Go Halftime Report starts right now. Welcome good to have you with us on this thursday our Investment Committee today, josh brown, john ageri, Jenny Harrington we begin the markets where all eyes are on the white house. That meeting on trade with those new tariffs looming. Watching it all. The latest, including the president ial tweet sending stocks surging the best gains since october u. S. Negotiators have offered to cancel the december 15 tariffs and cut existing tariffs on 360 billion in chinese goods in half. Thats according to two people close to talks my sources offer a couple caveats on the offer reported this morning by the wall street journal. It was made to the chinese last week clearly, a lot of time in between then and now second, talks have been taking place at the deputy level, with the ambassador absorbed by developments on usmca. Lighthizer will brief republican senators on that deal at a lunch meeting today on capitol hill. President trump appears ebullient saying the u. S. Is getting very close to a big deal with china they want it and so do we. That sentiment despite efforts by Peter Navarro to push for no deal until after the election. In an event on paid family leave just now, trump says, we wouldnt talk about china because were working on a deal with china i wont say up until now they have loved me, end quote the team is meeting in the oval office today, perhaps, an announcement awaits. We shall see. We will be back to you with any news stocks well off the highs. The dow right now is up about 115 points theres your s p picture perhaps we have learned our lesson how are we not laughing we learned our lesson about the tweets and other stuff as i said last week or the week before, call me when theres a deal and we will believe it. Lets take it on its face. Tariffs go into affect this weekend. What happens to stocks on monday and through the remainder of the year if that is the case well, i would imagine if tariffs go into affect, a lot of what were witnessing today gets undone i dont think we learned our lesson stocks are okay the s p 500 is sitting on a return of 28. 6 for the year thats an incredible year by any historical standard you want to look at. Absolutely incredible. Whats happening in the last week is undoubtedly a lly a performance chase. Alltime record high right now, up almost 1 on the day. Thats the world breaking out. Emerging markets are up 3 in the last two days. Thats not an index that does Something Like that unless you see p. Eople looking for stuff to get into thats what you are seeing i want you to look quickly the xle, energy stocks, they have been terrible until the last month or so they are making up a lot of ground you have a really big move there. The xlf, less than 1 away on financials from a record high. Even materials breaking out to a high these are areas that have not done as well as the overall market you see them go vertical the semis are going vertical health care and consumer staples. I think the trade stuff is exacerbating it. If we dont get these tariffs to go away, you will see a lot of what i described start to ebb away. We have new momentum in trying to have this run into the end of the year. Market is losing steam as we speak. A 100point gain on the dow is nothing. Who cares . What happens if the tariffs go into affect . What i have been saying is im from an investment perspective, im looking through the tariffs. When josh says if they go into affect whats happening will be undone were up a half percent today. Forget today alone. Will the end of year rally be undone i dont think so. Even if it is, what does that mean we lose 5 and were still at 21 . I dont think its the end of the world. I dont either. I think the tweets and the noise has become white noise a lot of investors are looking through it if we get tariffs sunday, i think everyone knows that theres a really high odd some version are then retracted, we give a little, we take a little. Its noisy i dont think that we have some massive pullback i dont think its the end of the world. I dont think this market is undone. 5 is a pretty good size pullback. We end the year up 21 instead of 26 you will not feel good. If you are somebody that sat on the side line all year because of trade nonsense and you chose in late november and december because of the performance chase you talked about sf that does matter. Im going i know thats not you im going to say shame on the person who sat on the sidelines. To joshs point, you come in now and then have the whole thing your run to the end of the year you look like a serious schmuck. Nobody wants that. Its easy to be critical of people that sit on the si sidelines. Its easy to say im looking through it what does it mean . We cant analyze the tweets. The tweets come out. They go away thats what im saying. I hope we learned our lesson in trying to do that. We have to address whether we wake up monday morning, we have tariffs or we dont. So to me, the market trades down significantly through the week, people have made a lot of money. They may not wait until next year to book those gains some book them already they just want to take money off the table. Their equity portfolio have risen too big. What im doing is i bought some of the more volatile positions i hope they expire worthless they are on the way to being worthless. I have taken the opportunity to add. I added to boeing yesterday because the stock was down i added this morning on delta. What came out of the faa, the head what came out of the ceo of delta is that were going to see the max come back early next year theres opportunities. I cant go through and say, look, im running my portfolio based upon what comes out. I have to look through you are looking through it . Here is the awakening i have come to. We look at things differently. You buy and you hold forever right . You dont liquidate. I liquidate when i feel i reached price targets. Not that you dont im sure you do. The market you cant analyze. You cant guess it the economy is Strong Enough thats the controlling narrative. There are shortterm disruptions from tweets positive or negative, whether we get a deal or dont if you look out i dont know if its three months, three weeks or six months, the market will be higher