Closing Bell - Closing Bell Overtime: Evercore’s Roger Altman Talks Arm & Capital Markets; Breaking Down Apple’s Rough Week 9/8/23

Episode Date: September 8, 2023

Stocks closed moderately higher today but averages finished lower on the week. Unlimited Funds’ Bob Elliott and Bleakley Financial Group’s Peter Boockvar break down the market action. Evercore Founder Roger Altman talks the capital markets and how the upcoming ARM IPO will impact things. 3Fourteen Research’s Warren Pies correctly called oil’s summer rally; he joins to talk what’s next for energy markets. Gabelli Funds’ Tony Brancroft breaks down a big weak for defense. Fairlead Strategies’ Katie Stockon on the technicals behind the dollar and homebuilders. Raymond James’ Srini Pajjuri talks Apple’s rough week.

The stock's eking out gains this Friday, but we are lower on the week for all of the major averages. That is the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. Coming up this hour, Evercore founder Roger Altman joins us with his view on capital markets ahead of next week's ARM IPO and following encouraging comments on this show yesterday from Goldman Sachs CEO David Solomon. Plus the case $400 oil. We will talk to an expert who has been ahead of the curve in predicting oil's rise with prices ripping higher since the start of November. September, sorry.

September. But first, the major averages ending a tough week for the bulls. The Nasdaq composite falling more than 2 percent on the week. The Dow and S&P 500 also gave up some ground. Well, next week, shake the market out of its September slump. We've got a full house here on set to talk about it. Joining us now, Unlimited CEO Bob Elliott and Bleakley Financial Group CIO Peter Bokvar. Welcome to you both. Where to start? Peter, I'll start with you.

Right now, stocks trading at the levels they are. I mean, we've had such a rip-roaring start to the year. The fact that we're in this narrow range and have been for the better part of a couple of weeks, a couple of months, where do we go from here? I think on one hand, stock investors don't want to miss the Fed is done rally. And they're sensing the Fed is just about done. Yes, we're pricing at about a 50-50 chance of another hype by the end of the year. But I think a lot of the basis for the rally, it goes back to the bottom in October, and the top on the dollar was, I can't miss the Fed is done rally. So I think after digesting Q2 earnings, which at the end of the day,

you had this big rally in tech that was neutered, essentially, when actual earnings came out. I think we have to deal with, yeah, maybe the Fed's done, but that doesn't mean rates are all of a sudden going to drop. And this rise in long-term interest rates, I think, caught a lot of people by surprise, because we had some complacency. Inflation's dropping. Fed's almost done. Oh, boy, the 10-year yield's all of a sudden four and a quarter. So that creates not only a hurdle for stocks, but also another hurdle for the economy, because it's a realization and reinforcement that we're in a different interest rate world here, and we better get used to it.

And it's going to clip away at a lot of different companies that have debt coming due as the weeks, months, and quarters progress from here. Yeah, higher for longer. And the Fed and Fed officials have continued to hammer the point home for so long now that it would take quite a lot for them to start thinking about cutting. You're short tech right now, right? Yeah, I mean, I think, you know, tech stocks and the valuations that we've seen are pretty extreme and very reliant on that. That bounce from an expectation that the Fed was going to pull back. And the reality is each day that comes in, we get incremental new information that suggests that, you know, the Fed still has a lot more work

to do, whether it's in wages, whether it's in underlying inflation, even, you know, the many of the macro stats continue to be good enough to keep the Fed on pause, at least for a very long time, if not tightening more. And so you put that together and that liquidity expectation, that world of, you know, lower interest rates, that's not going to be realized, particularly as was mentioned on the long end, seeing the pressure there. OK, so, Bob, you're short tech. Peter, you're wary of how shaky the premium consumer is and how much that's been holding things up in the economy. Apple has a big announcement next week. And that kind of it's tech that appeals to the premium consumer. I know Mike Santoli just said there's no trend in trading around Apple announcements.

But four out of the past five weeks after an iPhone announcement, the stock has sold off. So who would be negative on Apple for next week? Which of you? Either of you? Like, kind of, okay, Peter, why? Because of the premium consumer concerns and the China stuff? Well, valuation, people delaying the upgrade to a new phone. I use my son as an example. Like, when does he want a new Apple phone? And he hasn't asked that question in a while. So him and all his friends, there's no excitement to upgrade. They're happy with their existing phone. And then, of course, you throw in the China thing. But the valuation is when you have a high valuation, there's no

room for error. There's no room for error when earnings don't grow. There's no room for error when 20 percent of your business is now at risk. There's no room for error. And I think that the excitement that Apple tries to generate is losing some of its effectiveness because people just don't feel like, again, the need to upgrade their phones. And big tech has been big for the entire market. So I wonder, Bob, are we in a bit of a boy who cried wolf situation with the overall markets, except it's boy who cried recession? A lot of people forget at the end of the story, the wolf actually comes and eats the boy, right? Because nobody believed it was coming.

This just got dark. Well, is it going to get dark literally for the markets? Because not everybody's believing in a soft landing, but we have this setup. Well, I think that's such a great point that the probabilities of recession over the course of the next, you know, three, six, nine, 12 months have risen considerably over the course of 2023. Just at the same time, everyone has given up on recession. And so you go back to that overall market dynamic. You're looking at 12 percent earnings growth priced into 2024, right, at a time when you're getting that pressure on the long end, at a time when, while the labor market is tight, we are starting to see those cracks,

at a time when geopolitical tensions are clearly emerging for some of the high-flying stocks. You put that all together, it's going to be pretty tough. It would have been tough to achieve 12% earnings growth with no other issues, and maybe even the Fed easing. Think about it in the context of a Fed continuing to be tight, geopolitical tensions, the consumer demand is slowing down. Like that combination of things is pretty tough to achieve those lofty expectations.

