Closing Bell - Closing Bell Overtime: Bull case still intact? 5/17/22

Episode Date: May 17, 2022

BMO Capital Markets updates its market outlook. Brian Belski, the firm’s Chief Investment Strategist, explains why he lowered his S&P 500 year-end target. Plus, Mike Mayo from Wells Fargo Securities makes the bull case for Citigroup. And, Michael Santoli takes a closer look at “pain” for his “Last Word.”

Welcome to Overtime, everybody. I'm Scott Wapney. You just heard the bells. We, of course, right here, just getting started. In just a few minutes, I'll be joined by iCapitals' Anastasia Amoroso on whether this rally in stocks actually has some legs. That is the big question. And we do begin with our talk of the tape today. And it is the trustworthiness of this market move. It sure feels good after all of the pain we've endured. But can you believe it? It's the key question. We ask it to Joe Terranova of Virtus Investment Partners, of course, the Halftime Investment Committee as well. Your thoughts right now are what? I think it lasts longer than people expect because no one expects that it's going to last. Everyone, myself included, you're all taking kind of action,

using the rally to your advantage, maybe to reduce risk in some of the places where the market had you trapped previously. I like the composition of today's rally. You had small caps rallying. You had financials rallying. It really wasn't the trash decimated, you know, where the chainsaw has fallen on equities type names that have rallied year to year today. I thought Sarah made a great point with Johnny Fine within the last hour when she said, you know, the Fed chair comes out within the last hour or so. It's pretty tough. It's pretty hawkish. Has to be. Market closed up a lot. Market like that. Since then, rates went up. Market still was able to close, you know, better than 400 on the Dow. And in my view, the credibility of the Federal Reserve, that went up as well. And that's what markets want. Does it mean that the volatility is lessening

in any way in your mind? I think I've listened to Pete Najarian, who's done a very good job identifying that what we should be watching with volatility is the Nasdaq volatility. And yes, if that in fact is going to continue to be on the path that it is where it's beginning to decelerate, that's a comforting message, a comforting characteristic for investors in the market. You know, if you look at what Powell said,

this was a conversation he had with the Q&A with the Wall Street Journal. If the economy performs as expected, 50 basis points on the table, which is consistent with the message, financial conditions, he said, have tightened quite a bit. The 10-year did move up. Now even though financial conditions may have tightened a bit, the point that Johnny Fine made, which I thought was a great one, was that they've widened, you know, credit spreads

have widened, but in a, quote, low beta manner. So they haven't exploded. They haven't made a lot of people too nervous, nor the Fed, which is maybe the most key point of all. I think that we are going to have to accept that the consumer is going to weaken its demand. It's just inevitable, Scott, for us to get the final resolution on where the Federal Reserve is going to land here with this normalization process. The consumer has to back off with the sensational demand that they seem to have, and we're getting evidence that that's actually occurring. I think that's positive.

Okay, you walked me right into where I wanted to go next anyway, and that's Walmart. Big story today. And with you, a bigger story than perhaps for many. You have been in this stock for, I don't know, three weeks. And here you are today at the Open. You sold Walmart. Give me the particulars on it for those who didn't see this on the Halftime Report, the price you sold and why you did it today.

Did you get rid of the tape, by the way, from the halftime report? Because I don't want that anywhere where the public can view it. But no, what I said was that Walmart had finally made this return in terms of technical momentum. The stock was above 150. I cited the potential breakout that it was going to have. I think I even said it was going to get above $200. Now, fundamentally, I don't have to add anything further than what Jim Cramer said with you this morning. I mean, it is just an idiosyncratic, abysmal report from Walmart. But how do I think about

that when I own it? Walmart is the classic example of the type of stock in 2022 where I wanted to hide out in. It was up year to date before today. It was giving you the quality metrics that you look for in a stock. Why did I get out of it immediately today? Because everyone owns it. Everyone sees the same thing that I could see. Everyone looks at Walmart and says, aha, there's the port in the storm. So I immediately got out of it today because there's a lot of people that are carrying this position at an overweight and unfortunately for

Walmart that leads to further deterioration nothing to do with fundamentals I remember correctly I think you said and please correct me if I'm wrong because I do want the viewers to hear it directly from you you sold it at 132 no no no I saw I saw it today about 1015 I sold it at 136 and a quarter 136 and a quarter 36 and a quarter. $1.36 and a quarter. $1.36 and a quarter. I was out right away. So above the, oh, you were like, the minute that the market opened, you're like, I'm out.

I know, I know. Listen, I've been doing this a long time. I know when people are trapped. People are trapped in the stock right now. And don't think tonight, where Walmart closes, that everything's okay. People are trapped. This was a port in the storm, the classic stock you wanted to own in this environment. Well, I wonder what the storm is going to look like for the consumer. There was that news that crossed later today. It was as a headline about Wayfair, a hiring freeze. I mean, Home Depot certainly looked better than Walmart, but its traffic was down. People spent more, but traffic was down. So, you know, I think, you know, I wonder whether that's going to become a real trend.

