Closing Bell - Closing Bell: How Far Can the Rally Run? 11/20/23

Episode Date: November 20, 2023

How far can the AI fueled rally really run? Adam Parker from Trivariate gives his take. Plus, Big Technology’s Alex Kantrowitz and CIC Wealth’s Malcolm Ethridge weigh in on the chaos at Open AI and what it might mean for Microsoft’s stock. And, Anastasia Amoroso of iCapital breaks out her 2024 market playbook.

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with the Nasdaq on the run again. And once again, it is AI at the center of it all. Microsoft shares hitting another record high today. It hires the founder and one-time leader of OpenAI, that company thrown into chaos over the weekend, as you undoubtedly know by now. Other key players in the AI space, whether it's Alphabet or Amazon, they're also higher. Of course, NVIDIA approaching $500 a share ahead of its critical earnings report tomorrow. We're going to discuss all of that. Take a look at the scorecard with 60 minutes to go in regulation.

We do have a good amount of green today and we are ramping a bit as we begin this final stretch outside of Microsoft. The Dow has gotten a big boost today by Boeing, an upgrade there. The Russell 2000 is higher again after coming up its strongest week in months. And how about interest rates? They're calm, too. The 10-year near 4.4. Well, there it is, 4.42. It's the lowest level of the day, I think, on the 10-year note yield.

It does take us to our talk of the tape. How far can this rally run? A rally pushed again today by the ai hype but some say in need of much more to keep the party going let's ask adam parker he's the founder and ceo of trivariate research a cnbc contributor and he's back here at post nine good to see you a remarkable run a remarkable rally and here we are pies of the day as we begin the final stretch. And it's a similar kind of story, right? All these mega cap stocks, not a one, are in the red. Yeah. I mean, as we talked about last few weeks, I mean, in years where the market's up a lot, January through October 31st, it almost always rallies November, December. I think there's been 38 years in the

last 100 years that you've been up 10% or more. And then the market's up 32 of those 38 the last two months. Is that a self-fulfilling prophecy? Is it people chasing to catch up because they weren't positioned for it? All the above. All the above. It's a combination. So that and you get some things you can seek your teeth into about the fundamentals and you're off to the races. Tenure yields lower and people, the equity multiples are going higher, and that's kind of a champagne luge or whatever you call it for the market. Do you buy into that? Does that make sense to you?

I mean, I think the investors I talk to obviously have been saying for a while they think this could happen, as you know we have, but I think the question is what did they sell in December? What could rotate in January? A lot of people ask about that because it seems like 100 years ago, but it was only a year ago that Tesla, Meta, and Nvidia were awful stocks in 2022. And then their low was really January 3rd, first trading day of this year, and they've ripped basically all year.

So I think people are trying to figure out what is it that's lagged this year that maybe could get the rotation benefit next year. Is it healthcare that looks oversold? Is it staples that are probably down too much on GOP1? Is it something else that maybe gets a benefit of a flow if people end up selling these things in January? But for now, it seems a bit of a fait accompli. Do you think that those other areas that have done a lot of nothing

are going to do something as the calendar turns? Energy, materials, you said health care staples, things like that. I mean, energy, materials, and health care are our three biggest overweight recommendations. So I think they have good risk-reward, better than average, have some achievability, and people aren't positioned for them. So it looks to me, and each one's separate, there seems to be like one of those myth-buster things where everyone just says, oh, health care's bad in an election year, and like as if it's definitely going to happen.

But I look at some of the names, and I think, so you're telling me people are going to consume less calories and live longer, but they'll need less healthcare. Like some stocks are implying some implausible scenarios in med devices and in other areas. So I'm really warming to the fact that the estimates are low and some of them look pretty cheap. And obviously I like, you know, some of the healthcare services, just, you know, even, even things like UnitedHealth as a customer, all they do is raise pricing on me every single year and they give me zero choice. So they have pricing power on me. And I think these companies have good earnings growth unless you get a recession and, you know, small and medium businesses go out of business. If I go out of

business, they won't make money from me. But short of that, they're going to raise pricing every single year on me. And guess what? I have to take it. But, I mean, are we at a position now, you know, the Russell's up 7.5% in a month. Is there staying power there? Is it time to take a serious look at the Russell? Or as long as you have the overhang of possible recession at some point in 2024, do you have more risk? I think the Russell, I don't like the call to, like, small caps over large. I don't like that call. And I don't like the call to like small caps over large. I don't like that call, and I don't like it for many reasons.

First of all, you want to own those businesses when you're right before, let's say two to three months before the Fed's really going to cut, right? So if you think we're going to cut in February or March, and you think this is the maximum level of pain in earnings, and they can't take it anymore, and they have to cut rates, then yeah, you buy small caps on anticipation that the accommodation will ultimately result in their earnings growth and margin expansion. Where I am now, I look at it and I say, no way do they have more achievable estimates than the big seven. We know why the big seven are up.

