Closing Bell - Closing Bell: Overtime: Another Record Close For The Dow; SEC Wades In On Cyber Attacks 12/15/23

Episode Date: December 15, 2023

The Dow ended Friday at a record high and the major averages notched their seventh straight week of gains. Morgan Stanley’s Daniel Skelly and Ironsides’ Barry Knapp break down where the market goes from here. Citi is closing its once-heralded muni business; our Hugh Son details the latest moves of CEO Jane Fraser’s turnaround efforts. Charles Schwab Chief Fixed Income Strategist Kathy Jones on her playbook for 2024. Lacework CEO Jay Parikh on new SEC cyber security rules. Wells Fargo analyst Mohit Bansal on his top pharma picks for 2024. Plus, Care Bears and what it reveals about the state of post-pandemic supply chain.

Welcome to Closing Dot Overtime. I'm John Ford. Morgan Brennan is off today. Coming up this hour, Charles Schwab's head of fixed income breaks down the big moves in the bond market this week, with the 10-year yield sinking below 4% after that Fed decision. Plus, we've got your healthcare playbook for 2024. Wells Fargo's analyst lays out the six picks that need to be on your radar for healthy returns in the new year. We begin, though, of course, with the market and a push higher in the final moments to close out another strong week for the Bulls. The seventh consecutive week of gains for the major averages. Small caps were the biggest winners this week.

The Russell 2000 jumping more than 5%. Joining me now is Daniel Skelly from Morgan Stanley Wealth Management and Barry Knapp from Ironsides Macroeconomics. Guys, welcome. Happy Friday. So I'm looking at what moved today in particular, Daniel, and I see underneath tech and comm services security, Zscaler, Palo Alto Networks, CrowdStrike, some of the big cloud names, and AI hardware, including NVIDIA, Supermicro, even Intel higher. Where do you go from here after these kinds of gains if you were holding these? And can you chase them if you weren't? Sure, John, and happy Friday.

Thanks for having me on. So look, the last couple of days has seen a vicious rotation into the laggards, right? The small caps, the higher beta, cyclicals, the leverage stocks within the market. And that's following, of course, what had been obviously a tumultuous year for those types of stocks versus the Magnificent Seven. So look, I think it's only natural that you're now going to see, frankly, a little bit of rotation back into quality, into growthier ideas and into ideas tied to secular trends such as cybersecurity. Right. As the digital economy continues to expand, as cloud expands, cyber continues to be a theme that I think will have enduring growth and certainly earnings power. And I think lastly, as we look to next year, we're going to get in January just a glimpse of just how sustainable some of these rotations are.

And from my own personal perspective, we'd still like tilting towards some of these quality growth ideas like Palo Alto within cyber. Wow. OK, so maybe following up on that idea, Barry, you say that Wednesday's Fed meeting changed the rules of the game and maybe in a way that's good for equities. How? Well, in September, which I thought that the September SEP forecast, the framework that Chairman Powell created was a hawkish mistake. At the time, we were in the midst of a bear steepening, supply driven bear steepening in the yield curve. The deeply inverted curve is a massive problem for the small banks in particular. And then the areas of the economy they finance, like multifamily real estate, small businesses, and even the federal government, because the banking system

buys a lot of the issuance in the belly of the curve. So I thought that that was curious that what they did, and I was describing it as follows through that period, which was the necessary condition to end the rate hike cycle and start reversing at least the last three hikes, which I think were excessive, was disinflation. But they added a sufficient condition, which was a rise in unemployment and weaker growth. I didn't really understand that. You know, that so-called Phillips curve and beverage curve had gone vertical, meaning we weren't getting an increase in unemployment and wages were coming down. Well, that was the game and the rules all the way until the quiet period ended.

