Closing Bell - Closing Bell: DoubleLine’s Jeffrey Gundlach on the Fed Decision 11/1/23

Episode Date: November 1, 2023

Bond King Jeffrey Gundlach gives his first, exclusive reaction to the Fed and Jay Powell’s press conference. Plus, he explains why he believes we have started a bond rally. Plus, Ritholtz Wealth Management’s Josh Brown breaks down Gundlach’s big market calls. And, Qualcomm results are set to be released after the bell. We have a rundown of what to watch when those numbers hit.

You're listening to Closing Bell in Progress. Welcome to Closing Bell. I'm Scott Wapner here at the New York Stock Exchange. That was Fed Chair Powell after the second pause meeting in a row. No hiking of interest rates, exactly what the market was expecting, of course, with the real question heading into today, what comes next? In terms of on that note, the statement was very similar to the past one, which led to the pause.

Chair Powell saying inflation has moderated but remains well above the target of 2 percent. Getting there, quote, in his words, has a long way to go. Economy expanding at a strong pace above expectations, but that the full effect of policy tightening has yet to be felt. Said there will proceed carefully, said that at least a few times. We'll make meeting by meeting decisions. We'll have Jeffrey Gundlach, of course, of DoubleLine, as we always do, exclusively coming up in just a moment. In the meantime, let's bring in Josh Brown of Ritholtz Wealth Management. He's also a CNBC contributor here with us on set. Nice move in stocks. Nice drop in yields. You think that's on the idea that they're done? Yeah, I think the reaction in stocks started off as muted.

There's actually only one sector that's in the red right now. Outperforming sectors are a little bit of a mixed bag. I can't really tell a great story about this. Maybe Santoli can come up with it. Tech, utilities, communications all up more than 1%. I think a lot of what we're seeing here, though, is just the fact that there is no new news. Art Cashin had a note out relatively quickly once we all saw the statement. He mentions the fact that even the

periods and the commas are in the same place. There's not a lot here. And in the absence of not a lot, markets can rally. It's one less thing that we have to worry about. And I think that that was really key. Last thing I would mention, all of the action, the meaningful action, let's say, is in the belly of the curve. The two, the three, the five and seven year treasury all have down double digits. But when you look at the short end, it's flat. You look at the long end, it's flat. I thought that was maybe somewhat notable. What's the reason behind that? I asked my research team. They said positioning and hung up on me. Yeah. The 10-year note, you'll just look at it at 477. That really came down today with the Treasury refunding announcement. Some of the economic data was weaker. We'll ask the legendary bond investor Jeffrey Gundlach about all of that. He does join us right now exclusively to react.

The CEO, CIO, co-founder of Double Line Capital. Jeffrey, it's a pleasure to have you here on Fed Day as always. Yes, Judge, good to be back for Fed Day. Not a lot of, Josh is right, not a lot of news today. It's almost a direct repeat of the last meeting, you know, carefully. He said that very early on and repeated it. I think the market likes carefully. So stocks rallying bonds, obviously rallying to or down now about 25 basis points. But also, you know, he said they're not even talking about cutting interest rates. They're not even having a discussion about it. And yet at the same time, he's not confident that they're sufficiently restrictive. So the door was left pretty much wide open for future

flexibility at meetings. And, you know, the yield curve is completely flat. So it's kind of in the same mode, I think, that the Fed's tone was, that Jay Powell's tone was. And that's a reason why you can rally after this brutal sell-off in long rates over the past two, three months. I'm glad you went there because the words may have been nearly identical. The statement, certainly, as you said, was nearly identical. What's not identical to the last meeting is the move in interest rates. Ten-year yield was 434, Jeffrey, at the time of the last decision. We've been talking about 5 percent, certainly more recently closer to 434, Jeffrey, at the time of the last decision. We've been talking about 5 percent, certainly more recently closer to 4.9 percent, though you see the drop having today.

