Closing Bell - Closing Bell: Debating Growth vs. Value in 2024 11/30/23

Episode Date: November 30, 2023

What area of the market will work better in the new year? Two famed investors gave their own differing views – one says growth and the other says value. Virtus’ Joe Terranova and Requisite Capital’s Bryn Talkington break down their outlooks. Plus, Tesla held its Cybertruck event this afternoon. We drill down on the biggest highlights. And, Gabriela Santos from JP Morgan Asset Management is revealing her 2024 forecast and how she’s playing the market in the new year. 

Kelly, thanks. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. And we are moments away right now from the delivery of Tesla's very first Cybertruck, an event we are going to show you live when that happens. In the meantime, this make or break hour begins with the final day of a great month for stocks. And questions now about the rally's staying power. We'll ask our experts over this final stretch. Your scorecard with 60 minutes to go in regulation. Dow's getting a nice lift here, up nearly 400 points. A lot of it Salesforce, UNH as well. But Salesforce was big after its earnings there. You take a look. Otherwise, it's been tough to get much going, although we'll see what we do here over the last hour.

Well, that's despite what some are calling more Goldilocks economic data today. Jobless claims ticking higher. The Fed's favorite inflation measure. The PCE in line with expectations. The Chicago PMI blowing past expectations. So that's what you had to work with today. Yields, well, they're moving a little bit higher. Still, 435, though, on the 10-year. Takes us to our talk of the tape.

What area of the market will work better in the new year after two famed investors give their own differing views? One says growth, the other says value. So we tee that up with Virtus' Joe Terranova. He is also a CNBC contributor, and he's with us at Post 9. I wanted to set up this debate because we all know what happened this year where growth demolished value. Maybe the spread between the two was the largest in an awfully long time. I had a conversation with John Rogers of Ariel at CNBC CFO Council meeting down in D.C. We had Brad Gerstner on, well-known tech investor on Halftime Today. Here's their views. We debated on the other side. Take a look.

I think the top of growth stocks is coming again. I really, really do. You saw the journal had a story today that Russell 3000 is up roughly 34 percent and the Russell 3000 value is only up 2 percent. It's one of the largest gaps in the history of the recorded history, I guess, of looking at those indexes. So that gives me a lot of confidence that small value is going to be the place to be and that growth stocks are going to have a very difficult time as we go into next year. There's a reason that tech has outperformed, right? 20 years ago, tech was about five and a half percent of global GDP. Today, it's 15 percent. In 10 years, will tech be more than 15% of global GDP? I ask another

question. Over the next 10 years, do you expect tech earnings to grow at a faster rate than non-tech? If you believe both of those things to be true, which we do in spades, then you need to be invested in technology as opposed to non-tech assets. I said pretty clearly that he would take the other side of John Rogers. What do you think? I think that the nucleus of the economy is the semiconductor chip. The semiconductor chip represents growth. You think about oil, it really represents what value is. Oil used to be the nucleus of the economy many, many decades ago. So I think that for small cap value to outperform growth in 2024, we are therefore dealing with a very difficult economic environment.

And we're potentially dealing with an environment that's somewhat similar to what we had risk off in 2022, because that's when values seem to work again. What I see as we look ahead into 2024 is that growth is actually going to expand the recovery that we've witnessed in 2023. Let's keep in mind, hyper growth, Scott, hasn't even participated yet. If, in fact, the Federal Reserve steps back, no longer adversarial, it gives the market a couple of rate cuts, you'll begin to see hyper growth participate as well. Hold on. You said something that just makes you want to come back.

Actually, one second. You said that for value to do well, you said it needs to be a difficult economic environment for value and small caps to do well. Isn't it exactly the opposite? No. So if we are in 2024 faced with a climate and it could go either way, so you're automatically saying, well, that means recession. What if, in fact, the Federal Reserve begins to raise rates once again?

And I don't know whether they will or they won't. But, in fact, if the Federal Reserve raised rates like they did in 2022, then growth is going to struggle. The jury is still out on the direction that the Federal Reserve. The Fed is not going to raise rates like they have been. What do you mean? If we get another rate hike in 2024, is that a surprise to the market? The answer to that, as we all know, is yes. In that environment, growth is going to struggle in that environment. There are people that are suggesting we could get further rate hikes.

I'm not one of them. I'm giving you the scenario. I know, but I just disagree. I'm giving you the scenario. I know, but I just patently disagree with the idea that small cap or value stocks are going to work in a difficult economic environment. That's the environment in which they're going to work. Why? That's not how it goes, though. It's energy. It's energy. It's health care where you find small cap value.

