Analysts expecting massive moves from one stock thats already up 90 this year. Halftime report starts right now. We will co. Good to have you with us janice, chief investment and liz young, director of Market Strategy also with us today. Making news jpmorgans chief equity strategist. We want to begin with stocks at a new record were entering a critical week for money, the busiest yet for earnings, including apple, a fed meeting, which could see another can out in Interest Rates. Shannon, on track for record close, financials on pace for 52week high the question is, is this the breakout weve been waiting for . Get out of that range. I think if its going to happen, it definitely could happen following this week you talk about the fed, if they continue to be exportive, as long as they leave the door open even just a little bit, the equity market will take that as a positive we saw strong earnings out of the big tech names last week like microsoft we could continue to see strength out of apple this week. Weve got facebook theres a number of things here. Weve got some data. The ism comes in better than expected, doesnt decelerate again this month, i think that could provide the economic lift that you could see some more gains in the afternoon market. Bank of america says s p 500 is poised for a breakout a largely technical call i mentioned you, the news youre making is a new note where you say the market could reach 2020 midyear price target of 3200 sooner, perhaps by even december, around the he said of the this year. Why so optimistic . Mainly on trade i would say trade has been the biggest drag for earnings for global profits over the course of last 12 months. Deescalation will drive upside surprise, gets us to that 3200 level sooner than later. Paerngs better than expected. Better than expecting, some form of troughing, 3q, 4q, Recovery First half of 2020. Too strong to say youre calling a bottom youre calling a bottom in growth and earnings . Yes the big thing here is on the Business Cycle do we see some recovering of Business Cycle slowing down for the last months. A lot of data outofchina, i think the Second Derivative improving. Liquidity has also been supportive because of easier monetary conditions. I think were sort of at afternoon inflection point, positive inflection point. Do you agree, liz i agree its positive earnings better than expected but the bar was low. I dont know it was going to take much to get there unfortunately were not going to know if they have bottomed yet until the next quarter some of the positive surprises that could take us into breakout phase is pmi bottoms, we have pmis come in and improve, gdp to the upside, a number, and a tangible trade deal not talks about brift you must be more positive, based on buys if you keep added to position in smh, that cant be from a position of defense. No, it isnt. Its a position of offense i dont see any tangible bottoming other than hope and we havent gotten a pmi clearly data is squishy. Time creates the bottom, maybe unbelievable liquidity but weve also discounted it so as i look at the market, though, and i was going through the numbers today, the most recent bull market extended of seven to nine years, you had gains exceeded in this tenyear. Average gain 2009, 2019 to date is 14 with the market up 150 you look at 91 to 99 average 21 , market doubled. You go back 82 to 99, 19 to 52 . Were not so out of line we cant keep going also add Interest Rates were not as low then as they are now. I think youve got enough set to tat market higher but it comes back to trade. Thats what it all turned on not the fed, purely on trade right now they have racheted it back for the most part so the reason, i think regardless of what the fed does, the fed doesnt go, nobody expecting knee jerk down and bounces back up, wove got until november g20. Youve been making the argument as long as i can remember at this point the market needs a trade deal to break out, right, to take that higher the market might be saying no, jim, we dont need a full deal, positives, bottoming in the economy, earnings picking up, the fed is going to be helpful and thats all you need. The market is trying to tell you something with this move to new highs and beyond. Completely agree. Its been two weeks since the sentiment shifted, the he said of the last trade talks. What i want to see is a confirmation in apec, not g20 just to correct you, steve mid november the two president s will be there. Lets see a signing of phase one. Phase one to your point, scott, is just phase one. Theres a lot more to do thats a tangible sign that will can the sentiment. Lets talk about how the sentiment comes up i missed you guys, caterpillar, thats as ugly as it gets, raggied sense. Positive going negative, positive on positive, apple, that stock is on fire. I could point to other industrials that say who cares about caterpillar, honey well, utx prosecutor or banks. Theres a sentiment shift, its lovely, all of us, steves optimist or offensiveness, he is offensive, is based on that. We need that both sides, chinese and americans, are saying were on track. Lets get it done. Im not going to just describe why the market reached alltime highs thats why its going to continue to go higher. Youve got liquidity not just in the u. S. But global entire Banking System providing a tremendous amount of liquidity what youre looking at pricing and looking at asset prices in the month of october you had the dax outperform the s p, a comeback from the russell once again. October 28th, october 29th, whatever the day might be, thats the day the inversion story died inversion is something we heard about in the yield curve for the better part of 2019. Right now the only part of the yield curve that is in inverted is threemonth to twoyear its basically sitting at negative one basis point youre about to say goodbye you havent done that since march. You have all these conditions that set up favorably. Then you have an announcement lvmh pay 14. 