Closing Bell - Closing Bell Overtime: Dow’s Best October Ever 10/28/22

Episode Date: October 28, 2022

It was the best October ever for the Dow … so what might that mean for your money and what will work best in this new market environment? NewEdge’s Cameron Dawson, Firstmark’s Rick Heitzmann and AJ Oden of BNY Mellow give their expert takes. Plus, Elon Musk has taken control over Twitter and is already cleaning house. We debate what the future of that company could be. And, one of Barron’s top financial advisors Cheryl Young of Rockefeller Global Family Office breaks down the sectors she is recommending to her high-net-worth clients.

Welcome to Overtime, everybody. I'm Scott Wapner. You just heard the bells, the big cheers, of course. We're just getting started for Post 9 here at the New York Stock Exchange. Coming up, we have a big interview you cannot afford to miss. Fed whisperer Nick Timorosa of the Wall Street Journal, he will join us. He'll tell us what's likely to happen at next week's all-important meeting, and even more importantly, in December and beyond. We begin, though, with our talk of the tape, the best October ever for the Dow and what it might signal about where your money will work best in this new market

environment. Let's ask Cameron Dawson of New Edge Wells. She's here with me on set. It's great to see you. Welcome back. Unbelievable move that we had in the market. I'm curious your thoughts, given you've been more negative than a lot of others. Yeah. So when we talked a few weeks ago, we thought it was very dangerous to be too short or too negative in this market, simply because we got so oversold, moving too far, too fast to the downside. And it meant that we were really primed for some kind of relief rally. And then to see the market rally so much on today's kind of very weak news from the tech names showed you that there is still more buying,

still more positioning to kind of get just back to neutral after people got so short. So we think that this rally could continue. First level to get through is to 3,900. We have to break through that. That's very important. And then the next step is that 200-day moving average to be about 4,100. But then stocks are pretty expensive there. Yeah. It looks like we are going to, you looks like we're still settling out, of course, but we're at 3,901 on the S&P. So we're right at that line that you've been looking for. Yeah. And that was that battleground zone all summer. It was resistance. It was support. And so breaking through that is important if we do. And if we get to 4,100, that's where we have to look at valuations.

Because even if earnings come in flat next year, we'll be trading at 18.6 times earnings at 4,100. If they actually decline, and maybe they don't based on some of the good numbers we've seen coming out of these cyclical names, but if they do decline about 10%, we're trading at over 20 times. That's where the risk-reward starts to look less attractive. I mentioned the words I wrote at the top, a new market environment, right? You got the best October ever for the Dow, the best month for the Dow since 76. So value has been outperforming growth. That is what I'm talking about when I reference this new market environment. Is it lasting? Is it legit? Is it real? I think so many sectors have

been left for dead over the past few years because of this surge in liquidity from the Fed that really helped tech stocks, growth stocks. But when you look at some of the numbers coming out of industrials, coming out of health care names, areas that have been unloved for a long time, I think this is setting up for what could possibly be the new leadership of the next cycle, just because they've been forgotten for so very long. I'm wondering how you're thinking about next week's Fed meeting. I mentioned also, and just to remind our viewers, we have the so-called Fed whisperer, Nick Timuros of The Wall Street Journal, is going to join us a little bit later, where he tweeted today, basically, 75 basis points is almost a lock for next week.

And then it's not so certain for December. Is next week going to move the market or not? Well, let's see how much Powell pushes back against the easing in financial conditions that we have had. Because as stocks go up, financial conditions do get easier. If they see that's a problem, like they saw that was a problem at Jackson Hole, then that pushback could kind of take some of the breath out of this market. But the other thing that Nick pointed out was that the employment cost index is probably what they were watching, because that tells you about wages.

That came in just about in line with estimates, but it's still running at 5% on an annualized basis. That's so far above what the Fed needs to see in order to get to 2%. So talks of cuts of rates likely are very far in our future. Yeah. I was looking on Twitter before we began our conversation. There are some, there is a good conversation about the employment cost index, how important it is. Yes, it's higher than what the Fed obviously wants, But if it's plateauing, which some suggest that it is, maybe that is good enough, if not for a pivot, at least for a pause. The market seems to be banking on this notion of 75, then 50. Then

let's sit down and take a look around and see what's up for a while. Well, and I think the math could actually bail us out there, just like as we look at the inflation numbers overall, because we will hit tougher comps as we go into 2023. So that's likely enough to slow the pace of rate hikes and get us to a pause. But is that enough to get us to starting to cut rates, actually adding liquidity into this market? We think that is what's necessary to see sustainably higher valuations. You have to see money supply start to reaccelerate. So just getting to a plateau probably isn't enough to get you there.

