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I'm Scott Wapner, and you're listening to CNBC's Halftime Report, the podcast, the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in.
All right, Carl, thank you very much. Welcome to the Halftime Report. I'm Scott Wapner, front and center this hour, trading the tariff whiplash. The market's looking to build, at least trying to build on last week's gains. We'll debate the road ahead with the investment committee. Joining me for the hour today, Joe Terranova, Steve Weiss, Sarat Sethi and Rob Seachin. We'll take you to the markets. We are green, but we are off of the best levels today.
No question about that, as investors still try and make sense of everything that's been happening. Joe, Morgan Stanley today addresses the consistently inconsistent, I think you could call it, policymaking. Quote, investors should prepare to be fooled many more times.
One well-known investor told me last night, quote, I'm forced to trade tweets rather than invest in companies. And Goldman's Tony Pasquarello says over the weekend, quote, preservation of capital is still job number one. There are times to go for the break. There are times to go for the gas. And I don't think it's the latter.
What do you think? I think I agree with all of that. I think nothing has changed. I think we've had a confidence shock as a result of whatever we're calling April 2nd. I think that we are going to see that behaviors as it relates to consumers and corporation is going to continue to contract because of that confidence shock. And I think you have to turn to the market. I think you have to turn to the market and let the market guide you as to where ultimately it's going to be going. Last week,
the the North Star was the bond market without question you following the bond market I would tell everyone today you have to be watching the back seven technology and semiconductor and still the bond by as we write I mean you were you know is today you have yields at 440 look the last couple days even I talked to us about this up before the show but most of the activity that I have had has been in the futures market I'm trying it you having such extreme difficult sleep analyzing
individual underlying equity names that's that's not where right now because of the confusion you can find opportunity so it's really the macro it's derivatives it's the futures market and looking at all of that collectively today bond futures not as active as they've been the last couple of days the real activity last night and again today in the nasdaq follow the mag 7 you now have only alphabet and apple higher as we speak so we've lost
basically the entire of the MAG-7, and you have the SMH lower. That is not encouraging for those who thought we were going to take out last Wednesday's intraday high at $54.81. We failed below there earlier today at $54.59. Rob, is your firm approaching this right now, as Tony Pescarello suggests our investing audience should? Preservation of capital is still job number one?
That's always job number one when you do what we do. But there are days to be a buyer, as we've seen in the last several weeks. And there's days to be ease up on the accelerator as well. We've seen such massive moves, I think, that we thought coming into the year that volatility was going to be here. It looks right now like volatility is here to stay as long as there's uncertainty around this. And there's challenges to growth. There's challenges to earnings.
But that does not change the fact that you are rewarded in big down days. We were down in the four thousands last week. We took advantage of that to be a buyer. And, you know, in the short run, we're really, really rewarded. So I think you have to look at clients and say, what days are you going to be active? What days are you not? We have not been, Scott, knocked into a different atmosphere. Equities have been able to deal with COVID.
Equities have been able to deal with the shock of 2018, the growth shock. The pivot in 2013, yes, there's short-term scares, but once there's certainty, they're always able to deal with it because companies are incredibly adroit in dealing with what's happening in front of them if they know it.
Right. And now they don't know anything because we're far from certain that that's the problem. We've done a lot of damage. Even if this rectifies itself from a volatility calm down, the residual effects are going to last for a while. The notion that the bond market was the biggest game in town, literally it is, but figuratively, too, now in that.
that's where you need to watch. And Barclays today says it's the biggest problem. It's the bigger problem for sure. They don't think that risk assets can stabilize until the bond market does. And OK, you get yields down today. But as long as that remains as unsettled in its own right, you're still going to have a level of volatility that's going to make you a little nauseous.
Right. And I agree. You always got to watch bonds. You always got to watch rates. I agree with Joe. That's the most important thing that's going to drive the market because it affects what your cost of capital is ultimately. That affects your investment and then impacts your return. In every DCF model, you're modeling, okay, what's my cost of capital?
So you have to watch it. It affects market order, most importantly, right? Sure, which affects everything. Which is a derivative of everything I just said. Everything you've said is a derivative of the disorder that was happening within the bond market. It affects confidence. It affects almost everything. It affects stability in some respects of the equity market when you're seeing what's happened in the bond market.
That's why we've been gyrating through this process here. The moves are definitely not giving you comfort, even on big down days, because they're so big. And, you know, I've said this before, Robin, I'm surprised you haven't written it down. You should write down everything I say. But in terms of... Nostradamus here. Let's determine the end of the world. In terms of Brexit, in terms of 2008, those were certain events.
