Closing Bell - Closing Bell: Eli Lilly Expansion, Bitcoin & Leveling the Playing Yield 12/4/24

Episode Date: December 4, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

All right, guys, thanks so much. Welcome to Closing Bell. I'm Scott Wobner live from Post 9 here at the New York Stock Exchange. This make or break hour begins with a record high repeat as the S&P and now Nasdaq hit new milestones today. We'll ask our experts over this final stretch how far this bull market can really run. In the meantime, we'll show you the scorecard here with 60 minutes to go in regulation. It is green across the board. Tech is leading after Salesforce and Okta earnings beat. Those stocks are surging. NASDAQ is the leader today. Look at that. Salesforce good for 9%. Okta better than 5%. Meta, Apple, Amazon all hitting new highs as the mega caps continue their resurgence today. Elsewhere, a big slide for Foot Locker. After its earnings and guidance mis-expectations, that stock down almost 10%. It does take us to our talk of the tape today.

Where to position for another leg higher in stocks? Let's ask Adam Parker, Trivariant founder and CEO and a CNBC contributor with me once again at Post 9. Good to see you. Welcome back. Great to see you. You feel pretty good about where this market is? I mean, the momentum seems kind of clear and obvious at this point, right? Yeah, yeah, it does. I think most of the people I talk to are just worried about a rotation, whether it's the inauguration in late January, whether it's Jan 1 or could somehow creep into the second half of December. A rotation, what do you mean? Just kind of a switch of leadership, you know, maybe kind of a new winner, new loser.

I mean, look, all of us can say there's stocks that are up a lot that maybe shouldn't be. There's stocks that are up a lot that maybe I can kind of see why they are. And then same thing, there's some that are down a lot. You're like, really? I'm not sure they should be down. And then others that are down, you know, Foot Locker, like, are you sure? Physical retailers, of course they should be down. Target, you know. You've been negative, you know, physical retailers for as long as we've been having these conversations. Yeah. Yeah. That, like, we like Amazon and Walmart, we don't like physical retailers call. Yeah. It's obvious, but over time it just keeps working. And I think it's, you know, Target's been a really bad stock for several years.

Coals, dollars, other. I think they're still in trouble. Do you think we're in the early stages of a prolonged bull market, prolonged even further by the election of Donald Trump? No, I don't think so. I mean, we've been in bull market for a long time already, right? Two years. Yeah, yeah, two and a change. Yeah, well, two slash 15, depending if you take COVID out, right? I mean, you know, whatever.

It's been, it's been a good year. Well, I mean, you had the rate hikes. So I think the biggest risk, and I think the bull probability is still higher than the bear. I still think it makes sense to, you know, keep risk on. But the biggest negatives I see are it makes sense to keep risk on. But the biggest

negatives I see are there's no question the Fed path looks less accommodative than it did a few months ago, right? Like you could get a strong jobs report later this week and they could have a hawkish set of commentary. And I think three months ago, everyone's like, oh, eight, 10 cuts are coming. We're not getting that many cuts. But like the Fed chair was just talking with Andrew at Dealbook. I don't know if you had a chance to check out the conversation. We're not getting that many cuts, but the Fed chair was just talking with Andrew at Dealbook. I don't know if you had a chance to check out the conversation. You're making your way down to visit with us.

He said, economy, remarkably good shape, stronger than we thought it would be in September, labor markets better, downside risks appear to be less, inflation coming in a little higher, and therefore he addressed where he thinks policy can be. Let's just listen to the Fed chair because he doesn't do this that often, and I thought his comments were pretty interesting. The economy is strong, and it's stronger than we thought it was going to be in September. So the labor market is better, and the downside risks appear to be less in the labor market. Growth is definitely stronger than we thought, and inflation is coming a little higher. So the good news is that we can afford to be a little more cautious as we try to find neutral. I mean, the takeaway from that is, in other words, we're in no rush, right?

We're in no rush to cut, but we know cuts are coming, right? And then when he overlays the fact that the economy is in remarkably good shape, stronger than we thought, labor market's better, inflation. But are you asking me to articulate what the bear case is or what my view is? In other words, I think the bear case would be the Fed. We want to we want to we want to fight the Fed until we think they're halfway or two thirds the way done. And then we got to say, hey, look, last cycle we got bullish, even though they were still hiking because we saw it was close to the end.