Are you surprised? Maybe the story of the week. I know that Dow is getting all the love today for the obvious reasons of those incredible stats that I read you. But the resiliency of tech after what happened this week with those big earnings reports, basically ex-Apple. Yeah, it is really incredible to see just how resilient the tech area has been because it still is trading at such a premium valuation to the rest of the market. We thought that given the fact that it's trading at a 20% premium where interest rates are, you should see some more weakness and underperformance in tech. Now, it has been resilient, but if we compare that performance to what we're seeing

out of cyclical sectors like industrials, tech is rolling over on a relative basis, which means that these trends of weaker performance could continue. So maybe we rally back up to resistance in tech, but then we start to really fade. All right. Let's expand the conversation now and bring in Firstmark Capital's Rick Heitzman and A.J. Oden of BNY Mellon Investor Solutions. Great to have both of you here at Post 9 with us, too. Rick, I mean, the resiliency of tech this week, if I would have told you that the big four out of the five were going to deliver what they did and the NASDAQ was going to close the week higher, if I told you that on Monday, you'd have told me I was crazy. I would have told you were crazy, but I also thought tech was oversold. So a lot of money was on the sidelines. I think folks overreacted to interest rates and

overreacted to a slowing in tech and maybe the macro environment over the last six months. And now people are renormalizing their portfolios. AJ, is this an idea that some of these tech stocks had just come down too much, as Rick suggests? Too good to ignore. Most have valuations bigger than the S&P, richer than the S&P, but far lower than where they were, let's say, in January. I mean, I think the Fed is putting a higher price on innovation and the cost to do that and invest in capital. I mean, I can understand why investors might see these levels as attractive, but I think prices still have a further way to go down. So I would say still remaining underweight in tech. And it is a bit of a surprise seeing how earnings were a little bit disappointing in that sector. There are some who would suggest that investors stayed too long in these names. They were, you know, juiced by no zero interest rates. They were further juiced by the

pandemic. And maybe we need to rethink the growth rates of all of these businesses as they tell us that the key parts of their businesses are slowing. Well, they're maturing. They're not. They're slowing and maturing, but they still have exceptional growth rates as innovation still continues there. And although they've taken a step back, a lot of these companies are down 50, 80 percent from their pandemic highs. So there has been a renormalization. What about the mega caps, though, specifically looking at that group? Has the tide turned? Will investors go back into these stocks? As we point out at the top of the show, the outperformance of the Dow, the outperformance of value.

Investors seemingly wanting to gravitate towards that area. Well, I think they fled those stocks during the time where there were uncertainty earlier in the year, whether it be because of the war, whether it be because of interest rate rises. And now I think people are taking a more sober approach and trying to figure out where should they be. And obviously, tech has a space in every portfolio. Yeah. You've been fairly defensive in the market, AJ. And are you still that given this incredible move that we've had over the last few, you know, from the mid-October low? I don't know, Dow's up 14 percent? Yeah. I mean, a couple weeks. Yeah. I mean, if we look at today's rally and this month in general,

I think it's very reminiscent of July and what we saw after Q2 earnings. Ultimately, we still haven't seen that earnings recession yet. But to me and to where we're allocating with investors is that you're seeing a risk-free rate at 4.5%, 4.3%. At multiples where they are today, you're looking at 5.1% earnings yield. You're not really getting compensated for the added risk you're taking. Not to mention, we still don't know what the Fed is going to say next week when it comes to how long they're going to be in restrictive policy stance. And so if you look at how the velocity of money has gone down over the last 10 years or so, and asset price inflation coming off of that,

as we go into a tightening cycle, you've got to see valuations come down, too, and you need to be compensated adequately for the added risk you're going to be taking in the equity markets. I've heard some suggest, Cameron, this week, too, that what happened in big tech was a reminder of what's coming in terms of earnings expectations coming down. And if you heard what you did from the best in breed businesses, you can only imagine what the others are going to be faced with as well. Is that a valid point? It could be just a timing mismatch, or this could be a function of the fact that big tech was the biggest beneficiary of pandemic trends. So if anywhere pulled forward earnings into the last couple of years, it was tech. And they also pulled forward spending and

hiring. And that is the rationalization that's happening now. There are some parts of the market that you haven't seen that same kind of pull forward, and they're just starting to kick into high gear. United Rentals talked this week about how they're seeing the best environment for large projects in the last 32 years. So there still are pockets of strength in this economy. It's a question of does the weakness that we're seeing in parts of tech start to spread and really start to get into other areas of the economy where we see a more broad-based slowdown. What gets you more excited about the market? Is it just beginning and end at the Fed's door for you?

