that all tracks with the vision Cook laid out just this past May when the tariff threat was at its worst. Over time, Apple plans to move as much production as it can for us bound iPhones to India. And by the way, it is working out so far, Jefferies analysts estimate only about 9 million iPhones will from the going to the US will come from China this year. Other products like US bound Macs and watches and AirPods, those are already being made in Vietnam. Speaking of those other devices, Joe, new MacBooks, iPad Pro and a Vision Pro announced today. Those are actually the same products as before, but they do have a faster new chip Apple's calling the M5. Becky gave me her iPhone 17. That thing is heavy. Try this one. That's the air. Oh, so the air is I tried to get Andrew to buy this and he wouldn't. He always buys the. He buys the biggest and the baddest one. This one is really nice. What about the battery? Battery's fine, lasts me long. Yeah, I heard they weren't long enough on the thin. No, no, they didn't last long. That is fake news as they call it. Fake news actually works in AI. We're still waiting. So they got the tariff situation mostly taken care of. They got some relief. There was that threat the other day that seems to be kind of mitigated by now. But when it comes to AI, that is still the big question. We're not going to learn more about that until early next year at best. Disappointments up to this point. Most, yeah, they really whiffed on this one in a significant way. I haven't seen Apple make a big promise like that in a long time and just completely failed to. They might have time because they're so, they do so good at everything else, aren't they? This a billion users on this device alone. That is the platform power they have. They get to choose what model they want to use. Now, whether that's OpenAI or anthropic or a mix of them all. And you get to choose which one you want to use on the iPhone. Seems to be the direction they're going. And by the way, Perplexity, one of your favorite apps, that's what they do. I switched the chat GPT and I don't know because they made some mistakes. Perplexity. Yeah, they all do. You got to check it. But then I, I got to tell you my story about ChatGPT this morning. It was unbelievable. I go back and forth. I'm going to show you because I took screenshot of it. Let's go to Brake Force. Coming up. LVMH soaring as the luxury markets look to make a comeback after years of underperformance. But what will it take to sustain demand in places like China and Europe? That's straight ahead. The heaviest metal credit card of all time, rumored to be one of only 18 in existence, plated with the very same tungsten that forged the international space station and wielded at business dinners like a samurai sword. It's a classic corporate power move, but the real power move having end to end visibility on your most critical shipments. FedEx. The new power move. And now a next level moment from ATT Business. Say you've sent out a gigantic shipment of pillows and they need to be there in time for International Sleep day. You've got AT and T5G so you're fully confident. But the vendor isn't responding and International Sleep Day is tomorrow. Luckily, AT&T 5G lets you deal with any issue issues with ease. So the pillows will get delivered and everyone can sleep soundly, especially you. AT&T 5G requires a compatible plan and device coverage not available everywhere. Learn more@att.com 5G Network the Russell 2000 hitting an all time high after years of underperformance. But some are questioning the makeup of this rally. Many of the top performers in the Russell 2000 ETF over the past month are what some would call speculative names, with several of them still unprofitable. So can you really trust this rally? For more, let's turn to portfolio manager of the Needham Small Cap Growth Funds, Chris Retzler. It's like so many things, Chris, and welcome. It's good to see you. You would think Lower rates are tailor made for a move in the Russell. But then you got, you know, tariff concerns. A lot of times you worry about the smaller companies ability to deal with, with the tariffs more than maybe some of the big caps. So you know, what is a more powerful force? Is it a good time? So we think that small caps are coming into a good time that you know, we've been underperforming for the last couple years. You know, revenue acceleration will certainly be a welcomed benefit here. You know, beyond tariffs, which I think has been absorbed, obviously we still have some gyrations and further work to do there. The big beautiful bill, tax certainty, deregulation I think are also very important which help to counterbalance what the tariffs have done. You know, looking at the bank earnings, it's looking quite positive out there. The capital markets, both equity and debt are open. M and A is active which is also a good tailwind for the asset class. So while we still work through tariffs and it is an impact to a lot of companies, you know, I think they have a lot of ability to adjust, but I think they just want more certainty. And obviously the China tariff is a very big one for a lot of companies. So Chris, you've, you've lived through this with the small caps. How many false starts would you say that we've had that didn't pan out over the last, what is it, five years? How long has it been? And it just hasn't, it hasn't happened. It's been too many. But I would say what we saw in the March