Closing Bell - Closing Bell: Goldilocks Era Over? 3/18/24

Episode Date: March 18, 2024

After a four month rally based on a Goldilocks economy, AI excitement and the prospect of an easier Fed – is the playbook changing as the first quarter winds down? Adam Parker from Trivariate Research and Jordan Jackson of JP Morgan Asset Management break down their forecasts. Plus, RBC’s Lori Calvasina explains why she is bullish on the energy space. And, Goldman Sachs’ Elizabeth Burton tells us her approach to diversifying your portfolio and the two “I’s” she is excited about right now. 

Hey, welcome to Closing Bell. I'm Mike Santoli, in for Scott Wapner. This make-or-break hour begins with stocks working hard to hold gains with the help of Alphabet and Apple for a change, as the street waits for a pair of crucial events in coming days. NVIDIA shares up pretty small, especially for NVIDIA, ahead of CEO Jensen Wang's keynote in the next hour. You see it up less than 1% there, while Treasury yields push to three-month highs as suspense bills over a Fed meeting that comes after an uptick in inflation has stoked more uncertainty over the outlook for rate cuts, 435 on the 10-year. So here's your scorecard. The S&P 500 has been higher all day. It is definitely a top-heavy move. You see it there,

up 0.8% of 1%. The equal weighted S&P is up about half a percent. NASDAQ is ahead by a full percent. Otherwise, mixed tape. Alphabet, though, as mentioned, popping this morning. It is now up four and about 4.3 percent. It actually has been the biggest upside contributor. Apple is ahead as well, 1.4 percent, on reports that Apple might use Google's Gemini AI capabilities in iPhones. So with the 10-year in the 430s and WTI crude up another couple of percent to its highest price since Halloween, that is behind part of the Fed suspense. This all leads us to our talk of the tape. After a four-month rally based on a Goldilocks economy, AI excitement, and the prospect of an easier Fed.

Is the playbook changing as the first quarter winds down? Let's ask Adam Parker, Trivariate Research founder and CEO and a CNBC contributor. So, Adam, yeah, those have been the narrative threads. It's worked pretty well. Been almost no pullbacks. Been a little attention on some frothy pockets in the market. In the last couple of weeks, things have cooled off but not fallen apart. Where does that leave us?

Well, I think the bull case is still intact, right? If the average company can have gross margin expansion, if I start thinking earnings are going to be up for the next few years, they'll be ahead 25 versus 24. And if I ultimately think the Fed's going to be accommodative, I think that's a pretty good three-legged stool for optimism. Yeah. So the things I'm monitoring, I guess, to get cautious, three things.

Does China continue to look bad, not improve? The fundamentals erode. The U.S. comes with exposure there, look bad. Maybe I've gotten positive data points on a relative basis lately, but we'll see. U.S. consumer, is that really slow? I was worried about it when Discover reported, then they got bought. There's been some pockets at the subprime where you get worried, but I'd say in aggregate, the consumer's in pretty good shape, even if it's eroded a little. And the third thing is maybe you don't worry about the front end with the Fed.

You worry about quantitative tightening and sort of the balance sheet. But that's how I'm weighing it. And it's still skewed to the positive as far as I could see it in terms of risk taking. So does that mean also on a tactical basis, you would just kind of stick with what has gotten us here? I mean, you have seen things, for example, I mentioned the fraud pockets. I mean, crypto had this huge ramp, everything related to it. It's backed off a little bit. So you've seen a few little hints that the market is sort of saying enough for now on some of the hot stuff. But what about tactically? You know, most of my clients are institutional investors trying to beat the S&P 500. So they're never going to be too big in Bitcoin miners or uranium or whatever.

I think they are focused on how to play AI. And so to me, that trend isn't in the price over a three to five or 10 year view. It may be a little ahead of itself tactically. So for me, I think there's lots of stuff to own. If you're going to say, hey, this is going to last three, four, five more months, there's fear of missing out. And I don't want to, you know, I'll run toward the bubble as opposed to away from it, then you still want exposure to AI semis, to software where revenue is accelerating. And if you want to balance it, which is what we do, we offered a note this week, you know, five ways to find stuff that's not correlated to the AI trade in semiconductors, or maybe you own some energy in copper where, as you pointed out in your preamble there, you know, crude's up a

little bit. So I think there's ways to balance the portfolio. But I don't think you want to run a fund and say, I don't own anything related to AI. That doesn't seem right to me. Yeah, arguably, that's kind of what the market in aggregate is doing in a way, right? It's not quite as all in on one trade. Well, we are less than an hour away from NVIDIA CEO Jensen Wong's keynote at the company's big GTC event. Christina Partsenevelis is there in San Jose, California, with more on what we might expect.

