The'Halftime' Investment Committee debate whether the rally can continue to have legs

00:09:48
https://www.youtube.com/watch?v=JVJC0orZcMY

Summary

TLDRThe discussion highlights the current state of the stock market, which is experiencing some declines despite being at record highs. Analysts are preparing for the upcoming earnings season starting July 15, with mixed expectations regarding corporate earnings due to potential margin compression from tariffs and inflation. While some analysts remain optimistic about economic growth driven by tax reforms and deregulation, others caution about the risks of slowing growth and the impact of tariffs on consumer prices. The conversation reflects a divide in sentiment among analysts, with ongoing concerns about inflation and the overall economic outlook.

Takeaways

  • 📉 The stock market shows some declines today.
  • 📅 July 15 marks the start of the earnings season.
  • 📊 Earnings expectations are mixed, with potential for margin compression.
  • 💰 Tariffs are impacting corporate earnings and consumer prices.
  • 📈 Some analysts remain bullish on economic growth due to tax reforms.
  • ⚠️ Concerns about inflation affecting demand and pricing persist.
  • 🔍 Companies are currently absorbing tariff costs.
  • 📉 Consumer discretionary and staple sectors may see earnings decline.
  • 🤔 Analysts express caution about future earnings growth.
  • 💡 The tax bill is viewed as pro-growth, but its effects are uncertain.

Timeline

  • 00:00:00 - 00:09:48

    The market is experiencing a downturn as the second half of the year begins, with earnings season approaching and concerns about tariffs and inflation. Joe expresses optimism about certain stocks like Amazon and Meta but anticipates flat to lower earnings growth due to margin compression from tariffs. He highlights the importance of upcoming earnings reports and the potential impact of inflation on corporate margins. The discussion also touches on the mixed outlook from analysts, with some predicting a bullish market in the long term despite short-term challenges.

Mind Map

Video Q&A

  • What is the current state of the stock market?

    The stock market is experiencing some red across the board, with stocks at record highs.

  • What are the expectations for the upcoming earnings season?

    Expectations are mixed, with some analysts predicting flat to lower earnings due to margin compression from tariffs.

  • What is the significance of July 15?

    July 15 marks the start of the earnings season and is expected to reveal important insights into corporate earnings.

  • How are tariffs affecting the market?

    Tariffs are expected to lead to margin compression for corporations, impacting earnings growth.

  • What are the analysts' views on economic growth?

    Some analysts are optimistic about economic growth due to tax reforms, while others caution about potential slowdowns.

  • What is the outlook for consumer discretionary and staple sectors?

    Earnings growth year on year for consumer discretionary and staple sectors is expected to be down.

  • What are the concerns regarding inflation?

    There are concerns that inflation may take hold, affecting demand and pricing.

  • How are companies responding to tariffs?

    Companies are currently absorbing tariff costs, but this may lead to higher prices for consumers.

  • What is the general sentiment among analysts?

    There is a divide among analysts, with some remaining bullish and others expressing caution about future earnings.

  • What is the impact of the tax bill on the market?

    The tax bill is seen as pro-growth, but its effects on the market are still uncertain.

