Was interesting. Whats your headline here. Why should stocks continue to rise well after 20,000 . Well, really what were noting this week as we head into the final week of the year is the potential for what we call bullish outside year, and basically in simple terms all that means is throughout the year weve traded below last years low, which was 1867 on the s p 500. If we were to close the year about last years high, which is 2135 and we have three days left, but it looks pretty good to do that, that would leave a bullish outside year. Now, its only haepd every happened two other times in history. One was in 1935. One was 1982. Ill sample size it too. Its really not sufficient to draw too many concludes from, but those two years were followed by yearly gains of 28 and 17 respectively. Thats just something were looking at as we head into yearend here. How do you factor in, though, whats happened since election day and how that could skew any sort of technical signals that the market may be giving off . You know, thats why you dont want to use statistics alone to kind of create your market view here. Really this is just a supportive factor to whats been happening since july. Namely thats the cyclical or offensive sectors are outperforming. Were seeing leadership and good breadth. This isnt based purely on the signal. This is more just supportive of whats happening over the last few months. What internally what sectors would you want to be invested in if you think this could actually keep going . You know, i think its interesting. Dpnls have perhaps become a very quick consensus long, but you have to remember the financials are the only sector that are still negative over the last ten years. They were underperforming for that. They recently broke out on a relative basis on a fiveyear relative base to the s p 500. Yes, theyre over bought in the near term. If you take a step back and think for how long you have been underperformers, where do you think financials are set up pretty well here despite the recent more consensus view of them being an outperform. You dont like Consumer Discretionary, which is interesting. Were looking at Consumer Confidence. A big number today which follows a big number last month as well. Why not that group . Heres Consumer Discretionary. Its actually the second best performing sector over the last ten years, and its still the best performing sector since the 2009 lows despite the recent underperformance. Now much of that is because of amazon, but theres also a lot of traditional regional names that were up so massively from the 2009 lows that despite the fact that theyve underperformed, it makes you think there could be more underperformance to go as we head into 2017. Just because of how much they outperform just over the last ten years. If you look at discretionary, on an equal weight basis to the s p 500, that takes out the effective amazon. Thats actually breaking down from a fiveyear relative top. Discretionary i think is going to avoid as we head into 2017. Interesting. You have given us a good point to start the debate. Appreciate your time. Thank you. Jonathan, what do we think . What do we think . Do you have a feeling as though because of where we seem to be going in this market, be it the 2017 can be another good year . It can be. If you go on the backs of what weve witnessed so far in the last month or so, and you talk about the financials, you start to look at technology stocks, and obviously this huge run in the chips which really has been something thats persisted throughout the year, but you can absolutely see this now, and can you see the m a, and you still look at an area where youre talking about great valuations. You get incredible yields. Youve got incredible cash sitting on those Balance Sheets. That combination for technology, by the way, loan growth and the regulatory issues in terms of some of that may be easing back, you can understand why these financials. I had regrets when i got out of the xlf. I jumped back in two days after i got out. I continue to be there, and i continue to add to the financials. Technical catholic its said, joe, that the market has set itself up for a good 2017. If you combine that with a lot of pessimism surrounding the marketplace, that didnt really give the big holders, the institutional Money Managers time to quickly shift their strategies and get long this market. There was not very many people talking about financials on the institutional side, but yet, they were rallying. They were rallying into september, and there was reason at that point and optimism to start owning them. Financials are going to tell the story for 2017 . I think so. If you look at the negativity, we sat here a year ago. There was no reason. Everybody is bashing. Rates and oil is going lower. The regulatory pressure. There was no catalyst, right . Everybody was positive well, not everybody. People were positive on the banks only because you could say they were cheap. The other part even with their dividends, most investors wouldnt own these banks because they had cut dividends before, and that once you see a lot of funds dont buy stocks that have cut dividends, but i think the paradigm has shifted. You get regulatory now tail winds that will help these banks. Theyre going to keep capital, raise dividends, and i think youll see investors coming back because its so kevin oleary, you dont agree with this . I like his regression to the mean theory. He is saying if you look longterm, they have to regress to the mean and start underperforming. The problem i have, if i listen to that, i would say, okay, i have to sell all my Consumer Discretionary and go long financials. Thats the trade i just heard. I wouldnt do that because if trump actually does cut taxes, which sounds like he is going to do, one of the main beneficiaries and why you see such optimism, including today with consumers, is they get more to spend. All this optimism, and believe me, ive enjoyed the run too. I maybe have gotten short the small cap banks. Thoor not come to a theater to you any time soon. Its going to take a long, long time. I dont think were going to see them in 2017. How about those tomatoes, buddies . It doesnt happen. Kevin, how about the idea that you just go to last quarter, and you look at the earnings, and they were pretty spectacular when you went through all the Big Bank Earnings . And the fact that an improving economy. When you say where is it . I think its already there. This is just one more tail wind that pushes it even further, dont you agree . And you have just been paid for it. Now, if you tell me were going to have bumps to their at earnings estimates. By the way, just to reign in all the enthusiasm, i havent seen any major upgrades to s p earnings yet. We need to see that. Weve had an anemic 4. 