And then suddenly Powell on Wednesday said, nope, Waller was right. If disinflation or if inflation comes down, we don't really care whether the economy weakens or unemployment rate goes up. And that was a real game changer. I've maintained a underweight in small banks and in small caps and largely because of my expectation that the economy needed to deteriorate to start that process of disinverting the curve. on Wednesday. Williams tried to push back a little bit, but he was very unconvincing, in my opinion. He didn't really push back on that framework. So it was a curious meeting, to be sure. OK, so Dan, are we running low on pessimism now? I mean, one of the arguments about why the market was OK, stocks were OK to move higher was, oh, there's still so many people who are pessimistic, who are skeptical of this. And maybe a lot of those folks got shaken out here, no? I think you certainly had some pessimists shaken out, no doubt, John. But when I look at

the $6 trillion plus still sitting in money market funds, it's hard to argue that we've had a tremendous rush completely into risk assets, right? And so, again, I think coming back to the Fed spotlight, I think the Fed's surprise, the Powell pivot follows a year of surprise. A year of surprise is where an interest rate cycle, the most aggressive of which since the 80s, didn't really break anything that monumental. We had locked in corporate and consumer balance sheets from 20 and 21. We had aggressive fiscal spending. We had private capital stepping in, in the form of private credit and others, following the banking crisis this spring, and still lending to the industrial economy and to medium businesses.

So it follows a line of positive surprises all year. Again, we're focused on the idea of slower growth next year, absent recession. And in that type of environment, you still want to focus on both quality and the equity and credit market. All right. Dan Barry, stay with us. I'm going to bring in CNBC's senior economics reporter, Steve Leisman, who had the interview of the day today with New York Fed President John Williams. Steve, first of all, we're starting off with some generic Western guy names. Dan, Barry, Steve, John. That's good. We're real people.

Call me Wyatt. All right. What is your takeaway from this full week of literally market-moving news and this interview. I like the way Barry Nat put it. I think there are definite game changers out there. I think that's the story. I think that Powell walked away from this need for lower growth. And it basically he's what's the right word is skewing this notion of a sacrifice ratio that you have to give something up to get it. And I think it's a you have to give him a little credit for hanging on to it, but eventually giving it up,

because it's a little like saying to the pilot, you can cut the engines at 1,000 feet. You don't cut the engines until you're on the ground, right? But every idea of bringing down inflation had some below potential growth to it, some notion of employment rising by a certain amount. Saying, hey, we may not need that this time is a big step. But I do want to talk about John Williams for just a second. He took on this Herculean task

today of trying to calm the market's rate-cutting enthusiasm, John, saying rate cuts may have been mentioned at the meeting, but it's not really the focus of discussion around the Fed table and the market's reaction. William suggested a bit too strong for where the Fed is thinking right now. We aren't really talking about rate cuts right now. We're very focused on the question in front of us, which as Chair Powell said, the question is, have we gotten monetary policy

to a sufficiently restrictive stance in order to ensure that inflation comes back down to 2%. That's the question in front of us. That's what we've been really thinking about for the past five months, and I think we'll be continuing to think about for some time. Now, William's got some help from his colleagues today. Atlanta Fed President Rafael Bostic said he's penciled in two rate hikes.

Efforts were not, some efforts were helped, some were not. Austin Gould will be saying he sees rates lower next year, but, quote, not significantly lower. Just so you know, John, the average Fed official's penciled in three rate hikes into their forecast. The market's got six built in. So someone's going to be wrong here, but maybe not by a whole lot. So to tie both of the things you said just now together, from Fed Chair Powell, maybe no more pain, right? Maybe we can get away without the pain. And so the markets might have heard that means extra ice cream. And no more pain does not necessarily mean extra ice cream. That's somewhere in the middle is what

Williams and Trump's policy. There's a whole set of new discussions that has to be had. Because if you look at where the Fed is forecasting real rates, which, to be fair, John Williams called my calculations simplistic on national TV today, but it's what we got. They're looking for a real rate, an inflation adjusted rate of 2.2%, which is the same rate they have this year. Why should the real rate be the same next year as it is this year? You could argue that maybe they will do more and should do more if indeed inflation keeps coming down. A big part of this, we talked about it the other day, was what happened with the PPI and the impact on next week's PCE.

Powell came out and said 3-1 year over year. That means it's going to be in the twos on a three-month or six-month annualized basis. OK. And so with all that, Barry, how does that change your playbook for the weeks ahead since you got sort of crushed on the small cap and small bank trade? Yeah, I Steve hit on a key point there, which was that, you know, I would go back again to September and the structure of their real rate forecast back then was for real rates to go up in 2024 and again in 2025. And at the time, I thought that that was it was crazy and likely going to drive us off a cliff. Now that they've altered that and there is room, rates to go even lower, I would argue. And as I said, I think they've come to the right conclusion. But what I would what I think it means for,

you know, portfolio allocation for thinking about how next year proceeds, my expectation is we were going to have the first big trade out of the gate, the 10 move was likely going to be lower and I thought the first quarter we could trade down perhaps even to 4100 or so on the S P because of this you know crack up that was coming this idea that either we get significantly weaker growth and the earnings estimates are too high you know or um a financial accident in order to get the Fed to actually pivot and do the right thing. Now that they've altered that, I'd have to say the probability of us getting that pullback all the way to 4,100 has gone down a lot. I do have a 5,100 target at the end of the year. But again, I've been avoiding those banks and small caps thinking they would struggle during that correction.