Their estimates are more achievable. Okay, they're more achievable. Why? Labor, materials, depreciation, pricing, mix, all the things that make them awesome companies, continue to make them relatively awesome companies until you get closer to the bottom. At that point, then you could dream the margins can expand more for small caps. I got to time it that closely. I mean, if I think the Fed is going to cut sometime in 24, I still can't buy them now. No way, because it has to get way worse before you can get in there. And you can't tell me today is the

day of maximum pain for earnings and equities. I think it's too early. Moreover, I think that whole small cap, large cap valuation thing is a little bit misleading. Yes, you take the cap weight, you know, look at equal weighted, it looks like it's expensive. But when you peel back the onion, just even one layer, it's really not that compelling. Growth stocks are expensive for both, equally expensive for small as they are for large. And value stocks are equally cheap. When you look at profits and you look at cash flows, these things deserve to be relatively more expensive. So it's not like they're expensive for no reason.

They're expensive because they're just more awesome. Would you still be, because they're more awesome, I like that. Would you still be overweight, mega cap relative to everything else? I mean, our call has been and remains that you should be market weight the big seven and make your alpha bets elsewhere. You know, make your bets for alpha. But you're still getting alpha in the big seven. I'll let them participate and I'll make that, but I won't let them hurt me or help me. Why do I say that? And I know you got a big panel of smart people coming after me that can really dive into the details. But what I'll say is this. The idiosyncratic risk is low low meaning macro explains a huge amount of performance when the markets up and

growth beats value and large be small I can explain a ton of these guys returns to there's what 60 sell side analysts and four million four thousand buy side analyst do you think I can know something about Microsoft that's not in the price that nobody else knows I mean I can't know that and I doubt anyone who comes on here does and then and then thirdly like I can't know that, and I doubt anyone who comes on here does. And then thirdly, I can't replicate their performance with another basket. So I'm left with a non-replicable macro stock I can't know anything about. By definition, I should be market weight that group. Why is it an advantage if you can?

So many buy-siders, so many money managers have rules where they can't own more than their top five names. It's 25% of their fund, or they have all these risk management rules. You can't have a position more than 3%. Given how big these got, and they're structurally underweight, and so those who have the flexibility to own them should, and not let them hurt or help them, and just participate as they do.

So if you want to avoid things like financials, discretionary, and industrials, are they on your same right before the Fed cuts timeline? Yes, that's right. I think when you get more offensive, you're going to want to own more industrial, small caps, things that have more margin expansion. Cyclical businesses do well before the trough

and the dream that the recovery happens, not right when things are deteriorating before the Fed gets there. Do you want to rotate from mega cap at that moment into these names, or is that the moment where money comes out of the bond market and cash and goes into those other areas so that it's a rising tide of fed cutting lifts all boats so to speak it'll definitely will lift all boats when that happens these guys just go up

more i don't know how much money these days other than the net exposure of hedge funds and kind of big cross-asset networks that are going to allocate from fixed income to equities really goes into equities incrementally. So much money is run in three-hour to two-day holding period at multi-strats. And a huge percentage of daily volume is three-hour holding period. So I think what you're talking about is bigger allocations to equities as people chase it up. I think on the margin, that's why we're going to go up this year. I think we go into next year, I think it'll be a little bit trickier. It's hard for me to sketch out. We haven't done our year ahead outlook yet. I love ingesting everyone else's first to see what the consensus is. But to

me, I don't see anywhere near as much upside for next year. I think that we rally this year and people look in January at a cold market. Because most of the outlooks that I've seen, at least to this point, are for that, muted you know, 4%, 5%, you know, dividends, whatever. You get a little bit more than that, but not much. Why not, though, if the Fed's going to cut? So I don't think the Fed can cut before earnings and conditions get worse. Right. So the question is timing. Last year, every single big firm said we'll be down in the first half and up in the second half. And so naturally, you know, we ripped higher in the first half and up in the second half. And so naturally, you know, we ripped higher in the first half.

What if the CPI goes under three? What if the CPI goes under three? I mean, what if the Fed can cut because it can, not because it has to because you think things are going to get that much worse? If earnings are growing and they are accommodative, the market's going to rip higher. Right. I mean, for sure. And I think the question is just how long can we stay in gold locks? To me, the bold case would be the Fed doesn't act for two or three years.

