Assessing the Damage 4/7/25
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Welcome to the Halftime Report. I'm Scott Wapner, front and center this hour. Trump's trade war wiping trillions of dollars in value from these markets in just a few days. We will assess the damage now, debate what is next. With the Investment Committee, of course, joining me for the hour today, Joe Terranova, Brian Belsky, Jim Labenthal. Also with us on set today at Post 9, senior market commentator,

Mike Santoli, we will show you the markets. We have had, as you probably know by now, the biggest intraday move since early 2020, from bottom to top, 8%. It's been extraordinary. It's been volatile. It's changing by the minute. So continue to watch the majors, and we'll continue to bring you up to date on what is happening. Joe, what's on your mind? Treacherous, that's the word.

The environment of today is an awful environment. It's an awful environment for an investor. It's an awful environment for anyone that's trying to trade this market. The last couple of days, yes, there were opportunities as it relates to trading. There are certainly opportunities for long-term investors who do not believe that what the future will look like is going to look like something we saw in the 2000s when we had a lost decade.

But what we are seeing today when you have that 7% swing, when you've had the deleveraging that you've had over the last several days, what happens after that deleveraging? A lot of hedge funds, a lot of institutional speculators, they step to the sidelines. And what you're greeted with is a type of a market environment where you have today where you think you potentially get an all clear signal, and then you're just whipsawing all over the place. So what do you do in that environment? I think you really have to study.

how much risk you have in equities and bonds and the totality of your portfolio. And if you're beyond the boundaries of where your comfort level is, I think you have to retreat on that because you cannot have strong conviction about either direction right now, given this treacherous environment. All right. Tom Lee, we got Tariff Liberation Day wrong. Yeah, you did.

We want to apologize as the terms of tariff liberation day were far worse than we expected. Morgan Stanley, be prepared for another 7% to 8% potential downside. Krinsky's talking about the 200-week moving average. That's 46.74 as being major support. You know, Mike, I'm curious. You've seen so many markets and you've seen a lot of volatile markets.

over the course of your career? What do you make of this one and the way that we've had this price action today? I think a lot of those folks who are trying to use whatever process to come up with some kind of structural, maybe we've done enough to the downside, it does settle out not too far below where the overnight futures were, like kind of 46, 47, 4800. And that kind of takes you back to the beginning of 2022. And I think it is very relevant that we haven't seen this kind of intraday action since early 2020.

because it is that kind of complete disjunction, right? It was essentially the market was trying to handicap a process. The process was completely thrown off by an off-the-charts, basically, interruption in the world economy. And that's what happened in 2020. And then what you're left with is trying to figure out if we're getting to a level of being washed out to where it doesn't matter what the news is.

You know, we had the latest post from the president. People say, wow, the market took it well that he said another 50 percent on China. Well, one, that's a preposterous number. The market recognizes that once you're getting up to these levels, it doesn't matter. But also, he said negotiations are happening with other countries. Do we do we care? Do we not care? Is it just the market reacting to itself right now? Do we do we do we even believe it?

Because you get the narrative of the two sides of the story. Not negotiable, negotiable. He's going to negotiate. These aren't negotiating things. I mean, is it for revenue? You have the billionaire backlash. That's new this week. You have this idea that maybe there'll be legal challenges to it. I think that there's a migration in sort of the center of opinion of how this might go out and how urgent the issue is.

To me, I'm just watching the market and saying, you know, looks like it made it. The equity futures made a triple bottom overnight. Use that as your downside kind of mental floor for the moment. It's like 4850-ish. But, I mean, it's so tenuous. And when the market's moving like this, I always say it has to just go really far to find anybody with conviction.

And that's why you get this type of twitchy action. Pasquarello, Goldman Sachs, the fundamental backdrop has undeniably worsened, he says.

He's the one a week ago was like preservation of capital, people. That's what this is about, that the game has changed. He follows it up with this most recent note. While the primary trend is now lower, I also think you have to be aware of the increased probability of indiscriminate short cycle rips. It's a feature, not an oddity, of when you have the S&P do this sort of thing. I expect the S&P will cut a broad pattern of gap down, gap up over the next few weeks.

over the next few weeks and the final point he reiterates his view preservation of capital still the principal objective by trading instinct and it's nothing more than that he says is that next week bring some form of de-escalation you know you've had some the headline that the market moved on we're looking Brian for any signs of light as many people I talked to yesterday late into the night were thinking that there's got to be some sort of pivot

coming at some point because this is untenable, that they don't understand the damage that they are causing. If $11 trillion wiped out of stocks in a very short period of time doesn't

ring the alarm bells, then something ultimately is going to do that. I'm frankly struck by the fact that you suggest today that you are staying the course, that you have 6,700 for the year on the S&P. I have countless targets taken down, more again today, 5,600, 5,200, 5,950 from various strategists respectively there. Why are you staying the course?

Well, first of all, we're excessively fortunate to be here today. We've had this opportunity over our career to be on this network during days like this, and I can't be more humble for that, number one. Number two,

Joe used the term treacherous. I would say unfortunate. It's very unfortunate what's happening here because I don't think it is anything with respect to fundamentals. And as you know, we're a fundamental investor. I can't speak to other people's process or discipline, Scott, in terms of how they look at targets. I know that how we do. And my team and I spent the weekend writing two reports, one for the US and one for Canada, as is our duties as the chief strategist at Piper.