I mean, for us, I'm excited about fixed income right now. I mean, we're starting to see yields being attractive again. And for us, we're actually looking at opportunities to dip our toes in the high-yield market. I mean, when you look at spreads at 500 basis points above the risk-free rate, I mean, that's attractive to me. Inflation, although obviously hurting the consumer and persistently high, it's also giving companies an opportunity to de-lever. So although it could be the canary in the coal mine in the high-yield space, it's also an opportunity to potentially get some real yield or positive real yield,

as well as getting a high coupon for valuation. What about the notion that rates are topping out? I agree that we have seen the Fed Fund's futures rate pricing a little bit above where it could be. But once again, restrictive policy, how long is that going to be? This recession could hit and could be a little bit longer than we anticipate if it does happen.

Now, I'm not saying it will happen, but if it does, you're going to want to be something that's a little bit more safe. And I think fixed income provides that opportunity for investors. And as we've started to see yields in the 10-year space moving and sticking around 4%, it might be an opportunity to add duration to portfolios. So Cameron, I mean, that's been a debate that we've had on numerous occasions with you and others, bonds versus stocks. It seemed like the conversation had gone to bonds before this rally happened. And now maybe we're rethinking things, thinking about what the Fed may do and whether rates have topped out or not, whether the short end of the curve is as attractive as it once was. How do you see it? Well, I think that the theme that there is competition for capital now still exists, meaning that you can get compensated. If you're

making a certain return target that you have, you can get compensated without having to take the kind of equity risk. Now, that doesn't take out these movements that we see in the short term, where you can see trading benefits. But we think overall, bonds do look more attractive than they have in many, many years. Does that mean giving up on all of your equities? No, because equities are down nearly 20% year to date. Usually after moves like that, you do see better equity returns. Of all of the reports, Rick, that came out this week, of all these businesses, which do you feel best about, let's call it for the next

couple of years? I probably feel the best about Pinterest. And I know we've talked about it before, but they have a completely differentiated product. If you think about just the rise of TikTok and TikTok in the United States is now as big as Snap and Twitter combined. And what they're taking away in terms of short form video from YouTube, from Facebook, from Instagram, from Twitter. I think they're all fighting over the same pie as opposed to Pinterest, which is playing a different game. Yeah. One of your companies that you've invested in, so I can understand the love for it. And maybe it bucked some of the social media issues that we've witnessed in the others. But of the, let's take the mega caps, which left you feeling best in a tough week?

It's probably Apple. And if you think about Apple and you think about the network effect they have, they continue to roll out hardware. They're continuing to add products like payments. And I think that they're going to be the most resilient and they have the best network effects going forward. Who do you think is the most challenged going forward? It's, I think, easy to suggest that it's meta, but is it truly? I think it's truly meta. I think people are aging out of the flagship product.

I think they're having tremendous competition from TikTok on the Instagram product and even in Reels. And I think they're over-investing in the metaverse before they're seeing real traction. You feel like the best days, AJ, of big tech are behind it for a variety of reasons that we discussed a bit with Rick, just the timing of where we are in the economic cycle, where we are with where rates are. We're not in the pandemic anymore. And maybe people are reassessing that these companies aren't as quote unquote great as perhaps we thought. I wouldn't say the best days for tech are behind it. I mean, there's going to be a Fed pivot at some point. They're going to ease back on rates, and that's going to create an environment

for the technology sector to take off again. I would just say right now for investors, it may be a little bit too soon, but I can't understand why seeing these valuations drop the way they have this year, they may want to go in at this point. How would you address that question, whether people stayed too long and reality is setting in that the growth rates are unsustainable? Well, just a couple of months ago or a few months ago, people were talking about these as bond replacements, that they were just so consistent.

Well, last few years, that's been a good part of the conversation, right? That their bond proxies, their safety plays. But they were trading at such elevated valuations. Google trading at 10 times sales, Meta trading at nine times sales. But when your sales are now growing just about in line with the market, do you really deserve that big of a premium on your stock? And the answer is likely no. So as these businesses mature, it's likely that we start to see their multiples converge closer to the market because you simply don't pay that high premium if sales are not growing you you think we're going to see it that compressed i don't think

you're going to see it that compressed because some of these businesses have just such good business models and you think about the business model of search for Google and even on the YouTube platform. You think about the UGC product at most of the social networks. Their normalized margins are 40 percent. So I think you have to look at the margin profile as well as the revenue multiples. You still think, AJ, that you think the lowest firm that we had put in prior or are you still looking at the market and thinking you know all of what the fed's done has still to filter through the economy and the stock market today is not going to look like the stock market six months from now i think there's still more risks to be priced into the market ultimately aside from just the fed we've seen energy prices continue to go up and inflation hasn't shown a persistent level of coming down.