Christina. With more people as well, because this used to be, what, a few hundred people that attended this event, and now we're expecting 11,000 in this SAP arena in San Jose for CEO Jensen Wang's two-hour keynote. It's, yes, a developer's conference, but Wang's words could help add sustainability to the entire AI ecosystem, which is why so many people are paying attention to it.

Investors, first, expect NVIDIA to launch a new GPU chip. Well, more details, I should say, about the B100, which could be at least two times the performance of its previous H100 chip. NVIDIA doesn't usually provide pricing, but I've seen estimates anywhere between $40,000 to $50,000 for this chip. We'll also hear more about products ranging from CPUs to how they're going to better monetize their software, going up against big tech companies, some of which are going to be in the audience. Other key themes, demand extending beyond the typical pockets of Google, Meta, Microsoft,

and into the pockets of finance, healthcare, government, and sovereign wealth funds. And then lastly, inferencing. So that's where you use trained large language models to spit out answers to your queries. And it's the next step of the large language model train. Inferencing contributed roughly 40% of Nvidia's data center revenue and demand is expected to be, is expected to grow and be a major driver for the years to come. So the bottom line though, today is about demand sustainability. Investors want to know is the pace of demand going to keep up, you know, one to two years from now

even beyond that. They'll also want to see how that one trillion dollar total addressable AI market can go to two trillion in just five years and in turn justify owning this soaring stock, which I know you pointed out to was up by over two percent earlier today, now down ahead of Jensen Wong's speech. Yeah. And Christine, it's gone a whole 10 days, I think, with the new all time closing high. So, yeah, it's it's gone a whole 10 days, I think, with the new all-time closing high. So, yeah, it's been a rough patch on a relative basis. You mentioned, though, a couple of times that Wong is expected to at least give some kind of hints on the sustainability of demand, looking out toward the horizon. I mean, the company is only a few weeks out from its earnings report last time. Is there a likelihood that he's going to have things that are, things that are very tangible about that supply demand dynamic at this point? Honestly, I would say no. We

already heard that one to two trillion dollar TAM. He mentioned that in Dubai not too long ago. So there are some analyst notes that are guessing maybe he'll say, oh, it's going to be roughly 500 billion dollars per year, which would obviously be a number we can work with but in terms of putting financial targets usually this event is about new products right and about how that demand is expand expanding to other facets of the economy and I think that's where they're going to lead with and the collaborations which I didn't even get to the collaborations with other companies like Micron, like Broadcom, perhaps Intel. Again, I don't know.

I'm going to get the information as everyone else in just an hour. But these are all big movers for other names within this space. But last point, Mike, you talked about the stock. It was down four to five sessions just last week. There's concern that maybe this is a sell the news kind of event. You saw some selling heading into this event. And yet the stock keeps climbing 10 weeks in a row. Weekly gains, even with those drops last week.

Yeah, for sure. Yeah, I would expect big picture vision. And we'll pick it apart once it's out there. Christina, thanks very much. Adam, you mentioned before that you didn't think that maybe all of the upside for AI across the market is sort of in the price. In what way would you say that? Well, I mean, there's the revenue side where NVIDIA is clearly the biggest beneficiary. And then there's the cost-benefit side.

Over the next decade, you're just starting to see companies talk about it. So I think that's what I mean when I say it could be a decade long. Anyone who's got a lot of data about their employees and about their customers is going to try to get more efficient, and that'll take years to unfold. So I think the other thing about NVIDIA, I wrote this in a few weeks, called the NVIDIA God Trade. Like, if you don't own it, what you're saying is you're God. That you're saying you think it's really close to the peak, and you know that, even though you probably missed most of the first $2 trillion, that it's then going to go down 30%, which everyone suspects at some point as soon as they're three months away from meeting demand. Then you'll buy it again at the bottom and ride it for the next ways up, as if you're God

the next three moves, even though you weren't the previous one. I think there's an inherent arrogance by saying, I don't own it based on current valuation. I think you have to say, I'm running a fund. I want exposure to the biggest investment theme over the next decade. This is the best product from the best company in the early phases of deployment. You can do all you want to say who are their customers and how is it going to happen, but it's still early days. So we all think it's going down 30%,

but it could be 30% from another trillion higher. That's my stance. You sound a little bit like a passive indexer. I mean, I could buy the S&P, and $1 out of every $20 goes to NVIDIA right now. I think for the biggest six or seven names we've written in a long time, you should be pretty close to market weight. You don't know anything about the stock that nobody else does. They're pretty macro.

If I know if the market's up in large beats small, growth beats value, I can explain 60%, 70% of NVIDIA's returns. And I think it's awfully arrogant to say I know something about NVIDIA that nobody else knows of the hundreds of buy-side analysts and 60 sell-s that's not in the price. So yeah, you should be pretty close, pay low fees for that and then make your alpha elsewhere. That's probably prudent, you know, long-only strategy. Yeah. I mean, I guess even if you were active, we've talked about this too. I mean, a 5% position is pretty substantial. It's pretty chunky. It's pretty chunky. Yeah. Yeah, that's right. Let's bring in Jordan Jackson of JPMorgan Asset Management and broaden out the conversation. Jordan, good's right. Let's bring in Jordan Jackson of J.P. Morgan Asset Management, broaden out the conversation. Jordan, good to see you.