I'm sorry, Piper, I had BMO. And at the end of the day, it is excessively rare to have this type of activity two days in a row. It's not rare to see a Friday type of sell-off into the weekend and have the exacerbated bottom.

that Mike is talking about on a Monday. In fact, on Monday, March 20th, you and I were on the Markets of Turmoil show after the market closed on COVID. And at that day, I said the market's going to rally up 50%. And so I'm not being flippant, I'm not being stubbornly bullish. I believe in what the market is telling us historically. And since 1950, when you have these types of moves in these successive days, 12 months out, the market's up 29%.

Does that mean that we're not going to see these exacerbated moves on a short-term basis? Nobody can predict those. Nobody can time those. But what we can predict is the fundamental backdrop longer term. Near term, yes, we have some damage here. And we will assess that and assess our target once we know where the bottom is and when we begin to recover from that.

Okay. I want to take issue with one thing that you said. Aside from the confusing where you currently were. That's neither here nor there. That's for you to reconcile, not me. Better hope you still work there. You make the claim that this is not due to fundamentals. I would make the argument that it is everything to do with fundamentals. Forget about the technical trading of levels here and there, averages, blah, blah, blah.

This is obviously about the market sensing a recession and trying to right price itself for the recession that many now see as a higher probability. Many firms are obviously taking up their expectations of that. If you

think that earnings are going to have to come down, which they will in a recession, and that the multiple will have to come down, which it will, then that is purely based on fundamental trading, not on anything else. That's what the market's trying to go through. Don't you agree?

Okay, so stocks lead earnings, which lead the economy. Stock market's telling you that we're probably going to have some sort of a slowdown and or a recession. Remember, when the recession, the Fed comes in and pumps in liquidity. The Fed pumps in liquidity. What are we going to do? We're going to buy stocks. So I think at some point, we are going to have some sort of slowdown and the earnings are going to go down. We'll adjust our targets when we start to see some substantive proof of that. What do you mean? You don't...

No, hold on a second. What's happening, do you think that this rhetoric and change in tune and fake news and tariff stuff, do you think that has anything to do with how companies are going to be earning their money or how they're looking at going forward, how to model their company? How can they change on a daily or weekly basis when we don't know what we don't know? You're telling me that companies haven't already changed?

their expectations for the kind of business and spending and investment that they're going to do they all have. Do you think they all have? Do you think the membership process on in Costco has changed? Do you believe the way that the operating system runs Apple has changed? Do you believe that the internet machine at Google has changed? Do you believe that how Netflix and the way that they run their business has changed? No, the answer is no. Now

How they model that, how they grow that, how they operate that, yes, we know that and that is going to change and we will change our numbers accordingly when we see those real numbers, Scott. So I think from a longer term perspective, we are investors. We're not going to react to today or last week or what Trump's going to say in 30 seconds. We don't know that.

because that's not fundamental. What Trump is saying is not fundamental with respect to his reaction and how we're reacting is not fundamental. But the markets are what the markets are. And it's not different this time. It's not different this time. And the way that the markets react to these types of things and how they flush this out is exactly how they're going to flush it out. We've never had a almost willingness by a president of the United States to send the market down

by $11 trillion worth of value.

ever. And that's why I said unfortunate. As an investor and as we talk, and we have to answer to our clients, Scott, because we, unlike other people, we actually run real live money. And it's been a really humbling time. This is not time for pride. Pride brings disgrace and humility generates wisdom. Now's the time for humility. And it's been a tough three or four days. You don't sound humble. What do you mean I don't sound humble? Your tone, I mean, the...

The strength of your voice sounds like there's humility in it, but your narrative doesn't sound humble at all. It sounds like refusing to see the facts in front of you. No, we don't know exactly what the facts are, quite frankly. Do you think that the earnings numbers at the high are realistic?

Are you staying with two? What are you at? Is it $290, $300? No, I'm at $275. And what multiple are you putting on $275? Well, again, markets don't run off multiples versus earnings. That's an academic practice that works with respect to the 500 stocks and the S&P 500 and what they're growing. That's too simplistic side of things. But if you take a look at where we think...

Normalcy is it's a high-teen to low-20s multiple. That's where we are from a longer-term perspective. That's not a recession multiple. Who says we're going to a recession? That's not a slowdown. That's not even realistic. Even if you get growth, right now it doesn't look like you're going to get much, does it? Do you know that for sure? Okay, so 20 times earnings makes sense to you right now.

That makes sense. I think 20 times earnings, given the fact of the consistency of the earnings backdrop, the United States longer term. Yes, it makes sense, especially considering where I actually do think that that money is going to come back to the U.S. over the next year or two. I really do. And so let's get through this unfortunate behavior.

and move on from here. And I'm sorry if you don't think I'm humble, because I'm actually quite humble, Scott. And you would know this if you'd actually sit with our clients and talk to us about how we've been in terms of longer term. And we have a track record that we're going to sit with in terms of calling markets and making people money, and we stand behind that.

Here's where I am. There are so many indicators right now that if you follow them, indicate from history that you will have a good one month and three month return from here. You can go down a long list where the VIX index is, you know, how many stocks, what percentage of the S&P 500 on Friday traded two standard deviations, put-call ratios. It's a long list.