And he does acknowledge the tighter financial conditions existing and the impact that that is having overall. So they clearly have been moved by the fact that the bond market's done a lot of work for them. I think that's right. The higher for longer concept has a really dark underbelly to it that I think has affected the bond market over the past six or eight weeks. And that is that the interest expense on our debt is going up by hundreds of billions of dollars. And it goes up every day that the Fed funds rate stays at 5.3%. And if the Fed's going to raise rates a little bit more, which seems less certain than it was, say, perhaps the last dot plot, well, then we're going to have a lot of interest

expense. In fact, 50% of the Treasury's supply in the public Treasuries mature in the next three years. And so if rates stay at these levels, we're going to have an interest expense that goes up to $2 trillion on the federal debt. And that's what the deficit is today, is about $2 trillion. So we have this tremendous pressure caused by the Fed staying higher for longer. And I really think that the narrative is changing. I see it almost on a day-to-day basis

now that people are realizing that this interest expense problem is starting to come home very quickly. In fact, if we have a deficit that's 6% of GDP or 8% of GDP in that range, which is the range we've been in, we will have interest expense that will be 50% of tax receipts in five years. And obviously, that's a really big problem. So one thing that the market has to confront is we cannot sustain these interest rates and this deficit any longer. In fact, I've started to refer to our debt problem and interest sense problem using the nuclear defense condition, the DEFCON. You know, if you're at DEFCON 5, everything's fine. But I think we're at DEFCON 3 now.

And I think we're about to go to DEFCON 2 on this situation. Because if you look at the debtclock.org website, they show that we have $211 trillion of unfunded liabilities in the United States. And they also calculate that we have $219 trillion of assets, corporate assets, household assets, small business assets. In other words, our unfunded liabilities are virtually identical to all of our assets. And I just get this feeling that if the liabilities, if the assets, if the liabilities get bigger than the assets, well, that's kind of like you're running a hedge fund and you're about to get margin called. It would mean that all of the obligations that we've made, we can't even, if we sold everything at today's prices, we can just barely cover them right now.

It's almost like we're the equity holder back before the global financial crisis in a CDO squared type of financing scheme that ended up causing parts of the global financial crisis. We need interest rates to come down or we need the deficit to come down, and neither of those are happening. With the Fed higher for longer and with these wars that we are intent on funding, I hear the words blank check. We're on a collision course with this DEFCON going to DEFCON 2, and I believe that we've started a bond rally here. I think we've had such a brutal increase. I think the Fed is sounding the right tone. I do think rates are going to fall as we move into a recession in the first part of next year. And I also think that

based on an inflation model, that the CPI is likely to come down on a headline basis anyway. If we have the current commodity and energy structure in place, which seems to be relatively stable, it should come down to about 2.5% by, say, spring or early summer of next year. So I think rates can fall in the backdrop of inflation being calm and the economy weakening. Rates can fall, but then I think the response, and this is my bigger picture view,

which is extremely important. I think we've started a bond rally. But once the reaction comes to the recession, we're going to have an absolute DEFCON 2, maybe head to DEFCON 1 situation on our interest expense, because I think interest rates are going to start going up because of the inflationary response that will be put in place to Quebec the next recession. Go ahead. I'm sorry. No, it's OK, because you, in some respects, echo the likes of the legendary investor Stan Druckenmiller, who was on the network this morning, who most recently said that he had bought a massive position in the two year and was talking about exactly the types of things that you're looking out.

The longer term charts of funding the deficit, in his words, were downright scary. So he seems to be aligned with with your point of view. And I'm going to come back to you and I'm going to come back to stand in a moment. But I want to get to Steve Leisman, Jeffrey, who's come out of the room. Steve, the biggest surprise to you was what? It's it's clear to everybody. And he was explicit in his own words. Jay Powell was in this move in interest rates. What the bond market has done that he doesn't have to do.

I mentioned where they were, rates were on the last meeting, 434. We've been talking 49 of late. So that's had a dramatic impact, hasn't it? Yeah, it has, Scott. And I want to go back to what I said on your show at noon, which is I thought there was a risk that Chair Powell would use this meeting to redirect the market towards the possibility of another rate hike. He chose, I think, not to. He said there's still a bias to hike, but he didn't sound incredibly excited about that bias. He seemed willing to sort of say, you know what, yeah, we're still thinking about whether or not we ought to hike again, so that's where the bias is.