And sure, you were scared as they were happening, but ultimately one event changed them, and that was the addition of massive liquidity. The Fed's hands are tied right now. They can't inject massive liquidity because they don't know where inflation is. So, you know, so giving back on the tariffs,
going back and forth. That's destabilizing and CEOs are not going to invest. And if you talk to them offline, rather than what they say publicly out of fear of retribution, if you talk to them offline, they don't know where to go. No, but that's why you've got people, Sirat. I'm so cautious. Right. Well, that's why you've got people. You have moves, too, which we'll get to in a minute because your moves look like you're trying to take advantage of some of the volatility that we've had and the pullback.
But this whole conversation is the reason why Krinsky at BTIG says we're going to be range bound. We're not going to have a V-shaped recovery. Morgan Stanley, the worst may be over, but the coast is not clear. Valuation levels are seen right now at the start of a downturn rather than at the end.
And Trivariate's Adam Parker, just to round out the kind of tone you're reading today out of the notes, less optimistic about equities now than we were just last week. And Citi today downgrading the S&P target and equities in general to neutral.
Look, I mean, we've all touched on this. I think the bond market, the credit market is driving the market today or in the last few days. And I think as a long-term investor, I agree with Rob, you pick up good companies, you can upgrade what your portfolio is, but in the short term, we're going into earnings season, we have a huge uncertainty as to where the bond market's gonna be. It could move on a tweet, it could move on anything, foreign countries selling our bonds, and then valuation, to Steve's point.
When you plug in valuation and you look at credit spreads widening, you look at other things, there's uncertainty. So I think the opportunity here is on down days or when you have cash, but I wouldn't come out of the market. I just think it's hard to be really aggressive. Because you just don't really know whether there's a legit and longer lasting flight from U.S. assets.
It's a key point that Tony Pasquarello, who I mentioned earlier with the preservation of capital comment, goes on in a thoughtful note, as he always puts out. I'll quote from it so you have the idea of what he's thinking about.
And he said, judging only from price action, like most of us have been seeing the price action in the market, and it's been up, down, up, down, up, down. We're suddenly witnessing a comprehensive turn away from U.S. assets. This is the single most important theme to monitor over coming weeks. I think this is important, too, to discuss, guys, because it affects almost everybody watching.
A related point: In the context of traditional 60/40 strategies, recent weeks have demonstrated a lack of insurance afforded by the bond market. This is a sea change from the correlation regime that dominated most of the past two decades. In other words, where are you hiding? Where's your hedge? Where do you feel better? If the stock market goes down, you can lean on that from your appreciation of bonds.
You're not getting that. You are not getting that in any regard. You are not getting that in basically the totality of the U.S. capital market structure. You know, you could talk about, you could find opportunities. You could say, well, TJX is making a 52-week high today, or maybe it's Walmart or some staples or utilities. But you're talking about sectors that are just not big enough. They don't have enough liquidity to provide the type of hedge exposure that we're talking about. So that all...
ultimately leads to a continued the leveraging process and it leads to a process that doesn't really allow the evolution of a real strong bullish trend off the bottom that's where you get that sideways activity that's what we're getting right now you know last night was interesting to me many people have said and and i've been over the over the last several weeks i keep saying where's the leadership where's the leadership because if you're going to get the sustainable
rally off the bottom, that 48-35 low last week. You need some form of leadership, and you don't really see any leadership stepping forward. You thought maybe you were going to get it from technology. You didn't get that. I've heard Saturday morning, okay, Saturday morning, you thought today was going to be a potentially 3% to 5% update for the NASDAQ. Yeah. That's you're going to get your leadership out of the abyss. And then Sunday morning, by mid-morning, you're like, well,
Okay, we may get a lift, but that's out the window. Right, because of the communication confusion. But I'm talking about what's the market actually messaging? And it was interesting, again, Steve and I spoke about this before the show. I was watching last night.
And yeah, the NASDAQ was strong, but it wasn't like you had universal strength in all of the major indexes. The Russell last night was underwhelming, underwhelming at best, and it's been bleeding all day, and now it's lower. And I think you need to have that universal strength if you're going to be able to say, okay, we are getting a message from the market that last week's low is a viable low. The problem is you can't get it. And like you said, what sector is going to give you that strength? Because...