I consider that technicals. The technicals in that regard actually support being in equities now and looking forward one to three months. The problem is the fundamentals, and I'm sorry, Brian, we may be talking different words here, but I'm going to use my definition. The fundamentals here are just so uncertain. Like, we don't know, and Scott, I think you were saying this, we just don't know what's next coming out of the president's mouth or if we can believe it.

The problem with that is that the stock market in that level of uncertainty about the fundamentals is going to absolutely go to the most worst case outcome that it possibly can. I think that's what's being priced in right now is the worst case scenario. Now, some may say, and Mike, you may have alluded to this, that maybe we're not fully priced into a recession. OK, the way I square this is- There's not a maybe. We're not.

Okay, where I square this, this tension that I have, Scott, between the historical patterns and the fundamentals is that we can go down in the short term, but I do believe those historical patterns of where we will be one, three, six and 12 months from now all point higher. And I want to say one more thing about this because many people have pushed back on this. They've said, this is different. This feels different. You said this a minute ago. We've never had a president who seems so willing to break things the way this president is.

All I can say to that is with a lot of history, a lot less hair and more of it being gray, I've been through plenty of world-shifting events. And it always feels different. It always has its own unique, unbelievable flavor. This time is no different in that regard, even though the flavor is different.

It feels like this is unprecedented. It always feels unprecedented at times like this. Mike, you always look at credit. And the many conversations that I've had over the last 12 to 15 hours have been all about credit from high-level finance people in this town. You had spreads blow out a little bit last week. Junk spreads are at a 17-month high now.

That's not wide enough if you think there's a lot more turmoil coming. You have potential losses of holders of corporate credit for selling a lot of leverage is how it was described to me.

No, that chart of high yield spreads is a chart of the market repricing recession odds higher without getting to the point of saying we have full blown recession priced in because in the long span of history, you're going to get higher than these current level spreads if you start into a default cycle.

The other thing is there are false alarms, right? It's not as if it's this all-seeing, forward-looking indicator of where things absolutely will go. And the tricky part, and I think it kind of brings together a lot of the points of view, is there's such a time element in this. There is a world in which a 180 on policy and you haven't really done much damage to corporate earnings power in the near term. But every day it diminishes.

So every day you walk in and they hand you a call option and they say if they de-escalate today, it's worth something. If not, it erodes by the end of the day. And so what are you going to do with your risk levels and what are you willing to buy and sell? So I think that's the track we're on until we have some kind of conclusive economic numbers to tell us, you know, perhaps otherwise. And to Jim's point, you know, if you've seen these times, it's only a handful of times you went down 10 percent in the S&P in two days. Right. November of 09.

COVID, a few others. And every single time you would have said, but nobody can predict how it's going to go from here. Because the reason you went down 10 percent in two days is because literally unpredictable. It doesn't mean you're at the low. It means the market is being forced to come to terms with something very dramatic. We have some commentary right now from Larry Fink, who obviously runs BlackRock. He is speaking right now at the Economic Club of New York.

Leslie Picker has the latest for us. Les, what's he saying? Hey, Scott. Yeah, he was asked first and foremost, kind of, there's a lot of history in the building of the Economic Club of New York. How would you characterize this moment in American history? And he was pretty sanguine. He said, it's no different than anything else. We're fine. And then he said,

In the long run, he would say this is actually more of a buying opportunity than a selling opportunity, noting that doesn't mean we can't fall another 20 percent from here, too. But he does believe this is a direct quote that over the long run, the fatality of the United States will persist. That said, he he

noted that they haven't had this many client conversations with the BlackRock community since March of 2020 in the heart of COVID. So it sounds like the phone's really ringing off the hook to get some clarity here. But at least from his standpoint, he says, even though the market could fall another 20 percent from here, that in the long run, he sees this as more of a buying opportunity than a selling opportunity, Scott.

Leslie, thank you very much. Leslie Picker, let us know what else Mr. Fink has to say. Let me just say, Brian, you say you're humble, then you're humble. I apologize for suggesting that you're not. It's not for me to say that you're humble or not, but you come off as a bit defiant to the notion that the game has, in fact, changed. This environment is, in fact, different, and

Things could go bad from here, from an economic perspective. The market's trying to figure out where we're going and what the appropriate pricing is going to be. Well, thank you for that.

You know, maybe it's the Irish-Polish blood that got a little boiled, so in terms of my delivery. So for you, for that, for the viewers, I apologize, but I do believe what I believe, and I don't think it's different this time. And I do believe, if you remember back in 2020, most people, including ourselves, pulled our forecast because, remember,

Remember, we didn't know it was happening. And if you remember too, in March of 2020, many macro bears were saying we're going into the Great Depression with actually no data to support that. So when we get the data and when we see earnings come in in the first quarter, we'll take a look at where we're going to be in the target range. Should we get to 6,700? It looks increasingly doubtful.

It would be great. Are we going to get closer to 6,700 than we think? Probably. I really believe that. And I do believe in what that markets are not different. Anytime you say it's different this time, it is excessively, excessively dangerous in this business. Okay. I'm just suggesting that what happened in 2020 that put us on a different trajectory, frankly, was a bazooka's worth of not only Fed liquidity, but...

fiscal policy from the government. If you think that the conditions are right for either one of those at the current time, then we need to talk because I don't. No, I don't think it's I don't think again, it's every market environment is different. Every market environment is different, just like it was following the great financial crisis that we went through and following the tech wreck that we went through and following what happened in the 90s, early 90s.