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  • 00:00:01
    Steve Weiss Jim Lebenthal. We
  • 00:00:02
    will check the markets here. We
  • 00:00:03
    do have some red across the
  • 00:00:05
    board today. We're saying that
  • 00:00:05
    the second half officially
  • 00:00:07
    starts today. It's the end of
  • 00:00:09
    the holiday weekend. The tax
  • 00:00:09
    bill is done. The tariffs are
  • 00:00:11
    still looming. Earnings about to
  • 00:00:13
    start and stocks are at record
  • 00:00:14
    highs. That's how the table is
  • 00:00:16
    set. So Joe how does the table
  • 00:00:18
    look okay.
  • 00:00:19
    >> So the table in the near term
  • 00:00:20
    still looks good. Momentum names
  • 00:00:23
    still holding serve acts on
  • 00:00:26
    Palantir higher today mag seven
  • 00:00:27
    I know we're going to talk a lot
  • 00:00:29
    about Tesla but how about Amazon
  • 00:00:31
    which to me looks like it's
  • 00:00:33
    breaking out. It looks like it's
  • 00:00:34
    going to go above two and a
  • 00:00:35
    quarter. Meta remains strong.
  • 00:00:36
    That's the moment. That's where
  • 00:00:38
    we are right now. However my
  • 00:00:40
    expectation for the third
  • 00:00:41
    quarter is at best we're flat to
  • 00:00:44
    lower. And I think one of the
  • 00:00:46
    reasons why is going to be about
  • 00:00:49
    July 15th. What is July 15th,
  • 00:00:51
    the start of the earnings
  • 00:00:53
    season, July 15th. We're going
  • 00:00:54
    to hear about earnings. We've
  • 00:00:55
    been lowering the estimates for
  • 00:00:58
    earnings. I think we are going
  • 00:01:00
    to learn that corporations have
  • 00:01:03
    absorbed the tariff cost, and
  • 00:01:05
    that is going to see significant
  • 00:01:07
    margin compression, the
  • 00:01:09
    inflation from tariffs. It's not
  • 00:01:10
    showing up in the inflation
  • 00:01:12
    report. So it's going to show up
  • 00:01:14
    somewhere. And I think it's
  • 00:01:15
    going to show up in margin
  • 00:01:17
    compression. It'll be okay if
  • 00:01:17
    you get the revenue growth. But
  • 00:01:20
    consumer discretionary consumer
  • 00:01:21
    staple I think you're going to
  • 00:01:23
    see earnings growth year on
  • 00:01:23
    year. That's going to be down. I
  • 00:01:25
    think the biggest challenge we
  • 00:01:27
    have in front of us is going to
  • 00:01:29
    be earnings. You know what else
  • 00:01:31
    is July 15th. This is to
  • 00:01:32
    buttress your point is June CPI.
  • 00:01:33
    And we have not seen the tariffs
  • 00:01:35
    show up in the inflation numbers
  • 00:01:37
    yet. I mean if it's going to
  • 00:01:39
    show up it's got to show up.
  • 00:01:40
    Then I'm just I'm just accenting
  • 00:01:41
    your point Joe okay.
  • 00:01:43
    >> The commentary this morning
  • 00:01:44
    Pasquarello at Goldman is still
  • 00:01:46
    a bull market yet one that is
  • 00:01:48
    delivering less convexity and
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    less consistency than before.
  • 00:01:51
    Core positions that I believe in
  • 00:01:53
    and would marry as a composite
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    US technology and US power.
  • 00:01:57
    Steeper global yield curves a
  • 00:01:59
    somewhat weaker dollar and don't
  • 00:02:01
    fight the primary trend in gold.
  • 00:02:04
    Morgan Stanley's Mike Wilson
  • 00:02:06
    Weiss a tougher first half. Well
  • 00:02:08
    we just went through better
  • 00:02:09
    second half. Better 26. Could be
  • 00:02:11
    some consolidation. He says
  • 00:02:12
    during Q3, they're bullish on a
  • 00:02:15
    6 to 12 month horizon. He thinks
  • 00:02:17
    that earnings tailwinds are
  • 00:02:19
    going to expand, not contract.
  • 00:02:22
    >> Yeah I'm going to disagree
  • 00:02:23
    with him. So I agree with Joe
  • 00:02:25
    that up until and Jim makes a
  • 00:02:27
    great point from CPI because I
  • 00:02:28
    don't think you have to see it
  • 00:02:31
    in July 15th. And I know that's
  • 00:02:32
    not what you meant, but I think
  • 00:02:35