Financials, you can't get it because we don't really know what capital markets activity is going to happen. Technology, we don't know what's going to happen to semiconductors or chips. So healthcare, we already have an overhang because we have somebody in the administration who does not, you know, like vaccines. So right now we're kind of in this no man's land and we're going to go into earnings season where nobody's going to commit to anything. Right. Well, you guys are you're committing to things. Yeah. No, no. I mean, sorry. I mean.
Companies are not going to commit. No, I understand. But but in the same breath, by the way, we're negative in everything but the S&P. But that's like a half point positive. So we're on the precipice of being negative there, too, as you are, as Joe said, getting just a peel off in everything, it seems. But Apple and Alphabet in terms of the mags.
You bought more Workday, you bought more Salesforce, so you're buying software. I am. I love cashflow companies. And I think with a valuation of these companies that have come down from 22 to 23 times to 15 to 17 times on companies that are embedded
in corporations globally. And then I bought Air Products also, which is the leading industrial gas company that has long-term contracts. The stocks now are 20 times earnings, was always trading 24 to 27. They're focused really on looking at their business, getting out hydrogen. So I'm upgrading the portfolio. And I'm saying, hey, where do I want to be? I know I'm not going to be right short term, but longer term, this is where I want to be.
You listen to all this commentary and certainly we're expecting volatility. We think markets could retest lows. But when you look at the Deutsche Bank institutional investor positioning surveys, they're in the second percentile of owning our equities. We came into the year in the 95th percentile. If you don't think everybody's moved to the same side of the boat, you are gravely mistaken. Sometimes the crowd is right.
Rarely. Rarely for long. And what I think Surat's saying and what we're saying is in those environments, you should certainly...
be looking for the things that you want to own coming out of this because it is a change in a headline, a change in policy, those type of things that you'll be scratching your head, why wasn't I taking action in environments like this, which is why he's making changes. But everybody now is cautious, us included, okay? And being in the consensus is wildly comfortable.
I understand, but I haven't talked to a single person who is anything but cautious because you just don't know what you're supposed to do and what information you're supposed to do it on. Right. To the point that this person was like, as I mentioned at the top, I'm trading on tweets rather than investing in companies. Normally you invest in great businesses. So invest in companies. But here's the deal. Some of the investors you're talking to, and I know some of them,
They have the freedom of choice. They are not the asset allocators. They can allocate to any asset class. Most that come on this show, and there's nothing wrong with it, they are the allocation to equities. So for them, I've got to put my money into equities. Generally, 90%, some of the ability to say 20% cash, but you can never see that. We heard that from Kevin
on Friday. So I agree if you find something that's dirt cheap and you're willing to withstand the volatility, that's fine. Is that what you're willing to do with the moves you made as negative and cautious as you are? You bought more Goldman, Meta, Netflix, Taiwan, Semi, Nvidia and Leidos. That's right. Those are all
These have been hit two hard names. - Right, so let's go through them. So Goldman I bought, as I mentioned on Friday, I bought something on Friday, I bought something the day before, and I think I've been paid for that. And cash is, with inflation, you can't hide in cash 'cause it's an appreciating asset. You can hide in treasuries, you'll see some depreciation. Basically, the yields are okay there and you got the tax treatment. In terms of Taiwan Semi, look, at 14 times,
You gotta buy that stock. And we heard Trump dial back on semis. The biggest issue there actually is not the U.S. for all the bluster, 'cause you gotta let semis come in. It's really China. So China, to me, is in a much more strengthened position.
The risk there, again, is China because of rare earths. So they basically embargoed all rare earth exports. Guess what? They're the only ones who have rare earth. We'll start a mine here at the end of the year, but otherwise it's 100% market share in China because the Vietnam mine is shut down under dispute. Rare earth goes into the chemicals, the byproducts, the refining. It goes into everything. It goes into airplanes. It goes into coal.
cars, it goes into chips. So that's disastrous potentially. And Xi had warned Trump about this in his prior administration, but it didn't mean anything. So that's the risk that Taiwan sent me. Nonetheless, as one of the world's most important companies, as we hear Jensen Wang say all the time,
I think it'll come through. In terms of Leidos, things seem to have calmed down. The reason why I added there is because in the budget reconciliation bill, they talked about increasing spending to the DOD. I hear you on the Netflix thing. That seems obvious to me. But Meta and NVIDIA.