5 billion for tiffany . Why . They want to be involved in the u. S. Consumer. The story is a strong story. You look at positioning, the position is not there suggesting the market is over allocated to equities. Part of the positioning point is where they are positioned within equities. Morgan stanleys mike wilson will say everything you said, thats fine and good as his note points out, its still defensives, underneath the killer, staples, utilities earnings are weak no matter how you want to sugarcoated, the bar is low expectations were ridiculously low. How do you counter that. First of all, market level positioning, its low, below average. Discretionary hedge funds, equity, macro, basically looking at some of the lowest in the cycle. On the average side of position. Liu within the market, thats where things are really interesting. We are facing a defensive bubble the market is pricing in probably things are not going to get better if you get any improvement from current depressed levels, i think market is thinking two, three, quarters ahead and not focusing on 3q going back to comments of cyc c cyclic cyclicals, if results come in better than slightly feared, stocks move higher. You like tech, industrials, cyclicals, energy, value, discretionary, you think the consumer still works i like the cyclical side, deep value, energy industrials and value within the growth sectors like semis with tech. Your point where sentiment is, behrens takes a big money pole says bears rise to a two decade high. The narrative is overwhelmingly defensive if not negative in most respects. Sentiment is negative, conviction levels extremely low amongst investors. Thats what creates potential for higher upside. If you start toss fundamental or macroeconomic data. The corporate sentiment, to jims point, one of the things that has come out over the last weeks the numbers, the sentiment. We hear recession mentioned much less than we were last quarter its more slow growth, which is supportive to a point on the cyclical side. More than anything else one of the declines in Consumer Confidence was related to this decline in corporate confidence we have seen over last quarters an were seeing a bit of a reversal over the last few weeks. Thats what goldman said people are overestimating the recession, you have yields moving up. Are we about to get off of that narrative, recession, recession, worried about growth. This is a classic case of do as i say not as i do everybody comes on here and myself included, we dont see a recession, everything positive, consumer is sturdy, labor is sturdy everything seems okay. Even growth is sturdy and were going to bottom here flows are saying we still want defensives and clients are asking all over the country what do i do to protect my portfolio. I think we have to start getting comfortable with going against that consensus and not following the herd into that defensive posture because youre going to miss out on everything still to come. To people afraid to fully buy in, so to speak, to what were doing in the market because it literally is a potential tweet away of these tariffs are coming in december and the whole story is wrecked. Right that creates the opportunity putting numbers on the exposure, talked about Hedge Fund Net exposure long short u. S. , Hedge Fund Net exposure in the 13th percentile thats extremely low gross is 94th percentile they are betting a lot of shorts where are they going to short . They are going to short the caterpillar. Earnings are flat, up 2 , 1 without energy, but they are flat the market is discounting going out two, three, four quarters. The question is what do you do when you get there are we taking that growth in the market from them bringing it forward . Right now the market multiple expansion lifting not lifting on Earnings Growth or anything like that look, i think its a window to invest but thats what keeps people at bay. What keeps people at bay, they expect the dialogue to be worse, they expected the recession talk to continue, so the hedge fund not only hedge funds but cash levels high, mutual funds, to your point all the questions. But thats the opportunity. Let me bring up this question the thing i would hear six months ago, six to eight months ago from big money investors, market is too difficult. Market is too difficult. I dont need to be involved, im not going to be there. Tweet here, tweet there, things move up and down, no conviction, no fundamentals. Are removing away from that . Let me say one thing. Its like anything else, he tweets so often and just so regularly you become immune to it, youre desensitized to it so it really doesnt mean that much anymore. A little bit of recent history helps. Im going to rebut comment about short si short selling driving value sector higher. I look at that as a bellwether of valley. It was after labor day we all rightfully questioned is that real or not . Gave a little bit back at the end of september but now its clearly on so my point to you is i think its fundamental more than Short Covering which may have started in Early September the question is do the fundamentals end up supporting it i think were all around the table saying this looks a lot like early 2016, we were in an earnings recession guess what, 2019 earnings, you know this, are flat versus 2018. Its the growth that is to come in 2020 that the market is anticipating you only get that if you get phase one. If theres a nasty tweet between here and november 15th, this thing could go down pretty quickly. The question earlier this year was are we at the end of the cycle, what inning are we in everybody thought eighth or ninth inning when youre at that point in the cycle, the market cant decide to go up or down we made it through september, i think whats getting tired is that end of cycle talk all of this expectation we might bottom, maybe the cycle lasts longer thats where the value and growth rotation, conversation dies in my opinion i dont know why we even really bother with it. Are you saying that a new cycle doesnt support value . Thats where it should be supported. Not a huge argument rotating value into growth. I think value and growth are sector call. If youre pro value pro sectar, or i. T. And health care. The fed wants to prolong the cycle for as long as it can. Is it going to do that or screw it up . The fed is acting supportive from the view of the financial market. Is it going to continue to do that. The rate cut this week as well as one more rate cut later in the year. If you see that things have bottomed, why would the fed, then thats a good question mark is it really