    it's likely you start to see it,
  • 00:02:36
    and not only from a cost input
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    affecting margins with
  • 00:02:39
    companies, but also from a
  • 00:02:40
    demand input. So you've seen a
  • 00:02:43
    lot of pre-tariff buying by
  • 00:02:44
    consumer, by corporations, pre
  • 00:02:47
    supply chain stocking. And
  • 00:02:49
    that's going to run out at some
  • 00:02:50
    point. If you go to buy a car.
  • 00:02:52
    They say despite tariffs being
  • 00:02:55
    announced on cars and in place
  • 00:02:56
    already they say you can get pre
  • 00:02:58
    tariff prices now. So they're
  • 00:03:00
    trying to drive demand. That's
  • 00:03:02
    going to run out eventually. The
  • 00:03:03
    reason why I disagree in the
  • 00:03:05
    second half is because I do
  • 00:03:06
    think inflation takes a
  • 00:03:09
    foothold. I do think that we're
  • 00:03:10
    going to run out of time on
  • 00:03:12
    delays. And thaall the good
  • 00:03:14
    news on tariffs, like with the
  • 00:03:15
    tax bill or, you know, whatever
  • 00:03:18
    he calls the bill being pulled
  • 00:03:20
    through into the market, which
  • 00:03:21
    is the reason for the sell off
  • 00:03:22
    today. That would hardly cause a
  • 00:03:24
    sell off how we've gone. But I
  • 00:03:26
    think that all the good news
  • 00:03:28
    from Trump administration has
  • 00:03:29
    already been seen and discounted
  • 00:03:30
    in the market. And now I believe
  • 00:03:33
    so. I'm saying in terms of
  • 00:03:35
    stocks, for example.
  • 00:03:36
    >> I know what you're saying. I
  • 00:03:38
    mean, what else would you be
  • 00:03:39
    saying in terms of whatever.
  • 00:03:41
    >> Else in terms of, for
  • 00:03:43
    example, the deduction of
  • 00:03:43
    capital expenditures up to I
  • 00:03:45
    think they raised to 4 million,
  • 00:03:48
    that if it's put into use in the
  • 00:03:50
    year you buy it, that will cease
  • 00:03:53
    up in some of the companies. And
  • 00:03:55
    there when they report, not this
  • 00:03:57
    quarter, but going forward.
  • 00:03:58
    >> How can stronger economic
  • 00:03:59
    growth that they think is going
  • 00:04:01
    to happen as a result of the
  • 00:04:03
    bill and deregulation and
  • 00:04:05
    tariffs not being as bad as once
  • 00:04:07
    feared? How can that all be in
  • 00:04:08
    the market already?
  • 00:04:09
    >> Because the market's trading
  • 00:04:11
    at record highs. It's trading
  • 00:04:12
    above what we viewed as a
  • 00:04:14
    troubled valuation area a year
  • 00:04:16
    ago before this. And the
  • 00:04:18
    fundamentals don't support it.
  • 00:04:19
    We are starting to see a slowing
  • 00:04:21
    in the economy. If you work
  • 00:04:22
    through all the you know,
  • 00:04:24
    basically what what they're
  • 00:04:25
    saying is this can drive
  • 00:04:27
    tremendous growth. You can't get
  • 00:04:28
    away from the fact that prices
  • 00:04:31
    are higher, that they still
  • 00:04:33
    don't have tariff deals. And
  • 00:04:34
    while they don't have tariff
  • 00:04:35
    deals, at some point he's going
  • 00:04:37
    to have to not extend the
  • 00:04:39
    tariffs but actually deploy the
  • 00:04:41
    tariffs, which will affect
  • 00:04:42
    pricing and demand.
  • 00:04:43
    >> They're betting they're
  • 00:04:43
    making a big bet on classic
  • 00:04:46
    supply side economics.
  • 00:04:47
    >> That's exactly right.
  • 00:04:49
    >> You flood the zone with the
  • 00:04:51
    opportunity to spend more, make
  • 00:04:55
    more, reinvest more. And thus
  • 00:04:56
    earnings grow more, the economy
  • 00:04:58
    grows more, and that what looks
  • 00:05:01
    relatively expensive today to
  • 00:05:02
    some in terms of the multiple of
  • 00:05:05
    the market, like Weiss, actually
  • 00:05:06
    isn't, because you are at the
  • 00:05:09
    beginning of this more prolonged
  • 00:05:12
    growth period than not. That's
  • 00:05:13
    that's the that's the argument.
  • 00:05:15
    >> You just used the term supply