Right? I mean, just give it what's happening. Trades. I have a core position meta that I've not cut back. It was a trade. And I could tell you right now, stock where it is, I'm probably stopped out of it. NVIDIA, I'm not stopped out yet. But it's a trade because I still believe that this is not in the environment where the market should be priced at 20 times. I know, but you didn't. You did. I mean, look, I'm guessing. Will you tell me?
It just seems obvious to me. You did not buy more of Meta and Nvidia today or whenever it was. - No, not today. - Thinking that you were gonna have a rollover in some of those names now. - No, definitely not. - Halfway into the trading day today,
as tactically as you are, that would scream to me like, wow, I'm kind of surprised by the role in those names so quickly today. - Right, but before I show, I did say to you and Joe that I'm short the queues. So I've been 75% cash since inauguration day pretty much.
And guess what? Every sale has been a good sale, actually a great sale. But I'm suffering because I've got some beta in the names that I own that that hurts me more than the market going down 5%. I could be down 10% in those names, but I'm good with them for the long term. But return is defined by point of entry first.
So I think, given my view, which is that the market should trade to historic multiple 16 times, I see $4,000 to $4,500 on the S&P. Well, and by the way, as Patty Martell on our production team just sent to me, Jan Hatsias just put out a new note.
quote, in part because of these uncertainties and in part because it is unclear how the U.S. economy will cope with the dramatic increase in uncertainty, we still peg the probability of a full-blown recession over the next 12 months at 45%. Remember, he had raised the probability of recession, and then there was the pivot
by the administration and he pulled it back. Joe, let me finish one more point just to follow up, just to conclude. So we talked last week that as you see, you know, Trump surrender a number of points and try to get back to rationalization, which is still a long way to go, that those headlines would drive the market higher because the worst case is embedded in the market, which is what you guys are saying, basically. I don't agree. However, I think
Given today, we're reaching the point of exhaustion on those headlines. So go ahead, Jim. No, I think picking up on what Rob was saying, I'm looking at everything from how do you think about the market that you have in front of you? And I do think, I do think, Steve, that...
there's enough to where you say to yourself, okay, maybe the damage we saw on the downside, we've absorbed the worst. And one of the reasons you could say that is you know this is now an administration that's going to react to the market. They are. They've indicated in the past that they will react with what they see as it relates to the bond market. So I think what that
presents for all of us is an environment that is completely different than what 2017 was, first year of President Trump's first administration. That was the lowest volatility environment that we've seen in the last 25 years for an incoming president.
Now you have an environment where I truly believe you're going to see one of the highest volatility environments. And it goes back to your Goldman Sachs trade. Anything related to trading in 2025 is going to have dramatic tailwinds behind it. So think about the exchanges, CME, ICE, interactive brokers. Think about everyone who's front facing with all the trading revenue. I don't think it's a one-off what we're seeing here in this upcoming quarter. No.
I think it continues throughout the year. The institutions that have been forced in, out, in, out, in, out, who are able to be more tactical than any other normal investors like the rest of us, why do you think the trading volumes are spiking at the banks like Goldman Sachs? And you saw it at Morgan Stanley and J.P. Morgan, right? Their earnings, normally you don't get credit for trading revenue, right? Everybody was focused on that. And you see Goldman. So I think your point's right on.
The consumer banks are really struggling, too. Well, I think consumer and I think also regionals are going, they're not going to have that. And when Bank of America comes out, we're going to look at credit, we're going to look at the consumer, we're going to look at real estate. Those are going to be other things that, to your point, trading is going to be driving a lot of this. Speaking of consumer... But trading values will slow down, ultimately. Well, if
the volatility does. Right, but Goldman has great leverage to pull across. Speaking of Goldman and the consumer, they downgrade hotels today. Marriott, Hilton, Hyatt, all cut. Hyatt goes to sell. You don't need to be a rocket scientist to figure out why. They say it's a result of their recent macro volatility and consumer pressures. We know, obviously, what the sentiment data has been. Let's get back to Apple for a minute.
because it was back over $3 trillion in market cap. And as it's come off the highs, quite frankly, I don't know if it still is. Steve Kovach follows it for us. It was up more than 4%. It's up still less than 3%. So it's right around that $3 trillion line, clearly. But what exactly does the exception, if it is that exemption, whatever word you want to pick, because it could change in five minutes too, what does it mean?