Good to be here. Let's get to some of the macro setup that we've got going on here. We mentioned, you know, the Fed two-day meeting starts tomorrow. A little bit more play maybe in what comes out of that in terms of the pacing of rate cuts, the tolerance for this uptick in inflation. But before that, Bank of Japan really expected to have kind of a signature landmark move. What do you expect out of it? And then what are the market implications? Sure. So we actually think the Bank of Japan's got enough ammo to finally get out of negative

rates. And we think they do that tomorrow. You've got really strong wage negotiations that are happening. So a lot of the big steel companies, the big auto manufacturers have increased wages at some of the highest levels that we've seen, multi-decade increases. The largest labor union just last week just agreed to some pretty significant wage increases. And this has been one of the criteria that the Bank of Japan has been looking for to finally get out of negative rates. Also on the growth side, right, they've got fourth quarter GDP that was revised slightly higher. So they avoided that technical two quarters of back to back of recession. And they finally got inflation after three decades of not getting any inflation.

And so I think this is a backdrop in which they can finally exit negative rates. The big question mark will be the direction for the currency. It will be. And I guess the other question is, I mean, it's been one of the best markets for months and months in Japan, best equity markets. You know, is it as good as it seems? And can you actually buy that news? Yeah. So the big risk for a while there was this negative correlation between the value of the currency and the stock market performance. It was very negatively correlated.

There's a lot of multinationals and these big multinationals generate a lot of their revenues overseas. And so just you just have this roughly negative point six point seven consistent relationship between the yen and the market from 2007 to roughly 2019. Then the pandemic hit and that correlation kind of broke down. It's actually roughly around flat today. And when we look at underneath the hood, right, inflation, while for consumers, it's your foe. If you're a business, it's your friend. So you've got some pricing power now. We're expecting roughly 10 percent earnings growth coming out of Japan this year. And so I think, again, there's things to finally be excited about in not just in the equity market. Right. So while there is scope for, again, rates to finally move higher, you've got to look at what's already in the price, what's already in forward markets.

And forward markets have about a quarter percent, 25 basis point policy rate by the end of the year. Unless the Bank of Japan surprises hawkishly or the Fed surprises dovishly, I still think you've got maybe some modest upward pressure in the end, but not enough that's going to derail equity markets. I was going to say, you could envision a world in which, you know, Japan looking to exit negative rates and get tighter at the exact moment the rest of the world is looking for an opportunity to go in the other direction. And that could cause a lot of friction. You don't think that's going to happen this time? I just think a lot of that's already in the price. So again, you know, and that's kind of the risk if we, you know, kind of shift back towards the Fed. I think there's greater risk that the Fed leans towards

maybe the dot plot showing two rate cuts this year versus sticking to the three rate cuts. Again, while over the balance of the last 18 to 24 months, things have gone in the Fed's direction. Growth has stayed firm. Inflation has gradually come down. Labor markets haven't toppled over. But since December, since their last FOMC meeting, things have kind of stalled out, right? We're seeing wage inflation that's proven to be a bit sticky at 4% to 4.5%. Job growth, arguably, we did get some downward revisions,

but on a three-month moving average basis, kind of reaccelerated to start off the year. So maybe the Fed has to lean into being a little bit more patient here. And Adam, I mean, I've been of the view that this bull market, this rally since October, was not mainly or even like a top three reason was that Fed's got to cut rates soon and deep. Right. It seems like if the economy's okay, like bull markets don't tend to end because the economy was holding up well. But how do you see this, though, after we've had all this kind of low volatility upside in the market and bonds at least sniffing out the possibility of higher for longer back on the table? Yeah, I don't even know if I'm qualified to understand three quarters of what

you just said, because Japan, not cool. I don't know anything about it. And Japanese monetary policy, I know even less about. I traded the yen six times in my life. My PA lost money all six times. So on the Japan part, I'll... You must have bought it. Yeah, I'll defer to the gentleman to my left. The part that I could debate a little, and I don't have a strong view, is just whether if they go from three cuts to two in the consensus view, if it'll matter for equities at all. I could see somebody saying, hey, you know what? Good news is good. Sure.