and April time period where we saw the VIX really blow out to the upside, I think some bottoms were really put in and buying began to come in. And you look at the old tale of don't fight the Fed. We are in a cycle now of rate cutting and there will be a point at which money market rates are going to drop low enough that money is going to have to flow in to the equity markets. And we think that it's going to find a home in small caps. You know, mega large caps have certainly outperformed and see a lot of money come in. And I'm not saying that they won't continue to go up, but I think the outperformance will come from small caps where liquidity is a lot tighter. And so as money moves in there, there's just not enough shares for where people are going to be allocating money. You got a couple of names, you got three of them. Two of them are actually down year to date. I think I can't believe Generac is ever down given some of the weather we have. And that thing comes on immediately with natural gas and it's amazing. That's up 25%. But what, what, what names do you like? So Generac is one, as you mentioned, they have a data center play where they have diesel backup generation, where they're coming out with new products there that would be competing with some of the incumbents. But the demand for backup generation is sizable for data centers. Two other names that we like are Badger Meter, which is a water meter business where, you know, meters run out over time. It's water utilities. And with infrastructure being built out, we think that Badger Meters are really well run company. Another name, we think where bead money is finally going to begin to flow in the rural broadband build out is a company that's really not moved with the market at all called ADTrans. We think it's good value and we think that there are some catalysts here on the near future. Yeah, Badger Meter. Let me guess, Milwaukee. That's correct. Kidneys. Kidneys. Chris Retz, Needham, thank you. Coming up, LVMH share surging on positive sales and a surprise there. Kering, Burberry and Montclair all up in sympathy. Is the luxury lag over? That's next. The exchange will be right back. LVMH having its best day in 20 years after reporting unexpected sales growth in the third quarter. Robert Frank joins me here on set with the numbers. Robert? And sitting or standing, we can talk about suits, we can talk about suits, we can talk about expensive cashmere sweaters. No one can stop us. No one can stop us, Joe. We can talk about European luxury stocks adding $80 billion in market cap on the back of those LVMH earnings. LVMH shares up 12%. As you just mentioned, the best day in over 20 years. After those earnings beat expectations, organic sales were up 1% in the quarter. That follows two quarters of declines. China did better than expected with Asia ex Japan up 2%. The US was up 3%. The core fashion and leather goods, that's really the heart of LVMH. That includes Louis Vuitton and Dior and that was down 2%. Watches and jewelry up 2%. And the star performer was specialty retailing. That includes Sephora or Sephora, I should say, up 7%. Shares of Hermes, Montclair, Gucci and are carrying all up today on hopes for improvement of China. But the LVMH CFO saying on the call that China is improving but customers are still being impacted there by the real estate crisis and some high youth unemployment. The good news, Joe, is that champagne sales, particularly in the US Were up in the third quarter. I'm not sure why people seem to be celebrating. There seemed to be maybe it was a pull forward on fear of tariffs, but we were already sort of well past that. But good news, people are popping the corks in the third quarter. There are parts of the spirits business that aren't doing well. I think it might have more to do with that. Beer's bad, right? Cognac was doing really badly for a while and is doing less badly now. That's really the heart of the LVMH spirits business. But they're very champagne is. I mean they own just about every ship from Dom Perignon to Veuve Coco. I mean all the brands that you can't pronounce are all owned by them. And they did. They did. Well, I like you know why? Casablanca, Moet and Chandon. Also Germans wore gray, you wore blue. We'll always have, always have, always have the exchange. Robert, the beginning of a beautiful friendship. See you later. Thank you. Coming up, more big banks beat Morgan Stanley and Bank of America, both reporting strong results as investment banking revenues top estimates. We're going to dig into the recent dealmaking rush and what comes next after this quick break. Welcome back. Stock market gains and a ramp up in mergers and IPOs, boosting revenue for the likes of Goldman Sachs and Morgan Stanley last quarter. And Leslie Picker joins me now with the numbers. You what's left? Anything left? I mean there's regionals left, the big six. We're done today. Hubbard. And guess what, Joe, they all beat on the top and bottom line. I don't remember the last time that happened. So it was definitely a good quarter. Investment banking largely to thank for that. That was up double digit percent in each of the big six US Firms all surpassing estimates for that line item. A revival of M and A and IPOs bolstering the high fee business. The long awaited green shoots that we've been talking about, they've finally been watered. Morgan Stanley CEO Ted Pick saying whether this is quote, the golden age of investment