Yeah, what it means is, Scott, we've stopped having that conversation about building iPhones here in the U.S. and these enormous costs of iPhones that that would result in. And now we're talking again about what we were before these tariffs went into effect and how Apple can mitigate those tariffs using the tools in its tool chest. So, look, with China still has those 20 percent, the so-called fentanyl tariffs on them. And that is still going to impact the bulk of iPhone production, especially those pro models that are coming over to the U.S. But
Now we get to talk about India again. Now we get to talk about Vietnam again. Bloomberg had this very great headline over the weekend talking about this one in five iPhones are now being manufactured in India. That's only going to increase. This wasn't because they knew tariffs were coming. They started doing this back
in the COVID times when those shutdowns in China forced them to look outside of China. And now we're talking about what tools in those tool chests that Apple has. So that includes raising prices a little bit more modestly. That includes playing around with some of the memory inside of the base models of iPhones so they can do these kind of quiet price increases. And then it also helps the margin conversation here too and what those margins looked like on the iPhones. So I think KeyBank put it best
This was like the best case scenario Apple could have hoped for, that surprise relief that they got. They're not out of the woods yet. We heard the president and secretary of commerce, Howard Lutnick, talking over the weekend that no one is going to be safe from these tariffs. But we've heard that story before. And the market, at least early this morning, was acting like, hey, this exemption is here to stay. And
And the thing that we thought coming into this Trump administration is going to stick for now. Apple gets these surgical tariffs. They get exemptions where they really count, but still got to navigate what's going on in China. Those 20 percent tariffs are still in line. And then you guys were talking about the macro, Scott. A lot of the chatter on the street this morning was talking about the macro environment as well and how if we are heading to a recession, just like John Hattia's note that you read off,
uh... was predicting uh... that could still be some headwinds for apple as well because sure the tariffs might come off uh... but they were facing some macro uncertainties got all right you have seen thank you for that a number of calls obviously there's still a lot of negativity around apple city they like the stock they cut the price target to forty five
You do have the price target at JP Morgan cut to 245. You have the target raised to 259 at Goldman. But there's just so much uncertain around this name, even with this news. And by the way, you know, decent return on investment so far anyway for Tim Cook and that million dollars that they gave to the inauguration because the market cap that they added on Friday and then again today, pretty good ROI so far.
What do you think about the stock here? So we've been neutral on the name. We trimmed it coming into the year after that very strong fourth quarter that Apple had to maintain that neutral weighting. I mean, it's obvious why it struggled. Ninety percent of their production is parts are manufactured and assembled in China and dropping from 125 to 20 likely takes the worst case scenario off the table. So it's probably
to re-rate here a little bit. - I was mesmerized on Friday. I never like to say this on air, but I watched the stock all day and I literally said to myself, "Apple is trading as if it's getting the exemption that it got last time." - Stock was up a lot. - You could just see on Friday, you could see the way that the offers were being lifted and the short-dated
options market that something was was going to unfold i'd i think apples okay look we sold out apple in the e_t_f_ in october somewhere around two twenty ish uh... but i think apple is going to be fine i think apple was smart enough probably to build inventory ahead of the tariffs i'm sure they've got enough iphones out there the real damage will unfold if in fact
there is further economic contraction in China. You don't get the recovery there. And domestically here, you do see the onset of an economic recession where consumers say, OK, we're not going to buy. I don't think Apple is personally, I don't think it's viable here. There are too many variables that could happen, such as the Chinese government.
you know said that anybody in government can't use an iPhone if you got Huawei making great strides there if you got other domestic phones of course they're going to favor those and particularly with Cook saying we're moving the supply chain there's nothing to keep Apple there and then rare earth you can't produce the phones unless rare earth gets exported to India all right let's take a quick break when we come back we have calls of the day and later we're talking about some diamonds in the rough because one firm is out today with a list of stocks what they say
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All right, we're back. Let's do some calls. It's got to be really hard, by the way, to not only make calls on stocks in this kind of environment, but to heed whatever call is out there just because, you know, what do you know? ADP and paychecks.
JP Morgan's looking at, okay, what are some of the least exposed names to discretionary spending? Well, they found these two. Quote, our battle plan for payments in fintech stocks as it relates to trade war uncertainty. They like these names because of volatile environments like this. You own them. I do.
So ADP and paychecks, by the way, they're both in the industrial sector, somewhat surprising. Both have strong revenue growth. I think when I look at the two and I look at the market share potential, I actually like paychecks a little bit better than ADP. ADP's got about 7% overall market share of HCM and payroll. So I think revenue growth is strong. Free cash flow margin is strong. Better position to capture more market share as we move forward. I think that's paychecks. Industrials, because...
these companies are so levered to the employment picture. And moving, migrating quickly to the cloud-based environment and who could get there the fastest is probably going to be the leader. Workday had appeared to be doing that, but the valuation for me on Workday is a little bit rich. All right. Let me, I'll get back to this in just a second. Let me get to a news alert from our White House correspondent, Megan Casella. Hi, Megan.