They tell you, hey, we ran under 2% for a decade. You were cool with it. We're going to run a little above 2% for a while. You're cool that we have this inflation thing mostly beaten. Don't worry about it. The big companies like the ones you're talking about, they can still grow earnings. Other ones can grow earnings a little bit. You start dreaming that 24 is above 23, 25 is above 24, and equities look cheap two years from now. So the bond market's going to do the Fed's work

for it on the way down as much as it's done it on the way up recently, right? Yields are going to come down as inflation continues to come down, and growth remains good enough? Yeah, good enough. Goldilocks, it's okay. Earnings are growing okay. I think if that was a 0% probability because the only choices were hard or soft landing a year ago, now it's 30% or some real number. I'm not saying it's the base case, but it's no longer unicorns and lollipops to believe that we could have tons of structural things. You're going to talk about AI in a minute when I get off, but it could be housing.

It could be AI. It could be electrification. Those themes all of a sudden, oh, that sounds pretty good. And there's old people and there's health care and this thing, boom, boom, boom. And all of a sudden you think 25 earnings are above 24 and 26 are above 25. And you'll be talking about 5,500, not 4,500 on the S&P. All right. We'll make that the last word. Great Thanksgiving.

Good to be with you. Yeah, thanks for being with us. We will see you soon, for sure. That's Adam Parker. As we said, top of the show, Microsoft shares, whoop, they're higher today. On news, the company has hired Sam Altman after this weekend's chaos at OpenAI for what this really means for investors betting on the AI arms race. Let's bring in CNBC contributors Alex Kantrowitz of Big Technology

and Malcolm Etheridge of CIC Wealth. So it's great to have you both with us. Alex, I'll begin with you first. Is this really the done deal that some are suggesting? I've seen something from The Verge earlier which says Altman's still trying to return to OpenAI as the CEO. I don't think it's over yet. I mean, until we go like a week after this crisis, right? We can't really say it's over.

There have been so many twists and turns over the past week that, like, you're not just going to call it now. And we do know that 700 OpenAI employees have said that either the board installs Sam and Greg Rockman back in the company or they're going to follow them to Microsoft. It's not quite feasible that they all go to Microsoft, but this is a power play and it might work. So there is a chance that at the end of all this, we do end up seeing Sam Altman back at OpenAI with a new board. That would be remarkable, just given all the things that have happened over the last, you know, not even a handful of days. Let's just say that Sam does in fact go to Microsoft. Does it help them get further ahead or does the chaos that's ensued at OpenAI give others a chance to catch up? Because you know what the narrative was. After Microsoft did the original

deal, it was like, wow, these guys have blown everybody out of the water. Alphabet's taken a step back, blew their opportunity, but now I don't know. What do you think? I think the real answer is both, right? Now Microsoft has 18,000 customers working on OpenAI's service through Azure. So Sam Altman going over to Microsoft,

that's gonna throw that into chaos. All these clients now are looking at other options. They're looking at Anthropic. They're calling Google, and they're saying, what can you do for us? They're calling everybody else. And so they do potentially risk losing those clients. And by the way, they also risk losing employees. Like, who's going to stay for this long in the middle of this chaos?

Some of your best researchers might go elsewhere, and that could help bring up the level of competition in a place like Google or in a place like Amazon. But in the long term, if Sam Altman does stay, what you end up having is them rebuilding some of these models within Microsoft. And then those work much more seamlessly inside Teams, inside Excel, inside Word, as the co-pilot that Satya Nadella has been telling us about. Now he doesn't have to worry about somebody else's technology. He has it in-house with Sam Altman running the show. But that could be another couple of years because they're going to have to rebuild these models from scratch

if they're going to do it within Microsoft. But what happens if OpenAI, in fact, does go slower? Because if you believe that that was part of the friction within the company, unease with just how fast this was being commercialized in terms of ChatGPT, Copilot, and the like. Does that hurt Microsoft's efforts if OpenAI sort of takes a step back and says, we need to breathe a little bit more before we just race this technology out to market? Absolutely, it hurts Microsoft, because it's not just the OpenAI show anymore. Maybe a year ago, OpenAI released ChatGPT,

they shipped GPT-4, they were leading the field, and all these other companies were trying to figure out how to catch up. Now they've caught up because they were building on top of commoditized technology that Google introduced, the transformer model, and OpenAI was just the best step productizing it. So now that everybody's caught up, let's say OpenAI,

their new CEO says, we're gonna put our foot on the brake. Think everybody else is going to put their foot on the brake? No, foot on the gas, right? And they're going to surpass OpenAI if it takes this pause. And that's why this idea of AI safety, which maybe this entire coup was built on, is it's kind of a crazy idea. We're not going to have a development of AI that's going to happen safely just because of the way that this works, right? This technology is out there. People want to build. They're going to develop whatever they can.