We have to take the speculative excesses, the abnormalities out of risk assets, which we're doing. Society's normalizing and we have to take it out of the economy. I think the consumer has a false sense of security in terms of their wealth. A lot of that wealth has been artificially created over the last couple of years. Well, you know what retailer reports tomorrow? Target. Now do we have to be worried for all of those people who like Target and like Brian Cornell and think he does a great job?

Are we now expecting something less savory, if you will, from Target tomorrow? I don't know what they're going to report, but they better report something good. You have to stay away from retail in general right now? I don't know if you have to stay away, but you certainly have to have muted expectations for it. Right? I mean, I got out of Chipotle in the last couple of days. I think that was the right move to make. I'm still in Marriott.

But candidly, I don't like the way Marriott's trading in the last two weeks. Marriott was trading really well. It's not trading so well. A lot of those stocks have gone up a lot for the obvious reasons of services and travel. And people are being particular about where they spend their money. They want to spend it on trips. They want to spend it in hotels. And they want to spend it in maybe restaurants during their trips, wherever they're going, and on airplanes. And then they're going to be a little more sanguine about how they look at the rest of the world and where they spend our money. Let's advance the conversation and bring in iCapital's Anastasia Amoroso and Jerome Schneider, head of PIMCO's short-term portfolio management. It's great to have both of you join the conversation. Anastasia, does this rally, if we're calling it that, does it have legs?

I think it does have legs, Scott. And I say this for a couple of reasons. Well, the main one being is that finally the technicals and the fundamentals seem to be better aligned here. So let me explain what I mean by that. It's interesting that the markets rallied off the level of roughly 3,900 on the S&P because that was the time when we hit an oversold level, for example, for the relative strength indicator on the S&P. And it was also around the same time that we reached a 16.5 times multiple on the S&P 500. What's so special about that? Well, when you look back and what the S&P multiple was back before COVID, it was about 16.5 times. And the Fed funds rate was about 2.25%, 2.5% then. So I think we may

have finally priced in a fair multiple for the S&P, assuming there is no recession, assuming there's not a greater growth slowdown. I think that's why the market's been able to bounce off of that. Now, assuming there's no growth scare, and for the time being, the data seems to be cooperating here. This morning, retail sales were fine. Manufacturing activity generally is fine. So so long as that's the case, I think the markets can build on this rally that we've had. Generally speaking, thirty nine hundred. That's kind of where I see support for the time being, Scott. OK, so, Jerome, you know, the Fed chair, as we said, as I just said with Joe, you know, he was tough.

He was hawkish, however you want to take it. Does that mean that the market closed where it did today, that all of the Fed is now in the market, as Bullard seemed to suggest this morning? Well, I think you have to actually look at what has happened. It's a bit of a sigh of relief. We really have to focus on the one key component, which Powell said, which there's an overwhelming need to control inflation. And if you look at that aspect, what we're finding is that the market reaction is one that liquidity or financial conditions have actually remained somewhat easy, although they've tightened over the past few weeks. But in a historical context,

there's probably a little bit more room to go for those to tighten, which means when you pair that together with what Powell again reiterated today about that focus on inflation, is that he's going to be quite comfortable with some weakness in the markets, in risk markets, going forward if that is going to be his juncture, where he actually wants to go. Meaning fighting inflation over supporting growth in the medium term. And if that's the case, today's rally just simply gives him further runway to simply move a little bit more down the runway toward higher rates and more importantly, to pivot toward that balance sheet reductions as another meaningful aspect of monetary policy tightening. Well, I mean, the key the key is your is your wheelhouse, right? I mean, it's about credit, right? He'll tolerate the stock market going down. He's not.

And even though he said that financial conditions have tightened significantly, he's not going to deal in any way, shape, or form, or he's going to be forced to do something if the credit markets start to seize up, which they have not. Right. And context here is important. Financial conditions have definitely moved tighter, but in a historical context, they're not anywhere near historical tights. Credit spreads, the same thing. We've moved from about 50 basis points in IGCDX credit spreads to about 85 basis points. Again, not anywhere near the 125 basis point historical norms. So there's plenty of room here to tighten along the way. And simply when we think about this as an anti-Goldilocks environment,

it's really not a reason to be a hero at this point in time. You've had front-end rates recalibrate significantly higher over the past few months, obviously offsetting some of the impact of what we think in terms of the Fed's road toward tighter monetary policy. But what it's really done for investors is reset expectations for what we can find as a little bit of shelter along the way. People are going to have to adapt to not only changing financial conditions being tighter, but also changing liquidity conditions, which ultimately means for all the investors, being equity, emerging markets, bond investors, that they're going to have to find a way to immunize their portfolios from a little bit more volatility that is undoubtedly going to be coming their way because of these tighter