So if that same logic applies on the other side, you could say, well, once we're two-thirds of the way done, I got to say there's less in front of me. And I could see people saying, hey, we're closer to the end of the accommodation cycle than I thought. That'd be one risk. If inflation's running hotter, we talk about it all the time. But the number one thing that matters to stocks, in my opinion, is gross margins go up. And a lot of companies, particularly smaller ones, can't handle rising CPI. It's bad for their margins. So that's the mega cap trade. The only last thing I'd say that's a little inconsistent to what Powell said is the 10-year yield the last couple of weeks, right? Where if growth's good and 10-year yield backs up to 4.7

and now growth's good and it backs up, we're going to 4.1, which one is it? So I think the market's up today because growth is good. Growth is good. That's, you know, people think growth's good, but it's not. Being good doesn't mean that yields have to back up again. Why does it mean that? Well, you can't both be, it doesn't, but you can't both be bullish that the Fed's accommodative and bullish that they're not accommodative. Like it's, at some point that Fed cycle. But they are accommodative, even if they're not as accommodative as we once thought they might be. But they don't have to be because you balance that out with a stronger economy. The things I'm worried about, and I still think the bull argument's in control,

the things I'm worried about, the Fed is closer to being done than I thought three, six months ago on the front end. And if CPI picks up and we get a little bit more inflation, that's not great for margins for a lot of companies. I think the bull case that I didn't know about three months ago is that the president of the United States, one of the things that the incoming president cares about is the stock market. And so he's going to create some volatility and do some things that change things. And if anything makes the stock market go down 10%, he's going to stop doing that, right? So it feels like you got a down 10, up 30 kind of guy from the top. He can't control everything, but he certainly can, you know, you know, sort of ask for policy and the like. Well, I mean, you lead into what some say is a Trump put plus a Fed put.

Yeah. Plus a strong economy. Isn't that, you know? Yeah, that's the cocktail. A plus B plus C equals. And that's why the bull case is still in control, I think, over the bear. But the bear case is definitely, and you have a lot of people on this show, you know, where they were bearish one or two years ago, and they're bullish now. So the sentiment's not as negative.

Right. That happens. For good reason, though, right? I guess. I mean, the year-ahead outlooks from all the big firms are bullish this year. They were bearish the last two years. So the sentiment, the contrarian sentiment thing is you can't romanticize your contrar contrarian bull anymore like you could a couple of years ago. And that's probably where I feel like the bearish argument is. The bull argument is, I think generally the economy is

pretty good. What Powell said, I think high level is right. And I think earnings will grow. And so you don't want to be, I don't want to short stocks where gross margins are going up, period. That's it. Tech, the resurgence that we're seeing, what does that mean to you? I'm a little surprised when I see like Salesforce up nine on like a slight beat where the company's already, stock's already ripped. So it felt like there was some optimism in there. It feels a little extended to me relative to the fundamentals personally. I could see wanting to go maybe mid or small cap software. Software's killed semis in the last three months. And that's the opposite of what makes sense in the medium to long term way where there's a lot more technological obsolescence risk for software.

Are you really sure Salesforce is going to be an AI company that makes it in five or six years? I'm not, but I'm really sure I need time on semi, right? So it is a little bit of a near term, you know, kind of long term disconnect I see. So you're not playing your biases at all from your prior life? I'm anchored. Of semis over software? I could be.

Come on, as a former semiconductor analyst saying it's time to buy semis and sell software. If we threw a chart up. Story checks out. Exactly. I know you do well. Throw a chart up of a six-month IGV versus the SMH. You'll see it, you know, whoop, right? I like the small mid-cap story.

If you're bidding up all these stocks that do M&A, the alts, the investment banks, et cetera, then aren't they going to be software deals? And so maybe that's the place you go. You sell some large cap now that they've ripped. You go down stack. Maybe you get some multiple expansion with deals. And then you take your chances on, you know, whether I get an AI kind of resurgence in Q1 next year. There's the chart telling, right?

Yeah, totally. Totally, totally. I hear you. Guilty as charged a little bit. There are clients that are rotating a little bit into the industrial and analog semis a little. Their quarters are bad. You saw microchip miss again, guy down again. But people know they're good businesses, so they're trying to figure out if the economy really is better.

And I think growth's better. Shouldn't that clear out some of the inventory? And those stocks react more to it doesn't matter if inventory's high. As long as it's coming down, they can work. So maybe they formed a little base ADI, Texan, Microchip, et cetera. So there's definitely people picking around semis. It's just hard to walk in the office today and say, I love AI semiconductor companies, and I'm going to go massively overweight for the, you know, that feels, you know, a little bit more challenging for folks. All right. We'll go through some more buy or sell ideas coming up. But let's broaden the conversation out and bring in Kevin Gordon of Charles Schwab and Allie Flynn Phillips of Obermeyer Wood. It's good to have you both with us.