So do I think that we're going to have some sort of a magic bullet that comes in and changes all this? No, I don't. I think the magic bullet is let's stop with the unfortunate commentary. Let's get back to how markets are supposed to be consistently delivering in terms of price performance and how they act. Let's kind of get through this malaise. And once we get through this malaise, let's take a look at forecasts longer term, at least for the end of the year. But we do believe 12 months out,

the market will be up more than 20%. All right. Steve Leisman, our senior economics correspondent, is with us too. And I really want to focus on this credit issue because stock drops are hard to look at.

on the screen and on your statement, deterioration of credit is a much more serious issue in the bigger picture. How are you thinking about that? And how are those within the Fed orbit, do you think, considering all of this? Well, it's the thing you want to watch that would turn a stock downturn into something more meaningful.

And I'm watching it. I know other people out there are watching it. It's hard to imagine you have this kind of movement in stocks without there being some dislocation. And that's a nice euphemism that works for a little while until it no longer works. You can be sure the Fed is watching the credit situation. You can be sure they're watching out for dislocations. I haven't heard anything right now that makes sense.

me nervous or that potentially makes them nervous right now. It was interesting to listen to Besson on Sunday on the Meet the Press. His first answer was talking about the idea that this sell-off had happened smoothly.

And that's not important for the broader public, but it's important for people like us who watch the market very closely that so far it had been smooth. But you got to be on the watch out for it. The Federal Reserve has a bunch of existing liquidity vehicles that are available both to banks. It has swap lines with foreign central banks that could be used if there was a dollar crunch overseas. What the Fed would want to do, Scott, in this situation

is to not have to address any of this dislocation or any credit issues with monetary policy. It wants its liquidity vehicles to be used to solve those problems. And just one other thing, which is that I would argue to Brian, I don't like to argue with Brian, but it's different this time, at least right now, in that the Fed is a little hampered in coming in. It isn't like

the market goes down and yada, yada, yada, it comes back 20%. It comes back 20% because governments or central banks and companies take actions to make it come back 20%. And those actions could include help from the federal government, which I think Scott was just saying, I don't think we're going to get that this time.

help from the Federal Reserve, which is going to be very difficult given that there's an inflation impulse coming through. So companies are going to have to right-size, and that means a decline in investment and a decline in unemployment if this lasts for a while. So yes, it may be that the market is up 20% a year from now, but there's a lot of changes that would happen in the economy for that to happen. Steve, thanks for teeing that up for us. This is Steve Leisman, Senior Economics Correspondent. You want to address that, Brian?

No. Well, I don't want to ever argue with Steve Leisman. I mean, that guy's amazing. No, I think our research and our call for up 20% or up 29% from current levels or from overnight levels have nothing to do with the Fed cutting rates. They have nothing to do with monetary policy. It has everything to do with markets normalizing and unskewing all of the silliness that's gone on. From all the money being put into the system now being taken out? So...

- Scott Martin: This is part of our longer-term call, Scott, actually. I was hopeful and prayerful we wouldn't get to this in terms of how bad it's gotten, but I believe that this has been a shock to the system. This is number two shock to the system to normalization. First thing was deep seek. Don't chase stocks because they're just going up. The momentum trade completely went away. Now this tariffs stuff, I think we're being shocked into more normalized.

performance. And I think we're going to see more of a tighter range in fixed income. We're going to see a normalization of multiple, Scott, 15 to 20 on the high end, and then double-digit earnings growth for the next five years. And if we need to have a negative year, if we need to have this type of thing draw out for the next few quarters, fine. But I think

Longer term, I think this is where we're going for the next three to five years more normalized. What's going on right now is not normal and has not been normal for a while. Where's the emergence of leadership come from? I think it well, you may

Remember that we think you don't have to have one or two stocks or one or two sectors lead. I think a lot of things are going to work together. I think we're back into the 90s where a lot of different strategies, asset classes work. And I know that you don't like small cap and everybody likes to complain about small cap. But I think the reemergence of small cap. Small caps are down 20% year to date. Yep.

Because guess why? Because there's been no follow through on there and people are chasing performance and they've been selling them because they've been underperforming. So that's going to continue. You don't think they deserve to be down 20%? I don't think all of them need to. I think when I look at small caps, I look at stocks. I don't look at the overall index. And the Russell, by the way, is not, I don't think, the best index with respect to looking at small caps. So I think there's going to be pockets of a lot of different areas that work longer term.

Let's get back to Leslie Picker with more from Larry Fink. Les? Hey, Scott. Yeah, he's talking about the economy and said one thing I would say for certain is the economy is weakening as we speak. He is urging the administration to focus on more of the pro-growth agendas, which he campaigned on, things like tax cuts and deregulation.

And then Eric Schatzker, who's the moderator there from Bloomberg, he followed up saying, are we in a recession? Are we headed for a recession? And Fink said that most of the CEOs he talked to say that we are probably in a recession right now. So we're going to continue listening, but wanted to bring you those headlines as they happen, Scott.