But he didn't rely, as he has in the the past on the September forecast that called for an additional hike this year beyond what they've already done and I think it's really interesting what Mr. Gundlach is saying right there because where we are right now on the 10-year Scott is we've kind of wiped out the increase in yields that we had since the very important moment on October 17th when we had that really strong retail sales report. So at least in the 10 year that's gone. And I think where we're at, the idea that Jeff is saying that this is a possibility of a bond rally, what I think one of the things the bond market has been waiting for is an all clear signal from the Fed that at least there's not going to be additional

hikes. And we can get into Jeff's very interesting comments about whether or not the Fed actually needs to cut because of the deficit reasons. But I will say the Fed will at first not do any of that stuff until it feels secure on inflation. But that being said, the idea that the bond market has rallied to this point where it doesn't have quite a green light, but it's not like afraid of an instant or all of a sudden red light anymore. It's really yellow going to green when it comes to getting the go signal from the Fed that at least there isn't this very strong bias to hike again. I think that was an important change in the chair's tone today. Even so, Steve, it's striking to me that here we are some 18 months into this regime

of hiking interest rates, you know, a historic move, right? 525 basis points in nearly 18 months. And today the Fed chair is still unable to answer the question of whether they are sufficiently restrictive. He can say they're restrictive, which he did numerous times, but he cannot say that they're sufficiently restrictive, which to me is just incredible, given what they've done in the reasonably short time that they've done it. Yeah, I mean, Scott, they're trying to thread a needle here. They're trying to do get a soft landing here, not have a recession if they can get away with not having one. Growth has been way more resilient than any private sector or government sector economist has forecast. Unemployment has remained lower than people had forecast. The rebound from the pandemic has essentially defied most economic models.

And I think it's fair to say, you know what, this is a very uncertain time. What he's trying to do is keep Jeff from being too happy. He doesn't want to have a bright green signal that you can go ahead and start buying that short end of the coupon curve there, the two-year note, to bring down. I think he's – let me just say it this way, Scott. He's happy with the way the yield curve is right now in terms of the 10-year being more restrictive, but I don't think he wants to own it. He doesn't want to be responsible for the 10-year being here, there, or there. He's happy that it's more restrictive. He doesn't want to necessarily get in the way of the market pricing it the way it's going to price it.

Yeah, appreciate that, Steve. Thank you, as always, Steve Leisman, senior economics reporter. Back to Jeffrey Gundlach. Jeff, do you want to react to what Steve Leisman just told us? Yeah, I think he's right on. I mean, I think that somehow the tone seems to have changed. I feel like there's a good probability that in December, when we get dot plots, I have a feeling they're not going to be as aggressive as the current dot plot. And I also think that the shape of the yield curve is extremely unstable at this point in time.

We have an absolute flat as a pancake yield curve. We had that inverted yield curve of 108 basis points, twos to tens. That's basically completely gone. This is the classic action that one gets prior to recessions. You get a yield curve that inverts, and people talk a lot about it, and it gets very inverted, but it hangs out there for a long time. One point that I've been trying to mentor the young people in the investment business is everything takes much longer than you think it's going to. The yield curve inverts and everybody

says, oh, we're on recession watch. No, you're not. It has to be inverted for like a year, a year and a half, but that's already happened. And then it has to de-invert, and that has now happened. We also have the unemployment rate. While low, it is now noticeably trending higher and it's above its 12-month moving average and it's about to go above its three-year moving average in the first half of next year. That's very recessionary. We also have consumer confidence that has started to deteriorate in terms of people's view of the present. And that's starting to close the gap between the always cautious view of the future and the view of the present. These are very recessionary signals. And so I really believe that layoffs are coming.

I think we've seen hours come down. We've seen hiring freezes. And now we're starting to see layoff announcements, not en masse, but they're out there in financial firms and technology firms. And I believe that's going to spread. So I really believe that we're going to get this bond rally. I think the short end is going to come down. And I hope it happens sooner rather than later, because we can't afford this government that we're running at today's interest rate level. It's completely unsustainable. And I always seem to agree with Stan. We seem to have that same sort of Eeyore mentality about analyzing the government's finances.

I mean, you've used words like exciting of late when talking about what it's like to be a bond investor that you can quote buy a T-bill and chill. Now you have liked the longer end at periods not that long ago, right? The 30 year. But are you saying that the best the best way to play this now is to buy the short end? I think you can buy the entire yield curve at this point. I think the belly will out will outperform. I think the long end will do very well on a price basis, but it might not have as many basis points of a decline. But where the excitement really is in the bond market is in two and three year lived credit, where if we buy consumer receivables like credit card receivables, or we buy certain commercial real estate, say hotels and hospitality and leisure, forget about office. We're talking about getting yields of 7.5%, 8%, even 8.5%

without really any concern about defaults because the short end is so high and you're pricing these on a spread above the two-year treasury, which is up at 5%. And so if you can get a spread of 200 basis points, which is doable, you're talking about yields of 8% with very, very little risk. And so as I've been talking about really for several months, if not quarters, the returns available on a risk-adjusted basis in a mix of credit on the short end of the market, and then you can sleep at night because you own some recession protection that will come in handy, I think, in the first half of next year by owning the long end. So you have a combination of things.