Well, we almost got to that 4,100, I think is the answer. Right before Halloween, Dan, when I look at the charts and I look at the calendar, there have been some pretty dramatic moves right around the start of the year for a couple of years now. Do you expect that could happen again? Yeah, we could certainly see a pull in January, John. That's certainly been the case, you know, historically around that seasonality and notably a little bit more rotation is possible then too, right? Some of the beaten up dividend-oriented parts of the market, some of the value-oriented parts of the market. I would argue, though, John, that phenomenon could be short-lived

because we get a glimpse of reality in late January when earnings hit. And frankly, when you think about the last year or so, yes, AI and the big seven has driven a ton of multiple expansion, but that's where you've also seen the most earnings revisions higher as well, right? And so for our perspective, we think that trend likely continues. And, you know, again, the rotation probably lasts up until probably the end of January. OK, Steve Leisman, close us out. Well, I just want to defend what Barry Deer didn't do, because I saw yesterday, Wednesday coming in January. So it was about six weeks earlier than I thought.

I thought the Fed had not necessarily laid the predicate for the move that it made. I do think the market has overestimated the magnitude of it. It's going to maybe be a little bit slower. But then again, if you have a different forecast for inflation, then have at it. If you think inflation is going to come down faster, it's possible that the Fed could move sooner and a greater magnitude. I'll just add that there's still the recession probability or possibility on the table. The Fed is going to help that a little bit, but not as soon as you think. So it's going to take time for these tighter or looser financial conditions to work their way into the market and kind of underpin the economy. OK, we'll wait for it. And I don't think your calculations are simplistic,

Steve. I thought it was pretty good. And Barry used them, too. And how else do you do it? I mean, I will say this. The calculations are an artifact. They're not policy. Yeah. But how else do you do it? If you want to think about how the Fed is thinking about real rates, there's no other way to do it. Steve, Daniel, Barry, thank you. Be sure to catch Steve's exclusive interview. Another one with Chicago Fed President Austin Goolsbee. That's coming up Monday at 830 a.m. Eastern. Now, the Nasdaq 100 just closing at a record high. That's its first since 2021. Let's bring in Christina Parts-Nevelis at the Nasdaq market site with a look at the biggest movers in this rally week on Wall Street. Christina? Well, rally indeed with the Nasdaq also hitting seven weeks of gains. That's the

longest winning streak since mid-June. If we zoom in and we look specifically at the Nasdaq 100 you mentioned, Enphase is actually the leader this week. The group, oh, I should say renewables, has been hard hit this year because of rising rates, but optimism around the Fed's moves in the new year and overall stabilizing of rates has allowed some of these names to rebound in recent weeks. You can see Enphase up 20% this week. Broadcom also up about 20% in the week, hitting another record high. Citi and Bank of America analysts today cite strong VMware synergies and growth potential in 2024. Since we're talking about semiconductors,

they're also hitting all-time highs today in general. The sector, and it's not the usual NVIDIA leading the pack. This week was led by Broadcom, Marvell, OnSemi, and GlobalFoundries. And much like we saw with Big Tech, investors are looking to play AI with less

perceived air pocket risks and moving away from the NVIDIAs and into some of the smaller names like global foundries. Costco, a retail winner and one of the first to shed some light on holiday spending, the CFO said Black Friday and Cyber Monday sales were, quote, a little better than we were expecting. And given six companies, Apple, Microsoft, Amazon, NVIDIA, Alphabet, and Broadcom, make up about 40% of the NASDAQ 100. Rebalancing happening right now after the close today, something that happens about four times a year. What we're going to see next week is CDW, Coca-Cola, Europe Pacific Partners, DoorDash, MongoDB, Splunk, and Roper, the six names added to the NASDAQ 100. John? All right. We'll look for it, Christina. Thank you.