banking remains to be seen. But he expects over the next couple of years this category should be quote up and to the right. That mirrored what bank of America CEO Brian Moynihan told us earlier on CNBC about the growth in investment banking. It was a good quarter, highest non pandemic related quarter we've had. And across all the regions and across all the different Types of revenue. We felt very good about it. The pipeline is full, our customers are active, they're looking at deals and the momentum has been building for a good while here and I think now with the probability of deals getting done, the financing markets generally open up. We think we feel very good about the pipeline and these results barely included private equity activity. Lower rates should make financing cheaper for that cohort. Although higher valuations could be a turn off. Sponsor activity not really reflected in these M and A results because revenue is booked when deals closed and most of these transactions were done by corporations. However, bank execs do point to the trillion dollars in dry powder that has just been sitting there. And once P E does get back to in the game, it could be an even bigger unlock for them. Joe and they've got the whole new private credit area and everything else there. Do you expect Leslie to be, I mean will the Trump administration will make it even easier for big banks, do you think? Is that, is that coming? Basel, Basel 3, everything else? Oh, yeah, no, no, no. That is, that is conventional wisdom in the banking community that this administration. And that's partly why you've seen such a huge surge in their stock prices since the administration was elected in November. Is this idea that there is going to be a demonstrable rollback in the regulations that we've seen both from the Biden administration and before, which affects capital, so they have more capital to lend out, they could do more M and A and then just overall ease of supervisory and things of that nature. So absolutely, it's going to be easier. It's already become easier, easier for these banks. Great. Okay, Leslie, thank you. You going on vacation? No. You got the region, you got the regionals. Yes. Next week you got the region, but they're all merging so there won't be many of them left. Coming up another all time high for gold. And our trader sees no ceiling in sight. The move that he is making in metals. That's coming up next. Gold price is now above 4200 and our next guest says there's no ceiling in sight. Jeff Kilberg, founder and CEO of KKM Financial and a CNBC contributor. Jeff, there have been plenty of times in the past, I don't know, 10, 15 years where things have seemed even more unsettled than right now. And we didn't see similar things in fact for a while. I mean gold's been a pretty good performer, but nothing like this. What's different? It's been remarkable, Joe, and first and foremost, it's great to See you in the middle of the day. And by for the record, you actually dominated the domino. That illustrated you're so much better in him. But when you talk about gold, Joe, you're absolutely right on a three year move up 150%. But what has been the impetus? Obviously the geopolitical tension, there's people focus on decoupling coupling from the US dollar but it's also a lot of central bankers got caught off sides during COVID from that inflation hedge. So we have seen three consecutive years of record accumulation from central bankers. And I think moving forward with the relative strength at all time high in gold futures and all time high today we're still going higher. $5,000 is a target, but I don't really see a ceiling short term. Saw silver too. I remember, I remember the Hunt brothers and can you believe it, it took what is 1980, it hit $50 and it's been that long to get back here. So that that didn't make any sense. But is silver, is there any difference between the forces moving silver and gold at this point? I think there is. I think you obviously see Silver up about 80% year to date while Gold is only up 60% which are dramatic numbers. But silver certainly a precious metal. But gold, really people want to own for a lot of the folks who have an adopted cryptocurrency or bitcoin, they want to touch, smell and feel tangible gold. So that's why we've seen the pie and demand issue really out of balance. And that is why we're seeing momentum. And that, Joe, is why I believe gold is going to continue higher. Who in their right mind is going to sell a gold Future here at 4212. Right. And Bitcoin has been not as correlated. It obviously outperformed gold for a while but, but now gold is taking the lead at least the past month or so. I think we got to run, Jeff, but. All right, buddy, we'll talk to you soon. Final thoughts. You have 10 seconds. Final thought. You know, cryptocurrencies and bitcoin is very different, is more correlated to the QQQs, inflation hedge. Central bankers, they want to touch and smell and feel gold. All right, Jeff Kilberg, it's been a while. It's good to see you. Don't be a stranger. That's going to do it for the exchange on this Wednesday. Thanks for watching. Power Lunch starts right now. It's cybersecurity awareness month and LifeLock is here with tips to help protect your identity, use strong passwords. Set up multi factor authentication and report phishing scams. And for comprehensive identity protection, Lifelock is your best choice. 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