And so it's very easy to get yields. If you go to closed-end funds, which are now in a seasonally weak period because there's tax loss selling, and so they're trading at substantial discounts, net asset values, you can get prices of a lot of these credits that are in these clothes and funds are down at fifty sixty seventy cents on the dollar so even if you get a recession and you have defaults who cares if you buy a bond at par you've got to worry about credit defaults but if that bond due to interest rate increases is trading at sixty five cents on the dollar who cares if 30% of them default and return nothing in terms of recovery value? You'll still get 70 on your cost

of 65. So you're getting carry of double digits with very high probability of profits over a multi-quarter time frame. I'm almost hearing you also suggest, I'm sorry to interrupt you, Jeffrey, that, you know, that the equity market can do well in the reasonably near term, because if rates are going to come down, recession still pushed off far enough. As you said, things take a while to happen. The Fed may not go again anytime soon, if at all. Do you have a view on the equity market? Well, I've been negative on the equity market for several months, but just a couple of days ago, I observed that the S&P 500 has fallen all the way down to its trend line from the low in 2020 up through the low between now and then, if you just connect those low points. And the S&P 500 came down and met that trend line this week. And we're sitting right on it.

So with this relaxation in bond yields, which has obviously been a problem for the stock market, and this trade location on the S&P 500, I certainly think that this would be a poor trade location to be a seller. Interesting. Josh Brown sitting next to me has to advise his clients on what the best strategies are. He has a question for you, Jeffrey. Hey, Jeff, thanks so much for your commentary today. I appreciate it. I wanted to ask you, given that in the post-pandemic period, so many surprising things have happened, so many outcomes that nobody could have predicted because of how unique this environment is. What if higher for longer ends up serving actually as stimulus for the 20 percent of wealthy households that are now earning tons of money on their cash?

Don't really care what a mortgage rate is because they own their home. Is that a situation where the wealthy continue to spend, thereby negating what would normally happen with hire for longer? And one other thing to throw into the mix, if unemployment rate starts to climb, as you suggest, couldn't that also perversely be stimulative? Think about how great that would be for all of the employers who have been dying based on all of these salary increases and minimum wage hikes. Isn't it? Couldn't we have this situation where actually hire for longer is better? Higher unemployment is healthier. And actually, that ends up prolonging the economic cycle and not ending it. I don't know, Josh. I mean, there's some logic to that.

I think that the wealthy people, they have savings. They have wealth, by definition. And so them getting a higher interest rate of 6% instead of 2%, I'm not really sure that motivates spending exactly. I think it just makes them wealthier. So I don't really know about that. I just think that all of those unusual things that happened that you correctly point out, I think when you drop $4.5 trillion of free money into an economy, one should not be careful about predicting that's going to have outsized consequences. So what I think everybody missed here is what we had initially with all that stimulus was a massive boom in consumption of durables and that sort of the manufacturing part of the economy. And then what people missed is it then turned into a services economy because there was all this pent up demand for services and travel and leisure and all that stuff. And I feel like that's wearing off at this point in time.

And so I'm not really sure that those conditions are going to endure much longer. And again, I say hire for longer. I'm going to go back to my number one point that I started this segment on, and that is hire for longer means we have a massive interest expense problem, a massive interest expense problem in this country that is going to be, I believe, the next financial crisis. And so that's what I'm more focused on rather than some some, you know, Scrooge McDuck having more money in his vault. What about the idea of cash being king? I've had people come on, you know, the network this week and suggest that that is actually the best place to be. That's where the lowest amount of risk is right now. What amount of cash would you have in a portfolio now?