The overwhelming majority of the small cap index is health care. What has health care done in 2023? Health care in 2023 is underperformed. What did healthcare do in 2022? Joe, but value stocks, like a lot of cyclical names, are going to do much better in a strong economic environment. The whole reason that they haven't is because we've been worried about a recession for the last 12 plus months. Wait a second. Oh, wait a second. So cyclical only means that it's value? Cyclical can't be growth as well? Is Uber cyclical? Uber's growth?

We're talking about small and mid-cap and more cyclical stocks in nature that traditionally do better when the economy does better. They're the first to go in the tank when there's worries about the economy and the first to come out when the economy does better. What does better when the economy begins to accelerate from an environment like we've experienced the last two years is the Russell 2000. 40% of the Russell 2000 is unprofitable. So the opportunity for unprofitable businesses, for companies that are hyper growth companies

to actually begin to participate in the rally becomes evident in 2024 if that's the environment. Let's bring in Bryn Talkington because we need to expand this conversation And maybe it's become a debate Bryn from requisite capital a CNBC contributor. Do you want to weigh in here on what mr. Rogers said? Mr. Gerster said and and Joe's own views I Love to so let's let's start with small-cap value because I think it's really simple Small-cap value is probably the most economically sensitive sector you can invest in. And actually, small cap value is very heavily weighted in regional banks and industrials. And so if anyone actually believed the GDP print of 5.2 that we're going to get, and that would be consistent in growing,

then you would say, hey, this is time as we're going to get, and that would be consistent in growing, then you would say, hey, this is time as we are going to have economic expansion. I think the regional banks are healthier. Then you'd want to go into small cap value. But to me, the problem today is that I know there's so much negativity priced in with the regional banks, which makes up a huge portion of small cap value, not the Russell 2000, but that value segment of it is that we're gonna have 500 billion of commercial mortgages come due in 2024 and another half a trillion in 2025. And so I think it's still too early

because of that waiting of regionals that they have in the small cap value space. And I do think that we're in this unique environment where the valuations don't tell you we're early cycle. It tells you we're late cycle. And so I still think it's way too early to go into that small cap. But I love Joe's comment on the hyper growth names. And you've already seen that, Scott, because I was looking today at Palantir.

Palantir started the year at 6. It's at 20. Cloud fare is up 70%. You're already seeing a lot of these names have a huge trade-up. And so I think Joe's right about that small-cap growth area. If we continue to have rates that are going to come down, to me that small-cap growth area continues to have legs over that mega-cap names that we've had this year.

John Rogers is not talking about small cap growth. And I get why the ARK Innovation Fund is up 30% month to date. That's the best monthly gain that it's ever had. Why? Well, have you seen what rates have done over the last month? Obviously, there's a direct correlation between a drop in yields and the rise in those hyper growth names, the likes of which the ARK funds invest in. But this notion, Bryn, that small caps, mid caps or value only does well in a difficult economic environment.

Do you take issue with that? I do. That doesn't make I mean, small cap value. You need a good environment. You want to go into small cap value when the economy is expanding. Right. These companies are really sensitive to that economic growth. We're not expanding. We're a late cycle really sensitive to that economic growth. We're not expanding. We're a late cycle. GDP, that 5% print, once again, I think is like a peak print. And so I don't think you want to be in that small cap value space. I think if anything, you'd want to think about tiptoeing more into the growthier side if rates are going to come down.

Because I do agree with what Brad is saying about long-term, these secular growth names. And a lot of these names, like a snowflake, for example, they're way off those peak numbers that we saw in 2021, but they're definitely continue to get more durable, good earnings. So I feel really strongly about you need strong economic growth for small cap value to be sustainable. I mean, a trade is one thing, but to go in there for a one, two year, I think the equal weight to me, if you want like a fat pitch or like a granny pitch for next year, if you look at the S&P 500 versus the equal weight, this is the biggest dispersion since 1998. So this year, there's about a 14% dispersion between the S&P and the equal weight.

The last time we saw that was in 1998, which you had 18%. Now, maybe next year is like a 99. I don't think so. And so that, to me, is a better way to say not growth or value, but more equal weight. So I think either the S&P can catch down or the equal weight can catch up. So that would be the way I would play going into 2024, a good kind of granny shop position is to add an equal weight into the portfolio. Okay. So the economy just expanded 5.2% in Q3. What Bryn is saying, which I agree with, is that if there's further economic

expansion, you want to own industrials, you want to own financials, cyclically sensitive businesses. My argument against that is that if the economy continues to expand from 5.2 percent GDP in Q3, then guess what? Everyone that thinks the Federal Reserve is cutting rates in 2024 is completely wrong. No one is suggesting that you're going to go from 5.2 to 5.5 or 6. It's simply maintaining strength in the economy. It doesn't have to be, and it's not expected to be, anywhere close to 5.2. The whole point is that you're going to have a soft landing. That's the bull case. While inflation comes down, the economy is going to hang in, and then it's finally going to be values year versus some of these mega cap names. OK, that's the whole argument. All right.