Now, let's forget all this stuff we invented after the financial crisis. Bad is good and good is bad. And how about just we're in this pocket here where decent economic news means the Fed doesn't have to be as accommodative. We're all guilty of using the last three cycles as part of our average, which include TMT, financial crisis and COVID, none of which have anything to do with the current conditions. Yeah. And so, all right, if the economy is a little bit better and they only do it twice, like maybe that's actually pretty good. I don't know if they go three to two. It matters that much. I get what he's saying, which is all right. If they get a little directionally hogged, you could get a couple of days where it trades off around that commentary. But holistically, I think it could be pretty good. And I still think earnings

are going to be up. So maybe that's the only thing he said that I'm even qualified to respond to. And Jordan, I mean, I guess the other question is the reason that you might be concerned is if you think that a lot of the stronger economic numbers have been a bit of a head fake. In other words, the Fed's going to stay too tight because they're going to be focusing on, you know, they're sitting here waiting for shelter inflation to come down like everybody expects it to come down. And while they wait for that, you know, the underlying economy maybe struggles a little more, but it's hard to find the evidence of that. Yeah. But importantly,

they situated themselves where they're not going from, OK, three to two cuts so long as they're not going back to hikes. Yeah, sure. That's really the key from a macro standpoint. So so long as the Fed remains in this sort of cutting bias and that's three to one, I think that's generally pretty, pretty supportive. They think rates are restrictive. And actually, interesting enough, if you go back to 1980, there have been 14 calendar years where the Fed cut rates and there wasn't a recession in the U.S. economy. 13 of those 14 years, the equity market was positive by about 15.5%. The only year outlier was 2002. And I think we had a little bit of a hangover from the tech bubble. So this is a micro environment that Adam talked about that's very supportive, earnings growing. And then you've got a macro environment that's supportive that the Fed's got a bias towards easing. So

I'm with Adam. I'm bullish on the market. I agree with you. If the Fed hikes, I think we're selling off. I agree with that. Yeah. But I think, you know, look, you know, at Trivariate, we don't... But it would also take time for probably for them to get to that point of making that move. They need different data on jobs and inflation. Our website, you search palettes, there's zero search results. You know that's how we do. We look underneath. And I just see so many opportunities to buy things underneath that, to me, it feels very optimistic about security selection, active security selection,

and I think the risk score is still positive. Yeah. And, you know, to your point, Jordan, I was looking back at 1995. Everyone, you know, I've been bringing it up as the ultimate, you know, soft landing year. If everything went perfectly, Fed cut twice, July and December, after a long tightening cycle. So I'm sure that's in your data set of markets that treated it well. Yeah, but there was still scope for the unemployment rate to keep coming down. That's right.

I think the unemployment rate can push down any lower than what it's now. No, that's a lot of the other stuff doesn't match up exactly. But we'll pick and choose as we can. All right, guys, thanks a lot. Good to talk to you, Adam and Jordan. Let's now send it over to Steve Kovac for a look at the biggest names moving into the close. Hey, Steve. Hey, Mike. Yeah, PepsiCo shares, they're popping about 4 percent today after analysts at Morgan Stanley upgraded the stock from overweight to equal weight. Morgan Stanley predicting fundamentals that the company will hit bottom in the first half of the year and rebound from there. And

then shares of Shift4 going the other way, down about 7% or so here after Bloomberg reported yesterday the CEO told employees on Friday that outside offers to buy the company weren't enough to make a deal. According to the report, the Shift4 board thought the offers did not, quote, sufficiently value the payments processing company. Mike. All right, Steve, thanks very much. We are just getting started here. Oil prices climbing to a four-month high today. Up next, we're drilling down on that big move, RBC's Lori Calvacina, forecasting even more upside for the energy sector. She'll tell us why and the other parts of the market she's banking on. That's just ahead. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back. AI-related tech has been in the

spotlight for most of this recent rally, but energy stocks have quietly moved into a leadership position with the sector becoming the best performer over the last month. Our next guest sees more upside ahead for the space. RBC Capital Markets' Lori Calvicina is here at Post 9. Lori, good to see you. Good to see you. Thanks for having me. So this in the context of a broader market,

it feels like a lot of your work is pointing to kind of fairly valued perhaps, but there are things to do, maybe unexploited areas. Why does energy get into that category? So it's funny, Mike, I was talking to some of my salespeople earlier today and I said, sectors just haven't been that interesting of a discussion lately. And all of a sudden, energy got really interesting. It just sort of had this big move. We've been overweight. We viewed it as an inflation hedge in the portfolio. And guess what? Everyone's gotten worried about inflation again and interest rates. And so it's kind of doing what we hoped it would do.

It's serving the right function. But putting that issue aside, I mean, it's cheap. My analysts like it much more so than my analysts in other sectors. So I think that's an important read on fundamentals. And money flows, if you look at the EPFR data, is starting to shift back in areas, you know, commodities, materials, energy, industrials, kind of these cyclical areas that should benefit if the economy really is running hot the way everyone's worried. And is that your read on it? Because, I mean, obviously the underlying commodities have had a move as well.