Okay. Leslie, thanks so much. I mean, this is what I'm alluding to, right? Larry Fink, we're probably in a recession right now, which is why I find it difficult to make the argument that the target should be where you have it, that earnings are going to be just fine, that there's no reason right now to have any expectation other than

where earnings are supposed to be, and then the multiples justified at the higher end, which you said, high teens 20. You said that, not me. I want to know how you can justify that for our viewers, given what seems to be, for lack of a better description, quite obvious to most people but you. Okay, and I'll go back to what I said.

We wrote the reports over the weekend. We said that historically when you've had these types of days, it's very rare and it's not just because the Fed punched a bunch of liquidity since 1950, 12 months out from days like this and corrections like this. It doesn't matter if it's a correction or it doesn't matter if it's a bear market.

The market's up on average 29.2% 12 months following. Now, with respect to changing our target, I can't announce on international television that we're going to change our target. I have to publish a report. I have to look at the research. I have to do all this. I'm not going to react to everybody else changing their target because that's not how we roll.

Now, as I said, I will react when I know all the numbers, when I know the numbers are firm and we have confidence in the numbers in terms of growth. So then we will adjust. So when we have a recession, you're going to take your numbers down? No, because...

- Scott Martin: Well, the market's going to be up a tremendous amount before we have the recession. If the recession's happening right now, so then, you know, recession right now, and then two quarters, two consecutive quarters of GDP negative, by that time, we're going to be well into the Fed's probably going to have to cut if we have a recession, the market's going to be rallying, Scott. So we could be up from these levels. That's just the way that it works. So I'm not going to react to recession and macro stuff. Once we see the numbers and feel better about where the bottom's up numbers, we will change our targets.

I mean, look, yeah, sure. Markets typically, if you go back to the old cycles, they bottom like halfway through a recession or something like that. I just feel like we're sort of several days into the reckoning with what this is going to be. And it's just the bands of probabilities around every outcome is so wide that I'm not saying you can't have it happen. And again, if you do a policy U-turn, maybe you haven't done much except

cost a lot of credibility on Wall Street and among CEOs with the way that, you know, policy is being created. Even if you have a pivot, what is the pivot going to be? What's it going to be? Yes. And you talk about credit. We talk about like the plumbing of the system. To me, if you're rooting for the Fed to get involved, you're kind of rooting for an accident and you don't want to do that because the stock market is not going to hang in there for that.

because it's going to take a while for the data to pile up for them to act if it's just about the fundamental economic numbers. I think the first step is the violence of the last several days has to abate. And everyone clearly expected

that it was going to be a clearing event. We heard that. And everyone was positioned for the quote-unquote clearing event. You've had this violent deleveraging process. I do think there are things within the market today where you could take heart in. You could look at Nvidia, which is higher.

You look at Amazon, some of the Mag7 today look like they want to find some stabilization. That's a good thing. It's not indicative of this is the all clear. I think it's a process more than anything else that we have to go through. And that's really what a bottom is, a process. Jimmy, you bought Citi today.

Right? Is that what you did? I did. I did. I nibbled back at Citi. Just a little bit of history on this. You remember, I trimmed this about two months ago at 84. Where is it right now? 58. I mean, I'm OK buying it back here. I trimmed it. I didn't add the full position back. And by the way, reminder, I sold on UnitedHealthcare on Friday. It gave me some cash. I didn't put all that to work. Why the nibble at all, though, in light of what we're talking about, is because of my belief. And this is synthesizing everything we're talking about here.

Every piece of data that I'm coming in, just about every piece is negative. Like, I'm not talking about the technicals, the historical patterns. I'm talking the fundamental analysis. Every piece is negative. And to me, it strikes me that the conglomeration, the aggregate of that sentiment is just simply too negative. Let me be clear. The odds of a recession, in my opinion, have picked up meaningfully. But what I'm hearing from a lot of people

I'm not looking at you, Mike. Just a lot of people is a seeming 100% probability. I'm a little struck by what Larry Fink said. I'm a little struck by it. We may be on the cusp of a recession. We may be headed into a recession. The odds have gone up. But to say that we're in a recession now, I am looking for the massive number of layoff announcements. I'm not seeing them. I think they are going to come if we continue on this path.

But I'm not seeing it right now. And the reason I bring this up is because this is a moment where the polemics, the headlines can be damaging. And I'm sorry I'm going to do this. You know, Jamie Dimon is somebody who commands my absolute respect. But it's been three years since the hurricane comment. It's been three years. If this is the final reckoning of the hurricane, I just I feel like that I feel like some of the people in positions of power are being

Just a little bit careless in what they're saying. Earnings season on Friday, and ultimately that's going to tell us where the market's going to go through the course of 2025. Are you going to get the 11% earnings growth that the street is now modeling for? I think we're going to learn a lot about that, and it largely depends on the direction of the economy. I don't even know how much you're going to learn, to be quite honest, from this particular earnings season, other than the commentary is going to be awful. But we already know that.

the numbers may not reflect the current environment, just like the jobs report this past Friday. Please, jobs are a lagging indicator. A lot of that's before all of this tariff mess has ripped through the market. Subsequent to that, Scott, you will lose immediately the buyback intentions. You will lose a lot of the capex that was previously planned if there is that overwhelming universal negativity.