And it's going to be open source. It's going to be released by multiple partners. Nobody has a monopoly on this development, not OpenAI and not anybody else. Yeah. It's why I wanted to get your opinion so much, Malcolm, because, you know, let's remind our viewers on this show where you so publicly came on and said, you know what? Alphabet blew it. And I'm selling that stock as a result of them, in your mind, at least seeding the lead to Microsoft. Now, what do you think? So I think I'm actually in a little bit different camp from you guys, or at least how you started

the conversation in the sense that i don't know that it's still an open conversation where sam altman goes and the the likelihood that microsoft again is the really big winner after all of this chaos right they probably started the weekend thinking oh my god this is a crisis that's going to end up seeing us seed some of the dominance and some of this early adopter opportunity that we created to now you fast forward 48 hours and open ai probably did microsoft one of the biggest favors it could have possibly done with this unforced error in that it brought the talent sam altman and his top lieutenants over to microsoft and said irrespective of what open ai's doomsdayers

want to do with regard to going slow, we have the product guy, right? Sam Altman was not the engineer behind the scenes creating the model itself. As Alex said, that was a Google product, right? That was built once upon a time by Google. What he did was bring products that actually were interesting to consumers and allowed people to interact with AI in the way that we now know ChatGPT, which is his core talent. And so by bringing that in-house at Microsoft, he can focus and his team can focus solely on applying all of that know-how to Microsoft and entrenching them even deeper into their lead as the dominant powerhouse in the AI arms race. You want to

respond to that? I think Sam does stay at Microsoft. I'm not saying it's likely he's going to go back to OpenAI, just acknowledging that there's a possibility. But what Malcolm's saying is not in the nature of Sam Altman. He doesn't want to build high power Clippy. He wants to build generational, world-changing technology. He might have a chance to do this at Microsoft. It's going to happen slowly. You know, it's not, again, it's not going to be 700

OpenAI employees jumping over because they need to maintain the service that they've sold to thousands of clients. So it's going to start slow. He might end up picking some of his best, I mean, he's already picked some best lieutenants, but basically looking at the roster and seeing who he wants to rebuild with. And, you know, that's a good outcome for Microsoft, obviously. For Sam, you know, the people that I speak with, they're not quite sure he's going to want to stay and do that forever. And I think that's a reasonable perspective. I feel like, Malcolm, you sound like a shareholder who wants to get bigger in Microsoft and not entertain the idea that either Amazon through Anthropic or Alphabet itself could become the

player that Microsoft appears to be today. And it sounds like you think they've pulled off a tremendous coup here. Yeah, at the risk of sounding like what Dan Ives is to Apple, right, I am way further into the Microsoft camp when it comes to the conversation on AI now following this, right? Assuming the cards do fall the way early reporting says they would, Microsoft has the pick of the litter as far as some of the AI engineers and other tech talent that's, you know, forget threatening, that's actually already walked out of the door and is now booking tickets to go to Seattle, right? So I'm thinking that Microsoft manages to take this lead and run with it. And I don't think they have to worry so much about are we cannibalizing,

are we hurting our partner in the way that they would have before? Because you don't surprise the CEO of Microsoft with an announcement like this a minute before you actually make the decision. You bring a partner like that who's a 49 stakeholder into the conversation as you're considering making these moves otherwise you run the risk of them taking the war chest right the tens of billions of dollars they have in cash sitting on the balance sheet and putting that to work to bring these things in-house and no longer even have to have a conversation or worry that their flank is unprotected ever again in dealing with open AI. See, the thing is, if you do what Malcolm suggests you can do and why he is optimistic as as optimistic as he is, if you bring the entire thing in house, don't you then incur a level of cost that you did not necessarily have before?

And doesn't that change the financial dynamics, at least for the balance sheet and the way that investors need to view what this company is going to spend, again, perhaps more than it initially intended, and when they're going to be able to fully monetize that. Yeah, I don't think Microsoft is too worried about the cost. I mean, it's 700 employees, now very well-paid employees. Again, I don't think they're bringing everybody over. And then it's Azure, right? Basically, the big thing in the investment was the Azure credits that Microsoft made. This $13 billion they were putting in OpenAI, it was compute. Well, they have that compute in-house.

And now the OpenAI team can use that to train whatever new model they're building on. So for me, the cost to Microsoft, money-wise, not a big problem. It's liability. Do they really want to sit behind some of these big models and take, you know, the flack for whatever these folks who want to push the status quo forward as fast as they can? Like, does Satya Nadella want to be in front of Congress and say, yep, I built that? No, he'd much rather have Sam Altman do it. That's why they had the investment in OpenAI, right? So I think it's, there's the reputational cost, the money isn't a big deal, and then there's the time. This was all working very stably.

The partnership, I mean, Sam Altman and Satya Nadella, if you see a conference stage in Silicon Valley, they were standing there together. Now you're going to have to rebuild from scratch, and that partnership gets shaken up. So the question is how fast they can do that. It's not going to be snap your fingers and get these models working right off the bat. It takes time, and that time can be costly. Malcolm, lastly to you, we're going to be talking about AI a lot tomorrow, of course, as we lead up to overtime. And oh, yeah, NVIDIA, a stock that was four hundred dollars on Halloween, which, as I look now, is over five hundred dollars. So it's at the highs of the day.

