Ceo Dennis Muilenburg is out effectively immediately as they struggle to get the 737 back in the air. Halftime report starts right now. Welcome, good to have you with us on this monday, our Investment Committee today, joe ter nova, brenda is back, the cio of sand hill Global Advisers the end of year rally continuing boy, what a difference a year makes, joe, right . Certainly does. Remember last december . I certainly do. That stunk. It did. Not this time around. Not this time around. 30second record close of 2019 on friday, up 28. 5 yeartodate could have the best yearly performance since 2013 remarkable. We had a liquidity correction this time last year. We had a Federal Reserve that was clearly hostile. Weve seen significant pivots in that record. The earnings picture really hasnt changed in 2019 we know earnings have basically been flat. Where we sit right now looks as though the runway is pretty clear for further price appreciation were now getting participation not just from technology if you look at the leading sectors for the s p 500, technology up 47 , obviously significantly outperforming the overall s p. Communication services up slightly above the s p about 30 . Then the rest of the sectors youve got the financials kind of flirting with the s p return, but the rest of the sectors, theyre actual underperforming the s p. I think youve got a little bit of a catchup here, some dispersi dispersion which you and i like. Bullish sentiments in january and then you get earnings. Thats a critical question for 2020 so josh. Hey, skoecott how are you you got the memo, blue shirt, sweater. Rock and roll. Very comfortable today. Heres what i want to know we can love the year weve had, but i really want to focus on what comes next. There are a number of notes out today that are calling into question whether this whole thing that weve had here is sustainable. V vanguard says we face a 50 odds of correction in 2020. Of course that means theres 50 chance you dont have it bespoke what do i do with that exactly . Im not finished. Equities arent a bargain biggest headwind for stock market is valuation. Investors may be overly complacent about the year ahead. A few signs of market weakness but the current path is unsustainable. Ive been doing this a long time every one of those statements you could have made in december going into the following year every year that ive been in this industry. So theyre universally applicable theyre not wrong, 50 50 chance of a correction, sure, why not actually, history says well have an average of a midteens correction every year and a half. Its not a 50 50 correction as to whether the markets too expensive or not, thats a legitimate concern. Too expensive compared to what its not in a vacuum in the real world everyone thats allocating a portfolio all over the world is forced to make choices between one asset class and another. Forced to make choices between one geography and another. We dont have the luxury of saying this is too chep ap at ts price, too expensive at that price. You can have an opinion. Sometimes your opinion will be validated and sometimes they wont. Validations can go further hold on cant you say that the markets up on multiple expansion, lack of real Earnings Growth. I dont think thats really sustainable. Whats fundamental the question is should you bet on that happening twice. Thats the question. Apple gained 511 billion market cap this year. Its literally up 82 . Should you expect that to happen again . No, of course not. That would be tough. Im one of the people that enjoyed last december. We were buying i was on the air talking every day. Heres why im buying. Heres the length of time im hooking to ho looking to hold it for this idea that were going to coast with another zero volatility year in 2020, i dont think that anyone working on wall street believes thats going to happen. If it does happen, great if it doesnt, you will get another december 2018esque opportunity, and the question is are you prepared to do something about it when it comes, are you going to say, oh, this is the dip ive been waiting for but now i think were going to have a crash. If youre going to be guided by your emotions, you wont benefit from it. What about this idea of mkm technical strategy we remain firmly bullish over the longer term. We believe the best course of action right here is to take a profit take profits in some of these gains that youve gotten. You know, i think we might start seeing that happen but in the new year so for a few reasons, one, i think especially in the Fourth Quarter weve had such a strong market but we had a scenario that so many people were under weight that theyre probably still just holding on through the end of the year and not wanting to reduce a lot of exposure into that we also had an environment where Interest Rates are incredibly low. Moneys trying to find a home, looking towards the equity markets is somewhere where we could get a little bit more of a return and lastly, i think we have the opposite of last year with tax laws selling that really impacted last year this year people are not wanting to realize the gain. You might look to the next taxable year we dont think were going to see a massive correction, but could we see a pause in january . I think we absolutely could. Joe says we come into january with a lot of momentum obviously earnings are going to have to live up to some sort of expectations brenda, maybe others suggest youre going to get a correction in the new year. What do you think . First off on earnings, youve got a good three weeks to go we keep drawing parallels to last december. How about two kedecembers ago wn we had an incredibly low 2017. No parallels, opposite of last december. I think 2017 is the thing youre supposed to look at here. What im saying is you could well get a crescendo into a blow off top in january thats the other side of the 50 50 that youre bringing up. Theres no way of knowing, okay . What there is one way of saying is why on earth would you sell at this point in time. If youre a professional portfolio manager, spoiler alert, i am, why would i sell . Why am i saying im getting out of this . Im calling the top, im going to go to cash. You have career