Allie, I'll go to you first. Do you agree with Adam's view? Do you take issue with it? What's your own? Well, it's great to you first. Do you agree with Adam's view? Do you take issue with it? What's your own? Well, it's great to be here. First and foremost, what I do agree with what Adam mentions, let's just talk about the fundamentals. How do we get here? It has been the fact we've seen strong U.S. growth in terms of a really great labor market. We've seen cooling inflation pressures. Within AI, we've seen real revenue growth and in terms of great innovation. But

the key things we haven't highlighted is just the strong earnings we came off of. If you looked at third quarter S&P earnings, they were the height record earnings. And also the key thing in terms of really nice, healthy profit margins. And the key thing for the fourth quarter, we're actually trying to see in terms of upward provisions to sectors that are not technology and consumers and discretionary, et cetera. So the broad sector leadership underpinned by strong earnings, that's really what we're focused on. And the key thing also, which we really should be talking about,

is what are these things continuing into 2025? As of right now, U.S. growth might moderate a little bit, but of the top 45 economies in the world, none of them are expected to go into recession. So if you have a strong macro backdrop, real economics and actually real focus on margin, we could see in terms of the market continuing to have some strength next year. Yeah. Kevin? No, yeah. I think the growth story has been, you know,

as Powell was mentioning at the Dealbook Summit with Andrew, I think that's been, you know, one of the key supports this year. And it's now in conjunction or in keeping in alignment with a better stock market story in terms of overall breadth. The S&P in particular has had the best profile this year in terms of almost for the entire year, more than two thirds of MITS members trading above their 200 day moving average. That's a statistic we focus on a lot. But, you know, historically, that tends to be a kind of a good place to look for support. So, you know, as long as that continues to be the case heading into 25, it was the case before the election, during the election, after the election, as long as that's the case where you do have solid growth, then I think it's a relatively good setup. I would note that, you know, from a risk perspective, frothy

sentiment has really come to the front burner for us in looking at not just what's going on in the attitudinal side, but now what's going on in the behavioral side. Equity inflows have really, really gotten stretched from an ETF perspective. And, you know, that can last for a while. So it's not that you hit some magic level or some magic rate of change and then automatically things turn lower. But if you look to the policy outlook for 25, specifically out of Washington, I think that has the potential to kind of bring some volatility up to the index level. But, you know, it's so soon to tell at this point. The part that I think is going to change, if you go to September 18th, September 18th is the day where Vice President Harris's polymarket probability of being elected

was highest. And it kind of came down steadily and then massively after that. That's the day where the market microstructure really changed. If I look at growth stocks, all of a sudden, starting then, negative earners, negative free cash flow, low margin, what we call junk stocks. You're talking about like a lot of things. I don't mean this to be negative. ARK. Yeah, ARK. So ARK's up, whatever, 40%, 50% since lows.

I don't know the exact number. But what we track is sort of high-quality growth versus hyper growth that's junk. The junk growth's killed the quality. In fact, the most really outside of COVID recovery and financial crisis recovery in the last 15 years. I don't think that's sustainable. So when I said to you earlier, like, there could be rotation, I think people are going to sell some of these kind of, you know,

sort of really riskier, out on the risk profile, kind of frothier type of stocks, maybe go back into something that's slightly higher quality. Maybe you're seeing that a little bit today with the big tech stocks, because I think they've gotten a big move out of it. And we know ARK is a factor bet. It's a low quality growth factor bet with a negative alpha on it. Right. So I think that's I think what a lot of institutional investors can say, OK, we got this huge move. Now we got to sort of see where I could dream I'm fundamentally going to be supported in Q1. I just wonder, Ali, if we were too quick to make a decision that mega cap tech was going to underperform other parts of the market in the coming year. And whether we're going to revert back, maybe not to the level of outperformance, but enough such that you're going to want to be there. We think you're going to want to be in certain areas.

So for instance, like an Amazon to us is a real opportunity, particularly given the fact that they're using some AI to really improve their business in terms of drive, in terms of advertising as well. But the key thing is we always know is if you go back to the Mag7, let's go to the next level, the derivatives of those. Great example would be instead of a NVIDIA, maybe focus on a Taiwan semiconductor. Remember, for instance, chip manufacturers are

somewhat designer agnostic. They recognize the fact that they essentially have a great need or something they can supply to the globe. The fact that they can, in terms of operating at full capacity, and that way they have a real potential margin expansion. Something like that to us makes a lot more sense than, for instance, staying in the MAG-7. Another idea, for instance, would be let's look at some more traditional companies that are using AI to improve their overall operations. Deere. Deere is going through in terms of a little bit of a tough agricultural sector, but by using AI in terms of doing driverless equipment, they're helping farmers reduce the cost of pesticides by 60%, really improving their margins. So take some of the mag seven or AI themes and let's take it down

to the industrials, some of the other sectors. And that's to us where it'd be really more opportunistic going into next year. Kev, what about these sectors like industrials or like financials that have been trading at record highs that have outperformed by huge amounts? What do I do with those? Well, I find interesting, and you can kind of date it back to the middle of the summer when you really started to see more of this dramatic rotation out of the mega caps, specifically comp services and tech, and then into areas like financials, industrials. But within the broader cyclical complex, there has been a pretty interesting disconnect