It's up two and a third percent. It's five hundred near five hundred and five bucks. What should we expect here? Yeah, so I think for one thing, Scott, I want to go back to a statement that you made to me last time I was at Post 9 with you, which was this is why it's so tough to try and time your way in and out of these mega caps, because you just never have any clue what is the next thing that's going to happen, conversationally at least. But I think for NVIDIA, the conversation has now shifted from Microsoft is trying to compete with them in the chip space to the incumbents have now been solidified, in my opinion, as the dominant winners for years to come as it relates to AI, simply because

if I'm an investor and I'm looking at startup opportunities, can I really trust that the AI doomers and the zoomers who want to go slow and go fast are going to be able to get on one accord inside a startup? Or am I worried that my however many millions of dollars of investment will be obliterated the moment a board has a meeting and decides they're going to make a big decision in a vacuum that, you know, all of a sudden I have no no wherewithal except maybe one minute before the decision is made. And so I think for NVIDIA and others who compete in this space, they now have less to worry about from AI competitors than they did before Friday. Wow. Interesting. We'll leave it there. Gentlemen, thank you. Malcolm, we'll talk to you soon. Of course, Alex, good to see you here at Post 9 once again. By the way, do not miss CNBC special tonight, Talking All Things AI. Microsoft, Sam Altman, and more. That's 8 o'clock Eastern tonight.

Let's get a check now on some top stocks to watch as we head into the close. Christina Partsenevelos joins us with that. Christina. Well, let's start with Argentinian voters cheering libertarian economists, Javier Millet, as their new president. He's promising radical change of free market economics and a remake of South America's second largest economy. And that's why you're seeing many U.S. listed shares of Argentinian companies jump today, like Banco Macro. You can see up 24%.

And then Vista Energy is up there. It's Mexican, but it derives most of its revenues from Argentina. Or Argentine. Deutsche Bank showing some love for Boeing by upgrading the commercial jet maker from hold to buy with an increased price target of $270. They cite growing aircraft deliveries as their main driver, and that's why shares are up over 4%. Scott. All right, Christina, thank you. We'll see you in just a bit. We're just getting started. Up next, trading seasonal strength. Top technician Jonathan Krinsky flagging one part of the market he thinks could outperform into the new year. He's going to make his case. Tell us exactly what that is when we come back.

We're live from the New York Stock Exchange and you're watching Closing Bell on CNBC. Welcome back. Small caps having a great run this month. The Russell 2000 is up 9 percent. My next guest says there's even more room to run for that sector which he says is quote entering the best stretch of relative strength versus the s p let's bring in btig's jonathan krinsky so good to see you so you're a believer well scott the the call here really is a relative relative call more than anything right so um if we think about small caps up two or so in the year nasdaq 100 is up about 45%. So that spread NASDAQ over

Russell, we've only seen it greater on a year-to-date basis two other times. That was 98, 99. What followed there was small cap outperformance of the next three years by over 30% each year. So I think the call here is we've just basically gone nowhere year-to-date on the small caps. And one or two scenarios is likely to happen. If we're at the tail end of this growth scare, this bear market, then I think there's significant upside in small caps and maybe mega caps kind of chop around. And if we're at kind of this inflection where we've kind of run the course for this bear market rally, then I think mega cap tech is probably at the

point where it's not immune and going to see some catch down. So, yeah, I think in absolute terms, small caps probably have a bit more upside. But really, as we think about how to position for next year, I think the bigger fat pitch trade will just be this relative performance compression. But see, you've been looking for many, many months for a rollover in the overall market. I mean, had you on a bunch of times, whether it's on halftime or here, I've cited your notes all the time that you put out. You have not been constructive on the market whatsoever. And I still hear you talking as if this has been nothing but a bear market bounce when there's a cavalry of other people who would

argue otherwise. Well, look, Scott, I think, again, this goes back to what are you looking at? I mean, the concentration in the market is in some ways unprecedented. Two stocks, Apple and Microsoft, make up 47% of the tech sector. We just had the largest inflows on record in the Nasdaq 100. So I think when you talk about what has the market done this year, I think the bearish call on the indices has been 100% wrong. We'll own that for sure. But if you're talking about the average stock,

the bearish call has actually been a pretty good call. Since February 2nd, the average stock is down significantly. And we did have a pretty good drawdown in August, September, October in the mega caps. So I think we're now at a point, again, where a lot of good news is priced in. I think the performance chase, like I said, we just saw massive inflows in the Nasdaq 100. Could the chase continue a little bit more? Yes. But, you know, at some point you're going to have to have that conversion either where it's obvious that, you know, data is improving and we're not going into a hard landing. You know, if you say that we're in a soft landing, then why are small caps only at two percent on the air it just doesn't the narrative doesn't fit so we're open to that mindset that maybe the