I mean, we're still at we've been at 8 percent the last couple of months now for CPI prints. And I feel like the market may be trying to price in a victory way too soon right now. So ultimately, we're trying to remain defensive to be underweight equities. We're still allocated. But ultimately, we have to price in a little bit more risk that still exists out there from the geopolitical tensions that exist in Russia and the other countries that are starting to move into that conflict could see energy prices remain higher. Leave us with a thought before we let you go. Favorite places in the market right now are what? We like healthcare. We think healthcare is the place to be. It allows us to have balance in that defensiveness in the near term. We like it much better than utilities and staples, but we actually think healthcare can lead going into the next

cycle. We see strong demand trends and it's still trading at a 10% discount to the market, unlike a 20% premium for the youths and staples. So we think that's the place to start buying into on weakness. NASDAQ higher or lower at the end of the year from where it is today marginally higher largely higher i think there'll be a mix the names will be mixed it won't all go up like it did this month it'll be a stock picker's market s p 500 higher or lower than where it is today by the end of the year i'm going to say lower okay we'll leave it there i'm glad i got a call from everybody it's great to see everybody here hey rick heisman's going to stick around too because we're going to talk some twitter on the other side of this break.

But, AJ, thank you. Cameron, we'll see you again soon. I'm sure of that. Let's get to our Twitter question of the day. We want to know, with mega cap tech earnings now behind us, how do you feel about that sector? Do you think it's a great buying opportunity? Is the tech run over? Or do you think it's the same?

You can head to at CNBC Overtime on Twitter. Cast your vote. We'll share the results later on in the hour. But we are just getting started here in overtime. Up next, the future of Twitter. Elon Musk is now taking control of the social media company. And he is already making some changes. So what's next?

We'll discuss that after this break and later. Why one top financial advisor is not giving up on tech. She'll make her case. We're live from the New York Stock Exchange. OT is right back. All right. The top executives are already out at Twitter as Elon Musk takes control of that company now. Joining us to discuss what's really next is Plexo Capital's Lo Tony, along with First Mark's Rick Heitzman. He is back with us here. Lo, I'll turn to you first. So we know that the top execs are out.

What are your thoughts here as Musk takes control? Oh, the bird is freed. So Elon Musk, he's the chief troll catcher or whatever we should call him now. You know, look, this has been coming for a long time. Elon has talked a lot of ideas. What we do know is that Elon is a great product person. I mean, without question, he is one of the great product minds that we have right now.

And I am excited to see what's next. He's talked a lot of things, bring back Trump, make some kind of super app built around Twitter, you know, free it up so it's more open to free speech. I'm not sure what all of these quite mean, but we shall see. Can a great product guy as Lowe describes Mr. Musk turn this thing around? I think he can make some changes and he can make them quickly. Part of where Twitter was stuck was having a lot of middle management and a lot of people

making decisions. And I think the one thing he'll be able to do is cut that Gordian knot. So he has set some lofty goals, Lo. He has quintuple revenue by 2028, grow to nearly a billion users by 28, turn Twitter into a quote unquote super app and then take the public, take the company public again in three to five years. When those are the goals, how would you assess whether you think he can achieve that? I think those are going to be pretty tough. Here's why. Twitter has its best days behind it, in my opinion. I think the time to be able to make those types of changes, to change course and achieve those numbers, are past it. I do think that there is a core user base. I think

there's a great opportunity, but I think there were just too long to be able to make those types of changes that would be necessary. Is there still a great product there? Without question, it still will remain significant. It will remain an important point of aggregation for people to be able to share their thoughts. But I'm just not sure with all of these other platforms that have the ability to gain traction that show much more momentum, especially around certain demographics. I don't know if it's going to be achievable. It might be too late. You agree or disagree with that? I agree with some pieces. I think that he will go one or two for four in those broad, ambitious goals. Okay.

Probably the easiest one of taking the company public again. I think the network effects built into Twitter, the fact that even in the break, that's the first thing we check, and some of us are addicted to Twitter, make it that there'll be an ongoing place where this is a town square, this is where communication and news will happen. But can you increase revenue like that? Can you make it accessible for three times as many people? I doubt those things will occur.