between those that are a little bit more commodity sensitive versus those that aren't. So energy and materials have really struggled, especially from a breadth standpoint. But you've had industrials and financials relatively strong. So I think it gets to the broader theme that you can't really look at the market as this sort of monolithic creature, whether it's from a sector standpoint or even from an index standpoint. And it gets to the fact that probably heading into 2025, and which I think has been the case throughout, you know, this entire bull market when you date it back to October of 2022, it's paid more to be a little bit more factor and characteristic focused and maybe style focused

than it has been to be, you know, be sector focused, where you can't make these sort of outright calls, certainly on a shorter term basis, because you keep going through these relatively aggressive rotations, you know, at the sector level. So it makes a lot more sense to look for companies with expanding margins that happen to be healthy, companies with relatively strong revenue profiles, and you can find that in any sector. So we think that theme probably continues, and it's certainly been the theme for most of this year. I was just thinking about another risk because you got me real-time thinking. That's the idea of this program. Yeah, well, you're good at that.

You do that every time. I didn't mean to imply it was new. But I was thinking more about the semis, you know, guilty as charged. Look, the biggest risk that we haven't talked about the equity market in 2025 or 2026 is as soon as Taiwan Semi says that three months before they say that they can meet high-end chip demand for NVIDIA,

the entire stock market is going to get annihilated. Okay? Down, like, Semi's going to be down 20 to 30. So, say Google Business is high beta. The stock market data's not going to be down 10. Like, that's going to happen in the next two years. Right? I don't know when.

And so, we're all playing this game of chicken. But, like, if you start believing that NVIDIA, you know, Taiwan Semi can meet demand for high-end NVIDIA chips, the stock market's going lower. I'm not saying that's in the next six months, but you want something that will make the stock market go down at some point, that's it. You have. Sorry to get everyone's joy. I was a little too merry here on the desk. No, that's all right.

I mean, look. But that's something to look out for. There's an awful lot of optimism in the market. Right. Whether you call it froth or, you know, all these different places you want to look, whether people are getting too optimistic about certain things. And the only thing I'd say to Allie, and I, you know, I hear her point loud and clear on Taiwan Semi, I think it's probably the most important asset in the world. But if your clients care about the S&P and she knows as well, right, they, you know, they're going to tell you, oh, the S&P is up 20-something.

Well, where are you? The challenge with owning, being really underweight, the MAG-7, is just if the market cools off a little bit, the MAG-7 probably holds in better. And so the question is, do you really know something that nobody else knows about Amazon and Meta and Google, or should you just be closer to market weight and then take your bets elsewhere? Your microphone slipped down. Just put it back on there. It has a clip on it,. You can take care of that.

Ali, do you want to respond to that? I think the key thing is, is one of those where the goal for clients over time is you make them real money in terms of real companies. And so the key thing is, particularly going into it, is let's be opportunistic to the extent we have these pullbacks. Focus on those great high quality companies that we might finally be given at discount bargain prices. We would love an environment like that. So we know there will be pullbacks next year. So you just need to be disciplined, focus on quality, and be ready to move. And then really focus on those long-term wealth creation as opposed to just keeping up with the index for a short period of time. You got a couple of another pair trade that I think is interesting, AP, and that

is go long the alternative asset managers and M&A beneficiaries and short the small and regional banks. Yeah, I just think that the regional banks don't really benefit as much from the whole M&A thing that we're going to get proof cases of deals happening in the next month or two or three. And you know, all my law firm contacts and investment banking stuff that we have clients, they're busy. They're busy, and even for December, you see it even on the private side, too. I think Databricks did something at a $62 billion valuation on debt. People are busy, so I think there's going to be some stuff that's going to give you

fundamental support for why Morgan Stanley and KKR and PJT and all these stocks are up. And I think the regional banks are trickier. As you guys know, they don't really benefit some of the smaller ones from M&A. They still have that interest rate problem. Well, the rates are coming down. But don't they benefit from an even stronger economic picture plus? The regulatory thing probably is a multiple expander. But am I going to see demand for credit, them deploy the demand,

the tangible book growth that kind of generates the price of tangible book expansion they've already seen? You know, that could take a little bit longer to pan out than maybe, you know, on the bigger asset. So will you stay away from small caps broadly? I think it's getting long in the tooth there. I don't believe you can prove to me their earnings really accelerate and margins expand as where we are at this point in the cycle. If I had a recession, then I would want to buy them for the imminent recovery after that. So I think they're up a lot. I get why they're up. But I think that trade could be part of what I'm talking about of the lower quality growth trade. That could be something that people sell to get back in a higher quality growth in a rotation.

Jeff, what do you think about the small cap trade? Because over the last month, this Russell's up 9%. Yeah, I mean, well, if you're looking at it relative to the past few years, the Russell's still struggling to get back to the November 2021 high. So I think it'd be a different conversation if it was keeping on track or on pace with what the S&P 500 has been doing. But our focus for an index like the Russell, when you've got almost 44% or 45% of companies in that index that have no earnings on a trailing 12-month basis, is to put on more of the profitability lens or just the quality lens in general.