Thanks. Up next, backtracking on bonds. added to the NASDAQ 100. John? All right. We'll look for it. Christina, thank you. Thanks. Up next, backtracking on bonds. Citigroup is closing shop on its municipal bond business. We'll tell you why. And we'll discuss the big moves this week in the Treasury market with Schwab's head of fixed income. Overtime is back in two. Welcome back to Overtime. We've got a quick news alert on Apple. Shares are down fractionally in Overtime on report that China's iPhone ban is accelerating. The report saying more government-backed firms are telling their staff not to bring iPhones or other foreign devices into work. And Citi also pulling back today, underperforming the broader market. This afternoon, the bank is shuttering its muni business, according to an internal memo. Our Hugh Sun is here with more.

Hugh, this more a read on the state of Citi or the state of municipal credit? Yeah, I would say it's a more read on Citi. It's idiosyncratic to Citi Group and their problems. You know, and the context for this business is, as recently as 2021, they were the number two issuer in this business. It was a massive moneymaker for them. As their revenue collapsed a little bit over the last few years, they went down to about seven in the most recent year.

The returns on the business started to suffer. You've still got the same infrastructure. You're paying all these expensive salespeople and traders, and yet the revenue doesn't justify it. So that when Citi Group CEO Jane Fraser is looking at her multiple businesses as part of a reorg project, she's saying what businesses support a higher return and what actually erodes a return. And unfortunately for the muni folks, they were hurting the returns. Yeah, and I guess headaches in Texas didn't help them, and Citi also more broadly,

potentially bracing for some layoffs. Let me ask you about the state of savings. Speaking of financials, mortgage rates have come down with the 10 year and the five year. What's happening with high yield savings accounts? Are they coming down, too? Yeah. you would be forgiven for thinking that savings accounts would follow that, right, after seeing that mortgage rates collapsed. And so, you know, that's great news for homebuyers. However, they have different benchmarks. So a lot of the rates that institutions offer, it's really more pegged to the Fed funds rate. And so that's holding steady.

And, you know, the analysts I've talked to actually say that, you know, depending on how thirsty an institution is, they're still going to chase that customer. So offer a good rate. And actually, the average rate that's being offered among institutions could actually climb up until the point that the Fed actually starts to cut rates. Who knows when that is? So higher for longer actually applies to the rate in your savings account, which is good.

I believe so. All right. Hugh Sun, thank you. Speaking of fixed income and bonds, the yield on the 10-year falling below 4% this week for the first time since August. So where should you be putting your fixed income allocation heading into 2024? Joining us now with her playbook is Kathy Jones, Charles Schwab, chief fixed income strategist. Kathy, Citi is abandoning the muni business, but should investors abandon munis? Oh, absolutely not. They're still pretty attractive yields if you're in a higher tax bracket.

Now, obviously, the yields have come down a lot, and they've actually come down relative to treasuries because demand has been very high. But nonetheless, you know, we still think for somebody in the high tax bracket in a high tax state like New York or California, Munich can still make a lot of sense for those investors. Will, are we likely to have the same kind of bond market volatility in 2024 that we did in 23? I mean, after a really rough 22 for bond prices, I think folks expected more stability than we got. Yeah, we're not looking at a lot of stability, at least in the first half of

the year for the bond market. But having said that, volatility is both price up and price down. It isn't just price down. So we do think there'll be volatility because there's still a great deal of uncertainty around the Fed's reaction function. We saw that today with, you know, last time Paul talked, you know, everything was rosy. Then a couple of people come out and say, well, maybe not, you know, maybe not so much. So I think that the Fed's reaction function will be something that people react to and causes volatility, even So I think that the Fed's reaction function will be something that people react to and causes volatility, even though I think the overall trend in yields will be lower this year. A lot of bouncing around is likely. So help me understand how bond investors

should strategize in this environment as we head into 2024. There's always the question, should I buy individual bonds? Should I buy bond funds? How much risk am I taking on if there's always the question, should I buy individual bonds? Should I buy bond funds? How much risk am I taking on if there's leverage in the bond funds? Yeah. So, you know, it's not an either or choice. A lot of people will do both. So if you have enough money to create enough diversification, then individual bonds give you some advantages because you know exactly when you're going to get your principal back at par and what interest payments you're going to get. Barring a default, you have a lot less uncertainty about what the yield is going to

be on your portfolio and what the outcome is going to be. But sometimes you don't have enough money to get diversification with individual bonds, so you go to a bond fund. So I think it's a perfectly reasonable solution. You'll get professional management, and you'll get a lot of diversification for every dollar invested. But you're likely to get a lot more volatility in the net asset value. It's something you have to prepare for. As for leverage funds, you really have to be careful, especially with an inverted yield curve. So a lot of the leverage funds will borrow short and invest long. And with an inverted yield curve, that's a much more challenging situation to be in. So I'd be particularly cautious with leverage funds.