Not going from five, two to six. OK, so now we're talking about the economy. Now we're talking about the economy and we're saying that the economy is not going to expand. Where's it is going to expand? It just doesn't have to expand at a five percent clip. So then it's moderating from where it was in Q3. Obviously, the economy is going to moderate, but it's still going to. OK, so let's. No, no, no, no, no. If the economy moderates from five. Scott, I mean, it's simple math.

If we're moderating from 5.2%, then, yes, the Federal Reserve is sitting back in their chair. They're not doing anything. And guess where the growth comes from? The growth comes from? The growth comes from earnings. And if earnings are going to grow, then I want to own the growth stocks because that's where the strongest growth will actually occur. And we've witnessed that so far in 2023. Are you saying that if we actually have a soft landing, you don't want to be in any of those cyclical value areas like industrials,

financials. Like if they actually pull it off, you don't want to be in there? If you don't want to be in them then, when do you want to be in them? I want Russell 2000 growth before I want Russell. I want Russell growth before I want Russell value. Brynn? Yeah. Yeah.

I mean, exactly. I totally agree with Joe. I still, I feel really confident that it's too early for, I'd say, at an index level, right? The folks at Ariel are doing individual names, but at an index level, small cap value to me has risk on the downside, too much risk. I think that that small cap growth area, and once again, you're already seeing these names, certain names really separating themselves like they did once again from 2002. Past that, some of these names have durability. I think, though, that from a sector perspective, if you want to look at free cash flow yield, not free cash flow, free cash flow yield, still the two sectors that are the fat pitch for free cash flow yield are health care and energy.

And so I know energy has been unloved this year. But if you want to go with like durability, those two sectors are saying you need to own me next year. This is not meant to be a conversation specifically about small caps. It's about value doing better than growth in 2024 if we avoid the recession that some have been calling for for the better part of the last 18 months. In other words, I've got Caterpillar in front of me. That's not small cap value. However, it would fall into a cyclical camp. It's up 6% over the last 12 months versus an Apple, which is up 28 percent or a Microsoft which is up 48 percent or Amazon which is up 50 percent the question is in the year ahead if the economy is going to remain stronger than people thought is a caterpillar going to

outperform the likes of the Microsoft's or the Amazon's or the alpha or the apples which had tremendous gains this year. Yeah, I mean, I think you have to look at which companies and the industrials have exposure to China and which ones have exposure to the U.S. So that's actually where, from an industrial perspective, if you looked at the smaller names that are more U.S.-focused, because there's still so much money from the American Recovery Act that these cities have to either

they have to obligate the funds by 2024 and spend them by 2025. Those type of industrials that have U.S. focus could be a really good opportunity for next year. But if you have a lot of China exposure, which, you know, what's Caterpillar's Chinese exposure, then all of a sudden you have to think through maybe they still underperform because they have to deal with the lack of growth in China. And so I still think that's where, from an underlying perspective, you want to I think industrials that are U.S. focused to be a really good play next year. Banks are another category, right? Banks are another category which have done nothing. Why? In large part because there's been worries about what the economy is going to do. You've had an inverted yield curve for the longest maybe that we've ever had an inverted yield curve.

So the net interest margin spread is not, you know, would be advantageous to that area of the market. Again, if inflation continues to come down and the economy remains reasonably strong, why wouldn't financials do well in that environment? I'm not going to mention the words small cap anymore. Let's make this purely value versus growth. When I think of value, I think of health care, I think of energy, and I think of financials. Value and health care? I feel like the health care is like defensive. No.

Health care is a little bit of offense. Health care is a little bit of defense. It's a good mix of both. I disagree with that. I think that when I think of why financials have underperformed so far this year, I don't think it's been, I don't think the main concern, and I'll agree with you that there are concerns about the direction of where the economy might grow and loan growth and all that. But I just think the derivative effect of what we experienced in March from the regional banking stress really has been with us throughout 2023. And can those regional banks recover in 2024? Yes, they can. But what do they need? They need the Federal Reserve to step back. They need the