liquidity conditions. I'm going to roll with your don't be a hero thing. The question is, should you be a zero? No, right? That's the other thing is that this is definitely not an environment where cash is trash. In fact, it's quite the opposite. Cash not only does one thing, which is immunize your portfolio from a little bit of volatility, but to the extent you can actually move out the spectrum and not remain in those money market fund eligible investments that

are trading well below the Fed benchmarks, you can actually earn three to four percent returns with very limited interest rate duration. So the idea here is simply look at the landscape and how it's recalibrated over the past three to six months. And there's actually opportunities not only to create optionality, but not necessarily be over your skis in terms of risk allocations as we sort of see this market really evolving. And you have to be adapting to that evolving market in real time. I mean, I feel like everybody's now talking about everybody and their brothers talking about the-year. Anastasia, the best place to be right now is where? Well, I'd say three things. First of all, I would agree with getting paid while you wait,

and you have many more ways to do that. You can hide out in the short-duration beauty market, as some of your guests alluded to. You can also extend a little bit, and you look at high yield. You can look at floating rate securities. The yields on those are a lot higher than we were to start the year. You can also extend a little bit and you look at high yield. You can look at floating rate securities. The yields on those are a lot higher than we were to start the year. You can look at private markets.

Private credit, for example, gives you a yield of 8 to 10 percent. So while we wait out this volatility, I want to make sure I have some cash flow coming in while inflation is still 8.3 percent. But I also don't want to back away from some of the tech stocks that have gotten so beaten down and they're still growing earnings, some of them at 15% plus per year. So I do want to step in and buy some of those areas on weakness. I mean, we talk about short-term tactical trades, but when you back away from it, when should you be making these allocations? That's not in November of 2021 when all the valuations were here. It is now with at least a one-year time horizon. So I want to be stepping into some of those tech stocks. And I'll extend that in just a little bit to the private equity and the venture capital piece of the equation. Guess who's going to be

taking advantage of some of the lower valuations that we're going to see in the next few quarters? It's managers putting dry powder to work in private markets. So the time to step into those is now, and once again, not at the top of the market. You agree? Time to step in is now to some of those most beaten up areas of the market, like some of those technology stocks that have gotten absolutely destroyed? Growth at a reasonable price. I'm not ready just yet to step in and buy the extreme valuation stocks. I think to Jerome's point, now you've got a balance sheet reduction beginning. What does that do to liquidity conditions? It doesn't improve liquidity conditions. It actually deteriorates liquidity

conditions. So I think the market gave you a little bit of a roadmap today where you want to ensure in your portfolio you have health care, you have financials, you have industrials, you have materials, you have energy. Well, yesterday you told me that energy and health care were, I mean, I sort of said that's the only place that you really want to be right now. You kind of looked at me like, yeah, I mean. It's certainly what I want to carry at an overweight. It's certainly what I am carrying at an overweight. And I think, you know, as I said, I think the playbook for the second half of the year has kind of been set already with the price action of what is now approaching the end of the first half for 2022. And these are the leaders and the leaders I think

are going to lead in the second half. Jerome, volatility, can we expect it to calm down in any way considering the markets have come down so much. We seem to know what the roadmap is, and maybe we're believing it for the first time in a while. And I mean that both from an equity standpoint and certainly the bond market seems to be on the same page right now, at least with the Fed chair, at least on a better page than it was before. Well, clearly, rate volatility has come a long way. We've raised, as you mentioned, the two-year notes up 200 basis points since the beginning of the year. That's immense. And so a lot of the volatility emanated with the recalibration of hiking expectations. But remember, there's two or three different signposts along the way,

which should also be impetuses for volatility. One, the balance sheet and how it continues to evolve later this year. That's a significant impact in terms of how to think about the tightening policy and the efficacy of tightening policy along the way, which is going to be distinctly different than your typical traditional rate hikes in that regard. The second one is simply the economic outlook. The economic outlook is a little bit uncertain. At PIMCO, we've just downgraded our economic GDP forecast to 1.7 percent, and we view next year as being even below that.

So the softness in the economy is something that we're going to have to contend with, especially if we start to see percolations of recessionary fears begin to percolate through the market. So those two things alone are enough to create volatility in the market. And then a third one, which I highlight simply, is the structural element of liquidity within the market, which means simply the capital to put in place to move from one asset class to another asset class is not what it used to be, meaning market makers are requiring additional premium to move and transact business. Ultimately, what that means for investors is longer holding

periods, understanding that there's more volatility within markets, even formerly very liquid ones like treasury markets, et cetera, and ultimately a higher cash balance to offset some of these situations. So when opportunities do arise, you can actually pivot with very little transactional costs. So those three things ultimately are ways that you can think about volatility being a structural change, not necessarily a temporal change to adapt to right now. And that's going to probably happen over the next five to 10 years, a secular view. Yeah, just got to figure out how to live with it. I really appreciate it. I enjoyed the conversation very much. Jerome, thank you. Anastasia, of course, my thanks to you. And Joe, sitting right to my left here at Post 9, I know I'll see you again soon. Up next, we have big news crossing from BMO Capital Markets. That's Brian Belsky. He joins us after this quick break