  • 00:05:16
    side. And I've got to say, in
  • 00:05:19
    the last several months, that's
  • 00:05:19
    the first time I've heard
  • 00:05:22
    somebody say it. And that's
  • 00:05:22
    exactly what it is. This is
  • 00:05:24
    supply side economics. Now we
  • 00:05:25
    can debunk it based on history.
  • 00:05:26
    But here's what I think is going
  • 00:05:28
    to happen. First off, in the
  • 00:05:30
    short term Joe's right. We got
  • 00:05:31
    the Treasury about to refill its
  • 00:05:33
    coffers with the debt ceiling
  • 00:05:34
    lifted. You've got seasonality
  • 00:05:35
    coming in August and September.
  • 00:05:37
    I wouldn't be surprised if third
  • 00:05:38
    quarter is lousy, but and that's
  • 00:05:40
    healthy. Fine, fine. But I think
  • 00:05:42
    we're going to end up the year
  • 00:05:44
    higher by meaningful amounts
  • 00:05:45
    than we are now because of what
  • 00:05:46
    Scott, you just mentioned, which
  • 00:05:48
    is that this is a pro-growth
  • 00:05:50
    growth budget bill. Now, Steve,
  • 00:05:52
    you're right. We've got some
  • 00:05:53
    serious questions about that.
  • 00:05:54
    No, no, no, hang on, hang on.
  • 00:05:56
    We've got some serious questions
  • 00:05:58
    about what the tariff deals are
  • 00:05:59
    going to be. And if this extends
  • 00:06:01
    this question, this uncertainty
  • 00:06:02
    past August 1st, we're going to
  • 00:06:03
    have problems because companies
  • 00:06:04
    have hesitated on hiring,
  • 00:06:05
    they've hesitated on CapEx, even
  • 00:06:08
    giving the extra CapEx
  • 00:06:09
    expenditure. That is a huge
  • 00:06:11
    benefit. But if we don't have
  • 00:06:13
    the deals in place by August
  • 00:06:14
    1st, they're just not going to
  • 00:06:16
    know what to do. I think they
  • 00:06:17
    will. I'm just going to finish
  • 00:06:19
    really quickly. I think they
  • 00:06:20
    will get these deals in place.
  • 00:06:21
    They know they need them. And
  • 00:06:23
    after that, this CapEx
  • 00:06:24
    expenditure is very pro growth.
  • 00:06:25
    Next year, earnings are
  • 00:06:26
    estimated to grow 14% year over
  • 00:06:28
    year. I think they will. Okay.
  • 00:06:30
    >> Let me clarify my position.
  • 00:06:32
    I'm still fully invested. I
  • 00:06:34
    haven't taken anything off
  • 00:06:35
    whatsoever. I still think that's
  • 00:06:37
    the path of least resistance.
  • 00:06:39
    All I'm saying is that I think
  • 00:06:41
    we will have a softer earnings
  • 00:06:42
    period. To Joe's point, earnings
  • 00:06:44
    estimates typically get cut 3%
  • 00:06:46
    going into every period. I mean,
  • 00:06:48
    they've already.
  • 00:06:48
    >> They've already come down now
  • 00:06:50
    the bar is.
  • 00:06:51
    >> Lower right now.
  • 00:06:51
    >> You don't have to jump so
  • 00:06:53
    high.
  • 00:06:54
    >> But that's for this quarter.
  • 00:06:55
    Guidance for next quarter I
  • 00:06:56
    think is going to be somewhat
  • 00:06:57
    muted because you can't guide.
  • 00:06:59
    You don't know what tariffs are
  • 00:07:01
    going to be. You can't take the
  • 00:07:02
    word of the administration. How
  • 00:07:03
    many times have we heard that
  • 00:07:05
    I've got 20 deals this week that
  • 00:07:07
    are going to sign. So until you
  • 00:07:09
    see the whites of their eyes, so
  • 00:07:11
    to speak, you're not going to
  • 00:07:12
    take that out of the market. So
  • 00:07:14
    my point is that we're going to
  • 00:07:15
    see because of higher prices.
  • 00:07:17
    And we see we'll talk about the
  • 00:07:19
    airlines later. We see we could
  • 00:07:20
    see it in other goods as well.
  • 00:07:22
    And services. Keep in mind
  • 00:07:23
    you're taking a lot of the
  • 00:07:25
    population, the immigrant
  • 00:07:26
    population out of the workforce.
  • 00:07:26
    You know, the deportation
  • 00:07:28
    numbers aren't as large as we
  • 00:07:30
    saw under Obama or Biden so far.
  • 00:07:32
    But they will exceed it. But
  • 00:07:34
    they're scared. They're hiding.
