Deadlocked on stimulus we know the economy needs more stimulus, certainly pockets of it do. Does the stock market, though . What is if it doesnt happen im not sure if the stock market is pricing it in, happening right now. I mean, theres no scoreboard that i can tell you definitively its being priced in, but i dont think its in there. So if you do get something, i think it will be good for sentiment and it will probably lead to new highs, but if you dont, independent nm not sure as wbig of a disappointment as i would have thought six months ago. A lot of works continues to work, ive been talking about the housing stocks all year. Lows in particular in that index, low looks prime for a mega breakout, about to take out previous resistance, put that one on your radar. And then theres leadership from energy today, which is kind of weird. We were looking at some of these names and exxon could double from where its trading right now and still be negative on the year thats how beaten up this sector is thats a big mover today i dont think that these things are happening based on stimulus. The one stock that might be i want to point out discover financial, the discover card, its probably the best bellwether for what were thinking about in terms of the consumer stocks up 100 over the last six months its just absolutely ripping, and i think when you see activity in discover, which has some of the lowest credit quality versus lets say american express, i think thats a good indicator that markets are not terribly concerned that theres going to be a substantial downturn in consumer so thats what im looking at. So how do you play this, how do you judge whats happening in stimulus you see the gyrations here alone, a headline here, headline there, market up, market down. I think this played into some of the volatility that we saw in september. I think some of this to joshs point, coming out of the end of july and middle of august, i think we were starting price in or had expectations of an additional stimulus package. I think after the death of Justice Ginsburg and the additional contentiousness around the debates, i think there has been some lost euphoria as it relates to the stimulus i do want to point out im a bit more concerned about this kshaped recovery. That wont necessarily translate to the stock market in the very near term but im concerned about the overall level of consumer activity given the fact that we have a much lower Participation Rate than we had previous to covid. So if we look at the consumer, i think were getting two classes of consumer activity right now without the stimulus, i think that that continues to diverge so i think that can play into some of the retail exposure you might have in your portfolio but also it relates to Consumer Confidence and sentiment joe from the white house Economic Office was on and theyre maintaining, the white house is, that you have a vshaped recovery. In their words, selfsustaining vshaped recovery. I dont know if that takes some of the urgency from the white houses perspective, as jim cramer has been talking about, theyre not feeling a sense of urgency because theres a wide swath of the Republican Party that believes were having a vshaped recovery. Its the people that have a voice and are vocal and the people that are out spending en masse. You look at the Holiday Shopping season if you look at the, you know, different demographic groups, the wealthier individuals in our economy are going to be spending more this year because they havent been spending any money on vacations or other discretionary spend. I think theres going to be a come to jesus moment really for the working class americans who were relying on stimulus, expanded Unemployment Benefits and you and i both know a lot of these Small Businesses are not coming back and were going to continue to see more closures. I think that washington should start paying more attention to working class americans because this is going to continue to be an issue for Household Income at large. We know how much pain is out there for certain. Good point that you make its certainly one that resonates, too jethro, good to see you again. So how are you playing this market do you care about stimulus at all . Should the market care about it at all yeah, we think the market should certainly care about stimulus i mean thats played a role on the consumption side as far as consumers, which has been one of the key factors driving the economy. So, yeah, it is a factor that we do care about. What if we dont get it then . What does it mean for stocks were already sort of expecting a level of volatility to increase as you get closer and closer to the election if there is no more stimulus at all, the airlines get nothing, the American People get nothing, Small Businesses get nothing what does the stock market do . I mean, time will tell. We certainly think, you know, that there will be some sort of negative impact there. We just take the words from chairman powell which has sort of been pounding the table for fiscal as well as monetary measure. Certainly if the fed is concerned, then we would be concerned as well. You talked about the increase of volatility thats something you also have to take into consideration obviously the vix futures curve is already there in the 30s there is also possibility that we may not get the kind of fall were expecting you got to be positioned things might be calmer than we expect or be much more volatile than we expect as well the premise we laid out is should you go big by going small, a play on the move weve seen lately in the small caps which have outperformed month to date and wildly so the russell 2,000 is up 8 , dow, nasdaq have a gain of 2 there is a pocket of the Market Banking on a pick up in the economy, small caps are doing better there are many names i can get to in a second how about the idea that its time to get away from some of those bigger stops and focus on small and midcap stocks . I dont think you need to get away from those big cap stocks, scott. As long as you keep trimming some of the gains in some of those, which i know a lot of the guests on this program