Federal Reserve not even talking or even considering another single rate hike. They need the Federal Reserve pivoting in their messaging and saying, OK, the economy is slowing down. The market right now is pricing in, I think, three cuts in 2024. And I'm completely, I will tell you from my perspective, I see the economy slowing. But then you get a manufacturing figure like we got today at 55 that reverses 12 months of contraction. So there's extreme distortion in the economic data. And I think dissension right now is the word to define the Federal Reserve and their communication. I think you're hearing one thing from a Federal Reserve member

and hearing something different from another. I don't necessarily think that's true either. Okay. I mean, most, if not all, that have come out have mentioned that they can be patient and that where the rates are now are good. They're comfortable with the level that rates are now, unless the data tells otherwise. And right now, the data is cooperating quite nicely, which is why almost to a person who's come out in any sort of recent history, including Waller himself recently, who even didn't throw

back on the idea of rate cuts next year. Waller was probably the most dovish communication that we've gotten from the Federal Reserve in the last several months. I'll acknowledge that. But since then, we've heard from others in the Federal Reserve who have hinted that they might not be done. Joe, who cares what they say? Who cares what they say? That's a larger question. Has the Fed chair come out and said it? So who cares? They might not be done. Look, Scott? That's a larger question. Has the Fed chair come out and said it? So who cares? They might not be done. Well, look, Scott, that's a larger question. And I've been

sitting with you for the last 18 months saying you follow the bond market if you want to know where monetary policy is going to go. And the bond market's telling you they're done. So I personally think they're done. I think they're I don't think that they're raising rates anymore. And if they are done, which I expect, then I want to own growth over value. All right. We're going to leave it there. Bryn, thank you very much. Bryn Talkington.

Joe, thanks as well. Joe Terranova. All right, let's get a check on some top stocks to watch as we head into the close. Christina Partsenevelos is here with that. Christina. Hi, Scott. Well, Discover's share is higher right now by about 5% after announcing it was exploring the sale of its student loan portfolio. The digital banking company also saying it'll stop accepting new student loans applications as of this upcoming February.

JP Morgan analyst says a sale could contribute to share buybacks, and that means higher stock prices. You can see the stock is up almost 5%. Meanwhile, shares of Pure Storage moving in the opposite direction, down about 12%. The data storage company reporting an earnings beat in revenue in line, but it's the weak revenue outlook for both the current quarter as well as the full year that has investors selling today. Pure says it's partially driven by weaker upfront revenue since they offer storage as a service, so they get the money a little bit later on. Shares down 13%. Scott?

All right, Christina, thank you. See, in just a bit, we're just getting started here. We are still awaiting the start of Tesla Cybertruck event. We're going to take you there live when that event begins. Up next, more on your 2024 playbook. JPMorgan Asset Management's Gabriela Santos is here to break down her forecast for the new year and the three key risks that could impact investors in a big way. She's here at Post 9 after the break. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back to Closing Bell.

Major averages all set to finish out November with very strong gains. S&P closing in on its best month in over a year. Joining me now, Post 9, with her outlook heading into December and the year ahead, is JPMorgan Asset Management's Gabriela Santos. Welcome back. Thank you. Are we set up pretty good? We have enough momentum to push through the end of the year?

Are we sputtering? What's the story, do you think? So I think there's been good information in November that warranted this multi-asset rally we've had in stocks, in bonds, in credit, in FX. And I think really the information there was the taking off the table of certain risks. So taking off the table the risk that inflation reaccelerates, that the Fed has further hikes to do, that gasoline prices would keep spiking, that we'd have a government shutdown, or that data wouldn't slow down enough. Well, that's a lot of risks.

Those are a lot of risks. We checked all those boxes off. It doesn't mean there aren't risks. It doesn't mean things are perfect. I think it just means that certain tail risks have been avoided. Do we have tailwinds then? In terms of the data for December, we do think so. If we think about the magic numbers we would like to see in December,

it would be for the jobs report, a little bit less, but not too much less than 200,000 jobs, about or less 0.3% average hourly earnings, and CPI that comes in between 0.2, 0.3. And then lastly, hopefully the Fed doesn't spoil the party and show zero dots looking for rate hikes from here, or at least not the majority. I mean, it sounds like you're describing shows zero dots looking for rate hikes from here. Or at least not the majority.

I mean, it sounds like you're describing what some would suggest is already here, at least based on what the data has done of late, and that's Goldilocks. Yes, and I think for us, the outlook for next year, if we kind of zoom out a bit further, the numbers we're really thinking about, it's 2024, it's 2% growth, zero recessions, 2% inflation by the end of the year, and 4% unemployment rate. That is quite a Goldilocks environment. It implies a slowdown from here, but not too much. It implies a continuation of inflation cooling, and it implies the Fed easing a bit preemptively. We had this debate at the top of our program from, you know, famed value investor says mega cap stocks are going to come down, value stocks

are going to have their moment. You guys want to show that? Let's show it real quick, because we are getting our first pictures now of this delivery in Austin of the very first Cybertruck. And as you see Elon Musk there. Phil, you want to talk about what we're witnessing here? It's two years later than expected, but nonetheless, a pretty big moment here. It is a big moment, Scott. And look, Elon Musk, they love these delivery events. It's a chance for him to say, you know what, what we do, nobody else in the auto industry does.