Right, right. That ends up hurting your payout. Finally, sometimes investors can miss the forest for the trees. And I wonder, looking out, say, three to five years, what is it that we're going to kick ourselves for not doing in fixed income if we were too focused on the daily and weekly moves in prices and in yields? Well, we've been saying for most of the past year that this has been an opportunity to lock in some attractive yields for the future. And not just cash flow, right? We're not talking about any magic or even capital gains. If you can lock in yields of 4% to 5% for a 5% to 10-year time horizon with very little credit risk,

that's an attractive proposition. It's something we really haven't had for over a decade. So I think what you look back and kick yourself on is, oh, I didn't take advantage of those yields when they were higher. Right. It'll be the version of the mortgage that you wish you had gotten a couple of years ago. Kathy, thank you. Now, new cybersecurity rules are about to take effect in the U.S., which could increase transparency about the disclosure of costly hacks. We're going to hear from SEC Chair Gary Gensler about why he says the rule change is so important for investors. And take a look at another big day

for solar stocks. First, solar leading the S&P 500. End phase near the top as well, as Christina Partsenevelis mentioned. The TAN ETF climbing double digits this week. Stay with us. Welcome back. New rules are about to take effect about how much companies have to tell after they get hacked. Our Eamon Javers joins us with more. Eamon? Hey there, John. That's right. SEC Chairman Gary Gensler told us that means the public is about to learn more about cyber attacks that were previously kept secret. I think that there will invariably be more reporting. And it's really important because just as the same way if a material factory went up in flames, if somebody takes a material amount of information and that it affects the business and prospects of that

organization. You as investors want to know that. Now, here's what the SEC is requiring. Companies with fiscal years ending after today, December 15th, face a new set of risk management strategy and governance disclosure rules. The SEC says companies will now need to describe their processes for handling of cyber risks. And as of Monday, public companies will have to file 8K forms to disclose incidents and the likely impact that they may have. Now there is a national security exemption here, but the bar is pretty high. If the attorney general determines disclosure could harm U.S. national security, then disclosure requirements at the SEC may be waived in that case.

The big unknown here is whether the expected new wave of disclosures will tell us something that we didn't already know about cybercrime. Are there types of incidents that had not been reported at all before or not as much before? We're going to begin to find out next week. John, back over to you. All right. Eamon, thank you. Joining us now to talk more about the impact of these new cyber disclosure rules is Lacework CEO Jay Parikh. Lacework offers subscription-based services to help companies secure data that they put in the cloud, and Lacework was named on CNBC's Disruptor 50 list last year. Jay, sometimes these rules have unintended consequences, especially when it comes

to the liability that boards now have under these rules. What kinds of conversations, new conversations is this sparking? Yeah, thanks for having me, John. It's sparking a number of new conversations. I think, first of all, boards need to get fit on being ready for cybersecurity attacks and these new rules. First thing is being able to have the expertise either as advisors or on your board. And Lacework has actually created a volume of the book we call the CISO Board Book that helps companies bring that expertise to the board in the room or as an advisor to the

board. The other thing that is vague in the rules is how to declare or how to define materiality of cybersecurity incidents and your processes. We've created a materiality framework that you can use that's been created with dozens of industry experts for boards and experts here in the companies to be able to decide to make those decisions around whether or not a cybersecurity incident is material or not. Jay, is this rule really, you think, going to create more transparency or is it mostly going to create a new standard for butt covering language in financial disclosures, right?

