The s p 500 will do in the next six months of these 23 folks 63 say it jumps more than 5 . 21 say moves up, but less than 5 so 85 say stocks are going higher yeah. And you know how i love to play a contrarian, judge, but unfortunately, im not a contrarian with this one i agree with it. I think the second half of the year, we pick up momentum again, that we had in the First Quarter, that we basically traded sideways, except for tech and a couple of the health care names, in the Second Quarter, but i think second half, a lot stronger than weve just experienced. All right pete, so youve got the dow up 8. 5 s ps up 9 nasdaqs up 16 history guests that docs right. If you look since 1988, when youve had firsthalf gains of at least 6 , im going to read you some of these numbers. 2013, we were up 12. 5 first half we finished 29 . 2014, we were up 6, we finished up 11. 2012, we were up 8, we finished 13 2003, we were up 10, finished 26 and i can go on and on and on. The gains are pretty magnificent. Absolutely. Across the board. It does make you nervous with 85 saying, hey,wear at least going to be hear or higher that is certainly something where you just say, you know, you always want to be a contrarian now, the thing i wouldsay is, energy has not been a part of this at all. If at any moment we get some sort of participation there, and the financials, but i think the financials have a much better shot were going to prabreak it d by sectors in a moment but just the baseline case for stocks over the second half. Better than what do they do in the next six months i think they go higher. I think the way the Economic Situation looks right now and potential of anything that trump can go through, because i dont think thats priced in any longer, so, if its tax reform, if its whatever if something can get through or get close or get people excited again, thats whats going to lift these marks stephanie link . So i think gri with tagree we guys, is that this is not i want to be contrarian and that 85 is a little scary, but i think it implies that they believe the economy is going to continue to improve and that most importantly, earnings are going to continue to be solid. Maybe not 15 , which is what we saw First Quarter. Maybe its 10 thats actually the consensus. 10 might be just enough what i do think is key, and i dont want to go into the sectors just yet, as you mentioned. Well do that in a second but i think we need to have energy stabilized. You need to see a little bit of inflation to get that deflation scare out of the way and if you get both of those, i think Interest Rates can back up and thats going to provide confidence and provide confident in the inflation trade people try to make the case that techs trading like its 1999 1999, s p 500 was up almost 12 in the first half of the year, finished up almost 20. 98, up 17, finished up 26 1997, up nearly 20, finished up 31 are we going to have that kind of second half, where a 9 gain for the s p looks small . I dont think its going to be that big, but i do think were going to be up for the rest of the year and with all of us here always kind of playing the value play, you have to look for the opportunity. But this is an earnings momentum story for the next second half and if we can get earnings to keep on going like we did for the first half, i can tell you, well be sitting here in january, nobody thought earnings were going to be where they are today. So with this base case and steady growth and global growth, its not just in the u. S. Weber getting global growth, getting european growth. That is driving the market and we know the u. S. Market is not just local, it is a Global Market i mean, you can say what you want about surveys and about numbers and about history, every single time that stocks, the s p, has risen 6 in the first half of the year, its extended the gain in the second half. It has never had a down run after going up 6 . I think the most interesting thing, though, is when you came tosy ro sirott was, you talked 1999 i was on the the Trading Floor in 1999. The difference is when we look at the earnings now versus the earnings then and you look at it on a price to earnings, its not even close so the irrational side of that part of the ledger is not part of that and it was not just earnings, it was revenue growth. Revenues grew 8 in the First Quarter. That was a surprise, a very positive surprise. If that can continue, then the momentum can continue. Go back to 1999, and everybody wanted to be in stocks this is the most unloved rally, weve been talking about this for the last 24 months you talk to people who are missing out on the market, thinking the market is going to come down. We talk about the vix all time talk about, wheres the volatility this is not like we have to jump into this party because were missing it we talk about, where do we want to be . We asked these 23 strategists, of the 11 s p sectors, which is your top pick for the second half of 2017 . 60 said the financials. 50 said tech. 40 energy 40, health care. Industrials down the run, as well but financials lead the way, pete absolutely. Im one of those, i think this is a second half story for the financials i think we finally start to see them lift. Why . Because of the underperformance. After trumps election, we saw the financials scream to the upside since that time, pretty much have been sort of dead money. Just sort of sitting there weve seen paper time and time again, scott, in the xlf, in bank of america, in citi, in goldman sachs, and morgan stanley. Theyve moved a little here and there, but generally theyve pulled back and weve been in a fairly tight range ever since. I think technology and financials do outperform i think the energy call is the folks out there that are going to the contrarian side, trying to bottom pick and i think they might find themselves with exactly what theyre going to get, oftentimes, which isnt what they think when theyre trying to bottom one firm is trying to pick a bottom in energy were going to hit that later, as well, and debate that but what about these sectors financials going to lead