They have a number of their employees as well as customers who are there. He's got a fan base that is there. For them, this is their rock show. And what you're going to see, if you watch this, let's say over the next half hour or so, it's going to be vintage Elon Musk. The Cybertruck, he will tell you, is unlike anything else. It's the most boss truck in the world. It will have incredible performance, yada, yada, yada, all the things that he has said before, only he'll say it now on stage. And who knows? You know, they may do something

kooky or wacky where they show how indestructible it is in some fashion. So that's what you can expect from Elon Musk. Typically, these are kind of fun to watch, though I have to point out, every once in a while, he has an event like this, and you kind of come away going, that's it, I'm underwhelmed. Let's see what Elon we get here now. Special moments. So, but these things are rare. It's very rare that a product comes along that is seemingly impossible, that people said was impossible, that experts said was impossible. And this is one of those times. We have a car here that experts said was impossible,

that experts said would never be made. That it really is the most, I think it's our best product. I think it's the most unique thing on the road. And finally, the future will look like the future. So what we're aiming for here is something that has, that's more truck than truck. Keep your face to the light. Okay. Thanks, bro. That's literally my brother there.

So what we have here is something that is a better truck than a truck, while also being a better sports car than a sports car in the same package. So first of all let's you know they talk about how you know trucks are tough that's one of the defining characteristics of a truck. So how tough is this truck? Let's find out. So we actually had to come up with a special, ultra-strong, Tesla-designed steel alloy. So this alloy, this metal did not exist before. We needed something that you could actually manufacture, but that would have basically no corrosion, that didn't need paint, but you can still make it in volume. And part of the

reason that it has this angular shape is you can't actually stamp these body panels. The body panels would break the stamping machine. So, oh and I should say also the because of the steel exoskeleton it actually has more torsional rigidity than a sports car. It has more torsional stiffness than a McLaren P1. So that's a big deal. Now, you may remember an incident four years ago. Didn't quite go as planned.

And France, maybe we should try it again. Yeah! Yeah. Great. I mean, I think we could probably have a pro pitcher love it. It would still work. So anyway, the glass is tough, basically. That's what we're saying. So you don't have to worry about rocks hitting the glass and cracking the glass.

This glass is basically rock-proof. It also makes the car very quiet. So the thing that you'll appreciate when you drive the car is how smooth and quiet it is. It doesn't feel like a normal truck. It's smooth as silk and silent when you drive it. And yeah, so in terms of toughness. And then things like rollover. Because the center of gravity is so low, it doesn't roll over. And if you're ever in an argument with another car,

you will win. Thank you. Yeah, so... In movies, you sometimes see the hero or heroine hiding behind the car door while being shot with bullets. That doesn't actually work unless you're driving a cyber truck. So if Al Capone showed up with a Tommy gun and emptied the entire magazine into the car door,

you would still be alive. So, you know, and so people say like, well, you know, why'd you make a bulletproof? I'm like, why not? Do you want to, how tough is your truck? Because the other trucks, the bullets go through both sides. So you shoot a bullet, it goes through both sides of the car. And, you know, you just never know. the bullets go through both sides. So you shoot a bullet, it goes through both sides of the car.

And, you know, you just never know. I mean, sometimes you get these, like, late civilization vibes. You know, you never know when the apocalypse could come along at any moment. And at Kira Tesla, we have the finest in apocalypse technology. I was on the Joe Rogan show, and Joe bet me a dollar that his armor-piercing steelhead arrow would go through the car. Now, he owes me a dollar. Now, what about utility? So strength is great, but is this perhaps just a show truck? Just a show piece?

Or can it do actual work? How does it work as a real everyday truck? Well, here we have the future towing the future. So, basically, if you can fit any cargo in the trunk or in the bed, you can basically move it around. So it's got over a ton of payload capability, but you could really put more than that in it. You can tow over 11,000 pounds. And it's got a super tough composite bed, no liner needed. The bed is six foot long, four foot wide, and you can fit. We're going to stay with that live event down in Austin, as you see Tesla delivering its first ever Cybertruck. So, Phil LeBeau, he describes it, Elon Musk does, as more truck than truck while being a better sports car than a sports car.

My question to you, hyperbole of course expected, how quickly can they make these? What's the price and who's the target? Well, let's go through each of those. How quickly can they make these? What's the price and who's the target? Well, let's go through each of those. How quickly can they make these? They're going to ramp production very slowly. Stainless steel is not the easiest to work with in terms of the body panels there. So they've come out and they've said, look, do not expect full production, which is about 250,000 max capacity is the expectation annually. They don't expect to hit that until 2025. And that's if everything goes as planned. So it's going to be a very gradual ramp. In terms of pricing, we don't know that yet. I was just talking with somebody on the phone who said, I've put a reservation in. I cannot find out what the price is going to be.