because thats where its coming. There are stocks that are more susceptible and in the crosshairs, however you characterize it. Apple is one of them the stock cut its losses today it has come back towards the flat line here, a little bit its down on a report of shipments of the iphone declining meaningfully in november because of the looming tariff risk as well. Right everybody i think everybody on the desk most suppliers saying that these things dont hit the stock for a long period of time. There are monthly numbers that come out from the Taiwan Stock Exchange this was out almost a week ago i had it sunday put it in my notes. Definitely theres a high correlation between what the iphone shipments are, what apples pc shipments are apple has changed some of their suppliers. Its very high. More so, apple, of course, has changed they dont tell us their numbers everybody has to sort of guess at what these numbers might be to steves point, many of the brokers take a stab at it. Im not going to say credit swiss is better or worse cramer scoffed im scoffing at it. Cost you money in am b apple trying to get you to trade it. Im not going to say if tariffs go into affect the stock will be up. Does anybody think apple has traded on fundamentals its up 75 did the companys business get 75 better they maybe trade fu fundamentals. When its trading at fundamentals, i will buy it. Scott, quick, none of us on this desk and none of the people who are managing money watching right now are reacting to any president ial tweet at all. What the people and the machines that are reacting to that are why we jumped 300 points again, gillman hill is not buying on that tweet, nor is it buying when china global times comes out and says, we havent heard directly anything, show me i point that out, that these are machine reading algos for social media that are reacting to it. Thats why you see the move so violent. Also, to joshs point about the eem, we have seen tons of people piling into the eem whenever it gets into the low 40s. All year, it is at a fivepoint range all year it has been 39 to 44 were up against 44 again. If this doesnt go through and theres people betting it will, but if this doesnt go through, that will be another broken dream. This is a double top up there at 44 any substantial pullback in a stock like apple is gobbled up quickly. Dont you think . I have been making the point for two years that every share of apple you sell is purchased by one of three buyers first, the companys treasury. One of the biggest the biggest buyback in the market right now maybe of all time. Second, Berkshire Hathaway or third, the spy. If you think you know better than those three and you want to fight against them, you are welcome to do that the stock is up 72 year to date theres absolutely no way to steves point that the fundamentals of apple have improved by 72 this year. Understand that thats whats happening. Its not just happening with apple. A version of that story is happening across the entire xlk. Big buybacks, big index participation. You want to get flattened . Keep doing that. Its not a good trade this year. A trade deal with china playing into forecasts for stocks in 2020 as you can guess. Joining us now with his outlook is ralph kalakos you are thinking about trade and tariffs how today with this looming on the weekend we have generally held the assumption that we do continue to see deescalation on the trade side i think you get some form of tariff rollback ahead of the president ial election. Will that happen before monday or not to be seen i just dont see that tariffs go higher markets are pricing in a good outcome. There could be maybe a little pullback if we dont get somebody substantial i think that the trade is up trade does continue to deescalate we have had a big year in the market total return, 28 on the s p what does that mean for next year one thing, s p is up 27 , 28 . If you look at versus september last year, its up 7 . I think its up only the last few months i think thats largely on account of easier monetary fiscal policies and the trade optimism for next year, we do see more up side as the Business Cycle basically shows more signs of reaction ser reactir r reacceleration. What do you think of the economic picture in the United States do you have a good read . Do you feel like you have a good read on that theres seasonal distortions which people are flagging. The claims number today was not good what do you make of it in h when you look at claims, our economists are talking about it. Theres seasonal affects that create volatility. Bottom line, labor market is strong the consumer is in good shape. If you look at the job numbers from that came out recently for the last month, they were strong Participation Rate is higher wage growth, you see a little bit. I think the u. S. Consumer, the job market is one of the positives, not just u. S. But global economy. When you were here last, a few weeks ago, you talked about the economy improving globally as we discussed, we hadnt seen many signs of it right . In fact, some signs are going the other way. Are you seeing that now . Its only a few weeks. Whats the catalyst for it rates are moving higher despite easing money policies. Im cautious about that myself rates moving higher, different drivers. But were seeing rates moving higher, a lot is reflection of expectations of better growth in the future main a little the inflationary side we do look at a lot of data. Internationally, asia, a lot of our indicators point up, not just china when you look at taiwan, europe, things are extremely bad they are Getting Better than expectations yes, the level is depressed. Its the Second Derivative affect that shows signs of life. How much of chinas stimulus as they have been fighting all year against the trade war and trying whether its lowering reserve requirements down substantially or whatever it might be how much of that is going to start pouring through to the rest of the world because this is a connected world china can put up all kinds of stimulus and if any of these tariffs come off, doesnt that provide a significant pop to the rest of the world . For sure. If tariffs if you see partial rollback, to me that equals a positive base affect thats going to get