You know, you look at other calls in this market. We talked some about MegaCap, obviously, and you noticed some of the nibbling in these names that, you know, there was a moment today where the Nasdaq was green. Citi was talking about semis today. Could see another 20% downside.

Discretionary is under huge pressure. What do you think about discretionary names? Anything travel related has gotten destroyed. You think it's been overdone based on your view? Based on your view? Yeah. So we've been trimming around and moving some things around discretionary wise because we think

from a discretionary sector perspective, I think positions are going to be more concentrated in names like Amazon, quite frankly. And so we've added there. Where have you gotten out of that, discretionary-wise? We took major profits in TJ Maxx and longer term in Marriott. Marriott because we've seen volumes drop pretty dramatically. And we sold Target a long time ago, but Target's in staples. But at the end of the day, macro data on consumer

discretionary as Joe said is lagging. So consumer sentiment typically bottoms a week, I'm sorry, a month after the sector bottoms. And so again, this time may be different, but at the end of the day we think a lot of these numbers are already in there, number one. Number two, in terms of the earning side of things, from a modeling perspective in a process,

If earnings do come down, and they are going to come down, and you see all analysts drop their numbers at once in terms of the current fiscal year and next fiscal year, that's called an earnings revision. When you see earnings revisions all drop at the same time, that typically and historically is a fantastic buying opportunity. So I think, again, not to be always Pollyanna or positive, but I think if you have analysts dropping all their numbers at once, I think that actually could signal a nice buying opportunity. What would make you negative?

What would make you negative? I think if we see continued treacherous

behavior here that's gonna be longer than the next month or so. If we start to see earnings really decelerate dramatically more than we think it is, then we're gonna have to change our tune. And then lastly, if we see some sort of uptick in inflation, that's also gonna bother us and we're gonna have to batten down the hatches. - All right, you guys wanna take a quick break? Is that what we wanna do? Yeah, all right, we'll do that. Let's do that, we come back. We do have some new data on how retail

is feeling through all this. We will share that with you. Kate Rooney following the money. She has this report coming up next.

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We will hit 50,000 on the Dow and we're going to have a broad-based recovery in the S&P 500. The market's trying to find its bottom now. The thing I would say to retail investors is don't get panicked out by all of this.

Well, that was White House trade advisor Peter Navarro today on this very network. Good message after they've wiped out $11 trillion in value in the markets from the high. And new data shows retail investors have been trying to chase the sell-off. Our Kate Rooney is following that money, looking to take a little long-term Larry Fink-like advice, but not always easy. What do you know?

Yeah, Scott, so that is what we're seeing. Last week marked this record. It was the highest level of inflows from individual investors that we've seen in the past decade. It did slow slightly if you look at Friday. Vanda Research with this out. You can see on the chart there,

inflows were still near those records. And Marco Iacchini over at Vanda tells me the investor moves really come down to muscle memory. So it's 15 years of buying the dip has worked, and it is hard to shake that off. There is one defensive trade we've noticed popping up. So this inverse ETF for the tech-heavy Qs, it's called the SQQQ, climbed to the top of Vanda's most traded list by retail investors. First time that's happened in more than two years.

and suggests some hedging going on. It had not been in the top 10 on that record-breaking Thursday. Also, some steady buying of Vanguard's S&P index. So analysts say that could suggest dollar-cost averaging some of the longer-term allocation by more conservative investors. Robinhood noting that more aggressive dip buying

is also wearing off. Steve Quirk, the chief brokerage officer over there, told me there has been a migration to ETFs over some of the riskier single stocks out there. And the list of retail favorites, though, has been remarkably consistent across brokerage firms. It's not just Robinhood. You look at Fidelity, too. Number one is still Nvidia. As of this morning, it had about a 72 percent buy ratio. You got Tesla, Palantir still in the top 10. And then Ford became a top bet on the automakers this week. Amazon

still among the most traded names it comes as investors are sitting on record piles of cash as well as about 7.4 trillion sitting in March the money market funds right now Scott back to you okay Kate thank you for that that's Kate Rooney you think a lot about you know what the retail psyche might be through all this you know there was a point in time during the

you know, beginning parts of the sell-off that one of the reasons why you didn't initially have a larger flush was because retail was holding strong. Yes. And if not buying on the dip. Now, that may be changing. Yeah. Tactically, I'm not sure that's what you want to see, which is really the highly active retail trader feeling as if we can just keep, you know, kind of

averaging down and buying the same names, you maybe want to see a little bit of a backing away there, even if the long term is a smart thing to do if you're just rebalancing into into equities. I've also even a high net worth. Like you look at the numbers from from Merrill Lynch and that's a similar instinct.

