Jim terranova, Jim Lebenthal, jon najarian jpmorgans top strategist saying stocks will return to their highs. Lets bring in one of them today from new york. Welcome. Thank you got the note in front of me after this wild and turbulent week, why do you think were going back to the highs . Well, look. I think that the market is set up, when you look at just the market, when you look at the Business Cycle and so forth, its set up for further upside i think the profit cycle is going to get easier as we go to 4q, something to say about the cycle accelerating positioning is very low. Sentiment is extremely negative. I think theres a setup or a case to be made for upside obviously, the market is currently being held positive by policy, trade uncertainty and so forth, and thats where ultimately we need to make a call, and were sort of thinking we wont necessarily get much more trade escalation as far as the next layer of tariffs go some people, with all due respect, think were going to get a lot more that you have a trade war morphing into a currency war, and who knows what the next step is going to be as it relates to tariffs. How do you deal with that . Look, so far, we had phase one and phase two implements and now theyre threatening phase three. Phase three is directly targeted at the u. S. Consumer, or the u. S. Voter given that were entering 2020 and the reelection, i think thats a very risky thing. Something that would knock down the possibility of a potential reelection. Thats why im not very convinced thats something they go forward with. In the meantime, we could see more noise you think that trump put, if you will, for lack of a better way of saying it, hes going to try to protect the house, if you will, as best he can and keep the stock market from deteriorating to a meaningful level. Yes, i definitely think theres a trump put. You could make a case that temporarily theres also a trump caller meaning some of the upside is also being capped for sure due to the escalation but yes, theres a trump put in addition to that, were getting also a Global Central Bank put as well not just the fed, but globally Central Banks are responding relatively quick to the slowdown, which is primarily induced by trade that will basically provide stimulus and act as a tailwind to the broader cycle in the months and quarters ahead. How much visibility do you think you have on earnings giving the uncertainty around trade . Theres a million question marks and what i will say is the following, the most trade sensitive stocks, yes, they have taken a hit. And i think prices are thats being reflected in the prices. The sort of call it higher margin, more Service Based stocks, sort of the bellwethers of the u. S. Economy, i think have generally done much better. If anything, in 2q, many of them have revised their guidance higher i think that they are basically coping with all of this relatively okay. High momentum, the high quality stocks should be able to hold up its joe, thanks for coming on today do i need to now think about Profit Margins differently than i was thinking about them prior to the president s tweet and as you have indicated, Consumer Products potentially now are going to be caught in the crosshairs of this trade dispute. I am not as worried about the Profit Margins, lets say, as far as phase three is concerned. Were basically estimating if the president moves forward with this 10 tariff, thats going to basically shave off about 2 off s p eps. Mainly through margin contraction. Full 25 would be higher, about 4 off eps so i think s p can weather that. I think the bigger question is what happens to the consumer, the private side of the market, the Small Businesses thats the area that is more vulnerable im sorry, please finish your thought. Thats the part thats more vulnerable, and thats where i think the focus should be put at and given that, again, the consumer, you know, the consumer at the end of the day cares the most about their wallet, their wellbeing, their economic wellbeing and so forth, its a very, very sort of tricky and risky for the u. S. Administration to basically impose, call it some form of regressing tax on the consumer, which would basically be phase three. You have 10 upside between here and midyear of next year. What role does the fed play in all of that . Look, the fed is, i think, basically responding to the data, which has weakened again, most of this is really manufacturing slowdown or some form of manufacturing recession engineered on the back of this trade escalation so again, i think the benefits of fed easing, i think, are only going to be starting to basically kick in now. In the coming months typically, theres a 6, 9, 12month lag, response, if you will, between call it falling rates and eventually sort of the pass through effect into the economy. I think definitely the fed plays a very big role here and the fact that rates are coming down, i think thats very stimulative. Ill give you one simple example. Look at the 30year Mortgage Rate its down 100 basis points that has to help households, consumers, their wallet. Maybe the drop in oil prices is to some extent as well. We appreciate it we know you made some time, carved out some time for us. Well talk to you soon thank you lets open it to the floor. Doc, what do we think . Signs of a bottom are visible. A selloff is a medium term buying opportunity the macro is far from perfect, but the fundamentals justify higher equity prices is he right . I believe he is, scott. Im sure youre shocked to hear that because im usually an optimist about these things. What im seeing right now in the data is also that there are very small moves projected. As far as sustained moves. Now, this week, obviously, we have seen massive moves. Up and down. To be basically unchanged coming in today, slightly up on the week, prior to the 240point selloff we have right now. But what i would point out, scott, is 240 points, a, is not that much to the upside or downside b, the projections based on which calls and puts that people are buying right now are very small moves. Theyre basically pricing 1 to 2 net moves between now and next week. So when you look at things like that, when you look at str straddles, strangles, any way you might want to analyze the data, what im seeing more than anything, i guess, is protection being put on out in september by the qqq, the tech, and thats the weakest part of the market here today im not surprised to see that. S p, not so much its all just very shortterm, and again, its 1. 