You feel like it's kind of a global demand overlay? I think it's the U.S. is running pretty hot. Obviously, there's geopolitics when it comes to energy and some of these commodities. But I do think there is a begrudging acceptance that we're not on the brink of recession and things are not that bad. And maybe not so much the last couple weeks, but maybe about a month ago or so, there was a conversation about abataming in China that we were hearing a good bit about. So I think we're kind of in this weird healing process and energy is benefiting from that right now.

You do mention the general acceptance, this embrace of the not just no recession, but things look like they're humming along pretty well. It felt like that motivated a lot of people to allow equity exposures to go up and buy into this market as it went higher. Are you struggling to substantiate possible further upside in the index?

So, you know, there are conflicting cross currents right now. And in my meetings, this is a big thing we talk about. So on the more constructive side, my valuation model has been pointing to upside to, say, 5,400 or so, multiple of around 23.3 times on a trailing basis. That's if you buy the idea that interest rates are going to moderate, the Fed's going to do a certain amount of cuts and inflation is going to come down, 10 years is going to come down. And maybe those are a little bit aggressive. We wrote about that in our weekly today. And we said, if you just leave interest rates where they are, and depending on your earnings view, it's more like 5,000 to 5,200. So right where we're stalling. But sentiment is a problem. Now,

people don't feel all that great when you talk to them. They're in kind of a bad mood. But if you look at the positioning data on CFTC, it's pretty scary and it's starting to retreat. So I think we're going to have a pullback. I've been saying that since January. It hasn't happened, but it's going to come sooner or later. Yeah. No, it's I mean, the part of the market that has, I guess, like prevented that from really taking hold is so hard to handicap. Right. It of like the big growth these stuff a few of those working at any given time and the index is going to move away from yeah and I think it's an interesting debate right because there's this view if those stocks break down or stop leading it's gonna be a disaster for the whole market and I can see that argument

but I also you know sort of view it as like raindrops and buckets and if you you know I'm an old small cap strategist, right? So if you take a little bit of money out of some of these MAG7 names and put it into the Russell 2000, that's a lot more meaningful to the Russell 2000 or your average regional bank than it is to some of these big cap names. So I think it's a question, do they really run into problems in fall? Do they just take a breather and stop leaving? Do people just divert a little bit money and kind of reallocate their portfolios?

The latter camp, I think the market can still do fine. Yeah, I mean, I was pointing out, I mean, Tesla lost $700 billion of market value peak to now. Yeah. And, you know, it got absorbed somewhere else. And remember, you know, November and December was a pretty violent leadership rotation and the market surged. If you look at February, small caps outperformed and the market held on pretty well, you know, and we've had a good start to this year, even though you have had some rotation underneath the surface. So I think

the market can handle rotation. Does it contribute to some of those speed bumps that might, you know, kind of be nasty for a short term period of time? I think that's possible, too. Right. That's been the focus on just the momentum factor and whether that unwind really destabilizes something else. Now, you've mentioned small caps a couple of times. What is your stance in terms of large versus small right now? So we've, you know, and it's funny, this maybe happened a little bit earlier in February than I anticipated, but we basically said coming into this year, small caps got two consensus in December. I was talking about it in too many of my meetings with non-small cap people. And I said, you know, I'm not used to being the, you know, popular girl at the dance.

And so that just felt a little uncomfortable. So I think it was natural to take a pause. I think that basically that November, December move was all about the Fed cutting rates. And we said, you know, our positioning data, our valuation data looks middle innings. We think there's another leg to this trade, but people need to really get convinced

that the economy is running hot for that to sustain. And you probably just need to actually get to the cuts, because until we get to the cuts, I don't think people are going to be convinced that the Fed, you know, can can do what they're doing and the economy is not going to take a bad hit. So with that said, what are you expecting out of the Fed and maybe where's the market leaning? So I've witnessed just like so much angst over the Fed. I mean, just this dialing down of March cut expectations was really weighing on people pretty significantly the last six weeks or so. So I think a lot of that's kind of worked its way through, to be honest. I think it's all about the commentary. I'm not going to sit here and try to predict exactly what Powell is going to say.

But I do think we're in the part of the market where the reasons why they're doing what they're doing matter a lot. And so, you know, any kind of discussion of a hot economy, you know, sort of how things are trending in the labor market, what they need to see. I think those things are going to impact my world. You know, I'm fortunate at RBC that my guys were always looking for June cuts since last summer. So they've they're now looking for three cuts in the back half instead of five. So they've dialed down like everyone else. But it hasn't been as much of a journey. So it hasn't really caused us as much angst. Yeah, presumably he's not going to go back to we really need to run this economy cool to do the job on it. And I think I at least, you know, look, I'm not the expert on the Fed. Right. But I feel like that's what I'm hearing in the commentary. And I was always confused. People who thought that the Fed needed to destroy

the labor market to justify the cuts that, again, was never our house view. And I felt like I was never really hearing that. So. All right. We'll see where it goes. Laura, good to see you. Thanks a lot. All right. Up next, your Goldman Sachs market playbook. Elizabeth Burton is back. She'll explain her approach to diversifying your portfolio, plus the two eyes she's excited about. Closing bell. Be right back. Welcome back. Stocks bouncing back today with Alphabet leading mega cap gains. This comes as the Fed prepares to meet on rates this week. Joining me here at Post 9 with her investment playbook is Elizabeth Burton, client investment strategist at Goldman Sachs Asset Management. Good to see you.