5 growth there. Why dont we look for a sector that looks like financials looked in the middle of the summer when nobody wanted them and everybody hated them. You know what that is . Thats pharma and biotech. Its the same thing. The sent meant at this point couldnt be worse. Were still getting trump tweets on how he is going to control drug prices. The valuations are terrific. The dividends are terrific at least on the pharma side. The last will be first in 2017. I agree. Weve been adding now to certain pharmaceuticals. You look at novartis and bristol. These are companies with strong Balance Sheets. Theyve got good product lines. Here you go back to the etf. Lets short the pharma etf, the biotech etf and buy the xlf. Would you be more inclined right here to short the s p . I mean, you have made the case that you cant believe in parts of the trump agenda yet because nothing has happened. These stocks have run up, and, in fact, the whole market has run up on expectation alone. Would you short the s p then right here . No, i wouldnt short a boring market. This market is going to get boring. Were struggling to get past the big number this week. Weve been waiting and waiting and waiting. Theres just no incentive because now youre in a period now where you want to see which sectors are going to fail in q1 earnings. Youre trying to figure out all the optimism and then decide to be in those sectors. I like the pharma and the biotech. I dont see any of those missing numbers in q1. Where im really nervous and all the energy and all the excitement came out of really two sectors. Weve already talked about financials. We havent talked about energy very much. You want to see some pit falls in earnings. You might see some really horrendous misses in energy even though those stocks are up hijack. Thats where i think theres brittleness in the s p. I see the quality of the Balance Sheets degrade ated. I see a lot of junk moving north, and i think all of this excitement is going to come home to roost if we dont have spectacular q1. Take a look at the dividend yield perform citi and bank america, judge. You dont think theyre going to be moving up dividends in those two stocks . I think they are. Thats going to get kevin oleary excited. He is the guy that wants to get paid. When you look at formals up 23 and the bulk of that in one month. Because of the role thats not a little too much . I dont think it is. I dont think it is. I dont think it is either. John just brought up something. Kevin, do you not believe that financials will experience significant Dividend Growth at 2017, the likes that they havent seen in ten years . Kevin. Lets break it through three groups. Lets take Financial Service like insurance. Those guys i agree are Worth Holding on to. Youve got a lot of trash in the can sitting in these tiny regional banks that have had a move of 22 . Not in two months. Try 11 days. I see nothing thats happened for them in regulatory or earnings thats going to save them. Lets not burj all these financials together. I think theres lots and lots of risk in that sector. Youve got to really decide where you want to play ball. By the way, all of this Earnings Growth and all of these dividends that you anticipate are going to be coming. Youve got to have increased cash flow. Yes, for goldman sachs. Yes, for citi. Thats two names out of a plethora of names that are going to underperform in q1. Mark my words, boys. This is going to break your heart and grown men are going to weep sometime in q1 and q2. Lets take from midjanuary when you start to get earnings for q4. Are they going to back up the rally, or knock it right down . Not to mention the inauguration which happens as well, which some people have suggested is a sell on the new sort of an event. In and of itself. What is more important when the correction comes what are you going to do with it . I believe the strategy based on earnings, based on what pete has said, what john has said, what jim has said, what weve all said to you this morning is that there will be on the other side of 2017 enough catalyst to continue and correct anything where it is. So you buy the correction . Were trying to decide whether you should new money to work in the market right here right now. No, no. There has definitely been selling that has been deferred into 2017 for tax reasons. Theres absolutely no question about that. The financials are a key sector in which its occurred. This is a purely technical reason. In early january before earnings hits, i would expect some selling to occur particularly in the financial sectors as people realize a potentially lower tax rate, and they take some money off the table. I have no plans on getting rid of the financials. If you take a look at the charts, now about the fact would you put new . I already did. I was out for a day and a half, and i went into the xlf. I guess im answering your question. Youre going to be right over the course of 2017. Im not saying youre wrong, but i am saying that i think if you have cash on the sidelines, just wait a couple of weeks. Youre going to get buying opportunities. Probably in the first half of january. I agree. You wait a couple of months or maybe six weeks, but six months from now youre going to be absolutely right. Go after some of the things that have been beat down because thats what people are selling to buy down. You arent worried at all that with the president elect trump is going to somehow go after some of these big pharmas and some