Now, retail investors in general are slow to book losses. And so they're probably if they have cash, they are looking to buy. I don't see it as much as the sort of 15 year by the dip. We used to talk about in the 90s, Brian, by the dip way back then. And everyone looked at the 87 crash. To me, it's more about post COVID. There's this really highly active, you know, the kind of meme trend.

adrenaline traders as I call them that that to me is still there and you know I'm not sure they have to go away but maybe it doesn't help that they're just my concern with my concern with all that though is that market structure has changed so dramatically over the last five years I wonder if some of these retail traders their expression of buying the dip is no longer in the individual security itself but they're playing these zero dated options or they're doing it through a lot of options activity

which is creating even more violence in this treacherous environment. One thing that just I feel about this is, look, the historical pattern is retail is going to get it wrong. And I, you know, that's why they're, I hate this term, right? That's why they're called dumb money. But

2021, and we just mentioned meme stocks. Hey, guess who won? All right. The so-called dumb money won. I don't think that that's a historical pattern. I'm not saying you're doing that, Mike, but I don't think that's a historical pattern that we can really rely on that retail is getting it wrong. They've gotten it right. Well, the Vanda research shows that those accounts they track are underperforming. The active traders. I

Obviously, the market's been- To Mike's point, I think there's a difference. When we're using the word retail, there's a difference between those active traders in that 21 period and true retail. I see your point, and I will be the first to admit that I started out the show talking about historical patterns that I believe in. I don't mean to be duplicitous by immediately saying, here's a historical pattern that we should question. What I will say is that

Over the last five years, I have learned to question historical patterns, a lot of them, whether it's mainline economic dogma or what we're talking about now. If I'm a plain vanilla retail investor, though, with long-term money, the thing that I'm watching today is the fact that bonds are not helping you. No.

And so that's a little bit of a, maybe let's not say it's a pattern that's going to continue, but 60-40 has not actually been a buffer. It's helped you over the last several days, and everyone on the show knows I've been adding to the TLT position. But I watched it last night. I watched it this morning. This morning, I took off a little bit of the TLT. I'm still long TLT. I still think we've got lower yields ahead. But you have to look at things.

those dynamics in the market and when you see things that should be happening that are not happening you have to be quick to react to that I also you mentioned semis before I just want to give this to the viewers watch the semis because they were first in they were first in they made their high last July

Software didn't make the high until December. The market didn't make the high, obviously, until February 19th of this year. Watch the semis. First in is usually first out after you have this violent deleveraging process. Does my humbly defiant friend have something to add before we take a break? Thank you. I actually do. Thank you so much. You know what's different this time? What?

When I learned the business a long time ago from my very first mentor, Bill O'Neill, he used to say that institutional is a smart money, retail is a dumb money. I don't think it's that simple anymore because retail has a bunch of different types of connotations. High private wealth has done an amazing job in terms of asset allocation since the tech wreck.

And our private wealth advisors, first when we were at a place called Merrill Lynch, now at a wonderful place called BMO, have done a wonderful job positioning clients accordingly. During these massive drawdowns, they are positioned to add here, just like they were in 2020, and just like they are right now. So if you're doing your job as an advisor and you're cautioning your investors,

to be not fearful and focus on the longer term, now is when you should be adding. - Yeah, I mean, I just think it's insulting to even use the words anymore to describe retail investors who are more armed with more information than they could ever get in the past when the markets have been democratized more so than they ever have over history. - That is true, but everyone is riding the same curve, right? So if I have like a 90 factor market

model, and I'm at one of these pods, and it's trading automatically before the headline even gets to a human eye, yeah, we have more information than ever, but guess who has more? Who's paying the most for it and who has the most firepower? That's a fair point. I don't think it's dumb money. I don't think that's what it is. I think it's difference in time horizons. Retail does best when it arbitrages the professional time horizon. I don't have a monthly performance bogey I have to worry about.

I'm talking about 20 years from now. I can make the market work to my advantage if I buy on weakness. That's different than saying that they're always going to get every move right up and down. Okay. Pippa Stevens has the headlines for us. Hi, Pippa. Hey, Scott. The Trump administration has asked the Supreme Court to block a court order to return a Maryland man back to the U.S. from a notorious prison in El Salvador.

In an emergency appeal filed today, the DOJ argued the U.S. District Judge overstepped her authority in ordering Kilmar Abrego Garcia's return just before midnight Tuesday. The administration had admitted that Garcia, a protected legal resident, was deported due to, quote, an administrative error.

Ukraine plans to send a team to Washington this week to negotiate on a minerals deal. Kyiv's deputy prime minister said today the team aims to work on a more expansive draft of the deal offered by the U.S. as the Trump administration looks for repayment for military aid provided for Ukraine's fight against Russia.

And it was a blockbuster weekend for the Minecraft movie, the Warner Brothers film based on the video game, taking the top spot at the box office with an estimated $157 million, according to Comscore. It's the first movie this year to top $100 million and is the biggest opening since Deadpool and Wolverine last summer. Halftime Report is back right after this.

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EY, shape the future with confidence. All right. We will have earnings this week, believe it or not. Earnings season kicks off. Brian Belsky. Yes. Going to go with you. I want to know what you think about these large banks in the here and now. There's a lot going on. Recession fears, lack of capital markets activity, probably even less now as a result of all of this. What do I do?

Well, I think in the prior block we talked about wealth, and we really like those multi-divisional banks that have commercial bank, consumer bank, investment bank, and wealth. And that's why we're sticking with Bank of America. Our largest financial position across the board, Scott, is Berkshire.

And we still like JP Morgan, Morgan Stanley, and Goldman. Now we do think that the medium-sized banks, we still think that those banks are gonna suffer relative to the really big banks and the small banks. So we're gonna stay with that. Are their earnings gonna be down? I would guess that they're gonna be defensive. I know that you said in the prior commentary that it's almost too late, but no, it's not. I think they're gonna be very, very negative and very cautious, under-promise and over-deliver. We're gonna be back into that game. So we're still overweight financials.