with a new outlook on stocks. That's next. We have some breaking news in the OT. BMO Capital Markets just updated their market forecast. Joining us now, the man who did it, Brian Zbelski. He's the chief investment strategist. I appreciate you coming on to talk about a day that I think both of us thought was coming, Brian. So tell me what you did well thanks Scott I really appreciate it and we kind of hinted on last week when we talked about it's very difficult we think of things like an analyst and like a portfolio manager one of my pet peeves doing this now for my 33rd years when when an analyst downgrades the stock and then maintains the buy recommendation and changes the target price at the lows we wanted to make sure that we felt

really good about the low that we think is in place, actually, for this correction. It is a correction. It's not a technical bear market in the S&P. And we wanted to kind of bring things back to reality. And the reality is, Scott, quite frankly, that to attain a 34% move in markets from that 4,000 or so level was not going to happen in our view. And again, we want to play a little bit prudent person rule here, but we feel very comfortable with our revised target of $4,800 at year end, which is still a new price high, which gets us 20%. But I think the other part of what we did, I think it's very tactical in terms of kind of tilting even more toward value and out of cyclicals and maintaining a market weight in tech, because we do believe that the majority of the tech sector's weakness is already done. And we really want you to continue to focus on those most very stable and secular growth aims within tech.

I almost feel like this comes with a little bit of kicking and screaming, if you will. I get the fact that you dropped your price target to forty eight hundred. However, and the reason I say what I did the way I said it is that you maintain your earnings target. And I'm wondering how you think that stocks are going to re-rate the way they have and you think they now will by keeping your earnings target the same. It's a great question. It's something that you and I bantered about when I was on the show live last week at the New York Stock Exchange. And as I said last week,

we feel very comfortable with our earnings target. And when you take a look at the path of where bottoms up earnings are, we're almost there, number one. Number two, from an operating performance standpoint and cash flow, the other parts of the income statements of the 500 companies at the S&P, we think we're going to get there based on how strong fundamentals are.

Number three, in terms of the re-rating, over the last 20 years, the average P.E. is 20 on the S&P. We're obviously dealing with lingering inflation. And again, we called it wrong. We thought the inflation would go away a lot faster than it did. And so guess what? The upside could be that inflation does indeed fall apart. I'd rather be in a position to once again go back to fifty three hundred and really continue to sustain those very strong earnings, which we think still people are understating. I mean, it still seems as though you're holding on to this notion that this is not a bear market. It doesn't seem that way. I mean, you said it yourself. Whether we were down, Brian, 19 or 19 and a half percent rather than 20 from the high on the S&P, we're quibbling over that. I mean, by all intents and purposes, by looking at almost every single thing internally in this market, it's been a bear market. I mean,

if it walks like a duck and talks like a duck, it's a bear in this case. Yeah, it's a bear. And as I said in the report, the market is acting like a bear market. And it's already kind of discounted what I think is coming, which I do believe that the economy is going to continue to stay strong. And I'm a believer that all is going to orchestrate a soft landing. I firmly believe that. The other thing that's kind of lost in the report is we upgraded communication services. And communication services, we think, on the growth side is massively oversold, Netflix and Google. But more importantly, on the value side, AT&T and Verizon, we think, are very attractive yield components, especially considering how expensive consumer

staples and utilities, even though we brought those up to more neutral, they're expensive sectors. And I think you have to be careful kind of chasing the traditional defensive sectors here. And I think the communication services area is a great contrarian buy right here. Man, so you've I mean, I feel like you want us to play a heck of a lot more offense than we've been playing. We've been so scared into, you know, either our corner or the cash. And you want us to get a little more aggressive. I mean, you have no choice but to if you still think we can go up 18 to 20 percent from here i do and i actually the more i hear

about a bear market bounce and this not being real the more bullish i get you know me for a long time you know how i roll with respect to that but i still think and i said this in the in the in the very last sentence of the front cover i i think we're not talking enough about the unwind of the 40-year bull market bond. We're not. And what that's going to do and where investors are going to put their money, we think it's actually going to be in equities ultimately. Well, we also continue to see massive amounts of volatility around the world with respect to fundamental conditions in emerging markets in Europe, which, again, I think is going to drive non-U.S. investors back to the U.S. So we're in this transitory stage. We're transitioning back to normal. It's a lot more volatile than we thought. We actually thought the first half of the year was going to be volatile,