Good to see you too, Mike. I need to focus on, to some degree, on what the big asset allocators are up to and what the market might be giving them right now to work with. Just in terms of trying to achieve their returns, you have stocks massively outperforming bonds recently. I've been hearing a lot about, you know, being able to lock in returns at attractive levels for the first time in a long time. Is that still an active dynamic? How do you see things? Right. I think that's very much true. The average public pension plan in the U.S. has about a 7 percent return hurdle, somewhere between 6 and a quarter, 7 and a half-ish.

But let's call it 7 percent. And for a decade almost, there wasn't the fixed income book to really pull from to get some of those returns. Now you have more asset classes to pull from to generate lower risk returns potentially. So you can actually pull back from some of the more growthy areas or high risk areas. I would say that we're still at Goldman bullish on equities, potentially over credit right now. But you can start to look at your portfolio and say, you know, how much do I need to have in some of these riskier assets? And can we look at new sorts of investments? A good example of this is infrastructure, right? So we all know

what infrastructure is, but actually it's really only 20 years new in institutional and portfolios and really still nascent in most. And if you think about private equity, which in some public pensions in the United States is now just getting off the ground, some of them aren't even at target, that's been around 50 years. So to say 20 years in infrastructure, that means you really have about maybe 30, 40 more years for that to really get off the ground and become a bigger stronghold in portfolios. And one of the reasons I believe that institutions are looking at them are there are a lot of tailwinds, but it also might be a good diversifier to portfolios right now. I was going to say, so, yeah, we all know generally what infrastructure is, but as an investable asset class, I mean, it can be, I mean, there's infrastructure funds, what, hydropower or pipelines.

I mean, what does it comprise? And I guess what are the return characteristics and how does it diversify away from other things? So you went right to hydropower, which is great, but most people think steel concrete or the road i drive every day gosh it has so many potholes but you're right it's not just steel and concrete anymore it's a lot of things it's fiber it's renewables it's data centers and it has a lot of the same themes that we've been talking about in our 2024 outlook and even our 2023 twenty three outlook which is the forties. And deglobalization demographic did it digitization. And I'm forgetting the fourth one here

but- but yeah so it has those tailwinds we have regulatory tailwinds. These also also are at typically asset heavy. Some have you know pretty strong cash flows and they have inflation protection either regulatory or embedded in

contracts. Or they have such a market share they can pass some of those on to the consumer. So, you know, really this is a position of strength for infrastructure. And we see tailwinds going on for decades. All right. So infrastructure is the first eye. India is the other one. This is a market a lot of folks have had high hopes on for a while. But why do you think it's timely?

OK. You know, we're not novel here saying that we're constructive on India, but we are bullish on India. And it doesn't have a lot of place in institutional portfolios right now. Right. And we've seen a pretty good run. But one of the reasons we like India, we like emerging markets in general. We think there's a lot of opportunity there from a growth perspective. But in India, you get a lot of visibility into earnings, which you may not get into other emerging markets. And it's been consistent over time. So when we say we think there might be double-digit EPS growth there, we have more confidence there than we might have elsewhere.

And similarly, you know, it has a lot of tailwinds behind it as well. Is that because of just transparency of reporting that you have that visibility into earnings or just because of the, you know, the fundamental drivers? I think it's a combination of both of those things, which should give investors increased confidence to look at those markets. We are seeing a lot of interest in emerging markets. That would be one that we think has particular opportunities here. You know, the traditional way of thinking about emerging markets when it comes to central bank policy is that Fed eases, emergingging markets get a tailwind is that equation still in effect. So I well I do think

this year. We should be less concerned about what the Fed is going to do with. With respect to these markets because there's a lot of uncertainty particularly in the last couple weeks we think the general trajectory. Is the same right

we are going to end up in the same place but the pace of that so if you're going to look at these emerging markets. I'd be thinking more over the long term. I think in the in the same place with the pace of that. So if you're going to look at these emerging markets, I'd be thinking more over the long term. I think in the shorter term, look, we usually look at emerging markets when certain things happen with the dollar, right? But I think we could be in a scenario in a year or two where the dollar's position has changed. And do we want to, in a year or two, start thinking about where we want to be in the world?

Or do we want to think about it now? And do we want to get in before, you know, there's massive flows going into that area? Sure. And India, I guess, is not really an export driven. I mean, it's obviously what's going on there in the domestic economy. Right. And you've got, you know, you've got some other things there that that may help diversify your portfolio. So I think if I added together what consumer discretionary and infotech in U.S. markets, it's 42, 43 percent. In India, that's closer to 27 percent. So you can add diversification, if not just, you know, an outright bullishness on the market itself.