I don't like cash because I think that your interest rate, which is very attractive presently, may decline quite substantially next year. So I would rather be in something that's about two to three years. So at least you're getting that yield that I talked about around 8%. At least you're going to get that for more than six months. T-bill and chill. You can buy the six-month T-bill and get five and a half and spend that way for a long time now. The rate is no longer going higher. It's now starting to potentially decline. So I don't think you want to be in cash. The shape of the yield curve suggests that the 2024 will see the Fed cut rates by about 50 or maybe 60 basis points or maybe five-eighths of a percent. That's the one thing that I think will not happen. I think that either

there are going to be rates will stay high for longer which is not my base case by acknowledge that's a possibility but if the economy rolls over so i expect the fed is not going to cut rates fifty basis points they're going to cut rates two hundred basis points and that's what's wrong with the cash strategy you know the other thing i heard the chair say today that that i frankly don't recall him saying certainly not at uh... at a meeting,

was when he was addressing the idea of what the backup in rates has done, where financial conditions have gone. He said they're attentive to all of that. He did mention a stronger dollar being an influence on future rate decisions. And you know what else he said, Jeffrey, which sort of struck me at that moment? Lower equity prices. He actually brought that into the mix today as being a thing that could influence their future rate decisions, that if something happened in the stock market, that could be a powerful influence for the Fed.

What's your take on that? Well, what's new here? I mean, that's always the case. Remember 2018, where we had that bear market in the fourth quarter of 2018, because the Fed said that they were on autopilot for raising rates and doing quantitative tightening. And the stock market dropped 20 percent in like four or five weeks. The junk bond market seized up. There was no issuance for weeks on end. And suddenly the Fed started cutting rates and abandoned all of their rhetoric. So I believe deeply that when the recession comes, you're going to see a bond rally. It may be a company with a stock rally initially, but they're going to reverse because

of the policies. And then we'll see what happens when the stock market starts to drop in earnest with what would be surprisingly potentially a weak economy with rising bond yields after their initial decline. You also talked about oil prices being a, quote, real problem, that they would perhaps influence more hawkishly the Fed to react if they, you know, obviously took off higher. Are you surprised by the stability in oil prices even as we have a major war in the Middle East? I think everyone should be surprised a little prices are down your eighty uh... you would think that there would be significant uh...

you know shock problems with that that that war danger and it's obviously going to be expanding but i think what you're saying is the demand just isn't really that strong uh... europe isn't doing all that well the the Oil prices are down because the economy is slowing down. And so I do think that's a wild card. Oil could very definitely go higher on the wrong outcome in the Middle East. But for now, the commodity complex is completely asleep.

Oil included, where the Bloomberg Commodity Index continues to gently drift lower, still below its 200-day moving average, which continues to decline. So that's just another indicator, I think, of less economic strength than we saw, say, in the GDP number that just came out with a four-handle. I noticed the GDP now today from the Atlanta Fed was cut from 2.3 percent to 1.2 percent for the current quarter because of the very bad ISM report that came out today that I think really is a further corroboration of this economic slowdown that I think is going to be building steam in the months ahead. So let's look at the 10 year before I let you go. As we have this conversation here, 475 is where we are. Given your economic projection, what you think happens going

forward with the Fed, if you think they're done, the end of next year, do we have a two-handle on the 10-year, the three-handle, two-handle? What is the 10-year at the end of next year, do you think? That's way too far out to forecast, but I'm going to say that the 10-year Treasury will probably be not terribly different from where it is today at the end of next year. I think we'll go into a two-handle first, but then it's going to start rising. So this is an active situation. So for now, bonds, I think, are in a good spot. I think the 10-year will see below 450 before we see above 5%. And the 10-year Treasury has not closed above 5% in this cycle. It was right on it, but it never closed above it. I think we're headed to the lower fours before we head

back up to where we are or a little bit higher than we are today at the end of next year. But don't hold me to that, Judge. I have to deal with the next two months here to close out this year before I worry about 2024. You know, I was going to preface that question with I know you hate this question, but we love the question. But I didn't feel like saying that even though I knew you hated it. But it is what it is. I may ask you again sometime. But, you know, we're all good. I will. I appreciate you. I appreciate you joining us as always, Jeffrey, exclusively here on Closing Bell right after the Fed chair finishes. We'll see you next meeting. You betcha. One more to go for 2023. Good luck, everybody. Yep. You as well. That's Jeffrey Gunlock of DoubleLine. All right,

Josh, I'll come back to you. You know, the idea, look, even it says it himself, I wouldn't be a seller necessarily of stocks here, although he obviously favors and he's a bond guy and he has a specific trade and the best way to play it. Yeah. And I don't think you have to choose. You know, one of the one of the things to keep in mind in 2022, there was nowhere to hide. You lost money on cash relative to inflation. You got killed in bonds down 17% in the highest quality bonds you could have bought. And you got crushed in the stock market down like 18%, 19%. In that environment, there was a lot of talk about, well, there's nowhere to hide.