i think financials benefit the most from deregulation and thats the easiest thing in the trump agenda to get done, which hes been getting done, right . And then you have capital return we got the dfast results last week stocks sold off on the news. Wednesday night, thursday, trading, youre going to see these stocks, i think, act very well thats when c karr comes back and well learn about dividends and buybacks and that kind of thing and theyll be very good across the board and if you get tax on top of that, thats icing on the cake its very clear to me people expect rates to go up. If you have financials as number one and look at biggest laggards according to our survey, utilities and staples are going to be the laggards theres not going to be as much defensive, not going to be as much chase for yield, because rates are going to go up the economy is going to do better make sense it does the financials do well if we get Capital Market activity. Thats what gdp growth will do you add that to Interest Rate growth and Capital Markets will also help the financials do that so what people will do, the barbell strategy thats being used with utilities and staples as your defensive highyield play will rotate into the growth names and into financials, because the average financial has a much better dividend than the s p. Rick santelli would tell you, judge, that the fed isnt the only one out there trying to move Interest Rates. That the pits move Interest Rates. Where that money, where the trillions of dollars are traded back and forth, and the pits have said that they dont think the likelihood is that were going to see rates moving up in the shortterm now, for the longer term, i do think were going to see that, because the fed has now hit us three times with rate hikes. Each time, rates have gone down. So i think this is going to be a turn here, where we start seeing the recovery in europe impacting optimism about growth in europe, which then people start selling those bonds that have just skyrocketed yet again. And i think that is whats partially behind this big xlf trade today. Somebody bought a ton of calls expectations are very low on rates, in general. Draghi talks about no deflation or lack of deflation today and rates spike up it wont take much to get rates up and i dont think you need rates up that much i love this next question, because it is a debate that weve been having almost every day. And the response is proof that its the right debate to be having right now if you could own only one of the following class of stocks in the second half of 2017, which would it be . We asked these strategists on wall street. 50 say growth, 50 say value. So that debate rages lets do it again here are you surprised by that so if you Like Technology and you think Technology Earnings are going to be very good, which i do believe they will, then you kind of like growth. Although i think you can barbell technology, for sure but if you like value, if you like financials, thats a big part of the s p 500 index. So thats a value component. I think you can kind of do a barbell, you can kind of do a core strategy and own a bit of both and you can do that with stri industrials an was well. But you need energy to stabilize. If oil prices go to 35, industrials will not do well and the more we see coming out of europe, judge, the more you see steph i know you added to oracle last week. I just bought them for a shortterm flip, i dont still own them now but i do like it and i think oracle will do well with europe recovery i think hpq, the old hpq, whatever, i think well see a lot of these names doing extremely well contracti crm, microsoft, as well. Anybody think tech runs out of steam or is anybody on the tech team i think you have to own the big guys we own google because i think youll see revenue and Earnings Growth the question is, does the multiple stay or does the earnings accelerate. Whats surprising in and of itself, too, is 60 of the strategists that we asked think that were going to get tax reform by the end of 2017. And maybe that, in part, tells you why people are so optimistic that 85 of the total respondents say that stocks are going to go higher one way or another. They may or may not go more than 5 , but 85 of folks think that the market is going to go higher and maybe part of that was when mnuchin us with out there and was so adamant by august were going to get this done, and now you start pushing things out a little bit forwabttle bit they want something done by the end of the year. I think people are looking at that as the potential. And certainly, it could be i think if they could actually focus more on that, judge, and get a little bit away from health care for a little while, we would probably have a much better opportunity to get that let me ask you this if you do not get tax reform by the end of 2017, can the market go up by more than 5 as predicted here is it kicking the can down the road, saying its going to happen in the first or Second Quarter . Or just shut down in case of what happens to health care . I think if it gets shut down and nothing happens, i think the market will get pulled back. What if the can gets kicked down the road . Earnings will still drive this market. I dont think it matters. If they dont get it done this year, they get it down in the First Quarter if they want their jobs, because theyll have midterm elections. They have to get something done. But if they get health care done before tax, that is more positive for the market and dppthe expectations are completely nonexistent for anything in health care to get done. If they do get it done, you get a Better Health tax program. We have some breaking news regarding nestle our leslie picker has that story from the breaking news desk. This didnt take long, leslie. It sure didnt, scott this is a response, of course, to yesterday or actually, sunday, rathers, thirdpoint proposal, which we broke down all day yesterday. So nestle coming out and saying that early in 2017, they began a review of their capital structure and as a result of that review, nestle determined that Capital Spending will be focused on highgrowth food categories, such as coffee, petcare, infant nutrition, and bottled water and that they would be expanding their presence in highgrowth geographic markets they also, and this is something that third point suggested yesterday, they continue to assess opportunities for margin improvement through targeted efficiency programs. Thats a direct quote there from their statement. Most importantly, for investors here, they have announced a buyback program, which amounts to about 20. 