but obviously not this volatile. So guess what? We'll apologize. We're sorry for being as bullish as we are, as we were. But we still think the secular bull market, the 20 to 25 year bull market that we started to call in 2009, 2010 is very much in place. And if you want to call this a cyclical bear market, you can call it a cyclical bear market because the market is actually acting like that, Scott, but academically never hit it on the S&P. You know what happened to the last guy who used the T word transitory, right? They're making fun of him that he doesn't doesn't know what he's doing, that he made one of the most colossal mistakes in the history of central banking. And now he's trying to work his way out of it. I'm

just curious that you you use that word. Well, I think I think the second half of the year is going to be full of surprise. I mean, I have to believe that because, as you know, I'm a man of faith with respect to being positive and looking at how companies are. But I do think that inflation, there's a very good chance that inflation is going to go down like an elevator. And this is not just me being stubborn. It's not just me being contrarian. I think that the strength of the economy and how supply chains are on lifting and how we're unwinding those supply chain issues and how commodity prices are starting to roll over here on a longer term base if you look at the forward contracts. I think there's

a very good chance that inflation could surprise us with the downside. It's certainly not going to be at the 3% or 3.5% levels that consensus said at the beginning of the year, Scott, but I think it's going to be lower than most people anticipate. You might be a little stubborn, but I mean, it's okay. You got a hold to your conviction in some respect. Let me ask you lastly, before I before I let you go. Soft landing. You say we're going to have it, which means no recession. Earnings are going to hold up. All of this implies that the economy has a big, gigantic growth scare and it really turns out to be OK. Yet you want me to be underweight industrials. How? Another great question.

You know, we moved consumer discretionary down from overweight to neutral because it's just plain too expensive. And the most expensive parts, obviously, as you know, are Amazon and Tesla. And there's some great, great companies there that we think are valued appropriately that we'd rather have people own. On to the industrial side, we're very disappointed in industrials. If you take a look at operating performance, really is the best precursor to industrials. ROE and ROAs beginning to roll over pretty hard and earnings have been very weak. If you go back to the last kind of industrial recession that we thought about was 2015 and 2016, that really kind of drove the market multiple lower

as well. I think you'd want to be less cyclical here and be more kind of value. Joe talked about GARP, but really by sustainable earnings. And oh, by the way, some of the most sustainable earnings are tech, but also healthcare and financials. And I think financials really from the value perspective, I think they've not done as well as they should. And I still think that people on the institutional side are way underweight in financials. And I think that could be really the pick to click in terms of earnings growth for the second half of the year. Maybe they get a Buffett bump. We never know. Buffett looks at Citi, which has been one of the worst performing stocks and says it's time to get into that one. Maybe others are going to

follow him. I had a feeling we'd have this conversation, Brian. I just wasn't sure exactly when. I appreciate it as always. I know I'll see you soon. Thanks, Scott. All right. That's BMO's Brian Belsky joining us. Up next, the aforementioned shares of Citi. They're soaring today as Warren Buffett, Berkshire Hathaway reveal a stake in that bank, which means we'll break it down with top banking analyst Mike Mayo next. It's time now for a CNBC News update.

We go to Shepard Smith for that. Hi, Shep. Hi, Scott. From the news on CNBC, here's what's happening. Another somber day in Buffalo as President and First Lady laid a wreath at a makeshift memorial and met with the families of victims from Saturday's shooting rampage. Addressing the hate and racism that police say fueled the attack, President Biden warned of the growing threat of white supremacy that it poses to the American ideal. The American experiment in democracy is in a danger like it hasn't been in my lifetime.

It's in danger this hour. Hate and fear of being given too much oxygen by those who pretend to love America. The president went on to say that evil will not win and promised white supremacy would not have the last word. Children aged 5 to 11 are one step closer to COVID booster shots. The FDA approving a booster dose of the Pfizer vaccine. The CDC still has to sign off,

but it might be a tough sell for many parents. According to the CDC, only a third of kids age five to 11 have two vaccine doses already. Tonight, hundreds of Ukrainian soldiers from Mariupol in Russian custody, three families navigating the search for baby formula, and UFOs take center stage in a congressional hearing on the news. Right after Jim Cramer, 7 Eastern, CNBC.

Scott, back to you. I appreciate that, Shep. Thank you. That's Shepard Smith. Shares of Citi popping today after Warren Buffett's Berkshire Hathaway disclosed a nearly $3 billion stake in that bank. Joining us now on the phone, Mike Mayo from Wells Fargo Securities. He has a buy rating and a 70-7-0 price target on the stock. It's at $51 today. Mike, is this a game changer for that stock?

Well, this is a very clear endorsement for CEO Jane Change Agent Frazier for the new strategic blueprint, the change in culture and the prospects for year 2024 to infinity. Citi is undergoing the biggest and most dramatic repositioning in its modern era. I will say the caveat here, Scott, this is not an endorsement for the next two years when you're going to have pain from higher expenses, noise from divestitures, and probably shortfalls on earnings. So what you have here is short-term pain with cities restructuring, but likely long-term gain. And now Warren Buffett is along for the ride for this long-term investment.