Address the revenue goal. Can they make money? Can they grow the revenue stream? If so, how are they going to do that? I think that's going to be the hardest. I mean, by nature, no offense, but news is very hard to monetize. Can he grow the revenue stream? If so, how are they going to do that? I think that's going to be the hardest. I mean, by nature, no offense, but news is very hard to monetize. And therefore, even if you grow user bases, even if you grow consumption, the revenue per user can't grow that much more.

And you're often stuck with CPM-based advertising or brand advertising as opposed to direct response, which drives premium revenue. So, Lo, he tweets to advertisers this week that, you know, Twitter is not going to be in his words. It can't be a hellscape. It has to be a, quote, warm and welcoming place for everyone. I'm wondering how you you you think about that, whether you think there's going to be some sort of content moderation, which, by the way, he tweets about today as well, saying that Twitter will be forming a content moderation council with widely diverse viewpoints. No major content decisions or account reinstatement will happen before that council convenes. It's all sort of tied into the advertising question, isn't it? It absolutely is. And he's saying the things

that need to be said, because in order to be able to have any opportunity of even having a chance to achieve those revenue targets, advertisers have to feel it's going to be a place where people are welcomed and have a level of comfort, knowing that it's not going to be as decisive. However, this is almost diametrically opposed to how we know Elon really thinks about free speech. And that, in my opinion, is going to be the challenge, because in any community, you only need a few bad actors to make a lot of people feel uncomfortable. So I don't know how the balance is going to happen between giving advertisers this level of comfort that it's a welcoming place while at the same time

promoting free speech. Right. I mean, if you have a few people throwing eggs in the town square, you might not show up in the town square and in fear that you'll get hit with one. And you might not want to put your advertisement next to the guy throwing eggs. So you're it's not it might not be brand safe. The broader you open the aperture, the less brand safe it is. And that's going to be the challenge in attracting premium ads. If you suggested that maybe the easiest thing is taking the company public again in three to five years, as you can see it, would you be an investor in that product? Depending on the price, but probably not. I think that it's going to be a hard road to hoe. A lot of people know what Twitter is. They're not gaining a lot of new users. Consumption

patterns are pretty stagnant. It's harder to get to premium advertising. And I'm not sure this subscription product will be broad based. Lo, how would you answer that same question of let's hypothetically say in three to five years this comes to market as a public company again, would you look at it or shun it? No, I'm not a fan. Look, in my opinion, and this is just my opinion, as best days are behind it, I think it's going to be too difficult for brands to be comfortable in the environment that I know that Elon really wants to have. How about a CEO? He's not going to run this himself, is he? I can't imagine in the medium term, and I can't imagine as a public company in three years, but I do think he has generated a lot of value and a lot of interest,

and he probably will be able to find a high-quality CEO to take that job. It's going to be interesting to watch. I appreciate the time. Lo, thank you so much. We'll talk to you again soon, Lo and Tony. And, of course, Rick Heitzman here on set with us. We'll see you again soon. Of course.

All right, coming up, some big money advice. One of Barron's top financial advisors breaks down her investing playbook, the sector she's recommending now to her high net worth clients, and where she sees stocks going from here. We'll do it next in OT. Welcome back. It's time for a CNBC News Update now with Kayla Tausche. Hi, Kayla.

Hi, Scott. From the news on CNBC, here's what's happening. Paul Pelosi, husband of House Speaker Nancy Pelosi, is still in surgery after getting attacked in their San Francisco home this morning. NBC News says he was hit multiple times in the head with a hammer. Police have arrested 42-year-old David DePapp and charged him with attempted homicide. DePapp was reportedly trying to tie up Paul Pelosi until his wife returned home. The fraud trial for former President Trump's company is set to begin on Monday.

It's taken less than a week to choose jurors. The prosecutor's star witness, Trump CFO Allen Weisselberg, expected to testify on November 7th. And after 13 years, Tom Brady and Gisele Bundchen have gotten divorced. Both posted statements on Instagram saying they had parted amicably and are asking for privacy. Brady said the decision to end their marriage came after much consideration. Tonight on the news, the search for why a man assaulted Speaker Pelosi's husband and a look at the recent spate of attacks on politicians and government officials right after Jim Cramer, 7 Eastern, here on CNBC.