market um is entering that inflection point where you're going to get some more uh breadth confirmation from the secondary stocks but we just haven't seen it yet so um you know but i'm going to stop you i'm going to stop you for just a second forgive me I just want to stop you for one second. Because the last CPI report is the thing that arguably set this, you know, latest stage of the rally off. That's no if. That was fact, right? That report confirmed, followed and backed up by the PPI the following day, confirmed that inflation continues to come down a lot. And even the Fed has suggested that they can now be, quote unquote, patient with what they're doing. So, I mean, it seems like the consensus, at least the market, has started to believe in the soft landing story.

No? Yeah. I mean, look, I think that was that move in the small caps, right? And so if that's going to continue, you have to ask what is going to outperform over the next coming months in that scenario. And we think it's probably small caps over large. And conversely, if we're going into a period where maybe inflation is coming down for the wrong reasons, look, small caps probably go down in that scenario. But I think you're going to see mega cap tech where everyone has been crowding. You're going to see that catch down. So I think in either scenario, the spread makes sense. It's just a matter of which direction is it going? We still think, look, as you get into the end of the year, there's a lot of seasonal aspects to it. Momentum is on the side of the bulls here for tech for sure. But I think as you get in early next year, you know, again, you talked about it with your previous guests that once the calendar

turns, there's often some pretty significant sizable momentum rotations. And I think that might be the case here this year as well. I just don't know why there would be a rotation from mega cap tech into these other areas and why, if you believe in the soft landing story and inflation continuing to come down, the rotation would actually come from outside the market in from, you know, what's been happening in with yields and also from cash. Why does it have to come this rotation always from within? Not this time. It actually may be different. Look, it could be, but I think you've seen those flows, like I said, with the biggest inflows on record in the NASDAQ 100. It's a consensus trade that it works in any environment.

And at some point, that price becomes too full, right? And so, look, we talked about NVIDIA with you back in August before the last earnings report, talked about how, yes, it was a great company, but maybe it was a little bit of a sell of the news. And it had a pretty significant drawdown into October. It's now recovered that entirely. So we'll see what happens tomorrow. But I hear your point. I think the issue really is, again, where is that performance, that next leg going to come from? And even if you're bullish here, I think you've got to look small caps over large.

Yeah. All right. I appreciate it as always. Jonathan, thank you. Jonathan Krinsky, BTIG. Up next, your 2024 market playbook. I capitals Anastasia Amoroso breaking out her crystal ball where she sees rates, inflation and equity opportunities. That's after the break. Closing bell right back. Just a few weeks away now from the December Fed meeting, and my next guest is here to share her outlook on what their next move might be, how it could impact the market moving forward. Let's bring in Anastasia Amoroso, chief investment strategist at iCapital. Welcome back. It's good to see you. You bullish as we turn the calendar? I mean,

we're obviously on a roll now. Can it last? Well, I think it can last till December 13th. And I really circle... December 13th, that's it? December 13th. All right, mark your calendars, everybody. Well, the reason I say that, that's, of course, the next Fed meeting. And there is clearly a big disconnect going on in the markets right now, because the last thing we know from the Fed is that they don't actually intend to cut rates all that much in 2024. And the market discounted 100 basis points of rate cuts at this point into 2024. And that's what propelled and catalyzed this rally. But what does the Fed actually say on December 13th?

I want to hear why and if would they actually cut rates. And what I fear they might say is, look, inflation is still at 3.7%. You know, core measures, it's still not at 2.5% or 2% like we need it to be. If you look at the sticky services component, it's annualizing the last three months, annualizing 4.9%. So are they really going to declare a victory? Or are they going to say, well, I think we've made progress, and we're going to stay high for longer?

I know, but isn't it just enough if they, you know, continue to lead us to believe that they're done hiking? Why do we need clarity on cuts at this particular point? It feels like a little too soon for that. Well, and they're not going to provide that. And, of course, because you know what would happen. We'd have even more easing of conditions, and they don't want to do that. And I think the market is priced in the fact that we're going to be high for longer, and we can deal with that.

But now the market went a bit further and said, well, now we're going to have rate cuts. And if that's the case, you buy unprofitable tech, you buy small caps, and you buy all this stuff that's lower quality that's been rallying right now. Do you not believe in that? I don't believe in it yet, because I think the Fed really needs to deliver the rate hikes for this to really start to play out.