risk if you take some profits at apple thats career risk maybe thats a little bit strong ill agree with you on that. Cutting that much against the grain. Theres times to be contrarian and times to go with the flow. Right now go with the flow. Would you be shocked if the first two weeks of january we had a huge amount of profit taking because of the tax implication of having waited for the calendar to turn over . Ive been saying for weeks this absence of tax gain selling would propel the market higher, but i dont think on january 2nd. Look, ive got stocks i want to sell but for taxable investors im not selling them right now i dont come in on january 2nd and sell them. Not you, im saying everyone. Would you be surprised same thing applied in 2017. If you sold on january 2nd, of 2018 you missed some of the best gains wrong, wrong. You sold at the high point of the year. On january 2nd, the whole month of january you were up about 8 youre wrong. If you sold in january of 18 you missed two corrections. Youre purposely ignoring what im saying. Im just asking do you think i think that theres a high likelihood that a lot of people are rolling gains into january im not saying on january 2nd. I would be surprised if we didnt get a pull back because of how many people are saying i dont want to pay the taxes this year. If you sold january 2nd, 2018, i might have the number wrong, through january 29th you missed up about 8 yeah but. No yeah but. But taken away three days later. If in the entire year of 2020 the s p 500 was up 8 i think wed all be happy. I think youll agree with me on this, this idea of im going to make a strong move to cash on any given day is a 50 50 bet actually, its not. People dont do that in real life people dont take a portfolio and say i just read this note from vanguard. Lets get out of here. I think there is moderation, and i think there are people that they have monster gains this year just through the regular course of rebalancing. Its not the end of the world if they reduce equity exposure. I think the bigger question scotts asking is are we all just attuned to this idea it will be smooth sailing. Dow 30,000 next stop. Youre only 1,500 points away. Is that the moment of step back to where these questions that ive asked you at the top of the show become a little more sensitive . Its never a date its never a particular level. There has to be a catalyst i think the one thing we should be paying attention to is what joe brought up two thinks are going to happen, Fourth Quarter earnings probably not going to be that good. Its the guidance Going Forward which should be positive in light of easing trade tensions, the guidance Going Forward should be positive that should. Those with equity exposure, they will sit. They will wait, theyll be patient. Theyll listen to hear whats going on with earnings the move thereafter is not we go to cash. Theres a tremendous opportunity that presents itself, and its geographically based do you have the opportunity to diversify, rebalance outside the u. S. With a degree of confidence but you dont think its prudent look, stephanie link has been selling some pieces of positions. Shes been taking some profits in names like apple and looking to deploy that cash in some of the laggards is that whats wrong with that strategy . Theres nothing wrong with it youre not going to like my response my response is portfolios are like fingerprints. Theyre unique to every individual i dont know what stephanie has in her portfolio maybe by nature of apple continuing to appreciate, she needs to do some selling that is very common in a portfolio. I dont think stephanie is selling apple believing that apple is going to endure a 10 to 15 correction. Shes not shes just taking a little bit of profit. I just made that point clear so youre right, i didnt like your answer. Its unique to stephanie lets just say stephanie represents the investor out there whos watching and has had big gains in a stock like apple or xyz company thats up 50 like microsoft, or facebook which is up 50 . Whats wrong with booking a little bit of that gain, not selling the whole position take some profits and look elsewhere in a market thats appreciated a lot and then you have some stocks that havent done as well, and theres a catch up trade in those names. What is wrong with that . There is nothing wrong with it i like your usage of the term looking somewhere else as long as youre looking somewhere else and can find that opportunity, thats a great strategy. Im not saying put the money under the mattress. Theres a lot of people that come to this network that say thats the right move, go to cash you could look at emerging marketsment you could look at europe you could look at a lot of developed economies for the first time in years and find opportunities. Back to your comments, theres nothing wrong with it. For me personally i do not feel that i want to shave a position in microsoft or a position in apple because i believe 6 to 12 months from now ill just be buying it back at a near or higher price im not suggestive of any of those the top ten of the biggest big name gainers that are likely in the portfolios of our viewers you see the kind of gains youve had. You attempt to answer or at least entertain the questions ive asked whether some of these have gotten too expensive, whether there could be a correction in the very early part of 2020 and saying maybe i should just look at some of these positions that ive had the success in and see where the opportunities now truly lie, if i think certain parts of the market have gotten too expensive. Just a minute ago, maybe 30 seconds ago you had the dow gainers on the screen right there, and three of thetop fou were cisco, boeing and 3 m im going to leave 3 m aside because im not interested cisco and boeing love them 3m is its own unique story. Stephen tusa took it off a cell rating today and thats why that stock is likely getting a boost. Obviously thats been vaporized over the past several years. The point driving if you want to trim and stephanies not here weve got to be careful. I know she likes boeing. Weve talked about boeing with her a lot. A the that this price, news todt i think is a little bit consequential ive