Scott, back to you. All right, we'll see you then. Kayla, thank you. That's Kayla Tausche. Stocks rallying today despite a bumpy week, to say the least, of big tech earnings. But my next guest says she's not giving up on that sector anytime soon. Joining me now is Cheryl Young of Rockefeller Global Family Office. She's been ranked on Forbes' top wealth advisors list since 2016,

currently number four on the top women's advisor list, and number one on the best in-state advisors for Northern California. Congratulations on those accolades and welcome to our program. Thank you, Scott. Happy to be here. Are you more impressed with the Dow of late or the resiliency of the Nasdaq this week? So this week has been absolutely nuts to watch. It's been super fun, actually.

And it just reiterates my whole view that I've been telling clients all year, tech isn't dead. When we have these bounces, they're coming hard and fast. And while tech has definitely led the stock market down year to date, in fact, if you had not included the big five who announced this week, you would have actually outperformed S&P by about 2.3%.

But if you did not include these names, you would have underperformed on the last three years by an average annual clip of 7.88%. I was just running the numbers on Bloomberg this morning. So we really do not believe tech is a place you can avoid. Every company in the world has to have technology to operate. Do we, though, need to reset our own expectations for not only the growth of the businesses themselves, but the growth rate of the stocks? There's a mental heuristic that applies to everybody in this world called anchoring. And I think about this all the time because when we talk to our clients, it comes up often. They think about where their portfolios were at the market peak.

They think where their stocks are trading at the market peak. And they get attached to these numbers. I do think, Scott, we have to reset expectations. Look, the valuations in November were too high. I said that publicly in November. I said that publicly again in January. I felt we had to have a reset in these names. However, we depend heavily on technology. And while the valuations were too high, I also think the pendulum has swung too far the other direction and that these stocks have gotten overly beat up. And really, what's exciting about this week is it reiterates that there are a lot of buying opportunities for a patient investor. Does that also suggest that you think there's too much excitement around the value trade, which, you know, has obviously picked up of late and some are now suggesting

that it's going to have its real moment after years of being out of favor for growth, as you just mentioned. Yeah, it's a really good point, Scott. Value has underperformed the rest of the markets and certainly the growth sectors of the markets for the last 10 years running. And we have seen value outperform year to date. However, it's really easy to look at stocks in silo, but you have to think about wealth management in its holistic view. And if we had sold all of our big tech names last November, we would have incurred 40% taxes for our clients. And if you think about a 40% tax hit, that is still significantly worse than how much the stock market is down here to date. As of today, the stock market is down broadly to date. You know, as of today, the stock market

is down broadly about, you know, just under 20% of the S&P, closer about 30% on NASDAQ. But you're still better off riding through that than incurring taxes if you think about your long-term goals. And I don't buy stocks for the next two weeks, the next two months. Recessions on average last 14 months. And so if we are investing for clients for a 14-month time frame, we're really doing them a disservice. I think there's a lot of room for comeback. I think that while the valuations were definitely too high last November, and I don't expect to necessarily get back to those numbers, what we know about markets is that when we have a 20% sell-off in the S&P 500, the markets are positive one year later over 80% of the time.

The markets are positive two years later over 93% of the time. So the reality is we want to really look at companies we want to own for the long haul. We want to hold those names. I'm a big advocate of hedging, however, because for me, if I could hedge some of these big tech names that I did think were overvalued, I can keep clients in them, not pay taxes. But I can also create some downside protection. So as the markets go through these durations, as we work through what the feds are going to do with interest rates, we still have that protection in place. So I think it's really important to not just look at the stock picks, but also look at the taxes and the impact on one's true wealth. Yeah, no, those are all good thoughts. How are you thinking about next week in the context of this move that we've had in the market from the mid

October low? Does it come to an end next week or does the Fed give us some sort of reason to believe that it can continue for a bit? The markets have been completely focused on what the Feds are saying. Every time the Feds come back and have any kind of hesitation on whether rates will continue to go up, the markets have a big rally. We saw that in July and August. And then when they turned more hawkish, we saw the down turned back all through September. And October actually ended up OK after all. And I do think that we have a lot of volatility still to go. Valuations are still extended on certain parts of the tech space and on certain stocks. However, valuations are really, really cheap on other areas. I still like technology, but it is important to have diversification. And if I think about financial stocks, just to give one example, financial stocks have very low P ratios.

They've been beat up this year as well. Nice given place. And you think about what's happened with rates. The rates have gone up significantly. We are sitting at almost a 7 percent 30 year mortgage right now. It has doubled in the last year. Banks aren't paying me 7% for the money sitting in my checking account last I checked. So they're keeping a lot of that spread. And I do think that there are opportunities. The other area to think about outside of technology, we were looking at the airline stocks this week, and it was amazing some of the earnings that have come out of this space. I think we have a little bit of a tale of two economies going on right now.