5 and 2 moves. Its not nearly where it was this week when we popped up to the 24 vol we saw perhaps tuesday this week. Is he right is he right or is he ignoring too many of the risks that are now screaming . I wish i could say i know hes right the rb is very little is knowable my actions speak louder than my words. I havent sold anything in the last week and a half and remaining fully invest said. I think hes right the reason i cant just slam the table on that is it really depends for me on china, because if things continue to worsen there, corporate confidence will probably drop off as well as consumer confidence. And that will hurt Economic Growth across the globe. We the tom lee on the other day, who said famously now in the last week or so, back up the truck. Today, he reiterates it. And he doubles down. He says we urge investors to back up the truck, please. Even adds a please to it he thinks the environment is set up that stock prices, joe, should continue to go up tony dwyer said he thinks the s p to move back to the lows and then you buy where do you fit it. We have back up the truck, and maybe more near term sanguine is dwyer who says wait and then buy it thats indicative of the last week where we were monday evening, i think we would take 2900 in the s p all day. Certainly at the 2822 lows, things didnt feel good, but i think it is about equities and it is about the ability to sustain those Profit Margins as bubrovko highlighted and it goes back to the u. S. Consumer. If you tell me the u. S. Consumer is going to endure, stay engaged and continue to spend, then i think well be able to see over the course of time a reacceleration towards the highs. Youre telling me the consumer enough. The consumer strength its the key. Is it enough to take stock prices back to the highs youre telling me to ignore the manufacturing weakness or ignore the global weakness in other areas that the u. S. Consumer again, such a large part of the u. S. Economy but is it that important a part of the stock market relative to Everything Else . I do believe when youre mining for opportunities, when youre mining for opportunities in the equity markets, yes, thats the critical component of it we know Global Manufacturing is weak its reflected in a lot of the industrial stories thats understood. If we lose the u. S. Consumer, we have a problem a big problem were not revisited the old highs once again the other part of this thats incredibly important is whats going on with energy and whats going on with the financials in the last five days those are the two sectors that are losing the most ground in the last five days we need to at least see some form of stabilization. Lets welcome in another guest. Liz ann saunders is schwabs chief analyst. Welcome back thanks, guys. How are you . Crazy week, a wild one. Im sure your clients are wondering what to do now what are you telling them . Well, you know, this week was really a microcosm of whats been going on since january of 2018 were only about a percent up from that level. So a lot of sound and fury not getting us anywhere, and what our message has been since the end of 2017, which was the time where we moved from an overweight u. S. Equities to neutral is dont try to time the market but rebalance more frequently the beauty of that rebalancing it is forces investors to do what we know were supposed to, buy low, sell high add low, trim high, and your portfolio is telling you when its time to do something. You dont have to worry about which one of us on Halftime Report has the best shortterm market call. Thats been our message. Dont try to trade around tweets on trade, but really go back to sort of defensive diversified, go back to your kind of tried and true disciplines in this kind of environment. What do you make, though, of folks like what dubrovko, who just joined us, a thoughtful strategist at jpmorgan, who says if youre thinking big picture, as youre suggesting people should do today, you have a buying opportunity, the macro environment, while it has issues, is still justifying higher prices. And that youre going to get signs of a bottom are there. And all of that is enough to carry stock Prices Higher in the months ahead well, in the short term, i think the more definitive sign of a possible bottom is really just limited to the sentiment situation where you saw the spike in bearishness in aaii and some other measures. I think that provides some shortterm support for the market but i just dont see how the macro environment is supportive of this being a true bottom here i think that the uncertainty with regard to trade and the knowledge that really, with something as simple as a tweet, it could move the needle in either direction thats just treacherous to try to guesstimate around that i was listening before i joined, and talking about one of the guests was talking about Profit Margins not being under terrible pressure the rub is Profit Margins for manufacturers of capital goods tend to be much wider. The manufacturers of consumer goods, which is where the next tariffs hit, are on average less than 5 . Unless they want to eliminate the Profit Margins, youre going to see a greater percentage of companies and industries start to pass those costs on to the consumer if the tariffs kick in, which means less likely a deal is going to happen in the near term, if the weak sentiment on the part of Business Leaders goes beyond that and you start to see it impact pay rolls and claims, then it morphs more definitively into the consumer side of the economy. Thats worst case scenario, but its hard to bet thats absolutely not going to come to fruition because we have no idea what either side is likely to do next here. Thats for sure have a good weekend, liz ann, well talk to you soon