necessary if you have reversal of tariffs, are the rate cuts necessary. If youre getting both, where does the market go writes today the feds should cut rates as an insurance policy now your 3200 by the end of the year is at risk if the fed cuts this week and then pauses . No, i dont think so. I think again trade remains the big talk if you continue to see trade and deescalation. Again, look at corporates, we did an interesting analysis based on approaches, Recession Risk is coming down for sure the one big risk they are talking about, tariffs, tariffs, tariffs. You continue to see softening on the tariff side, the implement september 1st some talk, thats upside for earnings, for corporate. August 1st the president began tweeting about the trade tensions and he continued that for about six weeks. We said the messaging at that point was horrible it also came at a time when there was no earnings to discuss and the market basically was in a vacuum of contraction. The impeachment inquiry has taken the president s attention away about continually tweeting about the trade dispute. Its been a positive thing and allows the investor who look at whats marrying most earnings and recovery outside under the circumstances the u. S. German tenure down 32 basis points to negative 78 basis points what if this deescalation intentions with the chinese is doing what was needed most, which is benefiting the emerging markets, benefiting europe and making them slightly investable once again. Maybe not slightly investable theres an argument to make those are the places now more attractive you still have question marks about whats happening in the u. S. , not that you dont elsewhere. If you believe theres greater risk reward outside the u. S. , do you buy into that in any way. As a house, our jpmorgan view is were long europe, long japan relative to u. S. , more of a mubl view europe and japan have a cyclical tilt if you look at s p 500 theres cyclical, also low ball defense at those exposures. How do we feel about that european markets, see how europe is up 20 also. The positioning, if youre talking about positioning, its more positive in europe. In asia, particularly pz gentleman, they just dont short over there its 100 long so i think theres opportunity there. If europe is going to get better, the u. S. Is going to get a lot better id much rather play here. Keep in mind, the european index, they dont have technology to speak of, but its primarily financials and cyclical as you mentioned. Id rather be here with growth i dont think growth ever loses. Theres also a point and i think Carl Quintanilla mentioned it, when you have the gains like this year you generally finish good for the year. Two months for all intents and purposes left. Is that the setup is this telling you thats whats in the cards . Of i think as much as we her a lot of talk about tariffs, i think the fed is one thing that could derail this through the end of the year. I think its incredibly important we get the positioning from the fed were looking at. The dollar, tariffs, its really underpinned by the feds. Well see what happens this week the market, the question, how does the market react to what it gets mike santoli has that for us what have you prepared for us . The history is clear, this year, last five fed meetings coincided with a market at a record high or grinding its way toward it. It hasnt actually been smart to be positioned much more aggressively at the time of that fed meeting. Youve had occasion for pullbacks, anywhere from 2 to 7 the two stiffest pullbacks happened after may and july meetings, which guess what, were in the middle of an earnings season we thought were going relatively well. So with that history aside, i do think there are reasons to think this time were not as vulnerable going into this meeting on wednesday for a few reasons. Some of you have hit on, one, the market is not implicitly lobbying for an incrementally easier fed in other words we get the cut this time. If the fed signals its more or less on hold and this was a threecut mid cycle adjustment like in 95, 98, i think the market is better equipped it handle that. A few months ago mid cycle adjustment was code for not easing cycle and market in the risk of recession panic yeele curve situation, wanted the fed to at least absent as if it was more urgent, what it was up to right now were okay with that kind of messaging when you have cyclicals performing better and yields lifting, of course, emerging and germany market. All that suggests maybe were better able to ham if, in fandle says were not looking for a fourth rate cut. People want to take issue with that or agree cut pause, base case cut, pause. I love it. What the market wants. Take it. I think its bad if they cut and signal theres more cuts to come. Support for the cuts. Were starting to see stabilization in the u. S. Dudley says i get you but just as an insurance policy why dont we make sure. This will be three cuts in four months. A total pivot from where we were last year 10 months ago talking about four cuts four hikes into 2019. Does that surprise you, mike, hear everybody on the panel say they are cool with that, a cut and a pause. I dont think so. The Broader Market is or not. No, i dont think its surprising i think that essentially the market is kind of giving you those indications. I mean, look, i think the fed is going to try to convey flexibility as it always would its going to talk about the risk and talk about tariffs in december ive been of the opinion the details of trade matter almost not at all as long as a deescalation, an excuse to get more aggressive. The market likes when that issue is set aside it doesnt have to be a cause for getting much more excited. So i do think it makes sense that people would be okay with that you know, like i said, credit markets have been very, very firm they are not suggesting that we have a lot of macro stress getting added to the system. I think the recession panic really peaked about two months ago. The real tell, by the way, was the fact that the s p refused to really buckle in august when it was an overwhelming saturating idea the world was at the very end of a cycle and the market went down 6 1 2 and stopped going down. As weve said repeatedly, the risk and danger, really, was being too n