Sure. Elizabeth, it's great to see you. Thanks a lot. Great to see you. All right. Up next, we're tracking the biggest movers as we head into the close. Steve Kovach is back with that. Hey, Steve.

Hey, Mike. We got two executive departures, sending shares of two very different companies lower today. We'll reveal those names when Closing Bell returns after this. 18 minutes till the Closing Bell. S&P still up about eight tenths of one percent. Let's get back to Steve Kovach for a look at the key stocks to watch. Hey, Steve. Hey, Mike. Yeah, shares of computer accessory maker Logitech falling better than six percent today after the company announced its CFO was leaving the company for another job. Shares still fell, even though Logitech reaffirmed its guidance

for the 2024 fiscal year, which ends this spring. And then let's move over to Hertz, also slipping today. Shares down about 5.5%. That's after its CEO, Stephen Scher, announced he would step down. Gil West, a former GM and Delta Airlines exec, he's going to be the next CEO at Hertz. And Scher took over at Hertz as the company tried and, of course, failed to transition to electric vehicles. The company was forced to sell thousands of its EVs last year due to lack of demand, Mike. All right, Steve, thanks very much. Still ahead, a big tech double play. Meta and Netflix shares on the rise.

We'll tell you what's driving those stocks, giving those stocks a boost, and what it might mean for the mega caps in the long term. Closing bell. Be right back. Welcome back. NVIDIA's massive run-up might have some investors feeling some FOMO. If you missed out on the NVIDIA bonanza, CNBC Pro is laying out some other investments that could see huge earnings growth going forward.

Just head to CNBC.com slash ProPick or scan the QR code on your screen. And speaking of NVIDIA, don't miss the highly anticipated keynote from NVIDIA CEO Jensen Huang kicking off at the top of the hour. Up next, Alphabet shares popping on the possibility of an Apple AI tie up. We've got all those details. That and much more when we take you inside the market zone. We are now in the closing bell market zone. Deirdre Bosa is here to break down the big moves in Alphabet shares today. Julia Borsten on the analysts getting bullish on Netflix and Meta.

And Phil LeBeau on what's behind Tesla's big rebound today. Deirdre, obviously a big report here on Alphabet and Apple. How do you think it fits into the whole story of AI? Well, it kind of shakes up the rankings, or at least the perceived rankings. And it's essentially a plot twist

that you can actually see playing out in mega cap stock movements over the last month. Alphabet shares, they fell back in late Feb on that botched rollout of Gemini, but on today's report, look at this popping. They were up as much as 7% at one point, putting it ahead of Microsoft's performance over that time frame. Now, a deal to license AI features on the iPhone, that would be a very strong review to the bears who worried that Google's Gemini was falling short of competitors' products and that it would have trouble monetizing its AI. Its current distribution deal with Apple, that has really helped cement Google's dominance in search. So an AI deal could give it a boost in these early

innings here. But of course, there's a lot more that's going to be happening over the next few months that could reshuffle these perceived winners and losers again. Google I.O. is on May 14th. Microsoft Build is just a week later. And then you've got Apple's WWDC in June. You know, a lot of people are talking about where this puts Apple, but I don't think anyone's counting them out just yet. Sure. I guess a couple of things come to mind.

I guess, first of all, I mean, to the degree that this is something like this is going to happen, it definitely suggests there's no kind of winner take all situation when it comes to these AI tools, even if it's specifically for search. And I guess the other one is it's a kind of vote of confidence for Gemini. But is it just because it might be a little bit ahead of where Apple is? I mean, that gets to your final point, I guess. No, it's true. And is this really validation for Gemini? Like on one hand, yes, it would give it huge distribution. Like I said, that was so pivotal for search being on the iPhone. But at the same time, right, this is like a race that's so up and down. And that report said that Apple was also looking at open AI and it was considering

partnering with them. These language models are coming out so quickly and getting better and better that who's on top is just this constantly evolving thing. And again, like looking to those three massive events over the next few months, everything could once again change. Yeah. I mean, there's obviously such a sense of urgency for all these companies to kind of be there where it's all happening. Thank you very much, Dee. Julia, more street bullishness on two popular names here, Netflix and Meta. Yeah, that's right. Netflix shares are up about 2.5% after Loop raised its price target to $700 with a buy rating on the stock.