My belief here is that it is going to be something that actually just raises the bar for companies. And we believe here that security should be an enabler. As companies migrate to the cloud, they want to move faster. And security shouldn't be something that you're trying to do to cover your butt or to slow things down or to fearmonger. It really should be something that accelerates innovation. And I think these rules actually can do that. There's still a lot to figure out, and we have to iterate on what's the best way to do that. But it's really important to make sure that you have the processes,

you have the tools, you have the people. And given something, a system like Lacework, you have the data, that real-time data that's going to help you not only understand your risk, but be able to assess it, prioritize it, and reduce it. But then if, or more likely when, you do have a cybersecurity incident, that you can gather that data and you can mitigate the breach and you can comply with this four-day reporting requirement that the SEC has rolled out. Are we going to get the equivalent of auditing firms, but for cybersecurity? I know we have them to some extent already, but is this potentially going to raise the importance of that, of there

being kind of an authority that organizations, that boards, that leaders feel like they can count on to say that they've done enough? Or does that become their most trusted technology partner? I think it's going to be both. I think there are going to be firms out there that can advise, consult, be able to help you prepare for a cybersecurity incident and to run those drills. But I also believe that there are going to be partners such as Lacework that are going to help you get ready for these types of compliance, these rules, but also be able to respond quickly when something does happen? The market is pretty strong for cybersecurity public companies right now. I was just talking about Palo Alto and Zscaler and some others, CrowdStrike, their performance in the market

today. And there are quite a few companies getting ready to come public. Rubric is one. Cohesity, another, perhaps in 2024. What about you? Yeah, we believe that this migration to the cloud, that you can actually migrate to the cloud and you can expand in the cloud by being secure from the get-go. And Lacework can really help you. We're growing our business. We're helping enterprise customers with a whole range of security outcomes given our Lacework platform, and we're continuing to build the business. We're excited.

So I'm going to read that in a prospectus in 2024, maybe? Maybe? Maybe, possibly. All right. I'll be happy with maybe. Jay, thanks. Thanks, John. Time for a CNBC News update now with Bertha Coombs. Bertha. John, the jury in the defamation trial against Rudy Giuliani just reached a verdict awarding more than $148 million to Ruby Freeman and Shea Moss, two former Georgia election workers who he falsely accused of election fraud.

The Senate Intel Committee was briefed two years ago about a binder containing highly classified information on Russian election interference that went missing in the final days of the Trump administration. That's according to U.S. officials familiar with the matter who confirmed it to NBC News. Missing binder was first reported by CNN, which said it still has not been found. But the official told NBC News the committee has not been briefed since two years ago, but was not able to confirm whether the material is still missing. Federal drug regulators in September found quality control lapses at Moderna's main factory, including the equipment used to make a drug substance for its COVID vaccine. According to a Reuters report today, the FDA did not say whether those batches were released to the public. John, back over to you. Bertha, thank you.

Speaking of health care, that sector is still in the red for 2023, despite the market's latest push higher. Our next guest, though, says there are six names in the space that should be on your radar in the new year. We will get those picks next. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We'll be right back. Welcome back to Overtime. They say if you haven't got your health, you haven't got

anything, but that wasn't true for the S&P this year. Healthcare negative in 2023 and the fourth worst performing sector this year. Our next guest, though, has a new prognosis for 2024 with some top picks for your portfolio. Mohit Bansal, Wells Fargo biotech and pharma analyst joins us. Mohit, 2024 overall going to be better for healthcare, you think? So this is going to be very interesting. If you think that the market is going for safety and people are looking for safety, I think healthcare is going to do well but if it is normal market we think a health we think the growthy biotech name could do better in our our sector that's that's the call we are making okay let's talk about some specific names then what do you like uh abby iv is our topic yes

why so this is a story where it trades more like a value stock, but this company has a key product going away next year. And after that, we can see a lot of growth. So PatentCliff would be gone and they have a lot of growth products. And the company has also done a couple of M&A deals in the last couple of weeks, which should solve for long-term pipeline issues for the company. And Vertex Promising because of some acute pain trials in part? Right. So they released chronic pain or diabetic peripheral neuropathy data this week and that is the key reason why this stock could do well. What about Eli Lilly? A lot of hopes around weight loss drugs but that's not the whole story. Sorry I cannot hear you. It's asking about Eli Lilly, if you can hear me now.

And I know there's a lot of hopes around weight loss drugs, but maybe that's not the whole story. So, this is the, you're talking about Lilly, right? So, Lilly has a lot of pipeline, and then beyond the weight loss drug, the company has done some savvy deals. So, weight loss is definitely the reason. And then beyond that, the company has developed a lot of pipeline and they have a lot of, this is a company which spends heavily on R&D. So this company can have a long-term pipeline that could pay dividend in the future.