of that biotech these are priced in. Its already its got to already i own some, so im with you. I bought gillead with you. This sector has been a disaster. He is going to go after the me too stocks. The generics. Hey, im raising my prices because i can not because i have a new drug thats going to help lives. I want companies, the intellectual powerhouses. I want them to have really good drugs. Health care is up 2 since the election. You guys really believe that if he goes after pricing in some of these companies, in a meaningful way, not just a tweet. In a meaningful way that its priced in. Thats the big if. I dont think he is going to do that. No way. I agree with you, but i dont think he is going to do that. You have a new congress coming in early january. Theyve got so much on their plate whether its trying to roll back obama care, whether its trying to undo regulation and financials. By the way, confirming cabinet appointments. Theres no way theyre going to get to price controls on drugs. Theres not enough time. I also think were having a tactical conversation about the correction thats coming and talking about getting out of stocks. I dont think that if you tactically believe a correction is coming, i dont believe its just vix, but its certainly cheap enough, i would think, or i could walk you into my world where you could sell s p futures, and you are hedged and play the tactical strategy. Thats what someone like carl icahn is going to do. They cant get out of equity names or play a game where they get back in again. Theyre not going to do that. Do you buy the vix . You want to own volatility right here. Absolutely you do. You mention icahn. Is that the biggest no brainer . Is. Yes, thats a no brainer, and thats why you can hold on to those financials that these guys are saying maybe you wait, maybe you wait. Well, the timing is very, very difficult on this whole thing. Lets talk about retail stocks. They continue to be in focus as the postHoliday Shopping spree and returns get underway. Morgan brennan joins us live. Hey, morgan. Good holiday weekend. The early read on Holiday Shopping so far its pretty solid. Now, master card spending pulses total Holiday Retail spending exautos and gas was up 4 yearoveryear. Thats when never first the high of many end forecasts. Toegs holiday ecommerce. Big winners, according to master card, mens apparel, furniture, and furnishings. On the flip side, jewelry. Turning in negative growth. This isnt over yet. So with just five shopping days to go in 2016 we have retailers looking to capitalize on leftover spending appetite from consumers and do so as Consumer Confidence hits a 15 year high. Now, after christmas sales began yesterday both online and in stores. Macys and other Department Stores are still offering big discounts and free or low spending thresholds for shipping. Now, returns will be especially important. Thats because retailers can get consumers to do that in person. That will drive foot traffic and set the stage for more Profitable Exchange or an additional sales since people are much more likely to open their wall lets once theyre there. As we get some of these early readings on Holiday Season trickling in, if you take a look at the xrt retail etf, that is up about 1 today. Its up nearly 12 over the past six months, and today its being led higher by names like, as you can see behind me, macys. A lot of foot traffic here in herald square. A lot of people coming in and out of these stores. Morgan, thanks so much. Macys is in the background of the live shot. The five worst performing s p stocks over the past month. Theyre all retailers. Macys is one of them. You could put ralph nordstrom, pvh, and urban in that basket. What about retail here, jimmy . Well, look, short story. This Holiday Season despite what morgan was reporting for brick and mortar, it wasnt good. A lot of that growth, in fact, more than all of it, came from online sales. If you are in this space, and i am, you are now looking at a reflating economy and a tight labor market which even the fed is now observing as very tight. You have seeing wage inflation, and you are expecting that transfers through to greater consumption. Todays Consumer Confidence number supports that. Now its a 2017 story as opposed a Holiday Season story. Kevin, what do you do with retail . Discretionary Consumer Confidence 15year high today. The thanksgiving holiday were the leanest and meanest. They were really concerned. The thesis was that we were going to have less markdowns, margins were going to be maintained and there wouldnt be as much sell down. Its not just retail. Its also what you have to do with real estate. Part of this is some of the retailers are going to manifest into a split, into a reet and operation model. The truth is online is eating their lunch, and its manifesting itself quarter after quarter after quarter. I dont think the stocks are going to recover or outperform in 2017. Look at resto. Every once in a while i get an operator that blows their brains out. Did you dump jc penney . I dumped it from the halftime i sold it from the halftime portfolio commission. I hold it in real life. What this sector needs is consolidation. Thats the only way it gets through the threat of amazon. There needs to be consolidation. Im surprised it hasnt happened already. You should take a look at cap. Kayla put out a chart just a little bit ago about some of the performances and some of the price cuts that they had seen over that period. Gap stores was 26 before they started their first 50 off sale, and then the stocks down here at 23. 50 last friday. The reason is the cuts went deeper and deeper at gap stores. Where didnt they have to cut . Costco. Its one of the only exceptions to sell labor day. Last point quick. Weve been talking about sears for the last couple of years. In 2017. I think the question is are they going to be around . If you look at the way theyre trading right now, 900 million is their market cap. They look like theyre going out of business. They sure do. I bet they do go out of business. Techb oleary, thanks. See you back on the desk soon. Take care. Heres what else is