We expect that we will find that out during this presentation or shortly afterwards when they hand over the first 10. And then in terms of the customer, Scott, look, the pickup truck market basically comes down to three sections. Half of it in the United States, trucks for contractors, small fleets, electricians, true work trucks. The next 30 percent is what you would call functional use trucks, people who are taking a boat to the lake or hauling something like a horse trailer. They're not necessarily working with their truck, but they use it that way. And the final 20 percent are lifestyle buyers, people who are buying a truck and driving around a tricked out truck because it makes a statement, because it's cool, because I ride up high, whatever feeling you want to get.

That's who's going to buy these at least initially. And remember, these are going to be big sellers, Southern California, Florida, parts of Texas, maybe like in Houston, areas that are already adopting EVs. That's where you're going to find the buyer, Scott. Are you going to see many of these in Kansas City, Missouri or in Des Moines, Iowa? I doubt it. You're just not. And so it'll be interesting to see how this truck is received over time.

There's no doubt that Elon Musk has succeeded with the one thing you have to do in the auto industry that many in the auto industry forget about doing. You want to make a polarizing vehicle. You want people to either love it or hate it. And that's what you get with the Cybertruck. You know, Phil, you've covered Musk for a long, long time. And I don't know that we've seen a crazier 24 hours regarding any business person that I could ever think of. And we get what I think is a full understanding about why this man captivates us the way he does. The fact that we can't take our eyes off of him because we don't know what he's going to say, evidenced by what he did with Andrew yesterday. And we can't take our eyes off of him because we don't know what he's going to make.

And that's evidenced by this revolutionary vehicle. Who else, Scott? Who else? If you'd name another automaker where you're sitting in a boardroom, you say, why don't we shoot a Tommy gun into the side of it and reference Al Capone? Anybody else in the auto industry

would sit there and say, are you nuts? Not Elon Musk. And his fans and his audience love it. He cuts through a lot of the static that is out there. And look, you may come away from this and say, the guy's a carnival showman. And yes, he makes trucks. And I don't really care for his act. That doesn't matter to him. As he said to Andrew, he doesn't care if you like him or not. What he cares about is what he thinks works. And in this case, shooting a Tommy gun into the side of the Cybertruck to show that it's bulletproof, that works. And I guarantee you this, Scott, it works in the eyes of Tesla fans. Yeah, we'll see what it does in terms of

sales. Let us know if we hear about a price. We'll keep monitoring it, of course. Phil, thank you so much. That's Phil LeBeau, who'll continue to cover that story. Come back as there's news to tell you all about. We'll keep our eyes on that video as well. As I turn back to Gabriella Santos, I'm not going to ask you to comment on that, but I will ask you to make a segue, I suppose, to tech versus value. This is one of those mega cap tech stocks, right? And it's been lumped in with that group. And it leads me back to where we began our show to begin with, the conversation about what's going to work in 24. Is it going to continue to be large cap growth tech like the Tesla and some of these other mega cap names? Or is it going to continue to be large cap growth tech like the Tesla and some of these other mega cap names? Or is it going to be a reversion back to value? What do you think?

So I think one of the, we focus a lot on macro risks and we should, and we can discuss those to the base case, but I think we shouldn't forget about portfolio risks. And one of the main ones for 2024 is this idea of concentration risk, because the truth is it hasn't even been large cap tech or large cap growth necessarily that's done very well. It's been a handful of 10 stocks that one could call within the tech complex. And you have a spread of 55 percentage points between the top 10 returns and the bottom 490. So it's a spread we haven't seen since the early days of the pandemic and before that, the dot-com bubble. That's unsustainable.

It's been unsustainable in the past. So for us, we still find positive stories within tech. And I think it's more of a story of the initial AI enthusiasm starting to spread to other companies within the tech complex, other companies that provide semiconductor equipment or cloud and software infrastructure, or have large pools of consumer data that can use large language models to sell better products,

more expensive products to their end consumer. So it's more than just a handful of companies, and it includes other sectors too. Parts of healthcare can be growthy as well very uh discounted sector after a tough year and can include value as well defensives have been one of the worst uh performing parts of the market this year and there are good stories there around utilities and around reits as well all right i appreciate you so very much being here and bearing with us as we had our breaking news event, which, as you can see, is still going on. Gabriela Santos, thanks so much. Thank you. We'll keep our eyes there at the Gigafactory down in Austin. Elon Musk, as you

just saw there, is still on the stage. In the meantime, we'll take a quick break. We'll come back and talk about more year end market action. Been a strong November for stocks, as you know, but will it be a December to remember? Wells Fargo's Chris Harvey, he breaks down the sectors he's betting on heading into the final month of 23. Back after this. We're back. Stocks are a mixed picture on this last trading day of the month. Dow hitting its high for the year. Our next guest says time to play defense as we look ahead to 2024. Joining me here post nine, Chris Harvey of Wells Fargo Securities. It's good to have you back.