In this particular moment, it's the exact opposite. You can buy stocks at depressed, it's the exact opposite. You can buy stocks at depressed multiples away from the magnificent seven. You can buy stocks at historically average multiples. Then you can also look at the bond market for the 40 portion of your portfolio or the 30. And you have a lot of choice. You can choose. Do I want to take a little bit more credit risk? Jeff's talking about leveraged closed-end funds. Great idea if you have the wherewithal. You can buy high-quality, take no credit risk, all-term risk.

There are so many options right now. You can construct a portfolio depending on how you sleep at night, which risks you want to take. We didn't have these choices even as recently as one year ago. And I think from that standpoint, you may not love a VIX at 18, 19, but you have to love the forward looking outlook. To Jeff's point, even if there is a recession, you are being adequately compensated in certain vehicles right now for that risk, even if the faults tick up, which, by the way, I'm still waiting for it, hasn't happened yet. So that's where we are. And I totally agree with his premise from that standpoint.

So are you, you know, again, let's turn our eyes ahead tomorrow. Apple earnings. Oh, yeah. Yeah. Mega cap is all rallying today. NASDAQ is by far the strongest area of the market today. It's up one and a half percent. You see all of those stocks, Tesla included, which has gotten crushed lately. What are your expectations here? Is the table now set for a mega cap move because rates are coming down? So I'm usually the guy that pours cold water on this idea that any given earnings report is going to be really important. I actually think this is going to be really, I think Apple is going to set the tone for whether

or not we can have a meaningful large cap tech rally into year end. And if we don't get a meaningful large cap tech rally into year end, I don't think there's enough leadership elsewhere to really move the chains for the S&P 500. Apple, importantly, this is the first real quarter where they'll be able to talk about the phone, pre-orders of the phone, actual sales of the phone. They also did something really interesting. The first ever primetime announcement of a new product lineup. It was more about the laptops, the MacBook, but so what? I think that the setup is nice for Apple. It's probably in a 10% drawdown right now from the all-time high.

Not huge expectations. A lot of new products coming along. I like the trade into year-end here. I think you're going to be okay with Apple going in. Yeah, we're looking forward to tomorrow. Obviously, you stay with us. We're now in the closing bell market zone as well. CNBC Senior Markets Commentator Mike Santoli is with us to break down the crucial moments of the trading day. Christina Partsinoval is looking ahead to Qualcomm earnings. They are in OT. Mike, great to have you. Your thoughts? You know, we spoke in the middle of the day, Scott, about the question on Powell's press conference was, is he going to be really strident about trying to put another hike in

people's minds for December and also very assertive about saying that we really have to wrestle economic growth to the ground to take care of inflation. He sidestepped almost every opportunity to be very dogmatic about either of those points. So December, they want to be done. They think they can be done. They can't say they're done. But all but said, you know, let's just wait and see. And patience is a virtue at this level. That's fine. I think it was sort of the third thing this week, all these anticipated events that maybe the market was seeing as hazards, that it came out in a benign fashion, right? Both the Treasury announcements so far, as well as this one. So yields finally down below 4.8 on the 10-year. That's a big deal. Never got below that last week. We'll see if it really does continue into a genuine breakdown in

yields. And then, you know, the stock market was already finding a little bit of traction in the past couple of days. And now this was enough of a window to see if it can stick to be a little more than a mechanical oversold bounce. And we'll see. Honestly, I mean, the S&P is only back to where it was last Tuesday. We're not breaking new ground. But the last meeting, when he was in September, September 20th Fed meeting, we're at 44.50 in the S&P. The VIX is 15. And 10-year Treasury was 50 basis points lower. So all those things meant we're tied to financial conditions now. He didn't really feel like he needed to put people in a worse mood. They proceed carefully, right, which he's used now for

a couple of meetings in a row. And he used those words multiple times. To me, that's code for we're done if the data allows us to be done. Yeah, exactly. Prolonged pause, whatever you want to call it. Now, he did also say there's nothing stopping us from staying here and then hiking down the road, which, of course, is true. Of course, he's going to say. And I think it's fine. I think everybody can live with that at this point if market treasury yields don't start to fly. Right. He doesn't want to he doesn't want to pile on top of a significant move that you mentioned, 50 basis points since the last meeting. He doesn't want to pile on top of a big move in rates

and cause undue harm where he doesn't have to do it. That's right. Yeah. And so that's where we are. I mean, look, it's not like all the economically cyclical stocks started to rip on this because the economy is off to the races. It is just the big NASDAQ names. It really is just, you know, the indexes.

