Transcripts For CNBC Fast Money Halftime Report 20240712 : v

CNBC Fast Money Halftime Report July 12, 2024

You have that poll in the wall stre street journal and maybe the stock market considering maybe we wont have a contested lebs if the polling tells you anything accurate about where this race truly is what do you think investors should be taking from this move . I think thats correct. I think the two primary drivers for the higher market today are certainly the fiscal spending and what it equates to in the near term and the dynamic in the market for a trade and investors to extap larapolate is a rise i yields were finally seeing a welcome rise in yields and that is certainly on the belief of both of those actions i mentioned previously you have that to consider and how you want to trade that it has a direct impact perhaps on growth versus value, the polling on the upcoming election and were thinking about the president s health and what all of this means for the Campaign Going forward. So youve got a number of things in there. Lets start with yields. Rates being 0. 74 as a new high or recent high is Pretty Amazing that here we are talking about that as going up when who would have expected we would have had such a long period where rates have been below 1 and i think what the fed has said is they intend to keep rates low. So the fact that theyre not collapsing or theres nothing thats driven them lower is positive for the economy and investors are happy about that but i dont believe were looking at anything like a march up in rates that could get us toward 2. 5 or 3 . So rates are going to stay low but the economy is looking more moss tiff becau positive beca stimulus plan seems to have new legs it looks as if something is going to be passed and investors are very positive about that in terms of the election and how its affecting the market, friday was an interesting day because the president and the announcement of his covid, the market went down about 1 , not more than that but tech stocks were down more, down 2. 5 . I think thats part of i guess the process of healing, in a way, for a market that got a little extended on the nasdaq side if you look at a chart that didnt put together for me, you can see that on september 2nd, which was the peak of the market, the consent of the market cap allocated to technology was very high we were close to 30 and the percent of earnings about 23 . That was an extreme relative to financials and health care, which are underrepresented in terps of their percent of earnings as compared to market cap. That has decreased on the tech side so tech has come down as a weight on the s p. Its still overrepresented but of course its growing faster and we need that to happen we need there to be a little more breadth in the market, more participation in health care, financials and industrials and i think that sets the stage for, as, you know, what we expect to be a less contested election i mean, the market seems to be seeing that now with the biden numbers going up and a little bit more positive news on a stimulus and Movement Forward that we can see more participation on the consumer side most important thing for investors today is what . Is it the latest on the reopening . Is it the walkup to the election again, one month from tomorrow, or is it the thing that joe said, which we havent talked about in a long time and thats yields moving higher and the impact its going to have on certain areas of the trade right now . Hey, scott. Great to be back so good to see everybody today i think all of those things Work Together but theres one piece that everyone has to think about, right, when you say whats most important for investors . Its their time horizon. So for me the risk going into this election is all of zero right now, if im being honest with you ultimately i can buy stocks when they go on sale. So if someone is concerned about one of the three options coming out of this election, either a trump win or whether its a split white house split senate, or what do they call it these days, a blue wave i think it is . Regardless of which one of those things play out in a month from now, ill be prepared either with cash to pick up things when they go on sale or whether it be to watch names to rally into what occurs. It is holistically dependent on time horizons. Theres the market and the economy. We want people to do well. We want to see folks with jobs, we want to see a recovery and see people healthy as we think about covid as it relates to the market, whether its a reopening trade as we start to see vaccines come into play or these antibodies work on our president who i guess is going first and foremost into these trials, or whether or not its, you know, a potential retrenchment depending on these waves that were seeing begin to occur. I am actually more optimistic, as i always am, i think, as you know, about the fact that we know how to manage the virus a little better. Im less concerned about the cases spiking. If we start to see the death toll rise precipitously, ill be very concerned but if we see the deaths begin to taper off, thats a good sig and people Wearing Masks is a good sign. Jim, i want to focus on the rate issue for a minute because it may be the most near term issue for investors to grapple with Morgan Stanley says and asks the question it had whether a rate scare is one of the underappreciated risks in the market and they say a move higher on rates, quoting from their commentary today, should only further support the view as most recovery stocks are positively correlated by such a move led by financials this is mike wilson. This is the idea that if you have rates moving higher, you have growth stocks, these tech stocks become less attractive and then you have more of a push into reopen stocks or cyclical stocks or things like the financials of all places do you buy mike wilsons commentary today i do. I think mike has been somebody that weve learned we have to listen to when he says something. The one word i would quibble with is scare. When we say a rate scare the trajectory you just laid out doesnt scare me i dont think tech stocks have to come