Hey, Scott. So some auto company stocks are jumping right now off some comments from the president just a couple of minutes ago. The president is inside the Oval Office right now with the president of El Salvador. And in this long Q&A session with reporters, he's been asked about tariffs. He was just asked that after this weekend when he mentioned some short-lived product exemptions, he was asked which specific products would he be considering. And he responded, quote, I'm looking at something to help some of the car companies. Remember, there are 25% tariffs on nearly all imports.
of autos and auto parts. There are some exemptions in place for Canada and Mexico as long as they abide by the trade agreement that's in place. But Trump saying now that the car companies, quote, need a little bit of time to move some of their production back to North America. He says they're going to make them here, but they need a little bit of time. So he is thinking about that relief. He was also asked whether he might be considering any further exemptions for
Remember, Apple, of course, got a big win this weekend with the exemptions that were issued so far. The White House is, though, saying that smartphones and iPhones in particular could be subject to additional tariffs in the future. He was asked whether Apple might get any additional exemptions, and he said, "Look, I'm a very flexible person. I don't change my mind, but I'm flexible." He also emphasized that he is in regular touch
with Apple CEO Tim Cook and saying that he doesn't want to hurt anybody, but the end result is he's trying to boost the US's economic standing. One final point, he was also talking a little bit about the European Union, and as there are negotiations ongoing during this 90-day pause to see if they can avoid further tariffs, the president's saying now the European Union has got to come to the table, and they're trying to, but that they're taking terrible advantage of the US. I flagged that comment as the EU Trade Commissioner, Scott,
is in Washington right now to continue these sorts of trade negotiations. Potentially more news to come out of that meeting later today.
Scott. Okay. We appreciate very much the update there. Megan Casella, the White House for us. So we showed you Apple intraday. It's pretty much at the lows of the session, though still up by 2%, the obvious bumps that you would get in Ford and General Motors. Surat, you no longer own GM. No. You know, Jim Labenthal sold it on the very first whisper of tariffs a few months ago. We're
Remind us when you got out and was it in anticipation of tariffs? No, I got out about six months ago and it was in the low 50s. And really at that point, it had done everything we wanted to do. And then we were looking at this year to say, hey, you've got a new administration. What's going to happen? You're kind of at peak auto sales and peak competition. So it was just kind of one of those things we said, hey, we can move the money elsewhere. OK, we'll obviously watch all of those stocks that are moving.
on what Megan Casella was reporting from the North Lawn of the White House. We will get the headlines now, though, from Silvana Henao. Hi, Silvana. Hey, Scott. Good afternoon.
A congressional watchdog will look into changes made at the SEC, including any led by the White House or Elon Musk's Department of Government Efficiency. Reuters reporting in a letter sent to Senators Elizabeth Warren and Mark Warner, the Government Accountability Office, which is the nonpartisan research arm of Congress, wrote that in the next three months it will look into the agency's recent efforts to cut staff and leases and reorganize its workforce.
Saudi Arabia is reportedly planning to pay off Syria's debts to the World Bank. Now, that's according to Reuters, which says the plans could open up grants for Syria's reconstruction. But U.S. sanctions that remain imposed on Syria may complicate its financial recovery.
And in Turkey, a new phase of restorations is underway for the nearly 1,500-year-old Hagia Sophia to protect it from earthquakes due to its close proximity to fault lines. The project will focus on reinforcing the mosque's historic domes, the most significant work on the monument in over 150 years, Scott. Silvana, thank you. Silvana, now coming up, the tariff turbulence.
is driving investors into one part of the ETF market to manage this volatility. Bob Pisani knows where it is. He'll tell you next in ETF Edge. With reliable connectivity, enhanced cybersecurity, and advanced fiber solutions, Comcast Business helps turn today's small businesses into engines of modern business.