People feel like playing offense now. Why are you spoiling the party? Because the VIX is at 13. Everyone's really happy and it's time for either correction or some sort of pullback as we enter the new year. You just think we're just dramatically overbought at this point? We're dramatically overbought. VIX13 tells you you know exactly the path you're gonna go down, nothing's gonna surprise you, and the market has a funny way of doing that. But what if these are sort of sowing the seeds

of a bull market that's gonna run for a little bit? So how are we gonna have a bull market? The consumer's close to being tapped out. Multiples are 20 times. The Fed, people are thinking the Fed's going to cut, but I don't think the Fed's going to cut until the second half of the year. So where's that bull market coming from? Well, I mean, are multiples really 20 times?

Are they skewed by the performance of the top 7 to 10 stocks? That's number one. I mean, evidence of Black Friday, the consumer's kind of hanging in there pretty well. Inflation continues to come down. And the economic data is pretty good. And you've got some Fed officials who are talking about possibility of cuts next year. So where's the negative story in that? So that's why you're up 20% this year.

That's not where you're going to be up 20% next year. You're going to be up 20% next year because growth somehow, someway surprises. Inflation comes down, and the Fed cuts not because things are bad, but because real rates are too high and nominal rates are too high. Well, right. Well, it's because it's the idea that they cut because they can, not because they have to.

And I've never seen that, right? They always cut because they have to. And if you think about it, the Fed has an asymmetric payoff, right? They go too soon, they bring inflation back in, they lose credibility, and they have to. And if you think about it, the Fed has an asymmetric payoff, right? They go too soon. They bring inflation back in. They lose credibility and they have inflation problems. They go later. Well, what happens? To your point, the consumer's okay. Net worth is really high. Balance sheets for corporations are good. And we're sitting on top of 20% gains. So you can take your time doing this. There's no downside or very little downside to being slow to the gain. Well, I mean, so what kind of returns are we going to get next year? Pretty much a whole lot of nothing, right? So what we think is it's a trader's market.

You want to come into the year front footed. In other words, you want to be more defensive. That gives you some optionality because if we're right and the VIX does spike and equities pull back, you've got an opportunity to move around the portfolio. Best month for bonds since the 80s. That's what we're putting in. We're talking a lot about what stocks have done, but it's the best month for bonds since the 80s.

Yeah. Yeah. It's been a fantastic year. It's been a fantastic month. You should be happy about it. And now you're given a gift. You're given an early gift. Take that to reposition the portfolio.

It's good to see you. Thanks for being here. We'll talk again soon. It's Chris Harvey, Wells Fargo Securities Head of Equity Strategy. Up next, shares of Snowflake popping. We'll tell you what's behind that move and what altimeters Brad Gerstner had to say about that cloud name earlier today. And as we head out, we do have an important programming note. Do not miss a special hour in honor of Charlie Munger this evening.

Becky Quick hosting A Life of wit and wisdom. 8 o'clock Eastern right here on CNBC. We're now in the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, the big move in Snowflake shares. That stock having its best month in three years. Julia Boorstin's got the latest on Disney as Tryon's Nelson Pelch readies for another proxy fight. Mike, I turn to you.

Almost 500 on the down. That's a lot of sales for us, a lot of UNH, but still almost 500. Yeah, and also the S&P has perked up here. You've got a little bit of manicuring at the month end. But in general, the market has really held in there better than you might have anticipated, given the 10% sprint that we had. And yeah, the Dow kind of leading the way higher by basically not having as much downside. New 52-week high there.

In general, you know, it's rotating as opposed to pulling back. We'll see if that continues. All the data have stacked up in a fashion of saying a relatively comfortable, sort of lukewarm type of economy. The not-too-hot or cold is intact. Obviously, you know, we wait for next year to see if that continues. All right. Well, Tesla shares, they're down about 1.5 percent as we speak, as that event in Austin is going on. I'm going to go back to Phil LeBeau. And we're learning more now about the pricing of this Cybertruck, Phil. We are, Scott.

And we don't know which models were delivered. My guess is these were the highest of the high-end models, the Cyber Beast, which starts at $96,390. Now, we don't know if those are the ones that were delivered today, but that would be my guess that those are the models that were there. And then you've got next up in the mid-level, you've got all-wheel drive that will, those deliveries start next year at $68,890. And then finally, starting in 2025, the base model, and this is the pricing now. Let's see if this is still the pricing in 2025 at $49,890. This is probably in

line with what most people were expecting. And again, Scott, nobody ever thought that we would see the Cybertruck start at $39,000, which is way back in the day what Elon Musk said, hey, the single motor will be $39,000. And again, this is before the $7,500 federal tax credit. So you'll be able to take that off with these vehicles. But there you go. There's the pricing, anywhere between $4,999 and $96,300. What does an F-150 go for?