And what do you like about Regeneron? So Regeneron is another company where they have solved the patent cliff problem with their ILEA franchise. So now they have high-dose ILEA that could cliff problem with their ILEA franchise. So now they have high-dose ILEA that could convert a lot of ILEA business. And then they have this product called Depixent that recently or earlier this year released data for COPD. And this could be a big $20-plus billion drug in long term, which they and Sanofi sell together. What are the biggest risks across all of these that investors should think about? Because, I mean, a lot of these names can move violently.

Right. So, again, pipeline risk is always there. While investing in biotech, the most important risk is to keep in mind that these trials could fail. In these particular situations, probably pipeline is not as big a risk because a lot of the data has already read out and it is the launches. Some of the value names we kind of trying to avoid, they could become value trap. And that's why if the market is not going for safety next year, we would be avoiding those names. What about the names that have kind of reversed post-pandemic in a way that reminds me of what some e-commerce-related stocks or even video conferencing, Zoom, did in the tech landscape,

but they rebounded somewhat. Do you expect some rebounds in those names? At what point do you hunt for value? So if you're talking about Pfizer, I mean, Pfizer is one name where they benefited from the pandemic. Then after that, vaccine sales are dwindling down. And because of that, you are seeing some weakness. And Pfizer is the worst performing stock of the year.

We think this stock could be challenging for next couple of years. The reason being they have some new launches coming, but a street is still not sold on that. So they need this is more of a show me story that will take time to evolve over time. All right. We'll see when peak pessimism happens. Mohit, thank you. Thank you very much. Up next, the fragmented mind of the millionaire investor. CNBC's new survey results finding millionaires think the market is heading higher, but they see a big red flag on the horizon. I'll tell you what it is. Overtime comes right back.

Welcome back. The results of CNBC's latest millionaire investor survey are in. And while the group feels bullish about future returns, there is one thing weighing on sentiment. And Robert Frank is here to tell us what it is. Robert? Well, John, millionaires still holding a lot of cash, and they're worried about Washington. The CBC Millionaire Survey, that's where we poll those with investable assets of at least a million dollars. They found that most millionaire investors say

the S&P will be up at least 5% next year. Over 20% expect double-digit gains in 2024, and 21% expect markets to be flat. They plan to keep about 40% of their portfolio in stocks next year, 18% in fixed income, and still keep a lot in cash with 25% of their investments held in short-term money markets and cash equivalents. Their favorite sectors for stocks next year are tech and financials. When it comes to the overall economy, millionaires are a bit more bearish. 42% say the economy will be weaker or much weaker next year. Only 30% say it will be stronger. The biggest risk to the economy next year, they say, is government dysfunction. Inflation is still

also concerned about the economy, along with national debt. And when it comes to the Fed, only 27% see a rate cut in the first half of next year. 40% say the second half of 2024. And more than a third of millionaires say the Fed won't cut rates until 2025 or later. And John, given that Fed pivot on Wednesday, obviously if we took that poll today, it'd probably be a little bit different. But interesting how going into this rally, millionaire investors who, after all,

own 85% or more of individually held stocks, they were not positioned for a market rally. They're holding a lot of cash and planning to be defensive next year. Yeah, Robert, I mean, you're our wealth editor. So in a way, talking about millionaires, mere millionaires with you is like low rent. But I know you keep tabs on this stuff. So either from the data or from conversations you've been having, how does this relative optimism about equity, about the stock market, square with what's happened in the past? And if they're optimistic, why hold this much cash? Do they think there's going to be some different

opportunity in another area like real estate that they want to hold that for? Well, if you look at millionaire investors and even higher level investors like family offices with $100 million or more in net worth, they basically, they basically, the past two years, have been a story of moving out of public equities into treasuries, into cash, and into private markets and credit. And it's not so much that they're still bearish on next year. They are still bullish, slightly bullish on next year, thinking that the Fed will cut rates. They just didn't think the Fed would cut rates quickly. And they also didn't think the Fed would cut rates quickly. And they also don't think that that will generate a strong enough economy,

generate strong returns. So they were not positioned last year and this year for a market rally. They're probably going to be better positioned early next year. But they certainly were not expecting this end of year rally that we're having now and not expecting early rate cuts in the first half of next year. So we could see some of that cash. And there is a lot of it moving out of their portfolios into equities and probably bonds in the first quarter. OK, Robert Frank, with that deep look inside the minds and portfolios of millionaires. Up next, sign on the upward line.