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ETF Edge, where are people looking to hide out within the ETF spectrum, Bob? Oh, I have somebody who knows the answer to that, Scott. The wild markets are placing new emphasis on ETFs that are tactical in nature. That is, those that are not tied to indexes and can quickly allocate and reallocate resources. Let's talk to one of those managers. Katie Stockton, old friend of ours, founder and manager and partner of Fairlead Strategy, also manages the Fairlead Tactical ETF. And before I ask you about your ETF strategy,
You're a long-time active manager. What are you doing now, and what are you advising your clients? We believe that the loss of momentum behind the S&P 500 will stay with it for most of this year, if not even into next year. And therein, we've been recommending our clients manage risk. And that means different things for different people, but it can be more defensive leaning in your sector positioning, for one.
you know, more asset classes that have a lower correlation to the S&P 500. We are seeing this as a cyclical down move within a secular bull trend. So we'll be excited to come out the other side of it. Now, I want to talk about your ETF, your tactical ETF, TAC, T-A-C-K. You just passed the three-year mark. That's important for managers. Congratulations. So you rotate on this between the 11 S&P 500 sectors. We all know that. But you rotate between that and gold.
long and short-term treasuries. It rebalances every month. Here's a summary. Where are you invested now? What are you doing with this right now? Well, we have eight equal-weighted buckets that we try to fill with the best sectors. So we're eliminating the bottom three based on our technical metrics. And these are long-term indicators that we're using to eliminate noise, only identifying long-term shifts. So we want to be in those
sectors that have the best long-term momentum, the best relative performance. And if eight sectors aren't qualifying, we will give that bucket to other asset classes. And that's where we stand currently. We have seven sectors that are qualifying. We recently eliminated the technology sector, which is very significant, of course.
And we have small pieces in short-term treasuries, long-term treasuries, and gold. So this is fairly defensive. So consumer staples, utilities, no holdings in tech at all. You don't own the tech sector. You've got a small weight in gold. You've got small weight in long-term bonds. It's still almost 90%, what, 88% stocks, though, right? And here's a little list here.
Is that going to change at all? You do this every month, right? It will continue to change. It's model driven, so 100% systematic based on our technical models. We held technology from 2023 to all the way through until last month, really. So we did ride that technology outperformance, but with an equal weight position, we also morphed into these other sectors that had the opportunity to emerge as they have done before.
this year as outperformers. So that heavy defensive sector exposure is something we expect to stick with here for a while, whereas we expect the higher beta sectors of the market to gradually be removed from the TAC ETF and be replaced with those alternative asset classes. So this strategy you're using
run here would underperform if tech was dominant, which is what's been happening until a couple months ago, and would outperform if the market was dropping and bonds were rallying. That's been partly true recently. I guess this is a long-term way of saying it's been tough
being a tactical manager, hasn't it, in the last few years? So the benchmark for the TAC ETF is actually the Russell 1000 Equal Weight Index. And the secondary benchmark is something close to a 60-40 comparison. So TAC's design is to be a holistic portfolio.
And you're right, if the tech sector is the primary or sole source of upside leadership, 2023 was a great example, it will underperform the S&P 500, but it can outperform its benchmarks. We recommend holding TAC as a holding that
that hopefully won't let you down, shouldn't, you know, it should let you sleep at night and then supplementing that with technology stocks. We've got to let you go. But bonds underperforming here, bonds down is a major problem for this portfolio and for a lot of people that are out there. Is that a little bit of a surprise to you? For the tech portfolio, which has also that piece in gold and the short term treasures, which is close to our cash equivalent, it does actually fairly well with that diversification on the risk off front. OK, good.
Going to have to leave you. Always a pleasure to see you. We're going to have a lot more on tactical trading of stocks, bonds and gold. That's coming up on ETF Edge, 1.10 p.m. Eastern Time. Katie is going to be joined by Troy Donahue. He's the head of America's portfolio trading at BTIG. It's ETFEdge.CNBC.com. Scott, back to you. All right, Bob. Thanks so much. We'll do the setup next.
We'll do the setup for you. ASML, Wednesday before the bell, Rob, you own the stock. I mean, we already know about the difficulty in trying to give outlooks
What about in a stock like in a company like this? Especially when China accounts for 30 percent of your sales. Right. And the risk reward is definitely more attractive, though, than it's been in a long time for a name like this. But I think you're to see a lot of these companies, a lot of these semi companies, you know, guide down a little bit because I think the macro environment is just so uncertain.