I'm just curious. I don't know the answer to that question, but you probably do. You can trick out an F-150. You can trick does an F-150 go for? I'm just curious. I don't know the answer to that question, but you probably do. Oh, you can trick out an F-150. You can trick out an F-150. Look, most F-150s sell for above $50,000. I don't know where the base one starts at, but they start for well over, most people are buying an F-150 for over $50,000, probably $55,000, something in that range there. And if you really want to trick out an F-150 or, you know, a Chevy Silverado, you can do that. There are trim versions where you can really drive the price up higher. So this 96.3, that's what a lot of people thought we would see for the Cyber Beast, the top-end model. Got it. Phil, appreciate it very much. Once again,

Phil LeBeau delivering the goods as always, as he watches that event for us. Earlier today, by the way, on Halftime, Altimeter's Brad Gerstner made the case for Snowflake as an under the radar AI winner. I think they're one of the sleepers in AI. They're only a sleeper because everybody's migrated to the head of the software sphere this year with Microsoft and Amazon. But I think they'll have another excellent year next year. And remember, they're not trading at some crazy multiple of revenue. Not now. Yeah.

Right. But there was a time, remember when this company went public? And I think it was 100 times. I thought it was like 200 times sales. Yeah. Right? But there was a time. Remember when this company went public? And I think it went public at something like, I thought it was like 200 times sales. Yeah. I mean, look, and also the stock after the IPO got up to like 400. So you're going back a couple years. You had a $400 stock. Now it's around 100. And okay, I think it's eye of the beholder.

What's a crazy revenue multiple or not? He did also mention in that discussion free cash flow generation of the company. And you look at something like a free cash flow multiple, and it's like 60 on next year, but growing very fast. So there's real financials that you can kind of pitch yourself to on this. I think it's one of those companies where it absolutely has just all the tailwinds,

right place, right mix, right product. And what do you pay for it today is the whole question. Just for context, Microsoft is really rich at 40 times free cash flow right now in a world where the Nasdaq 100 in general trades for like 25. So, you know, you got to pay up for it. But customer uptake has been very strong. And they talk about this opportunity and, you know, rationalizing unstructured data. That's the A.I. play. And I think one analyst said it was up 17 fold year over year, that type of activity by their customers. So obviously everything moving in the right direction. The question is, do they still have to grow into this valuation?

All right. Then we got Disney percolating yet again. Julia Boorstin, Nelson Peltz, he's back. He's back. Nelson Peltz announcing he's seeking two or more seats on Disney's board and he will take his case directly to shareholders. Now, Tryon, which beneficially owns approximately $3 billion of stock in Disney, saying that the addition of James Gorman and Sir Jeremy Derrick to the board, quote, will not, in our view, restore investor confidence or address the root cause behind the significant value destruction and missteps that this board has overseen. Disney is responding, saying that Gorman and DeRocque's appointments reflect a focus on strategic growth initiatives, the succession planning process and increasing shareholder value. Disney also flagging that Ike Perlmutter owns 78 percent of the shares that Peltz claims beneficial ownership of.

Warning, quote, Mr. Perlmutter was terminated from his employment by Disney earlier this year and has voiced his longstanding personal agenda against Disney CEO Robert A. Iger. Scott, this is going to be an interesting one to watch. The window opens for nominations for the board on Tuesday. Yeah. All right, Julia, thank you. We'll continue to follow this one. We'll see what happens this time. As you know, from my source telling me, it's very likely going to be more than two. He's going to try and ask. He's going to try and get. Yeah. No, I'm sure of that. I mean, again, though, we're talking about kind of speaking for like 2% of the outstanding shares. They did just add to the board.

So it creates a little more of a sense that there's motion here. It'll be tough to get shareholders to have it happen. But, you know, if the stock works, you know, in the absence of any move on the board, I don't think anyone's going to mind that either, which is what happened the last time. Let's talk more about this market with 45 seconds to go, because Dow's good for about 525. As Mike was saying, the S&P picking up a little bit, too, which is good for about 19. We're having the last day of November ramp in what's been the best month in about a year

and a half. Yeah, just massive. It really looks like almost a completed V on the chart from the July high to now. Did you steal from the December rally? That's a big question. Statistically, it doesn't usually happen that way. But definitely going out in pretty good shape, even with breath looking better in the last couple of weeks. All right. There's the bell. The Bulls don't want any more drama in this market. As Mary J. Blige rings the closing bell, Dennis Leary's brother lighting a tree outside tonight, too. I'll see you tomorrow. Morgan and John, take it up at OT.