decided to buy some if youre stephanie, me, if youre joe, any of us and youre trimming something, there are places to put it where you dont have to say its too expensive. Stephanie mentioned shes putting the money from apple into nvidia which i think is a great strategy i applaud that. So has cisco. Not to the degree nvidia has. Cisco is not anywhere near as expensive as nvidia. You want to be a value investor, buy some cisco, you want to be a growth investor buy nvidia, god bless both of us i agree with joes earlier point, and one thing about geographic exposure and i dont think we can ignore it because its been an easy trade to be long the s p 500, and thats the only place you needed to be. The exception to that was in 2017 when the Global Economy was really doing well and if we see a resurgence in the Global Economy, particularly if china continues to stabilize and reaxel e rate the grow reacce the growth, i think you should see a shift. I think its important to stay diversified and look to other parts of the world in terms of deciding where to put the money youve taken out of the large cap stocks that have driven so much of the market this year. Do we think 2020 is going to be the year again, josh, of the u. S. , or is it going to be the year where the rest of the world has its catchup moment if you want to call it that, the emerging markets or the europe trade, which they have more relative value than exists here. I think its tough to Say International out performance will typically be accompanied by weakness in the dollar or strength in the foreign currency thats always a big factor in those in those moments of out performance of overseas stocks the other thing i would say is it tends to be streaky when you do see international out perform the u. S. , usually thats part of like a three to fiveyear moment its rarely like one year and the whole thing falls apart. Its been a very long time to answer your question, european equities are selling at a 25 discount to United States stocks we all understand the reasons why. Nobody has to tweet at me. We know less technology, et cetera, et cetera, but youre being compensated for the risks in overseas stocks, i think, even given the differential in economic fwrogrowth, demographi et cetera. European stocks broke a high set in the year 2000 when i was 23 years old. Im now 57 years old we are now breaking through that high this is something that a lot of people havent been talking about this year, but that is a new bull market for a very large portion of the world thats underperformed for a long time japan is breaking its down trend, chinese stocks had a good year believe it or not and emerging markets might have the fastest Earnings Growth worldwide by re worldwi worldwide by region in 20. Vanguard survey of portfolios, u. S. Investors are 80 u. S. Stocks on average, which means half are more in terms of their equity allocation. Were going the other way. Were overweight international stocks, underweight u. S. Large cap. I think it will look smart it may not look smart in the first three months of the year but were managing portfolios for people over 20 and 30 years, and were looking for better Risk Reduction returns, and not investing in the Rearview Mirror based on what worked best the last three years. And thats the type of supportive commentary that you have not been able to present in the last couple of years outside the of the u. S you finally can do that now walking into january of 2020 i think to answer the question if u. S. Outperforms in 2020, doesnt it come down to what josh mentioned before, apple up nearly 80 yeartodate, facebook up near 60 microsoft up 55 isnt it really the direction of these Mega Cap Technology names thats going to define if the u. S. Is going to outperform or not . I think thats where the focus has to be. What does technology do in 2020 . We well find out shortly. Well, but its the faangs and these other big names youre saying that have to perform. Its the mega cap its not value tech. No. Cisco and intel arent going to carry the market higher. No, no. Its going to be the microsofts and the apples and the facebooks and hopefully amazon and alphabet. Why does it have to be either or . Why cant microsoft, apple, amazon, continue to zoom. Because of the market cap weighting. And im not disagreeing with you. Youre saying the passive etfs, the dollar comes in, 0. 07 goes to apple i agree with you i dont see that thats exclusionary to intel or cisco. Hes not making the point its exclusionary. You cant just have cisco and intel lead the way in tech at the expense of these other stocks and expect the market to have any meaningful appreciation if the mega caps didnt we see that in september . I felt like we saw that in september. For a short period of time, does that work of course. Is it going to carry you the distance of the year ahead. Youre asking a legitimate question my answer is, i think it can, scott. I dont think theres a definite reason why it cant. If you want to say a definite reason why it cant, what joes saying about etfs and the fact that a dollar comes in and 30 of it goes to the fang names, i think the reason it sounds outlandish is that the last 12 years its been the exact opposite youre not the only one placing that bet clearly as, you know, this pickup of you want to call it recent in value stocks some thing it can last hey, guys. For a while. The stocks that were talking about now is the market leaders and the Growth Stocks were value stocks five years ago. Apple and microsoft were 12 times earnings they were literally in every value, rules based index etf or value managers active portfolio. Those were the they became the market leading Growth Stocks that happens all the time. All right, lets talk boeing. Those shares higher today on word ceo Dennis Muilenburg is out effective immediately. Our phil lebeau following that story and he joins us from chicago. No nobodys going to say theyre surprised by the news itself some may be surprised by the timing there were expectations he may be in the job until the max was recertified. Its the deterioration of the relationship between boeing and the faa. That has happened over the last week and a half. Go back to the meeting