Travelers, Joe, is also Wednesday. You own that name. EPS is going to struggle in this upcoming quarter for all of the homeowner insurers. And that's obviously attributable to the L.A. wildfires. In the case of travelers, they've already guided to about one point seven billion in catastrophic losses. Let's see if they could keep that number.
anchored there or if it exceeds $2 billion. The offset to that is potentially stronger margin lifts. Overall, though, I like the auto insurers above all else in the insurance industry, which has strong pricing power. We'll closely watch Amex, Surat, for obvious reasons on Thursday. Absolutely. I mean, I think Amex is going to be very interesting. It's going to give the high-end consumer where are they spending, where are they not spending, and also the experiential part, right? That was what we came out of COVID. So
So where are we seeing that? And then in travel, we're going to see what they say as well. Well, we've already heard from others, right? You can sort of glean what they're going to say, whether it's Bastion at Delta. I'd mentioned the hotel downgrades today. There's a lot of negativity around the travel space. Yeah. And I wouldn't be surprised for them to say, hey, listen, we don't know where this is going, just like everybody else.
But I think the indication is going to be what's stronger and what's not. Speaking of what's stronger, Netflix. Netflix year to date is up 4%. Steve Weiss, you own the stock. It reports Thursday. I've heard people suggest it's like recession proof. The last thing people are going to do is touch their Netflix subscription. Yeah, I think recession resistant rather than recession proof is perhaps better.
Look, every quarter has been like a crapshoot because you don't know if they'll increase their spending. Subscribers may go down, they may go up. This is a typical long-term play that you have to own because ultimately they're a unique company and they are the winner in the space. Okay, so we're going to do this. We'll take a break. We come back. I mentioned that one firm today has a list of what they think are diamonds in the rough.
We do have ownership. You probably own some of these stocks, too. We'll tell you what they are and we'll debate them after this break. All right, guys. So Roth is out today with the diamonds in the rough note, trying to look at names that might be able to get through some of this volatility. Applied Materials, Jyoti, Allman.
On the list, they say it's oversold. They think it has support. And they just come off the best week since November of 22, breaking a six-week losing streak. Yeah, doing the opposite of what I like to do, actually. Stock is down 11% year-to-date, down 32% over the last 52 weeks. You always look at...
applied material relative to its peers who are they lamb research k l_a_ corp k l_a_ corp is a company we have owned since november of twenty twenty that's a five percent year-to-date that's only down one percent over the last year i'd like k l_a_ corp better here better position than applied materials and i would actually think lamb research
is better positioned than applied materials. What about you? You like it? Listen, it was way oversold. We hit $199 on this name earlier this year, and a couple weeks ago we hit $126. No surprise to see a bounce off the bottom in an oversold name. We own it long-term. I think you can certainly buy it here relative to words. What about Syntos? Strong rally off support. They think it has legs higher. You own that, too. Uniform services. The benefit here is the company reported March 1st
26, so you'll hear from this company again at the end of June. You're owning this company for the management, the management of the balance sheet, the 50% gross margin, the ability to deliver mid-teens EPS growth for the last 10 years. That's remarkably consistent.
And TJX, so you referenced the name earlier. It had been getting a boost, even though when the consumer sentiment names just have been consistently going lower, TJX held up pretty well.
It's on this list. TJX off price is doing remarkably well. I believe TJX made a 52 week. This is a record. This is a record intraday high today. OK. Walmart, Costco also in that category because of the market share. Let's introduce another name, which I think today it made a new all time high. I don't know, Sirat, do you know Casey's Generals? Casey Generals store today?
C-A-S-Y, reasonable valuation, $16 billion market cap. If we could show the chart of that, that's moving higher today. That's a focus on convenience stores. Yeah. Jim Labenthal name. Jim? Okay. Yeah. Yeah. Give him a little props. Give Jimmy some props. Go ahead, Steve. Give Jimmy some props. We'll do finals next.
likely to be another eventful last hour of trade and I hope you'll join me on closing bell Dan Greenhouse Matthew Boss Stacy Raskin Stephanie Guild Brian Levin Levitt excuse me loaded table and I hope you'll be there with us final trade what do you got JP Morgan Morgan Stanley speaking of trading all right FTAI new buy last week all right you keep buying more of that progressive yeah
Progressive? Progressive. So you're still going insurance? Yes. All right. So we're still hanging green on the S&P and the NASDAQ and the Dow. The Russell's still red. I'll see you at 3 o'clock. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern, only on CNBC.
Thank you.
Thank you.
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Powering the engine of modern business. Powering possibilities. Now through April 21st, new customers can get started with 150 megabit internet and security edge for $49.99 a month for 12 months with a two-year agreement. Plus, ask how to get a $500 prepaid card on a qualifying gig bundle. Call today. Restrictions apply. Equipment tax and other fees extra and subject to change.