down in that scenario. I think what were talking about is the longawaited broadening of the rally weve already seen industrials start to pick up some leadership i said im waiting for financials to do so as well, but you cant do that without rates rising now, heres the 64,000 question, what does the fed do in response to this . I dont think the fed will let the tenyear get to 10 without putting weight on it and the only way they wouldnt put weight on it is if the virus is under control and the economy is starting to pick up speed. Were pretty several months away from that but in the meantime, i think the scenario just laid out by mike is exceedingly positive, one where you get sections of the market, namely financials that have really lagged, starting to participate. That broadening of the rally would be very healthy and very welcomed in my opinion steve leasemiesman, our econc reporter have been taking a look at trying to model what a second wave of the virus could mean and it directly relates to the kind of things you just talked about, jim. Steve, im wondering how theyre thinking about all of this when you look at the fact that youve got nine u. S. States now reporting record increases in covid cases over the last seven days as just one of the issues that we need to grapple with on the course of the virus. Yeah, thats a big part of it, scott. And we havent really even reached the fall and the winter where people will be forced inside so its definitely high on the list of things that are out there as major unknowns and we dont know if theres going to be a stimulus either one economist said to me that if we have stimulus, we can do 10 growth in the Fourth Quarter if we dont, it may be as low as 2. 5 so theres that major variable layer on to that the variable about how were going to react let me tell you some of the points people have been making to me the first is there does not appear to be the political will for a major shutdown again, and you can maybe see that by looking at whats happening in new york right now maybe bill de blasio in a place where there might be more support for a shutdown than in other parts of the country, hes trying to do this by zip code, not a citywide shutdown. It could push some businesses over the edge that have been unable to make it so far mark zamby says the Unemployment Rate could go up by 1 of 20,000 cases, that is if the average cases rises from 40,000 up to 60,000 you you could have a 1 increase according to zandi. Even you have to think at least some of their policy to this point is already oriented towards that risk. Theres not a whole lot left now in terps of what they could do after theyve already promised that theyre going to remain low till 2023. I dont know if they say now that things are worse, were going to go to 2025. You have Charles Evans on the tape this morning saying very specifically he thinks we need a big fiscal infusion and recessionary risks are higher if we dont do that in terms of what the fed has left, one thing for sure is a major, major qe program that has was talked about before would probably drive down the ten year at best. You raise a couple interesting points the base case, right, as youve always said for the fed is that there was going to be a second wave, at least according to the medical community. The medical experts have always suggested the base case is a second wave into the fall. So thats number one the other issue is im wondering to the point that jim was making about this move higher in rates and the tolerance of the fed if rates get even closer to 1 , which is obviously ridiculously low, but so much higher than where theyve been in recent months you know, i think the fed is specifically holding back on qe thats the major tool they have remaining. They do not want to do negative rates. They havent ruled it out entirely but its not like in their first five or six kinds of responses they would do. And one of the things that theyre looking for, scott, i dont think the fed can be any clearer on this, they are dont like to go there either in terms of urging politicians to do something, is they really want to see that stimulus they do not want to have to use their tools to help the economy here right now there is going to be i guess some tolerance for the ten year to rise and theyre going to hold back while they can but then if it looks like the economy, not necessarily the ten year, is going into a place that is of concern, thats when they would starred tot to address thd curve. I want to address it with my gang thank you very much, steve steve lays it out very interestingly for the next part of our conversation in terms of tolerance, tolerance for higher yields do Technology Investors right now have a tolerance for higher yields or do they become sellers and do they move into value so i think that question gets answered a couple of ways, scott. It would be in the scenario where theres not a second wave and rates are going up for the right reasons, which is the economy is improving and weve seen more stimulus come and jobs are improving and companies are improving. At that point that would be a worry about technology your discount rate gets much hire second, theres an opportunity in the market for money to chase other growth areas, which becomes value that changes to growth its too early for that. You bar bell and keep your tech exposure because weefr don don whats going to happen with the second wave, with stimulus or rates. When you say we dont know whats going to happen with the second wave, in what sense are we talking about as a mentioned to steve, the nine u. S. States reporting record increases in cases over the last seven days, it appears as though were in the midst of a second way are you more specifically referring to how economies in different states react to the second wave . Yeah. Im looking more on the economic data, scott, as to what is that effect going to have and how are the economies going to improve specifically in different states and how theyre going to handle it as well i think you stay with your tech investments, you obviously do Portfolio Management and i dont think its a question of getting