But do you think the stock's going to go up 40%? Well, the entire bank group is starting to trade as if we're definitely going to have a recession. So if we don't have a recession, which is our house view, then we see all bank stocks going up by like one-third to one-half. We put a two-thirds chance of that happening, and maybe a one-third chance of a recession where they could go down by one-third to one-half. We put, you know, two-thirds chance of that happening and maybe a one-third chance of a recession where they could go down by one-third. So the weighted

average return for the typical bank stocks should be up by like, you know, one-fourth or so. And Citigroup, the cheapest among the cheap, having this dramatic repositioning. This is a little tricky, though. This does not fit in a typical investment style box. I mean, my estimates are below street consensus for the next two years. But then we think years three to infinity are a lot better. Which wins out? Well, if you're a long term investor like Warren Buffett, you're in. And you've seen some other investors take longer positions, typically longer term oriented-oriented investors. And to some degree, it's starting to be in the stock that, yeah, there's a lot of noise when you have the biggest restructuring in your modern history.

Man, I'm just thinking about, you know, his being Buffett's once love of J.P. Morgan stock, no more. And what that says about the changing landscape in where you want to invest in the financial space. J.P. Morgan holding their investor day to day. And you question as to whether they've lost their fastball. Yeah, how ironic. If you follow Jamie Diamond from when he left Citigroup and rolled your stock into J.P. Morgan today, you would have made 50 times more money. So following Jamie Diamond's been the right move. Now Warren Buffett's out of J.P. Morgan today, you would have made 50 times more money. So following Jamie Dimon's been the right move. Now Warren Buffett's out of J.P. Morgan and in Citigroup. Talk about a reversal. Today was the J.P. Morgan shareholder meeting, but this coming Monday is their annual investor day.

And the question is whether or not J.P. Morgan has lost its fastball. It seems like they're pushing for growth in ways they haven't done in the past. They're sacrificing financials in the short term. They're spending more money than they've ever spent or any banks ever spent in history of U.S. banking. They've lost some degree of financial discipline, at least from the outside. I mean, how do you spend $10 billion more in expenses over a two-year period and do that intelligently? And if it's so important to spend all that money, why didn't J.P. Morgan spend it sooner? So there's a lot of questions for Jamie Dimon and the management team this

coming Monday at their investor day. So who's your new ace of the staff, if you will, if we're speaking in baseball parlance? Is it Moynihan? Is it Solomon? Who is it? I've said it before. I cannot believe that Brian Moynihan and Bank America stock has declined as much as it has when they're we're on the cusp of them benefiting from higher interest rates like they have not benefited perhaps in my 30-year career. So it's still Bank of America number one. That's for the short-term, medium-term, and long-term. Citigroup is certainly you have to have a longer-term horizon. And JP Morgan, we're on the sidelines.

People are looking for, you know, Nolan Ryan in his prime, and I don't think that's what you're getting. Well, all right, we'll make that the last word. Pretty direct in that. Mike, I don't think that's what you're getting. Well, all right, we'll make that the last word. Pretty direct in that. Mike, I appreciate your time very much. An update on this interesting story we followed all throughout the day. That's Mike Mayo. Let's get to our Twitter question of the day.

It's in this ballpark, if you will. We want to know, are bank stocks good to own right now? You can head over to at CNBC Overtime, cast your vote. Simple again, yes or no. Do you want to own bank stocks right now? Vote. We'll bring you the results at the end of the show. And coming up next, Santoli's last word is still ahead and the Powell pain trade for stocks.

But first, let's get to Christina Parts of Nevelos, who's tracking the action in overtime for us. Hi, Christina. We got some major movers today. It looks like the meme trade might be back in style. And one major alternative energy company is getting a big order. I'll have all those details and market movers right after this short break. Tracking some big late day stock moves. Christina Partsanovalos doing that. Hi, Christina. We don't have any company earnings today, but I've got a mover in the OT. I must ask you a question, though. I don't think we talk about it, right, a lot. European Wax Center.

There was a pun right there, but I screwed it up because I stumbled on the word mustache. You know that chain where you get out-of-home waxing services? Well, it just announced it would issue 4.5 million new Class A shares. Stock is down in the OT, almost down 3%. We also have fintech firm Q2 Holdings. That company closed 22% higher after a report that Q2 hired a financial advisor to explore a takeover from private equity buyers. Shares were even halted at one point today because of that volatility. Q2 Holdings provides banking software in

case you're wondering. Shares still down about 35% year-to-date. And it looks like the meme trade is coming back. GameStop shares closed 9% higher today. AMC up 10%. The world's largest hedge fund, Bridgewater Associates, posted its 13F filing, and it's out with the old and in with the new. The company parted ways with Tesla and placed new bets on those two companies, AMC and GameStop.