8 billion or 20 billion swiss francs that is to be completed by june 2020 you can see here, a slight increase in nestle shares. Back over to you and this comes after just to give people some perspective, this was third points first ever activist or is third points first ever activist campaign in europe its their biggest ever investment, 3. 5 billion exactly its their biggest ever investment and this addresses many of the policies that third point laid out. They called for margin improvement. Were seeing this year they called for focus on highgrowth opportunities. Were seeing this here in nestles report. They called for a buyback. Were seeing this in nestles report as i can tell so far, they havent addressed third points asking for nestle to sell its stake in loreal so hopefully well hear more about how they feel about that moving forward leslie, thank you so much you own nestle i do own nestle ive been to nestle to see them. I think its a Great Company it is one of the best companies out there. And i management has new ceo, as weve talked about. I think, you know, you let management theyve laid out this plan and they might disagree with third point, but youve got to let management do what theyve got to do. This shows that maybe they agree with third point more than people would initially have thought. And theres a lot of work to do and management agrees. They said it last year when we met them they said theyve got a lot of work to do and i think you can see Margin Expansion and they have the best Global Brands in the world. As a shareholder, were you happy to see loeb reveal that position as a shareholder, i prefer management to do what they want to do, and if loeb can help them, great. Was that a yes or a no . Im not it was like, i like them, but politics. Lets just say biggest ever its his first ever activist campaign in europe. Hes one of the Successful Hedge Fund managers there is if he can work with management, i dont like the whole idea of clashing with management down the road the nice thing about it, there are a lot of things they can do obviously, the buyback is good news, butconfecti confectioners business is up for sale thats why conagra rallied Pinnacle Foods also needs froze opinion theres a lot of stuff that can happen. This is the risk you run in being underweight consumer staples. The m a activity is the best in any sector judge, when you see just a 1 , because thats all dan loeb is 1. 25 its a 300 billion company a 280 billion company its basically 1 of the overall company. And yet, they respond this fast to it, sirott . Does that tell you theres a little more heat i made this point yesterday those old rules, if you will, seem to be out the window in terms of what sort of influence an activist investor can have, even the their percentage stake is small its not like nelson peltz had a massive percentage position in ge right look whats already happened or carl icahn those rules dont apply anymore. And this is evidenced more so of that new, that new road of activism if you are a credible activist with a credible plan, you can exert some sort of change, fairly quickly, at least it seems in this yes and it looks like in this case, they are aligned management is aligned theres nothing come out, third point saying its also new we dont truly know. Management has been articulating their need to change strategy and cut costs and buyback shares so that is not new and they have talked in the past about selling assets and things like that. I think it just gets accelerated. Lets get back to our market conversation talk a little bit about volatility it is at a record low. Pullbacks have been minimal, as you know people have been waiting to get in theyve not really had much of a chance and history shows with those ingredients, the second half of the year is usually even better for investors. Lets bring in msnbcs senior markets commentator, mike santoli live at the New York Stock Exchange michael . The weight of the evidence definitely points in that direction that the second half of a year, if youve had an unusually calm first half and of course, we didnt even get a 3 pullback if you look at the 16 years that have been similarly calm in terms of firsthalf volatility, the second half had twice as good a return as the second half with less volatility i think we do need a few caveats about that, just because one of those years that was covered was 2015 and we know by the end of the summer 2015, Global Markets started to get ragged. Things started to fall apart credit markets did actually seep into equities and you had about a 12 decline, maximum decline so i do think you can have a combination view here, which says things should get a little bit more jumpy, as we get on into the second half of the year the typical pullback after a calm first half is at least 6 on average 6 from this level is going to take you back to february and 2,300 on the s p 500 thats no big deal in the grand scheme of thing. Might feel like a big deal based on how calm things have been so i do think this is the question as we head into the second half, will this year be more like 2015 as i mentioned, or like 1995, which was basically nirvana and you melted up all throughout the year all these things, i think, get thrown into the mix. Longterm investors, you know, its tough because you are afraid, reticent, whatever, to get in with the kind of gains that weve seen. And then you just havent been given an open door to do so, because the market, as we said, has just continued to melt up. Yeah, and its done so, scott, by basically handing off kind of shortterm leadership