So while everyone is so mindfully focused on the feds, you have to remember from a psychological angle, we also have just emerged from COVID. No one wants to sit at home anymore. We've been doing that for two years. People are going out on their vacations. The planes are full. The hotels are full. The nice restaurants are full. And even if I'm paying twice as much for that vacation, I'm still going to go. All right, we'll leave it there. It's great having you on the program, Cheryl Young. We'll see you soon, I hope. Absolutely. All right, you take care. Up next, a key defensive play for your portfolio, a halftime committee member getting bullish on one sector after its recent winning streak. We'll debate the move just ahead. And later, the Wall Street Journal's Nick Timoros,

he breaks down what he is going to be watching from the Fed next week, what you should be looking for next week and beyond. Overtime is back right after this. In today's halftime overtime, biotech's big run. That sector locking in its longest weekly winning streak now since December of 2020. Steve Weiss thinks the gains are just getting started for that group as he bought the IBB biotech ETF today. Health care is one of my favorite groups here because it's defensive, because look at how they're producing these companies. I was in it earlier. You know, the interesting thing about the IBB is

it's never had two down years in a row, except for this year on top of last year. So as the market looks like it wants to turn, keeping low equity exposure, I'm looking for beta. That's giving it to me. Well, Requisite Capital Management's Bryn Talkington, also in the biotech trade, joins us now. It's good to see you. I feel like a lot of people like health care. It seems to be crowded. Cameron Dawson, who works with Rob Seachin, who was on today, mentioned it as their favorite group. Is it yours?

It's one of them. And I was just thinking to myself, everybody loves health care. And so that always makes me nervous. So we definitely like healthcare. Within CALS, which is one of our big ETFs, it's number one or number two at 25%. But here's why so many people like healthcare, as do we. I believe we are late stage economic cycle. And so if you are late stage, the playbook is to buy health care,

staples and utilities. The issue, though, is staples and utilities are trading at a premium to the S&P at 19 and 17 forward earnings versus health care is around 15. On top of that, you have growth within the sector. And so I think for those reasons, people are shying away from an allocation to staples and utilities and moving more towards health care because of those ingredients. You get that defensive late stage sector, but you also have growth. So you heard Weiss suggested he bought the IBB, which he was once in and now he bought today. XBI, which is another ETF that people may be familiar with versus IBB, which do you prefer and why? So I think what's so ironic, I think there's more ETFs than stocks today.

And so you definitely have to do your research because they're not even remotely the same. So IBB is a well-constructed ETF. The reason why I didn't buy it is it's really more of a larger cap biotech and somewhat pharma exposure. The average market cap is around $20 billion, and the top five holdings make up 40%. So you've got Amgen, Gilead, Vertex, Regeneron, and then Moderna make up 40% of that. And so you really get that larger cap biotech exposure versus XBI is more of an equal weight pure play on biotech. So the top five holdings in XBI only make up around 5%. And so when I wanted to get that more small mid cap exposure, pure play, I prefer XBI over IBB for

those reasons. All right, we'll leave it there. Bryn, thank you. Enjoy the weekend. We'll see you on the other side of that. That's Bryn Talkington, Requisite Capital. Coming up, we're wrapping up a wild week on Wall Street. Christina Parts and Nevelos is standing by with our rapid recap. Christina. Mark, it's telling us it doesn't always have to be about big tech. Some good news for your morning cup of joe and details on why maybe the risk trade is back on. All that and much, much more next. We're wrapping up a big week on Wall Street.

Christina Partsenevalos is here with our Friday Rapid Recap. Christina? Yes, markets capping off another week of gains despite big tech earnings disappointment. Even the Nasdaq managed to close over 2% higher this week. The relief in bond yields and seasonality helping a little bit. The Dow up 11% in October. That's the best month since 1976. Speaking of big tech disappointments, Meta down 23%. Amazon down 13% this week among the worst weekly performers on the S&P 500. Communication services was the only negative sector this week. That's because