Rate cuts. Rate cuts. Rate cuts for this to really start to play out. And, you know, I see different scenarios why they would actually cut rates. One of them, I think, would be a bullish one where they would go into the second quarter of next year and say, well, core PC metric as a 2.7 percent. We've done our job and now we sort of can cut preemptively while the economy is still muddling through. That's uber bullish. Is that far-fetched? Well, we just don't know, right? Because the other scenario is that they are forced to cut rates by the markets,

by the dislocations, by the defaults, the delinquencies. And so that's why that's really, you know, there's a bullish and a bearish risk. But the base case is that we have this muddle through economy that is a muddle through for markets. We've got to ramp up here as we're in this final stretch. We do have about ramp up here as we're in this final stretch. We do have about 20 minutes or so to go. And I just want to note that the Dow's at the highs of the day, more or less, were 275, 35,222. NASDAQ is the outperformer again. Rates, as I told you at the very beginning of the program, I think we're at 442 on the 10-year. We can take a look at that, too, because that's trickled down a little bit. You've had the NASDAQ pick up as well.

And then the Russell 2000, which has really been the standout of late, as we were just talking about with Anastasia, 6 percent or thereabouts in a week is continuing to ramp here as well. Are you a believer? Let's put the Russell aside. Sure. The underperforming sectors relative to mega cap do we still need to see or feel as though the Fed is gonna cut before we can feel confident putting money there look I think you

start to nibble and I would say there's three areas that are really catching my attention now which I haven't really thought about in the last probably three to six months and the first one is duration and buying bonds, investment grade, high yield. I think you start to look to those because if the Fed does cut in 2024, the average cutting cycle was about 360 basis points. And even if they cut by 100 basis points, as the forecast or this consensus expects, that potential 8% upside if you're buying a 10-year treasury in price

terms only, and then you add a yield on top of that. So if you're buying especially a yield with a spread like high yield and investment grade, that's an equity-like return in fixed income. So that's one space that I really like. The other one that I think is rallying today, along with everything else, is real estate. And real estate has been beaten up and the prices have corrected. And I had many conversations recently with real estate managers

and they're starting to see opportunity. Those were not the conversations six months ago, but they're starting to say, look, we've corrected 11% from the peak. Office corrected 30%. It might be a really interesting time to step in if cap rates on some of those properties are 7% to 8%. Yeah, and maybe avoid the apocalyptic scenarios that some have predicted. It's good to see you.

Thanks for being here. Have a great Thanksgiving. Anastasia Amoroso, iCapital. We do have a news alert on Salesforce and OpenAI. And I guess Steve Kovach, Mark Benioff wants to have a big role in this AI arms race too. Yeah, that's exactly what's going on, Scott. So Mark Benioff wants to have a big role in this AI arms race, too. Yeah, that's exactly what's going on, Scott. So Mark Benioff tweeting that he's willing to take any OpenAI employee who has submitted their resignation amidst all the turmoil we've been talking about all day and saying he'd give them the full offer and match everything that they're making at OpenAI to come join the Salesforce AI team, which has their own AI assistant called Einstein that's powered by, you know, these large language models at the same time. Look, this this is just a demonstration, though, Scott, of how valuable that talent base at OpenAI is, how desired they are. And basically, if things end up collapsing at OpenAI and they don't go to Microsoft, those employees can go basically wherever they want in Silicon Valley. And here's just the latest example, Scott. I want to weigh in on this issue as well as to, you know, whether it's a full done deal that

Altman is actually going to join Microsoft. As some are suggesting this afternoon that not so fast. Yeah. Yeah. There's some really cryptic posts on X from Altman and the like kind of talking about how they want to work with OpenAI and not necessarily committing. I mean, the big question is whether or not I think our contributor and Vergetter Nilay Patel was reporting an hour or so ago that, you know, he's talking about maybe coming back because of this letter. And what does that mean for the whole dynamic with Microsoft and him moving over there if

that doesn't happen? So, I mean, this game is still moving, Scott. It is not over. It is not a done deal, despite the messaging that we got from Microsoft and OpenAI early this morning. Yeah, a stunner turning into the strange. We'll see where it all goes. Steve Kovac, thanks so much. I appreciate that very much. Up next, we're tracking the biggest movers as we head into the close. Christina Partsenevelis is standing by with that. Christina. Some changes in the mixed martial arts world affecting one media company and some analysts love for sports betting. I'll reveal those stock movers next.

We're less than 15 minutes away from the closing bell. Let's get back to Christina for a look at the stock she's watching. Hi, Christina. It's football season. And analysts at Bank of America say that's good for sports gambling, especially ESPN Bet, a sports gambling service owned by Penn Entertainment, which actually just launched six days ago. Penn Entertainment, just for some history, sold Barstool Sports in the summer, then bought the ESPN trademark from Disney and rebranded its Barstool Sports book as ESPN Bet. The analysts over there say it's dominating initial download activity. Shares are up about 7% on pace for its best month

since September 2020. Sticking with sports, Paramount is selling majority stake in Bellator, a mixed martial arts promotion, which is second in size only to UFC. Paramount will maintain a minority stake, but the remaining shares will be sold to the Professional Fighters League for an undisclosed amount. Shares up almost 6%. Scott. All right, Christina, thank you. Christina Partsinevolo still ahead. Been a year since Bob Iger's big return to Disney. We break down how he's impacted that media giant, what work still lies ahead, what it means for the stock. Closing bell right back. All right, coming up next, your earnings setup.