We're going to tell you about the news that's sending shares of DocuSign sky high today. And here's the scorecard for the biggest Dow winners this week. Caterpillar, Walgreens, Home Depot, Goldman Sachs and Intel all up 8% or more. We'll be right back. Welcome back. We've got two stories on the deal front to tell you about today first shares of docusign are soaring after the wall street journal said the company was working with advisors to explore a sale potentially to private equity firms or tech companies the journal says talks are in early stages there's no guarantee a deal will be reached and an update speaking of no guarantees the story we told you about yesterday shift four payments jumped on a report that global payments there's no guarantee a deal will be reached. And an update, speaking of no guarantees,

the story we told you about yesterday, Shift4 Payments jumped on a report that Global Payments was weighing an acquisition of the company. Shift4 CEO Jared Isaacman told Morgan Brennan yesterday that the company was exploring various alternatives, but a Global Payments spokesperson telling us today, although we typically do not respond to market speculation or rumors, we are not in discussions with Shift4 regarding any type of strategic transaction. Now, after the break, it's been a rough, rough year for the bears on Wall Street.

But we still care how one stuffed bear's journey tells the story of the global supply chain. John, the Care Bear journey starts on the Chinese factory floor. And the toys are shipped in the U.S. ports and trucked to retailers like this Toys R Us in New Jersey, ready for consumers like you. Now, like many bears on Wall Street, this bear may have lost its smile in transit, but consumers might be happier about its price tag this year. We're going to tell you why when Overtime returns. Cheer up, little guy.

Welcome back. The journey of this grumpy stuffed bear can tell us a lot about the global shipping landscape, which is starting to heal after the pandemic snarled the worldwide supply chain. Courtney Reagan joins us with that story. Court. Hi, John. So this Care Bear has traveled somewhere between 32 and 35 days from the time it left the factory in China where Eunice Yoon was to getting to a store like this Toys R Us here at the American Dream Mall in East Rutherford, New Jersey. Now, two years ago, that very same journey took more than twice as long or more than two months. Transportation costs then made up nearly a quarter of the total cost of this Care Bear in 2021. Now it's just five percent. And Jay

Foreman, who's the CEO of Care Bear Toymaker Basic Fund, says it's really night and day compared to two years ago with the global supply chain. We're just seeing less pressure on the manufacturing cost and the transportation cost, a little bit more pressure on other areas of the supply chain. And also our customers are looking for more value. So we're being squeezed a little bit. So we're basically passing on the savings to the retailers so they can pass it on to the consumer. Gone are the transportation surcharges that Basic Fun had to add to retailers' bills in 2021. Now, though, there's toy deflation, seasonal discounting,

and consumers looking for lower-priced toys overall. So put that together, retail prices are lower for this 14-inch Care Bear, around $15 at most retailers. That's down from $17 to $20 or so in 2021. Also, that's 12 to 25% less. That's much more than the 2% deflation in the overall toy category over that same period of time. John? Court, I notice your bear is a lot happier than mine. Maybe that's your personality. I think

that's what we'll go with. But I got to ask about the overall impact of the factors that you talked about, because back when demand was super high, it was very expensive to get stuff over here. Now, to some extent, demand seems to be slacking off, but it's cheaper to get stuff. So is there a greater risk that some of these companies are going to take on too much inventory and that discounting won't move it? So that's a really good point. And I think that so many retailers, brands, even individual and big stores really learn from the mistakes of the pandemic with overordering to some degree. So it seems like for the most part, inventories are

really in check, if not, you know, maybe a little tighter than perhaps even they're comfortable with to try to avoid having too much merchandise. Because the other thing is, now that you can get items much quicker than you could two years ago, if they need more, they have the ability to place that order and get it quickly, which is something I did ask the Basic Fund CEO about. If customers want more of these Care Bros, how quickly can they get it? And he's already brought a lot of them already to U.S. shores from China. So it could really get him in a matter of days this time around, which is very different from what we were looking at in 2021 with this exact same bear. Well, Court, thanks. We had Tom Lee on yesterday. So we have to have two bears on overtime today.

That's going to do it for overtime.