Now, Loop raised its estimates for subscriber additions as well as EPS, saying near-term engagement and long-term macro and competitive trends are positive for Netflix. And JP Morgan reiterated its overweight rating on the stock, saying they, quote, remain positive on Netflix's ability to accelerate revenue growth in 2024. Meanwhile, Meta shares are also up about 2.5 percent on Mizuho, naming Meta a top pick, maintaining its buy and 575 price target saying they expect ad pricing for reels to grow with interactive ad units and improve performance they also project facebook's shops e-commerce ads will accelerate from international launches as well as their partnership with amazon now wells fargo also reiterated its strong preference for shares of Meta versus

Google, despite the fact that year to date, Meta has outperformed, saying that Meta is regaining ad market share. Yeah, I guess in both these cases, Julia, the analysts are betting that the good news is not quite in these prices. That $700 price target for Netflix would get it above its former all-time high, just below that level. I guess I wonder, too, about the ad business of Netflix and whether, you know, analysts seem happy to just put it out there as another growth driver, even if it's not necessarily, you know, reason one or two to feel like, you know, it's going to be driving earnings this year or next.

Yeah, look, they're talking about the ad business and Netflix really just being an incremental revenue stream. This is another way not only to generate new revenue, but also to bring people into the platform at a lower price point. So it's sort of the dual benefits of that of that revenue stream there. But I also wanted to point out here that a lot of this is really about these companies versus their peers. This idea of there continues to be cord cutting. Netflix is going to benefit from that. And maybe people will have fewer subscription services, but Netflix is likely to be one that they hold on to. And then when it comes to meta, these are sort of notes of optimism going into the next round of earnings, saying they believe that meta will continue to deliver on these various factors that they've laid out as growth drivers for the next year or two. Yeah. So the winners keep winning call, basically, in both cases. Julia, thank you.

Phil, Tesla for a change, getting a little bit of a bounce. What's behind that? Hard to know if there's something specific, Mike. There are a couple of people who have been speculating online that because they're going to be raising prices of the Model Y in Europe next week and the U.S. later in April, that this perhaps is going to goose the sales a little bit or deliveries a little bit in Q1. This comes at a time when Goldman Sachs out with a note today cutting its estimate, its price target down to 190 and cutting its delivery estimates, citing EV headwinds, the Giga Berlin problems. In the first quarter, they expect 435,000 vehicles to be delivered. That's down from 475,000 and now expecting fewer than 2 million deliveries for all of 2024.

Just as a refresher, the company delivered 1.81 million vehicles last year. And the estimate out on the street is for 2.06 million to be delivered this year. So now you've got Goldman saying, you know what, I don't even think they get to 2 million vehicles delivered. Take a look at shares of Tesla over the last three months. Remember, even though the stock is down 25 percent, yeah, a bit of a bounce here today. The next real catalyst won't come for a couple of weeks. That's when we get the Q1 deliveries that'll be happening in the first week of April. Mike, back to you. Yeah, Phil, and I've been trying to puzzle out the implications of these reports about potentially raising prices in Europe. I mean, clearly, the need to cut prices and the sacrificing of margins has been a big overhang on Tesla.

But when you still hear about BYD cutting globally their prices, I wonder how to make some sense of this potential move in Europe by Tesla. And the argument is that they're going to be raising their prices because they're trying to clear out their inventory right now. Either way you look at it, it's not a real good picture here because if you do clear out the inventory, fantastic. But when those prices go up, going against the price cuts that we've seen from BYD and from other competitors, whether in China or in Europe, it's just not a good environment right now for Tesla, really for all of the EV companies, because of the price cuts that have been put in by the Chinese competitors. Phil, you've made the case constantly that obviously there's a lot of demand for hybrids. Nobody feels like they necessarily want to or need to be forced toward an EV. What does that mean?

I think in the here and now for the traditional U.S. automakers, there has been some bullish commentary about how they're just throttling back on the EV investments has been a little bit of a psychological boost at least. Well, I think they continue to do that, Mike. I think they're going to be very judicious in terms of how much capital they plan to spend at least over the next year or two years when it comes to EV development. The stuff that's already been allocated, they're going to go through with those investments. But the longer term investments, when you get into 26, 27, I think that I wouldn't be surprised, Mike, if you start to see those get pushed out even further. The longer this goes,

that people are prioritizing hybrids over EVs, that gives them less incentives to start spending even more or allocating even more resources down the road. Absolutely. Yeah, they'll take it slower. Phil, thanks very much. Got about one minute left heading into the close here. You see the dollar's actually got a little bit of a boost. People are trying to knit together what it means for the Fed to possibly be cutting fewer times here. NASDAQ 100 has been up about 1% all day. The biggest upside contributors to the S&P 500 move today, Google by far, followed by Tesla, Meta, and Apple. So very much a mega cap growth story. And this is all happening in the face of still pretty aggressive increases in Treasury yields.

We hit about 434 on the 10-year earlier. We are now around 433 as people, again, try to handicap what these higher-than-expected inflation numbers might mean for what the Fed has to do over there. We had about mixed stress all day, even though the S&P up about 0.tenths of 1%, only 52% of U.S. stock exchange volume to the upside. That's going to do it for overtime. Hit it to overtime with Morgan Brennan and John Ford.