Zoom video. That reports in just a few moments the stock dropping more than 5% this quarter. What to look out for when those numbers hit the tape. We're going to take you into the market zone coming up next. All right, we're in the closing bell market zone now.

CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, Julia Borsten, one year, one year since Bob Iger returned to Disney. We'll discuss what's still at stake there. Bertha Coombs on what investors need to watch out for when Zoom reports its earnings in overtime. Michael, I turn to you. I got a Vixit 13.5. I got Apple at 191. I got NVIDIA at 503, up 100 bucks in like two weeks.

And it reports earnings tomorrow. All is well again, in some sense, or at least familiar. Because, you know, we were here. I always do this, but we were here 45-50 in July. And it was a similar thing. We had just broken higher out of a kind of resistance area. It had a correction. And you entered into this kind of grind because people felt they weren't fully exposed to the market. What were we worried about in July that caused the correction? Yield's going to run away

to the upside. The Fed's going to be a little bit more tough love than they were. Oil was a problem. Even seasonally, you know, we had some challenges. And a lot of that has basically been answered in a benign way. So I think it gets us to here. You have the seasonal tailwinds. Earnings are tilted higher. All that other stuff that's going to keep sellers at bay, it's really just a question of, you know, the short term, a lot of gaps on this chart.

The market looked a little bit grabby coming into this week. We'll see if we just have to cool off. Julia, one year, which probably feels like a lot longer for Bob Iger. And what an amazing month it's been, really, for the stock. It's up 15%. It's moving back towards $100. It's moving back, and it has been one year since Bob Iger returned to Disney. But if you look at the stock, it's only up about 3.5% over the past 12 months.

Certainly a rollercoaster year with more volatility and changes than in any other year that Bob Iger has run the company. Now, Iger fended off Nelson Pelz's proxy battle. He reorganized the company with 7000 plus layoffs and seven and a half billion dollars in cost cutting. He accelerated the buyout of Hulu, and he just recently hired a high-profile CFO. Going forward, Iger faces a slew of challenges, determining the future of the linear networks, figuring out when and how to take ESPN direct-to-consumer, what to do with Star India, and then who should succeed him. And he's facing a possible second proxy battle with Pelts, backed by former marvel entertainment chair ike perlmutter so we may learn more about all of this when eiger is scheduled to hold a town hall meeting on november

28th this is a town hall meeting with employees but hopefully we'll we'll get some news oh i know you will i know you will julia borson thank you so much covering disney of course bertha coombs covering zoom which reports in overtime. That's right, Scott. You know, the big question for Zoom investors is whether the video meeting software maker can show a path to growth. Analysts are looking for Zoom to report earnings of $1.9 a share on $1.12 billion in revenue, both at the top of the company's range of guidance, some of them looking for about 1.2. That would represent about 1.5% growth over last year.

Results would mark the sixth straight quarter of low to mid-single-digit revenue growth, a far cry from what we saw three years ago. With today's move ahead of earnings, Zoom shares remain about $500 below the all-time high during the pandemic in October 2020. Scott? All right, Bertha, thanks. A little bit of a move there before the numbers hit in OT. A little bit of a move would be an understatement, as I said, in NVIDIA. Let's just set the stage now for what's at stake tomorrow, given this stock's incredible run and all of the focus on AI, which you were reminded of multiple times over the last 72 hours. Yeah, I mean, I don't think anyone's going to be taken by surprise by the actual reported numbers because people's eyes have gotten pretty big for good reason.

The implied move, I think, this morning was like a 6% or 7%, which is a pretty big swing if you think about it, given where the market cap of NVIDIA has gotten to. I think it's completely about just the durability of the demand cycle. They need to convince people that customers are not hoarding the stuff and there's not been a lot of front-loading and that this is a business more than just this one-stage build-out. We'll see where that goes from there. I mean, it feels as if nobody is wanting to get caught flat-footed

the way they did last time with the huge beat and raise. So we'll see. It's aggressive, but as everyone keeps pointing out, the stated valuation is lower than it was, even as Microsoft stretches to like a 32 PE. This move by Apple has felt kind of quiet. It's kind of quiet the way it's run back towards 200. It's quiet and it's without narrative, as always with Apple.

You don't exactly know why, except that it's Apple. All right, guys. Good stuff. My thanks only. I'll see you tomorrow.