have said they have been doing, many of the panelists have done the same i think as long as youre taking some of that money off the table and then putting some of that men into the semx trade, in freeport and many of those kinds of stocks. Infrastructure play, if you want to call it that, scott, those are where im folk right now in particular. But im not like liquidating shares in the tech sector so that i can do that im taking a little off the table in those and those little bits that im taking off because of the outperformance of that gives you an awful lot to push into these others. And just to throw one more thing out, scott, the 100,000 jobs that the Washington Post said we lost forever by may, i think we really risk another 200,000 jobs, not just job im sorry, businesses, scott. I meant to say businesses, not jobs and jobs come with those lost businesses so youre making the same point i hear you i hear you exactly and thats why i really dont know what Speaker Pelosi and leader mcconnell and or mnuchin and the president are thinking because this is going to make a scar on america. This will be just like lehman, scott, a huge mistake if we dont address it and we instead l let lehman fail and all the other things that come from that i think the same is now if they dont do a stimulus. A lot of people share your view, they do. We had a couple of interviews last week where small midcap stocks were the central focus from the strategy of two of our guests chris toomey from Morgan Stanley privatewe wealth was on and her xi qiao said theres going to be a rotation from the large caps to the small and mid caps mid caps have lagged just because the economy has done better with the large tech stocks, but, you know, as the economy starts to rebound and starts to recover from covid and hopefully with a successful vaccine in the first half of next year, midcaps and small caps are going to come out ahead. Okay. So, josh, thats ther view jpmorgan is out with a note today where marco colonavich is one of the authors, well known for moving the market with forecasts and commentary they say buy russell 2000 value he said buy the russell value versus the russell 2000 growth valuation dispersion near record highs at levels not seen since the tech bubble, the stocks commanding such multiples are those with the highest expectations of eps growth, one of the most consistent contrarian indicators of 12month forward performance do you feel like were going to get more of a wave towards this area of the market well, its always possible and i would say historically the data is very clear small cap leads large cap coming out of reception and so the early stages of recovery historically, small cap has been the best bet and if you get outperformance by small cap value, well, thats very good news because the only way that happens is because its a true recovery and because the yield curve is steepening and because there is demand coming back for things like energy and industrials. So i hope thats the case. Unfortunately we can data mine and cherry pick these small periods of time during which the russell is outperforming the 500 and can say its been leading over this month or the last 48 hours. Its been a tough overweight for a long time and it wont be obvious that changed until a long time goes by where that trend sticks so so far weve just had episode after episode after episode where people get really excited about this valuation disparity, they plunge into that overweight and it ends up disappointing them and one time it wont but its very hard to know in advance when youre in that time so i guess my answer would be a truly diversified portfolio always has small cap exposure, always has value exposure but playing that game as to, okay, this is the time to really turn it up in overweight, for ten years people have been hoping that would be the case and it hasnt happened yet. I hear you are. So i dont know that this is the time you have some nice gains. Idt corp up 67 , sun power 43 , beth, bad beyond 40, go pro 37, cody, weight watchers, Goodyear Tire for solar, cleveland cliffs, harley, joshs shake shack, u. S. Steelkohls, you have some nice gains and yet a lot of stocks that havent done well to be fair we always have small caps in our diversified portfolio. Its hard to time. I think in this recession if you look back historically, there are several points in time you can see small caps leading out of recession this was a different type of recession. This was not a recession born by economic excesses, where we saw a significant washout that was an extended period of time that people are buying back into risk people have already bought back into risk. So im a little bit more hesitant on the small cap trade. I agree 100 that once we have a sustainable economic rebound, this is going to be where you want to be and adding an incremental position ahead of that over the course of the next couple of months is probably makes sense if you dont already have that in your portfolio. But this massive rotation that people are talking about needs to happen, i agree with john, theres no reason to there start adding here and there, add a broad index, a lot of losers in that universe as well jpmorgan wants you to keep adding to stocks more so outside the u. S. Than in they have upped their equity allocation to 8 from 6 they say its an opportunity now to take advantage of a better entry point that the correction we saw in september caused but they favor nonu. S. Equities, in particular japan and emerging Market Equities we havent talked about either in quite some time is now the time to start looking outside the u. S. I guess its always a time, scott, to look outside the u. S. , but i actually put very little of our invested capital outside the United States. I just i treasure the liquidity that we have here, scott. I think that we are going to get a big infrastructure spend under any administration and i think that, you know, you and i talked just two days ago about the massive buys in the iwm in that small cap space. I think that continues and if josh and the group are right about what exactly that means going