Amazon's in that category and not tech. Maybe, though, some good news for your morning shot of caffeine. Coffee futures hitting the lowest level since July 2021 on improving weather conditions and weaker demand. And dare I say risk on meme fave GameStop closed look at that 11% higher on the week Tesla up 7% ARK up 8% Bitcoin having a resurgence after a brutal year trading above $20,000 right now that's about 8% higher this week Morgan Stanley actually says a record 78% of Bitcoin has not been used in any transactions in the last six months suggesting some are holding on for that recovery in price. Let's recover this weekend. Goodbye. All right. Have a good one. We'll see on the other side. That's Christina Partsenevelos. Up next, we're gearing up for next week's big Fed

meeting. The Wall Street Journal's Nick Timoros joins us next with what's at stake for stocks and your money. That's just after the break. Welcome back. Big Fed meeting next week, the second to last meeting of the year. For more on what investors should be expecting, Wall Street Journal chief economics correspondent Nick Timoros joins us now on the news line. It's great to have you back on overtime, especially looking ahead to next week. And I want to remind people of a tweet that you had from earlier today, quote, the bottom line, while the Fed isn't data point dependent and the decision for next week of 75 basis points seems unlikely to change, another uncomfortably high employment cost index reading might argue for a somewhat higher terminal rate and could

muddy the debate over slowing the pace in December. So if we think next week is in stone, for all intents and purposes, at 75 basis points, how in flux is December really at this point? Well, thanks for having me, Scott. It's a great question. And it does feel a little bit silly to be talking about what's going to be happening two meetings from now. But I realize that's where all the attention is, because people want to know, what is the Fed's reaction function for slowing down the pace if they do not have convincing evidence of a slowdown in inflation? And it doesn't seem like they're going to get, you know, we're going to have two more inflation readings before that December meeting, but one of

them is going to be on the morning of the first day of the December meeting. So they're just not going to have a lot of time to see data before the December meeting. And I think that's why there's this question over, well, could they still step down to 50? Now, the ECI report this morning wasn't terrible. It wasn't great. I mean, I guess you can kind of take whichever side you want to out of that report. And so it'll be interesting to see how Jay Powell characterizes both the reaction function and the recent data when it comes to whether there's a red light or a yellow light to slowing the pace down to 50 in December. It was clear from their projections at the September

meeting that they do plan to slow down at some point and they do plan to stop at some point. But it does feel like the stopping point is getting pushed further out of the calendar as the economy continues to show a fair amount of resilience here. How, if any, do you think this current stock market rally influences their decision making, if at all, if it continues into the meeting next week? Does it have any bearing on their decision you've mentioned in the past? Even if they want to slow the pace, they have to be careful in the way they articulate that to the market because they don't want the market to go off to the races, so to speak, on that move. Yeah, it's not just the stock market. I mean, they care about

financial conditions, credit spreads, borrowing costs. And so if you were to get a sustained, a dramatic loosening of financial conditions, something like what we saw in July and the first half of August, that would be a conundrum for them. It is counterproductive for them. They are trying to achieve this process of disinflation. They need financial conditions to get tight and stay tight. And so that's really the challenge here communications-wise is how do you signal that a slowdown to 50 doesn't mean that you're about to stop? It doesn't mean that you've changed your view about the tradeoff on inflation and growth. I think the bigger challenge,

though, for the Fed is they need to see evidence that inflation is really going to come down. And that means unit labor cost growth. You know, labor costs have to decelerate here. And until you see evidence of that, it's hard to be confident that, you know, you can you can you can be, you know, change your position a little bit. Yeah, we'll see how it all unfolds. Appreciate your insight ahead of it. Nick Timoros, Wall Street Journal. Thank you. Santoli's up next with his last word. A great buying opportunity. That's what you thought for big tech after this week. Our Twitter poll, let's bring in Mike Santoli for his last word. What is it? Well, interesting that people now think it's a buying opportunity. People hated these things until this week.

Look, obvious resilience here, both in the economy and the market. But the conversation with Dick Timmeros brings up the next phase of this conversation, which is, is it going to be palatable to the Federal Reserve to just go on faith that inflation is going to cooperate down the road and just try and convey that they're going to step down the pace of tightening? I don't know. I don't think it's make or break. 50 to 75 in December cannot be the difference

between this market holding together and falling apart. No, it only has to be that in combination with other things going wrong. I mean, I think we're slicing it a little bit thin, but I think that's the necessity because we do need the message that the destination's in sight, even if it's not here. Look, I think the message that I took from Tim Ross was temper your enthusiasm about what you're expecting. Be careful of what you're hoping for.

I agree with that, but I pointed out we were at 4,200 on the S&P on Jackson Hole Day when Powell decided he had to swap the market down. So there's leeway there. Credit spreads are not quite as tight as they were back then. So the point is, yeah, at some point they're going to be unhappy if the market gets overexcited. I'm not clear that we're there yet. I mean, what do we say?

We had the best October ever. Best month. Best month since 76. Best October like ever for the Dow. We do have a day left in the month. All right, we'll see you. Have a great weekend.