out of it because you see rates moving you. Thats what they are arguing over at citi, they raise i. T. Back to overweight he says financials like look a value tra trap cramer says financials are a value trap do you agree with that no. We saw the market continue to trend back up. Look, at the end of the day, you have to be in tech tech is the new consumer staple in my mind you can coin that to me if youd like to, scott because its true. Tech is going to be here whether its a reopening trade or not. Its up to you to get in at numbers where you think works for your portfolio as it relates to financials, people talk about financials being a value trap thats a broad sector, guys. Lets stop pretending like its all just a Consumer Bank and all sole lily wedded to interest ra. Youll see Consumer Banks doing well but you can see citia and jpmorgan and large Consumer Banking doing well where Interest Rates remain low. Were seeing Capital Markets exploding. Look at the other ways that Financial Services firms can actually outperform in this but they havent, though. I mean, im sorry but they havent. They havent in totality since what, since the end of march . Can you get in right now absolutely are you seeing other spaces within Financial Services doing well like, again, asset managers, like the private equity firms yes. Because money is cheap you have 10 trillion mind some of these, 2 trillion on the sidelines for investment scott, you know, i hear you and part of the problem is the rhetoric that you get around Consumer Banks not outperforming because its sort of like a selffulfilling prophecy where everyone is kind of hohum, hohum on financials and then you see these guys just like last quarter with kind of knockout earnings reports, i think youre going to see it again because again people are underestimating what these bank can do in a time of low traycint rates. This is an opportunity to get in, scott. Lets look at where citi is right now. Its trading around 69 a share and trading at 44 or so right now . Its still a buy i want to have more of this debate who wants to take the other side of that . Because i would that argument has been made repeatedly over the last many months the xlfs down 20 on the year i heard that all before. It hasnt worked why would it work now . Well, you know over what time frame hasnt it worked . What period, courtney, have the banks worked for investors people have come on this show repeatedly and made the case that you got to buy the banks, theyre trading well below book value. Ive heard that forever and then the stocks go nowhere. Why would it be different if you bought them a we if you bought it a week ago, its time horizon. If youre a shorttime trader, its time horizon. If youre a longterm investor, the banks have worked depends on what kind of bank or Financial Services firms youre talking about. We have clients that have won with, quote nquote, financials over time. Lets make a distinction. In the points that you make, court, some areas of the financials have definitely worked i dont want to make a blanket comment that the financials as a group im trying to talk about, for example, the banks, the bank stops, the jpmorgans, the citis, the bank of america, the wells fargos have not worked and ive had people come on and say theyre going to work and they have all these other businesses and trading for such large amounts for book values and peeliople go into these sto and they feel like theyre in quick sand because they go nowhere. Its my turn. So heres what i would say. We dont own any banks except for First Republic it n its not a Big Money Center and weve been consistent about that for years. A big factor is lower Interest Rates, which has happened. Then you have commissions coming down, a negative and then you have the idea of investment banks, they get some big piece of every day i guess thats not happening right now and then theyve got a lot of commercial real estate loans and guess whats happening to big Court Buildings in cities like new york, boston, chicago, los angeles, those buildings are empty and those owners are going to have trouble with their debts to the banks so i understand that theyre down, that theyre selling for very low multiples if you believe the e of the pe, but i think theres still a lot of risk if you have a tolerance for that risk, if you can say im going to buy jpmorgan and citi, wells fargo and put that aside and not worry about it, im not going to make it a big position, i think its fine to give that bet a chance to work and it probably will over a long enough period of time. Its just hard to make the case right now versus other sectors thats the way we look at it and we own plenty of financials but theyre s p global and other types of names hang on one second. I want to go down to tala who has news about the White House Press secretary kale kayleigh n testing positive for covid in her statement on twitter where she said first she tested positive, she said she had no knowledge of hope hicks, the president s Top Communications aide having tested positive when mcenany briefed the press at 11 a. M. Nbc is reporting that mcenany was pulled from the president s trip to bedminister new jersey for two separate fundraising events later that afternoon. She was not told why, according to nbcs reporting and did not learn until later that afternoon that hope hicks had tested positive so that is some interesting detail here, that mcenany knew she was pulled from the trip earlier in the day but was not told why, did not learn until later that hicks had tested positive mcenany had continued to brief the White House Press corps that day and informal gag ls as she was testing negative as recently as yesterday evening but this morning she tested positive but continues to have no symptoms. A trip in terms of why the president was allowed to go to bedminister for those events, even after it was known that hope hicks had tested positive and the white house had responded to that saying that, quote unquote, white house operation himself approved that. Reporter thats right, scott. Its unclear what the time st

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