And lastly, shares of Plug Power. This is an alternative energy company. They surged 11% after the company said it got a huge order to deliver a gigawatt electrolyzer in Denmark, the biggest in the world to date. What's that, you ask? It's an apparatus that produces hydrogen through a chemical process.

The hydrogen is then used in heavy-duty fuel cell trucks. Plug Power, though, is still down about 41 percent year-to-date. There you go, Scott. All right. I appreciate it, Christina. Thank you. That's Christina Partsenevelos. Up next, is it time to get in on the chip trade? That is the big debate breaking out today because there was a big upgrade of a very popular name. We'll tackle it in overtime, halftime overtime next. In today's halftime overtime, two big calls in the chip sector today. Piper Sandler upgrading AMD to overweight, raising the price target, while B of A reiterated NVIDIA as a buy. Some

on the investment committee, though, think the calls, they're a little early. So there's going to be an opportunity, but I just think we have time on that. Michael Farr, what do you think? Do you like this? Yeah, no. No, too early for me. This has been the leading edge of the falling knife of this market. And I think there'll be some opportunity there.

But no, I think it's too early. I think the trend's still down. Joe Terranova back with us now. He made a trade in one of those names at the open. It was? NVIDIA. NVIDIA, which I've owned for quite some time. Look, let's first understand my personal positioning here. The ETF JOT carries a 5.9% weighting towards semis. That is the highest technology industry in the ETF. So we've got AMD, we've got NVIDIA. Personally, I own AMD and I own NVIDIA. I told myself that on a bounce, I had to get rid of one of those names. Why did I choose to get rid of NVIDIA?

Wow. I have phenomenal management, both companies, phenomenal management. Quality companies. NVIDIA, a little bit of a higher valuation. Personally, for me, I have never traded NVIDIA well. It's going to a personal holding requires me to trade it. Why don't you stop trading? Well, okay. I was going to ask you, well, why are you bothered trading it, man? Because I own it. I have it. Do the old Kramer thing. Right.

Don't trade it, own it. In JOTI, AMD, NVIDIA, those are long-term holdings. So I'm trading AMD. I'm trading NVIDIA. I've traded AMD really well. Cheaper valuation. Want to hold on to that. I also respect Harsh Kumar, who is the Piper analyst, tremendously.

Let's remember, January, took amd from an overweight to a neutral when the price was 135 he knows amd well i'll follow him here so on the amd call and hold on to that so you don't think it's too early then on amd which was the crux of the link for i'm over commentary no i'm overweight semis yeah well i'm right but you're you're overweighted in the etf you manage it's not like you we discussed yesterday. You can't be as nimble as you can be when it's in your own personal portfolio. You're overweight. Will you be overweight the next time you rebalance? I don't know. It depends on what the environment is. My belief is that markets are in the process of bottoming. It's going to bottom over the course of time. I believe that, okay?

We've probably seen most of the price damage. If you look at technology, you know, the industries within technology, semis have the highest sensitivity in terms of responding to markets recovering. So I want to be in semis. Okay. We've seen the bulk of the price damage.

Have we seen the bulk of the time damage, though? That's your next question. No. I knew you were going to say that. All right. That's Joe Terranova with us there. Up next, big opportunities in this bounce. Stocks taking a leg higher today. Our next guest is optimistic heading into the back half of the year. He'll make his case for you next. And coming up at the top of the hour on Fast Money, the former Walmart U.S. CEO Bill Simon weighs in on that retailer's tough quarter.

Overtime is back after this. As you know by now, stocks pushing higher on Wall Street today with the Nasdaq jumping nearly 2.8 percent. Our next guest says there are big opportunities within today's bounce. Let's bring in Kevin Simpson. He's the CIO at Capital Wealth. It's good to see you again. Is the worst over? Well, no, I don't think the worst is over, but I think there's certainly opportunities here, Scott. I was going to bring a cautiously bullish fund tilt to the program, but Brian Belsky beat me to the punch. I'm optimistic, but I'm not sure I'm that optimistic. What makes you optimistic, if not as much as Mr. Belsky is?

You know, I think there's opportunities when you see pullbacks like we've seen. The NASDAQ, even now after today's close, is 25 percent from its high. Last Thursday, interday, you brought it up earlier, we saw the S&P down 19 and a half percent, which is basically a bear market. So when you see things like this happening, the active manager is going to look for opportunities. You know, valuations, fundamentals matter here. And we've got to be careful about looking at a bull bounce and think that it's an all in rally. And we learned that today. I mean, hit us right in the face with the comparisons between Walmart's earnings and Home Depot's earnings. It's a question of really importantly selecting stocks that make sense in this environment. So you're no longer in Walmart, but you are.