manifested through healthier margins. We estimate that cumulative negative impact of tariffs alone, s p took 7 to 8 hit instead of having a year where we have 8 , we look at maybe 1 . You get any portion any partial rollback, that creates a positive base affect i think the fiscal and monetary policies you are seeing benefits i think more of that will be visible as you go in the coming quarters would you be negative we have the bump up in tariffs what would that do to your outlook . Absolutely. Thats a game changer. Then that suppresses the cycle and this reacceleration is off the table. When we look at wage growth, it looks like a lower income segment is having wage growth in 4 whats the compound affect of that on the broader economy . Wages, thats a big topic i hear that all the time across investors. I dont think its a concern at this point for the s p for, for corporate, for margin, for the broader economy. I think at this level still, i think its positive. The wages start to accelerate into higher levels in terms of potentially driving up inflation, it becomes a problem. I will share this. We run pretty extensive Machine Learning analysis of what corporates are saying. Its one of the least concerns that corporates are expressing in terms of wages. You see it in Certain Industries broadly speaking, its tariffs and the u. S. Dollar. I had thought of it as a positive for the economy that segment had significantly more to spend. If it hit upper earning, they might not be as meaningful. I think thats right. That segment were talking about, what they spend their money on is essentially food and gasoline for their cars. If theres anything left over, they pay down Credit Card Debt its meaningful when they have, for example, the subdued gas prices that we have had for most of the last four years it helps i think a lot of what were seeing in wage gains for that segment has nothing to do with the fed. Walmart said, were going to pay our people enough to get off food stamps. Mcdonalds did it. The biggest employers in america, amazon is the second largest private employer in america, they pay better than minimum wage i think that has more to do with that segment seeing an improvement in wage growth than anything happening with the federal reserve. Why do you have delinquencies in auto loans . Why are they picking up if everything is great, people are making more money . Does that cause you concern . Loans, i think one section of the Broader Market and the broader going delinquent on something you rely on every day to get to work is an issue isnt it yeah. Sure its an issue the auto market has been an issue not just last several months its been an issue for the last two years. That might be a little negative. You look at the Housing Market, mortgage market, thats picking up strongly since the fed did the pivot. I think the picture is fine. I want to get our eye back on the market whats the likelihood of a top heavy year coming up where the gains that you think can be made must be made in the first half of the year because of all of the election noise thats going to come in the second half its not just in the president ial race. You will talk about the prospect of the house and the senate, how thats going to shake out. Its going to get noisy and ugly and its going to get loud and messy. You have to make everything in the first half of the year you dont again, if i would make a case, i would make a case the biggest upset is before the election versus in the last, last part. I think the market normalizes as you go into the final stretch on the election race. Im talking about the conventions in august. Prior to that is where i think theres the most juice in terms of the market upside and where things get priced in a lot is linked to what happens on trade. You dont think we have pulled any of that forward in this year . I think you do. I think this year, we were thinking a lot is a function of trade the fact that were talking about a partial phase one deal, that could occur now, yes, thats pulling forward some of the upside into last part of this year as opposed to beginning of 2020. What do you think in reality 20 8 move in equities according to the target. The question is, how aggressive should you be as an investor between now and mid 2020 i think by mid 2020, were looking at double digit again, scott. Not 24 or whatever. But a strong double digit growth number like i say, i believe the catalyst will be some sort of trade deal and then that china push through to the rest of the world. In particular, to joshs emerging markets and things like that, the eem, i said multiple times, we have seen massive institutional buying here. It looks like it wants to break through. Im citing the eem level at 44 we break through there and go to the up side, i dont know we stop until we get to close to 50 i think that big catalyst, that lift comes from all the money china has put into the system. Its a really interesting question, because right now it would be hard pressed to find anybody, even some of the most devout democrats that you talk to or socialists that thinks trump is going to lose thats your base case right now. You have a lot of risk if the polls start going more towards the real left democratic party, which i dont see. Its petering out. I think the election is going to be a nonevent for the first half, as everybody is saying i know thats my point is that why you need to be a more aggressive its void of election stuff for the most part. I think volatility does pick up both up and down. I think you get aggressive when you find a single deploy capital providing you have a longer term time frame. Go back to your beginning saying if we got tariffs, you think the market could be down 5 to 10 . One reason why it wouldnt, is because everyone is waiting for that. Everyone is assuming it nobody is assuming tariffs are coming on. At this point, the market is assuming theyre not going to happen on sunday im saying, i dont think in the worst Case Scenario you get 5 to 10 pullback everyone is desperate to step in on the stock level you can see where look at the market what was the high of the day 313 thats the concern right there about tariffs coming in. You have i get it you have the tweets you have real reporting b