Not a lot of investors do that, especially retail individual investors that we have at Schwab. So it's not as popular of a thing to do for small caps. But if you are, I mean, if you're a little bit more active and a little bit more selective, the profitable parts of that index have done quite well over the past couple of years. So, you know, I think that there are definitely opportunities and earnings can do well. Small caps can do well when rates are elevated. I think it's more about the volatility of rates coming down. I believe it there. Ali, good to talk to you. Thanks for being here, Kevin. Thank you as well. Once a semi fan, always a semi fan. I mean, I'm you know, you're right. Guilty as

charged. That's Adam Parker back with us, too, at Post 9. To Seema Modi now for a look at the biggest names moving into the close. Hi, Seema. Hey, Scott. Less than 40 minutes left in trade, and the latest analyst notes show that Black Friday sales really fueled demand for toys and games, and that is sending shares of Mattel higher by over 5% on Pace for its best day since July. Mattel executives also saying they saw strong sales

come out of the holidays and now expecting positive growth in the fourth quarter. Now, that optimistic holiday outlook is also helping shares of Hasbro outperform. You'll see stock is up about 3%. And then take a look at shares of Roku jumping about 10% as Needham analyst Laura Martin says the streamer is likely to be scooped up for a large premium in the next year. Martin writing that Roku's current base, pricing power and data sets make it an attractive acquisition target and potential buyers could include Netflix and Trade Desk. We'll watch that one, which shares up 9.6% right now, Scott. Seema, thank you. That's Seema Modi.

We're just getting started here. Up next, Goldman's Tony Pasquarello is back at post nine with the opportunities that he is seeing as we look ahead to the new year. Just after the break, we're live at the New York Stock Exchange. You're watching Closing Bell on CNBC. Dow good for better than 300. All right, welcome back. S&P 500, NASDAQ again hitting intraday highs today, putting them both on track for a third straight day of record closes. Here to share his top themes for the new year and beyond, Tony Pasquarello, Global Head of Hedge Fund Coverage at Goldman Sachs. Back to Post 9. Welcome back. Thanks, Scott.

What's your base case, do you think, for 25? Well, it's been a terrific year for U.S. equities. Total rate of return for S&P 500 plus 29 percent. More locally, up 11 in the past 12 days. I think there's still gas in the tank as we move through December and into 25. I say that for a few reasons. The economy is performing well. We've got U.S. GDP growth plus two and a half percent for this quarter, plus two and a half percent for full year next year. Financial conditions remain easy. I'm sure we'll talk about the Fed, would they, should they? But the fact is right now, financial conditions are very accommodated for forward growth. And then you have the technical side of the equation. Flow of funds running net positive. The biggest holder of the asset class, which is households, are on the bid. The biggest holder of the asset class, which is

households, are on the bid. The biggest buyer of the asset class, which is corporates, are on the bid in the form of buybacks. It's the world's best known secret. Seasonals this time of year, very favorable. And so I think this momentum probably continues through the month and then into the start of next year. Just to the start, I mean, when you say that there's still gas in the tank, do we have a quarter tank or do we have like almost full? Now, did we just refill the tank? I should probably better say. Right. With the new administration coming in,

that's just going to be more growth friendly. I don't know how else to put it. I think that's right. No, I still think it is bull market. I still think the primary trend is higher. If we're right on growth, if we're right on Fed, if we're right on technology, if we're right on Fed, if we're right on technology, the raw ingredients would argue for the rally to continue.

Now, is risk-reward the same today that it was a year ago or two years ago? No. Is valuation more demanding at 22.5 times? Yes. But again, big picture, the primary trend is still higher through next year. Market goes up next year because of better earnings growth or multiple expansions, kind of hard to get both. What do you think? If I had to pick one, given that we're forecasting S&P earnings growth plus 11 percent next year, I'm going with earnings growth.

And it's what you said, which is I think, look, there's a lot of unknown variables in the political equation. Trade slash tariffs, taxes, regulation, there's a lot of unknown variables in the political equation, trade slash tariffs, taxes, regulation, immigration. There's a lot we don't know. I think in the end, though, you hit the key point, which is my expectation is the next administration will be operating from a pro-business, pro-cyclical bias. Does the Fed add fuel to the growth fire or does it snuff it out a little bit because it waits too long or it's too patient, too cautious to move too quickly? What do you think? Our expectation is the Fed goes in December, January and March two more times next year. So we're sitting here in June. The funds rate is three and three eighths. OK, that's a little bit more than the bond market and the strip prices. So on net, I still think part of

the story this year is you've had, like I said, you've had a strong growth backdrop. We think that continues. And alongside that, the Fed has a good hand to play and they can continue to deliver these adjustment cuts. I mean, that's the point that Powell continues to make. Exactly. That hand that he thinks he has. He's got a lot of cards, right, that he can play. Correct. And he could be patient in how he plays them before he throws them. He doesn't want to throw everything on the table now. He doesn't have to. That's right. And I think I'm kind of of two minds on this. On one hand, you'd say the unemployment rate went from 3.4 percent to 4.1 percent. We know lower income households and small businesses have been under pressure.