We should mention, though, Mike, the post-earnings reactions are now improving. Yeah. So most of the quarter, didn't matter if you beat or missed, you were getting punished. That turned with Amazon, how I feel about this, AMD yesterday, amazing follow through to actually a miss on guidance. Yeah, good point. That's a better tone when you get those post earnings. I mean, it's been a minefield. So everything kind of got beat up ahead of this week's earnings. And yeah, so find some kind of equilibrium and just survive this earnings season, I think, is the job. Even though,

as Pisani was saying today in his note that he sent out this morning, you know, earnings estimates for the fourth quarter coming down. You know, 60% of the companies that have reported thus far have had their estimates cut. Let's not lose sight of that as well. It happens. It's been happening every quarter. So you're kind of going down three or four percentage points in growth. And guess what happens? We beat by three or four percentage points when you report.

So I'm not saying this to be dismissed because we are only one month into the quarter. But I do think that it's not completely out of the realm of what we've seen as a pattern. No, I only bring it up because part of the bullish story moving forward is that earnings estimates remain stout and strong and you're all good. You don't have to start. You're all good. I mean, look, there's a lot riding on the first and second quarter. We'll get there when we get there.

All right. So I mentioned Apple's tomorrow. Qualcomm's today. Christina Partinovalos with a look at what we should expect here. Christina. Yeah, well, global smartphone sales actually fell 8% in Q3, and that's the lowest level in a decade,

according to CounterPoint Research. So that slowdown is expected to weigh on Qualcomm's latest earnings report. And while the stock has been down about 15.5% just over the last three months or so, interest rates obviously play a role too. But handset sales are expected to hit over $5 billion in the quarter, helped by a contract from Apple. In early September, we did learn that Qualcomm signed a three-year deal to supply Apple with

chips. That deal is really a testament to Qualcomm's product offering, if even Apple can't replicate the chips. However, Deutsche Bank analysts think this benefit is already priced into the stock. Much like we're seeing with PC sales, investors will be looking for signs of a smartphone bottom, along with details on demand strength from China, including any rush Android orders ahead of the holiday season. One area of concern, though, could be the auto segment, given the weakness we've seen from other chip makers like OnSemi, who warned of an EV slowdown in q4 much like amd's earnings call though expect qualcomm to probably hype up its ai products for the edge which means smartphones pcs and local computers but keep in mind that revenue ramp is not expected until at least 2024. guys christina

appreciate it very much we'll see you in ot it's it's funny you know christina mentions amd you've just bought amd uh within the last couple of days before the number, which is something you don't normally do. And here you go from a report and a slide to a near 10% jump today. So this is a really interesting reaction. And one of the comments that I made, presciently, I didn't realize it at the time. Yes, the numbers matter. More important is the sentiment around the MI300 chip. And that's exactly how things played out. You actually got a sell off in the stock because they disappointed on guidance. Fifteen analysts on Wall Street caught their price targets immediately following the report,

even though the average price target is still 30 percent higher than where it was trading. But then all of a sudden, the commentary around the chip, the guy from KeyBank is talking about the December 6th launch. That's going to be key for the stock. I agree with that. They're talking about a TAM of $100 billion and AMD potentially getting between 10% and 20% of that.

That trumped the numbers themselves. And that's what we saw happen today. All right, good stuff. And great having you here in the house on this Fed Day. So perfect. Mike, last words go to you. We'll see what kind of follow-through we get. You know, this can change quickly, as we've learned from several meetings past. Yeah, you know,

we bounced off 4,100. I mean, Apple certainly matters index-wise tomorrow. You probably have people a little hesitant to go out on a limb before you get that number. We also got the Atlanta Fed at 1.2 percent%. First estimate for the fourth quarter. So we're still racing for a slowdown, but we'll see what it really means. All right, great stuff, guys. Thank you so much. Thanks to all of you as well.

See you back here tomorrow.