  • 00:07:35
    So that's going to weigh that's
  • 00:07:37
    going to be wage inflation. So
  • 00:07:39
    there are all these knock on
  • 00:07:40
    effects. Yes. The bill is
  • 00:07:42
    pro-business. Without a doubt.
  • 00:07:43
    It's pro growth. And the
  • 00:07:45
    continuing threats on Powell. If
  • 00:07:47
    he does fire, he doesn't have
  • 00:07:49
    the right to. I think that that
  • 00:07:50
    could lead to something
  • 00:07:51
    positive. But the point is I
  • 00:07:54
    think that everything right now
  • 00:07:54
    is being seen through rose
  • 00:07:55
    colored glasses. And I don't
  • 00:07:57
    believe that's the right stance.
  • 00:07:59
    >> But the people wearing the
  • 00:08:00
    rose colored glasses are saying,
  • 00:08:01
    I've heard that could have,
  • 00:08:02
    would have, should have for
  • 00:08:03
    months.
  • 00:08:04
    >> The rose.
  • 00:08:05
    >> Colored. And it hasn't
  • 00:08:06
    happened. At some point today.
  • 00:08:07
    The glass is now for CEOs have
  • 00:08:09
    gotten a little more clear than
  • 00:08:10
    they were before. They were
  • 00:08:12
    these big thick ones before.
  • 00:08:14
    They couldn't really see through
  • 00:08:15
    the lenses very well, and now
  • 00:08:17
    they feel like they've got a
  • 00:08:19
    little more clarity. Heck, I
  • 00:08:20
    don't think we got more. We got
  • 00:08:21
    more guidance. I think they feel
  • 00:08:23
    like they got a lot more today
  • 00:08:25
    than they did three months ago.
  • 00:08:26
    They could barely they could
  • 00:08:28
    barely give. Well, you you're
  • 00:08:29
    talking to you know, you're not
  • 00:08:31
    talking to the biggest CEOs in
  • 00:08:32
    America.
  • 00:08:33
    >> Pretty big CEOs.
  • 00:08:34
    >> We're not going to like get
  • 00:08:36
    in a match. You brought up the
  • 00:08:38
    CEOs we're talking about. But I,
  • 00:08:39
    I, I know for a fact that
  • 00:08:42
    guidance last quarter was way
  • 00:08:43
    better than people thought. Way
  • 00:08:45
    better. Most people expected no
  • 00:08:46
    guidance whatsoever. Now, some
  • 00:08:48
    gave two the things that
  • 00:08:49
    guidance just to cover
  • 00:08:50
    themselves. But I feel like
  • 00:08:52
    there's a lot more clarity today
  • 00:08:53
    than there was three months ago.
  • 00:08:55
    How can there not be? You can
  • 00:08:57
    argue that.
  • 00:08:57
    >> I can. We're tariffs.
  • 00:09:00
    >> Well, I mean.
  • 00:09:00
    >> Your CEO, you can make $1
  • 00:09:02
    billion investment unless you're
  • 00:09:04
    a semiconductor CEO and bringing
  • 00:09:05
    it into the US. And that's going
  • 00:09:07
    to be a long tail right to get
  • 00:09:08
    those up and running. Do you do
  • 00:09:10
    you have greater clarity in
  • 00:09:12
    terms of what the tariffs will
  • 00:09:14
    be where your supply chain.
  • 00:09:15
    >> Should be? I feel like you
  • 00:09:16
    have certainly much better
  • 00:09:17
    clarity than you did.
  • 00:09:18
    >> Well, you know, you don't
  • 00:09:19
    want no.
  • 00:09:20
    >> Question about that.
  • 00:09:21
    >> But we saw some back, you
  • 00:09:23
    know, back then.
  • 00:09:23
    >> You know what the rules of
  • 00:09:25
    the road are with Vietnam,
  • 00:09:26
    right. That, that that covers a
  • 00:09:28
    large swath of American business
  • 00:09:30
    there. You figure something
  • 00:09:31
    positive is going to come out of
  • 00:09:32
    China because it has to for both
  • 00:09:34
    parties. So the worst is off the
  • 00:09:36
    table.
  • 00:09:36
    >> They're betting on China.
  • 00:09:37
    Everybody's pulling there I
  • 00:09:39
    think.
  • 00:09:39
    >> The worst.
  • 00:09:39
    >> Is already been negotiated.
  • 00:09:40
    >> Away from the actions from
  • 00:09:42
    this presidential administration
  • 00:09:43
    show that they do not want the
  • 00:09:44
    reciprocal tariffs that were put
  • 00:09:46
    in place on April 2nd to go
  • 00:09:47
    through, i
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