So that would argue for more of what he's been delivering. The other side of the equation is, like I said, growth is fine. I look at the equity market. It's not obvious to me that liquidity is too tight, right? Risky assets are screaming most everywhere I look within the US. So I think, again, Powell goes on the 18th. That's 100 basis points in his pocket. And he has six weeks for some of these other cards to turn over policy-wise. So if you're optimistic about growth, do you think that you edge towards equal weight? Because you think the broadening is going to continue today and recently, right? We have this resurgence in tech, which would kind of call that into a little bit of question. And you said if we're right on the Fed and if we're right on tech, what is being right on tech mean?

What's your view? So I'm still I still like tech. I still believe it. It manifests these elements of both sword and shield. You know, we sit here today. The Magnificent Seven is up another 58 percent this year. That's worth five trillion dollars of market cap creation. It's some form of magic. I think you have to ask yourself the question, can it deliver as much torque next year as it's delivered this year? But again, I say it all the time, you don't want to constrain your imagination around these companies. They're the best companies on the planet with the best balance sheets on the planet. There's a reason NASA's up 15 of the past 16 years. What about financials and things that are going to take advantage of this environment that we expect

for dealmaking, lower regulation, Goldman notwithstanding, because obviously you don't need to talk about your own company stock, and I know you won't. Sure. But it's had a great year like others. Sure. It's had a huge pickup lately since the election on the expectation of everything that I just said. That's right. I do think, again, in the constellation of potential policy moves, I think the deregulation variable is probably the surest bet. There are no sure bets. But I think there's going to be an active expectation, an intention to deregulate many parts of the economy,

including but not limited to the financial services sector. And so I do think if I think about the runway for capital markets, the runway for capital formation, the runway for M&A and IPOs, again, I think one can be reasonably confident that's coming to a theater near all of us. And this is a no-brainer U.S. over anything else? I'm a steadfast believer in U.S. exceptionalism. I detected before the election clients were saying, hey, given how much of the global share the U.S. comprises, given how concentrated the index is, I would love to find a few places to slide my chips outside the U.S.

And then post-election, it was like pencils down on that exercise. The hunting is still best in the U.S. You look at the month of November, Scott, U.S. equities outperformed the rest of the world to an extent we haven't seen since 1998. I do not want to fade the U.S. exceptionalism theme. All right. That's a perfect way to end it. Tony, thanks. Good to see you. That's Tony Pasquarello, Goldman Sachs. Once again here, Post 9 Up Next, Marathon Asset Management CEO Bruce Richards is going to be right here on this desk as well with his forecast for private credit in the new year.

Just after the break, Bell is coming right back. Private credit as an asset class has surged from just $40 billion in 2000 to an estimated $2 trillion today. And our next guest sees no slowdown in sight for the market's growth. Let's bring in Bruce Richards. He's CEO of Marathon Asset Management with us at Post9. It's nice to see you again. Nice to see you, Scott. It really is remarkable. And BlackRock does a deal right this week for HPS. I mean, what's the message in a deal like that in an environment where I haven't heard anybody suggest that this private

credit run is going to slow down anytime soon. It doesn't slow down. And BlackRock, managing nearly $12 trillion in assets, has the biggest voice in the room among clients and allocators based upon their sheer size and the great success that Larry Fink and Rob Capito have brought to the firm. And what they've said is we're willing to pay $12 billion or nearly 30 times FRE, which is fee-related earnings, to add private credit to the mix. And so we see private credit growing by about a 20% CAGR per annum for the next many, many years. So four years from now, Scott, private credit will be 2x the size it is today, four-year hence. It'll be another 2X or 4X where it is today.

Okay, so what you're saying is that you think we're in the early innings. We're in the early innings. Private equity's been around for 40 to 50 years. Hedge funds have been around 40 to 50 years. Private credit just came to the advent since the great financial crisis in 2008 and post-2008. So it's very early innings relative to other alternative asset classes. And most importantly, the most consistent returning asset class of all alternatives earning about 12 percent, regardless of whether markets are up or down. It's been uncorrelated

to markets. So we see it capturing a bigger part of the allocator's wallet. And also, when you look at the banks who owns tens of trillions around the globe in private loans, private credit is a force. You still have, you know, many highly credible people who are suggesting it's either in a bubble now or it's going to get to that point. And when it rolls over, there's going to be hell to pay. I think those were the words that Jamie Dimon said several months ago.