We think this is going to be the great opportunity for the next 12 to 24 months in terms of earnings growth, dividend growth, balance sheet. And so those are the names that we really like. So to kind of respond to what I asked you before about emerging leadership surrounding financials themselves. And I somewhat disagree with you that all boats can kind of rise. I think you have to find leadership when you're in this type of corrective environment from somewhere.

How important to you is it that financials not really just survive the upcoming quarter, but actually have a degree of relative outperformance to the rest of the market? Because like you, my strategy is overweight financials. A lot of the momentum strategies, overweight financials, financials have been quote unquote, the story of the last six months. Hey, by the way, BlackRock, you know, Larry Fink continuing to speak. Let me just introduce this into the conversation because I brought up the lack of deals, uh,

He says he does expect more M&A. I think there are going to be more M&A opportunities as we deregulate. I mean, the big question I have is in the United States, will SIFI banks, systemically important financial institution banks,

be allowed to do acquisitions now? And my belief is going to be yes. You know, if we have, you know, are you too? Are we going to see a flurry of new opportunities in banking? M&A? The answer is, I think, clearly yes. So just add that to whatever you were thinking about in your answer. Yeah. So per your point, you know, they've been under focus the last six months because, you know, you had the Trump bump in the fourth quarter. Everybody kind of chased the banks because they were massively underweight. Rightfully so, though. Rightfully so. It was the right trade.

So now if you see rates going down and you see these balance sheets of Fortress America in terms of how strong they are, you see the dividend growth side of things, you see the value. But I do firmly believe the really, really big ones and the really small ones, by the way, are the best position. The small ones because of the relationship and the cleanliness of their balance sheet. The big ones because they're multi-divisional assets. The middle-sized banks, I think you're going to see surprising mergers, surprising mergers of just below the money centers and some of the bigger regionals that

Because the only way that they're going to be able to compete going forward is to merge and try to take on the big banks. What do you make of Fink as part of the conversation about all these things that haven't happened that people wanted to have happen and thought were going to happen, which is why they were positioned the way they were coming in?

It's still like, hey, okay, it's still going to happen. It's going to be hard to dislodge that general thrust of this idea that at least incrementally we're going to move in that direction. I don't think that if we don't get M&A, it's because of regulation. If we don't get M&A, it's because people don't like where their stock's trading. There's a wide bid-ask.

and they don't have CEO confidence, which is plunge, which is one of the tightest correlations to M&A volume that you have out there. What I do think is interesting coming from the banks likely is probably the macro tell on the consumer because you always have Moynihan and Diamond saying our internal networks tell us spending is holding up and the deposits, you know, average deposits in the accounts are actually above pre-COVID. Let's see if that bears out as they give their guidance in the coming months. By the way, JPM and Bank of America are green today.

And yet, take JP Morgan, the creme de la creme off 25%. So the creme de la creme in the financial industry has been hammered here. But Mike, I think where you ended there is exactly the biggest point. We know that M&A is lousy right now. The IPO market, forget it. The reason that bank stocks generally sell off as hard as they do in a recessionary environment is because of concerns about credit quality, having to take up loan loss reserves, having to actually flow those reserves through your P&L. But

But, you know, I'm struck by the fact that not just the banks themselves, but the Federal Reserve has said that, generally speaking, corporate and consumer balance sheets are in good shape. It's not, this is not, doesn't feel anything like, you know, 2007 with the levels of leverage that we had then. Yeah. It sounds to me like you're going to be on the edge of your seat for Delta's earnings on Wednesday. No, no. Look, in fact, let's just address this. That's a big earnings report, though. Yeah. And you know what? I think it's going to suck.

I mean, I don't know how else to put it. How could he possibly come on and keep guidance? I can't see it. Now, I'm not selling the stock. They already kind of gave you a heads up that it doesn't look pretty good, the outlook, right? I mean, the last numbers that he put to it were to take down first quarter but keep the full year intact. I just don't see any way full year stays intact. All right, let's do finals after this break.

All right. Three o'clock Eastern today. Of course, Mike Santoli is going to join me for his last word and maybe more words given these markets. So thanks for being here for the hour. It's been a pleasure having you. And I look forward to seeing you in a couple of hours. Adam Parker, Torsten Slocke, Ed Yardeni, Bruce Richards, Jack Manley. Everybody is going to join me for that final stretch. And I cannot wait for that. Brian Belsky.

I'll give you the first shot. Scott Walker. At final trade. Sometimes it gets a little spicy. You know, it's good. Sometimes it gets a little spicy up here, especially when the markets are like this. People are certainly feeling unsettled. Yep. And...

No one clearly knows where all this is ultimately going to go. No one does. Thank you so much. First Citizens Bank. Thank you. Farmer Jim. Berkshire. I'll bet he's salivating right now. Salivating. He's probably feeling good about where they are. Go ahead. I mentioned semis before. KLA Corp. It's a name we've owned in the ETF since inception. All right. I'll see you on the bell. Thanks, everybody.

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The U.S. and China are competing for global leadership. The country who wins will define the world we live in. U.S. international assistance is vital to our national security. It helps prevent terrorism and avoid costly wars. It fights diseases and saves lives. It helps keep America as the number one economy in the world.

U.S. international assistance protects our interests at home and abroad. If America doesn't lead, China will.