Yeah, I hear you. And forgive me for interrupting you. you're no longer in Walmart, but you are. Yeah, I hear you. And forgive me for interrupting you. You're no longer in Walmart, but you've been adding to Home Depot. Yeah, I think we were a little early getting out of Walmart, Scott. We did it in March. But our thesis was that if inflation was going to be as high as it's been for much, much longer than we thought, unfortunately, the first persons that are hit are their consumer base. You know, the lower end consumer takes the punch of inflation first. And we saw that with Walmart. Home Depot continued to do well.

I think they will. You know, there's a thesis against it that higher rates are going to make it difficult for refinancing. But I think home improvements are incredibly powerful. The stock's down 30 percent from its high. The valuation still might be a little tough as we get compression in here. It's a position you want to build into. But it's got a really strong dividend. down 30% from its high. The valuation still might be a little tough as we get compression in here. It's a position you want to build into, but it's got a really strong dividend. It's got an incredible dividend growth. And I think we'll see similar numbers out of Lowe's. You like Cisco as

well? Old school tech, you know, old and ugly, strong dividends, another stock that's down 25% from its high. Cisco has a 10 percent compounding dividend growth. Past 10 years, you've been getting a raise of 10 percent each year just owning Cisco. So from a valuation standpoint, I think it's still undervalued. But all these names, you've got to be very, very careful because we're not out of it. This isn't a V correction where everything just magically got better on Thursday. Joe just talked about a bottoming process. And those take time. And it's going to take a long time. Covered calls on top of those,

hedging your risk a little bit as usual? Absolutely, especially when you see volatility like you did last week, Scott, over 35. I mean, it's a great opportunity to harvest that volatility. The argument against it is you forfeit some potential upside. But I'll forfeit a little upside for quite some time in this market. Harvesting volatility offers the downside, and that's what I care about. All right. Yep. I know you do, and you do it well. That's Kevin Simpson with us today. I'll see you again soon. Capital Wealth founder and the CIO. Santoli's last words next. Let's get the results of our Twitter question of the day. We asked,

are bank stocks good to own right now? Fifty three percent said yes. In fact, they are maybe agreeing with Warren Buffett. I wonder if Buffett hadn't taken that position in city with the vote would have been very interesting. Mike Santoli's here. I don't know what your last word is, but maybe we answered at least one question today and that the Fed share can be hawkish and stocks can still finish nicely. Right. Exactly. Well, in fact, the word I was going to hit was pain. And he mentioned pain. Jay Powell did say, look, there might be some pain along the way. And then the market kind of flinched briefly and then carried on to new highs. And I think the reason for that is the premise of this

entire move this year has been, yeah, there's going to be pain along the way. It's a narrow path and a bumpy one to a soft landing. And we've pretty much got that. And also when Jay Powell said that the markets have already done a pretty good job of hearing their message, that just implied they're not going to try to force it rhetorically and get financial conditions tightening too much more. Which he acknowledged already had. Yes. A bit. Exactly. And the other question, by extension, is which way is the pain trade in stocks right now? I think it's a tough call, though I do think a little bit higher initially. But man, there's so much agreement that 4,200 or 4,300, if we get there on this bounce, it's probably a sale again. The reason that these

rallies in tough markets, bear market rallies are so difficult, it's not because nobody anticipates them. You do anticipate them. And then when they come and you get a 7% move, it causes you to rethink whether, in fact, you're still in that downtrend. Well, OK, that was exactly where I was going to go. They all say, yeah, we can get a bounce, but I'm still selling them at 4,300. Wake me up when we get to 4,300. And then I want to see what they're actually going to do. Because it's going to be accompanied by some kind of atmospheric, some kind of news that say maybe we've shaken it off, maybe we've priced it in. And that's why it's very difficult to be bold about it. What I do think is you can anchor on a little bit is that at the minus 20 percent level in the S&P 500, you want a decent distance into taking care of some of the valuation excesses.

Positioning and sentiment definitely got depressed. I'm not saying maximum washed out, but they got depressed at least enough to get burned off in somewhat higher prices. Well, look, maybe what Bullard said this morning, you know, at like eight o'clock in the morning many hours ago is right. You know, it's in the market. Yeah. And Powell sort of doubling down on that. Right. The markets have gotten our message.

That maybe is the most important thing of all. Right. And maybe it finally, the market, I should say, understands the message. It can deal with what's happening. I mean, you can make it. Investors can make their peace with what the Fed's like. Now, the question is, if we go up 10 percent from here, are the Fed officials going to say, yeah, the market still figured it out? Are they going to interpret that as a loosening of financial conditions that they need to restrain again?

Right. By the very fact that the stock market going up, is that working against what they want to see? I think the next couple of months are pretty well baked in here in policy and markets kind of, you know, thinks it's OK with unless Powell takes that message to see they believe us. We can we can engineer the soft. Yeah. Yeah. And it remains to be seen. It does remain to be seen. And as you were saying before, credit remains so far. Yeah. In decent. That's a big story. Appreciate it as always. That's Mike Santoli with his last word. I'll see you tomorrow.