I talked to Jeffrey Gundlach back in September. These are highly credible people. I want you to listen to what Gundlach told me and have your reaction to it. This was in September at Future Proof. Without any doubt, I know that when the first question at a large crowd presentation is over and over again, talking about private credit, I say like, well, you're asking me that because you own a ton of it, right? You've got, you're an RIA and you've got your clients all in these funds. And of course,

now I think somebody is trying to do a closed end fund for private credit. You know, it gets, it gets weirder and weirder. You. First, someone's so bold as to want a billion dollar fund. Then somebody wants to do a five billion dollar fund. Now there's somebody doing a 25 billion dollar fund. This is what the top looks like. What do you think? My comments? Well, all due respect to Jeffrey, the simple truth of the matter is fixed income, whether it's high yield or loans, or whether it's structured credit, ABS, RMBS, CMBS, a complex of that yields around 6% or 7%. Private credit is delivering 12%.

So there's a lot of very smart money, the allocators that are speaking. And they're shifting capital allocations from traditional fixed income and credit orientation to private credit. And so that explains the whole story from the vantage point because people talk their book and I think that stands for itself. So as it relates to being a bubble, not at all. It's just early innings is just starting the overall complex. We've just lived through some bubbles like venture capital breaking and other asset classes like real estate asset classes breaking,

private credit has been a shining star, again, consistently generating 11%, 12% net returns. What if, as a result of, let's say, deregulation, the competitive environment intensifies to the fact where banks are just freer to lend more, so all of a sudden you have more competition in the lending pie. Is that a risk at all? Well, I don't think it's a risk. Look, banks are probably a bit overextended with respect to real estate exposure. They're looking to take down their private lending book. And so while I agree that deregulation is a big part of banks

and has been constrained in the banks. It's not the regulation of lending in the credit markets that's the issue. It's all the other regulations they have to deal with that have been constrained in the banks. So I wouldn't conflate the two. I think we will have deregulation for the banks, but I think the two can coexist where banks are lending and private credit managers are lending, and we're competing with business. And private credit will do certain types of loans that the banks naturally don't want to lend to. And so there's a natural circuit breaker as well, because when private credit is stepping up, like after 08 and on, banks were stepping back. You need that for markets to function well. And so they do coexist well together. What about as the cost

of capital comes down, the rate of return that you're going to get on some of these loans inevitably will come down, maybe not severely, but how do you see that? Because what was, I don't know, 12, 13, 14 percent return that you were getting on a lot of these loans maybe is reduced but to how much yeah we think the number is around 11 to 12 percent that we can deliver to our clients exactly no matter what the rate complex is not no matter what the rate complex is most lenders in the private credit world use about a turn of leverage and so using that turn of leverage you get well above a 12 return the the broadly syndicated loan market earns around a 7% return. And the private credit market with no leverage earns about 300 base points, more than that,

about a 10% return. With a little bit of leverage, it's pretty easily achievable to generate a 12% net return in private credit. How are you watching and thinking about what the Fed may or may not do in the year ahead? Because it all factors into the types of things that you think about. I go back to Powell's comments today with Andrew Ross Sorkin at Dealbook. Hey, things are great. Economy's great. Labor market's strong. Things are stronger than we thought they would be back in September.

And as a result of that, we can be cautious. We can go at our own pace. We're not going to be pushed and pulled by anybody. And they probably should. Look, we get unemployment this Friday. The market consensus is over 200,000 jobs. We get CPI next Wednesday, plus 3.2% is market consensus. Based upon that, the Fed shouldn't go.

How many more times do they go? Probably three times in a cycle, and they have eight Fed meetings next year. So looking at it next year, the two big calls that I have, equity markets, and you heard this right here, set an all-time low in this century at 666 in March of 2009 during the great GFC. And we'll set a yearly high next year at 6666. Up 10% from where we are today. That's next year's high, 6,666. Some say you're not even lofty enough. We visited with Chris Harvey yesterday here. He was at 7,007.

Well, that's our call, up 10% next year, because you're coming off a back-to-back 25% years. And we think the market is a bit inflated in terms of valuations, but the pro-growth deregulatory environment, hugely positive. The other big thing to look at for next year is just the U.S.-Europe dichotomy, how it's separated, where Europe is going flat and sideways in terms of growth, close to zero, inflation sub 1% by the end of next year. And we think ECB, Christine Lagarde, will bring their lending rate down to a ZERP type of environment, maybe 1% in the next couple of years and do whatever it takes to keep the economy back on track because Europe's in a low growth, no growth mode, while U.S. is steamrolling ahead.