doc. I was just going to say she mentioned, liz ann did, about whether or not you could say this is a bottom and certainly not at 2900 do i think its a problem its a place where we have hit resistance several times and im sure she would agree the question is was thatbatim on tuesday a buyable bottom that will withstand another negative tweet or another implication exactly. Will it stick exactly so in other words, joes number 2822 or Something Like that, roughly where the s p bottomed this week, i believe it will withstand that and that each one of these just becomes less and less impactful to the down side. And thats why i believe dubrovkos outlook, optimistic as it is, is the right one lets go a little deeper. Below the surface of here. Where were talking about market levels and where we may go lets talk chips for a minute, because theyre again in the news today the president says a few moments ago, were not going to be doing business with huawei smh is having a tough time chips are down a couple Percentage Points for the week jimmy, youre invested in chips. Look, youre seeing the effect of the huawei ban in a lot of reports skyworks and korvo, both had good reports except for the fact they couldnt sell to huawei, and thats hurt both stocks. Its hurt the sector overall look, that is a direct transmission of the trade war into a very important sector for the market very important sector for the economy. Its not getting etter, and theres no reason to think that the huawei ban is going to get lifted any time soon youre staying with these stocks that are directly impacted from that so i am, but let me be clear about this within the smh, the semiconductor industry, there are safer plays than certain other ones i like intel here. I think with the Balance Sheet its got the dividend yield, the multiple, i find that much more safer than an nvidia or an amd, which i have been talking about for quite some time as being too rich and in this environment where the semis are under pressure, you dont want to be in the richer names there yeah. What about intel, jim . Im going to pish you on that a little bit stocks done nothing youre correct. It has the unfortunate thing is every time the stock price gets going, something knocks it down you may not recall it because it was only three weeks ago, but they had a very good earnings report, and they guided higher and the stock was in the mid50s and everything seemed great. What happened is trade war hits. You get the feeling that, remember, the chip sector brought a lot of inventory forward earlier this year on the hopes that the trade war would get cleared and then they could produce more well, guess what the trade war is not getting cleared so that inventory has to get worked off that hurts all of the chip sector, including intel. This is a big underperformer. You know, a huge underperformer. Why stay with it well, because, okay, look, because if you look at intel versus amd, which is right up there, right, amd, i dont have the numbers. Do you really want to do that do i want to be in a 35 multiple chip stock going into a possible economic downturn or a 12 times chip multiple with a heck of a lot of scale this is an important point that gets lost in the chip sector when times get bad, you want to have the biggest scale so you can still keep your margins. Thats intel, baby not amd. I know theres a lot of amd lovers what if you want the better chips, which some say amd has a better one than intel . And theyre trading, i dont have the numbers at my fingertips, but several turns higher on price to sales and about three turns higher in terms of multiples on earnings more than baked into the cake, scott. More than baked into the cake. Amd has recovered all the losses it had since july 30th earnings its right back where it was when it began to fall. The equipment side of the semi story is something you want to look at. Lam research is going to give you a great indication thats not really recovered. Had a great quarter. Got up to about 218 and down below 195 its a name i would look at. I think thats going to give you an indication when sentiment rises again and we see money flowing back into the chips. I dont think its there right now. Except if youre looking at amd, that seems to be the one outperforming. When you look at the movement that micron has made, for instance, today i have unusual activity in micron not going to use it for our unusual activity highlight, but certainly unusual activity out in september, at the 41 strike now, the stock has basically gone from 41 to 48, back down to 41 thats micron. Over the last 30 days. Thats 18 to the upside, same thing to the selloff, back down to where it is to joes point, amd made all the recovery, all the way back its outperformed all year long. Year to date, i have it up 83 thats year to date, not year over year. But year to date, up 83 versus micron, up 30 i think both of these stocks continue to work this epic chip as theyre pricing that in for what thats going to do for the servers and so forth, skault, thats the amd chip going to be huge, and its not priced in yet. Thats why i think that breaks to the up side but it is rich. I agree. Public Service Announcement here everything that were saying about amd reminds me of what we were saying about nvidia a year ago. Okay its not that the technology isnt great. It is great. But look at nvidia its basically half of where it was a year ago dont think that that cant happen to amd, no matter how great their chips are. Nvidias chips are great okay. Public Service Announcement youre allowed to make that lets kick around apple. Katie huberty is publishing today, and shes thinking about once again the impact of tariffs and these consumer focused, if you will, tariffs that go into effect on september 1st. She says she expects apple to take multiple steps to limit that impact. Yes, shes not, you know, naive to the earnings hit that you could have, but theyll figure it out by working with their supply chain and this is a stock thats like a battleground stock now well, its a battleground stock because youre concerned its going to become weaponized. Right im not neces