forward, i think small caps will continue to do well and i think they will do much better than european equities, which still, quite frankly, and i know you said emerging markets, not just europe, but europe in particular still has brexit its got to wrestle with, scott. Even though thats not the end of the world for those guys, that holds it back the euro to the dollar has basically been locked at about 117 and i think thats locked there because europe hasnt been able to get around the rest of brexit yet is still feels, too, josh, like theres so much uncertainty before the election. This is part of that, too. Theres always going to be a next election and uncertainty. X2f, this is an ishares index, its of stock market in its right proportion, everything except for the United States is up 4 in the last three years. The s p 500 is up 45 , its a 10x return in u. S. Stocks versus basically a flat return for the rest of the world. This year china is substantially outperforming the United States. I dont think people know that china is up like 15 versus the s p up 4 . It has a lot to do with the pace of their recovery versus hour ours if you read ray dalio this week, its nothing to laugh at what ends up happening, the way you get overseas Stock Performance is traditionally it coincides with currency weakness or strength in the dollar. So if you look at the last period of time where lets say overseas stocks beat the u. S. For an appreciable period of time, its the lost decade from 2000 to 2009 you made zero money in the s p 500, none, flat factor in inflation and its worse. But you made money in europe, big money in emerging markets and that coincided with a weak dollar i think you have these regimes in overseas stock outperformance its not about what happened for six months when these trends get started, they tend to persist for three years, six years, ten years. Thats why you have to have exposure in these overseas markets because youre not going to know you needed it until were already deep into a period like that. You look overseas, find come peming value igatiovaluations, h dividends, growing Technology Sectors and china is a great example but also latin america there will be fortunes made by people who have diversified portfolios when there is a stretch where the u. S. Market doesnt do much but you have to be there in advance. I hear you, however, this one has the possibility of being a doozy. Except we all expect it except we all expect it, scott go find someone that doesnt think this will be a contested election you cant. This week the market was moving up and there were notes coming out on wall street that were saying now theres less likelihood for a contested election because as biden was expanding his lead in many of the polls, if to be believed and it turns out that way, the market is getting its arms around that issue. Do you know what wall street does better than anything . Make bad predictions . No, no. Its really good at explaining what just happened thats wall streets number one export to the world is explanations of what just happened the day before. Theyre great at it. Yeah. Well, you know, look, the election is coming and youre going to have to position yourself ahead of it how you think the outcome is going to turn out, jethro theres no other alternative either trump gets another four years, bidens elected, the other variable is a potential blue wave, which is now being factored in to forecasts as as well that has broad implications for future Stock Performance yeah, to some extent thats true you have the options certainly you can choose to take more of a directional sort of positional sort of bet into the elections. Actually what we chose to do is go a bit more with a neutral stance we had been net long in our portfolio. Now weve kind of moved towards a net neutral position which makes a little bit more agnostic in terms of how the election works out. Is it going to be tactical play, a lot of cacophony on different sides. But sift through the noise and find companies that will exhibit decent earnings pour during the Economic Cycle so john, speaking of earnings powers, samestore sales from costco up 15. 5 , beating an estimate of 9. 2 dominos had really good comps, too. The stock getting hit real hard today, the worst day since march because of some commodity and margin pressures, Commodity Prices up there hurting cheese prices mcdonalds up 46, cramer, id buy all three. What say you id buy all three and id buy b. J. s and walmart with the sams club and their expansion to compete against amazon, scott, with their amazon prime walmart has been absolutely killing it their argue ta their target and you know i love that at opportunity to the dominos play because ofthose costs tha caused them to miss on the profit side of that. Of the ledger. But i think overall these will continue to do very well, mostly because they have really eliminated a lot of competition by the way that they play the game now in particular, walmart, target and amazon i mean, theyve really crushed it now, costco is not really a delivery play the way those others are but, my gosh, those other three are just crushing it i think that continues, scott, as well as some of the can i throw one name out there . Agreed. So similar to what john is talking about, heres a small cap and a retailer you will never hear me talk about a small cap and retailer again after this probably, but gap stores from a technical standpoint, ill get into the fundamentals in a second, this stock, i dont own it yet, i may soon, this stock is snapping a down trend that dates back to 2014. It not in an up trend but it starting to be and snapping that down trend is the first step had a golden cross on the stock, the 50day is sloping positively and above the 200day. Whats going on here they put a new ceo in in march literally the day the pandemic started, that was her first day. But she is the woman that built old navy, added a billion in sales to old navy while she was running it they almost spun old navy off, the pandemic happens they said you know what, lets put sonia in churarge of the whl company. Shes been running this thin