And it's great for credit markets. It's great for the lending markets. It's great for private equity. It's great for equities. But equities are pretty fully valued. Well, you know, when central bankers start saying, we'll do whatever it takes, we've heard that message before and we've seen what the impact is on the other side. It's good to see you. Thanks for being here, Scott. That's Bruce Richards, Marathon, right here, Post 9. Up next, we're tracking the biggest movers into the close. Seema Modi is standing by once again with that. Hi, Seema. Hey, Scott. Yes, we are. One stock leading today's chip rally and JetBlue riding high on an upbeat forecast. We'll tell you what's next for that stock coming up after this break. All right, we're less than 15 from the bell.

Back to Seema now for the stocks that she's watching. Tell us what you see. All right, Marvell in focus today, Scott, trading at all-time highs on the heels of a very strong quarter and a new five-year partnership with Amazon. Now, a number of analysts upgrading the stock. JP Morgan, for example, raising its price target to $130 from 90, citing cyclical AI tailwinds. And then CEO Matt Murphy on the call last night confirming that he's all in on staying in place as the CEO of Marvell, putting to bed some rumors that he was being considered for the top job at Intel following Gelsinger's exit, looking at shares now up 23%.

And then JetBlue up about 8%, the airline boosting its fourth quarter forecast following strong bookings, lower fuel costs also helping. Shares have climbed about 18% this year as its new CEO doubles down on core markets in the Northeast and Southeast. Scott, that's helped. All right, good stuff, Seema. Thank you, Seema Modi. Still ahead, we're counting it down to the final moments of this trading day. What could be more record closes. Mike Santoli is on the other side in the market zone next. All right, up next, Alphabet CEO Sundar Pichai about to take the stage up at Dealbook. We're going to bring you that interview.

The Market Zone is coming up next. All right, we're down to the closing bell. Market Zone, CNBC senior markets commentator Mike Santoli here with us to break down these crucial moments of the trading day. A day in which we could see the first ever close above 45,000 for the Dow. We're on track for record closes there along with the S&P and the NAS. Just enough in just enough large stocks to get us there. It definitely, the don't short a dull market rules are in effect. We have this upward drift, pretty low volumes, but that just

means there's just zero selling pressure. Just nobody wants to stay in the way of a market that has the seasonal and fundamental and technical tailwinds. I'm watching all the sort of hot pockets of the market as I have been for some time. The Robinhood ripping. You've got things like every day there are three or four of these racier software stocks that just scream higher. Put call ratios are very low, not as low as in 2021. But anyway, you have this sort of market that's trending in the direction of everyone is going to be celebrating at the same time and they can see no downside.

But I don't think we're at a hazardous point in that process just yet. I mean, I'm looking at Salesforce today. It's up 11%. I'll type in Okta here, which had those good earnings too and was a big winner. It is up almost 6%. To your point, the divergence between software and semis has been so stark over the last six months. We showed the chart earlier, IGV versus SMH, and it doesn't seem to really be waning. Not yet. There's a willingness to believe that software is now kind of coming into the spotlight for AI. You had a lot of these stocks that really did less than nothing over the last two or three years after having a big, you know, 2021. And it seems like there was a big grab for stuff that hasn't participated,

higher beta, all those. That these stocks represent has been in favor and then semis themselves. Really in videos gone sideways ish. For six months. And there's a lot of challenges fundamentally for the non AI part of that. Sector so I think all those

things coming together. It's probably not going to persist like this. For very much longer but I do think there's a graph for stocks that haven't. Done a time. Microsoft is the second biggest upside leader. In the S. and P. today I could contributor. It's really been. Not a leader recently so I think that's the process. Market wants to stay intact it wants to turn to new highs. And

he uses different stocks to get their meta I mean I know it met us down today but earlier new high. Amazon record high, Apple record high. Apple's had its own sort of resurgence here with really no news to speak of. It's often late in a rally. I find Apple, it's sort of always there. It's always a high-quality name. It always seems like it's, you know, at this point, it actually did break out to a new high. But it's basically a market performer on a year-to-date basis.

So, yes, all that stuff is going on. I do think there's an element of, by the way, we had those soft ISM numbers today. Bond yields are down. I've been talking for a week about how the economic surprise index has rolled over just at the point when everybody wanted nothing but cyclicals. Now, I don't think this is game over. The economy looks fine. It's coming off a very strong level. Remarkable is the word that the chair used today with Andrew. And even real GDP for the Atlanta Fed is like three-ish percent for this quarter. So it's not an emergency. But what it is, is everybody got bowled up about the acceleration of the economy at the same time that the data has a soft patch. And so I think that's why also you're sometimes going to see big growth stocks are sitting right there.

Right. Because they are not necessarily as geared to the economy. So it gives a chance for the banks, for some of the industrials to rest. That's what they've been doing for days now. Banks have not really been at the center of things. And the rest of the big tech is able to take charge for now, again, until the tank gets depleted, as you guys were talking about. We'll get a jobs report in a couple of days. We'll follow that, obviously. But we go record close across the board today. In fact, the Dow looks like it is going to get that first-ever close above 45,000

as the bell rings in more record highs across the board. And the OT with Morgan and John.