So it raises the question, Peter, I'll put it to you first quickly. How do you invest right now? Where do you invest? So where can we continue to bullish on long energy stocks? I think oil is going triple digits. And I think a lot of these stocks still just assume oil is going to be between 70 and 80. So there's a lot of upside there. Uranium, precious metals, and value stocks have gotten killed, to my pain, of course. And I would be avoiding these big cap tech stocks. The earnings growth is

rather pedestrian now, but the multiples are still assuming quicker growth. All right. Peter, Bob, thanks. Thank you. Great having you here. Now, despite the market's choppiness of late, stocks are following a similar pattern this year to 2021, which ended with stellar returns. Let's bring in senior markets commentator Michael Santoli for more on that. Mike? Yeah, John, I can't tell you if it's pure coincidence, if it's some kind of muscle memory, if it's just the fact that this year is essentially a mirror image of last year when we had a January peak and then weakness for 10 months. But this is the track of the current year of current year S&P 500 in orange through yesterday relative to what we saw in 2021. So the same percentage moves actually even around the same absolute levels.

I asked the folks at Bespoke to kind of put this together because it's occurred to me we keep mirroring two years ago. So if there's any predictive value to this whatsoever, what we would see here, of course, is maybe a little more sideways chop or worse into maybe October, maybe through October. And then the traditional fourth quarter rally, which tends to happen more years than not, though certainly not all of them. I mentioned we're at similar levels. Take a look at this related chart, which shows the rolling two-year return for the S&P 500. So at every point on this chart, it's just showing you how much the S&P 500 was up or down over the prior two years. And what's interesting here is this weird kind of extended stutter step,

this shuffling around for a couple of months around that flat line. So we've basically been gone nowhere on a two-year look back. You've seen a couple of these happen in the past, at least something similar. Here was the mid-'90s, and right here was around early 2016, late 2015, early 2016. They happened to be mid-cycle slowdowns in the economy, adjustments in monetary policy, inflection points when either the Fed was starting to tighten

or finishing up a tightening campaign. So not to say that we know what's going to happen next, but this shows you a certain tendency. And of course, these periods where you have deeply negative two year returns were major recession associated crisis like bear markets, which we, of course, are not in right now. I would also make one final point, which is if the S&P happens to just stay flat from now to the end of the year, this is going to look like it's showing you about a 7% or 8% two-year decline. So this can go down even without the index itself falling away, guys. Okay. Interesting. Mike, what's also weird about this to me is we've had these major pivots in the market right around the start of the year for the past two years, right? So how much, how, if at all, does that factor into this weird pattern of this year echoing 21? Yeah, it is interesting,

John. And in fact, it's important to emphasize that's not necessarily the norm, even though we kind of start from zero psychologically and in performance terms at January 1st. Usually that's not necessarily when the market changes its character, although I would say this time the lowest for the market was in October of 2022. So you were rallying out of that. You did have a further pullback in December. So I'm not sure we really went strictly from a different type of market environment for this year, but it does tell you be on alert as we get into next year.

It's going to be an election year. There's a whole new set of seasonal and historical dynamics that we'll be talking about, whether they're predictive or not. All right. Mike, we'll see you later in the hour. Thank you. Up next, investment banking titan and Evercore founder Roger Altman joins us with his take on equities, the economy and the upcoming arm and Instacart listings that are just the tip of the iceberg, potentially for the IPO market. And later, what to expect from Apple next week after a rough few days of trading. We will preview the company's iPhone event as China concerns weigh heavily on that stock. Overtime's back in two. welcome back to overtime next week investors will be getting ready for potentially ready for arms

long-awaited listing is this the start of a bigger comeback for the ipo market we asked goldman sachs ceo david solomon on this show yesterday i definitely do feel better about the the capital markets and if you ask me to to kind of look ahead, you know, over the course of the next few months, especially if ARM and some of these other IPOs, you know, go well, I think you're going to see a meaningful increase in activity. Now, David, it's often an anemic amount of activity. I mean, nothing happened last year. No, I mean, it's really investment banking activity.

If you go back to the second quarter, investment banking activity in the second quarter was a 10 year low. And so it's not hard to improve off of that. But I think we could very quickly get back to what I'd call a more normalized level of activity in the capital markets. And that's obviously very, very good for Goldman Sachs. All right. Well, it's good for Goldman Sachs, according to its CEO. But joining us now is Roger Altman, Evercore founder and senior chairman. Roger, it's great to have you back on the show. Good for you. Do you agree? Do you agree with Solomon? Are we seeing green shoots? Are the capital markets starting to show signs of life again? I think there are green shoots. I mean, we've seen, for example, a relative flood of convertibles issuance over the last couple of weeks, which is a good

sign. I don't see any reason why the ARM and Instacart IPOs won't go well. These are good companies. And the stage, I think, is well set for them to be successful. But we'll have to be sure that happens. I think any recovery in financing levels is going to be gradual. I don't think it's going to be quick. But activity levels, generally speaking, as I say, witness the convertible market are picking up, and it's quite noticeable. Interesting. What's more important, especially to the IPO pipeline? Is it these companies coming public and having successful debuts, or is it the stock and bond markets, for lack of a better word, behaving or at least performing well more broadly?

I think it's weighted more to the latter. It's hard to have a robust IPO market if overall capital market conditions are down and weak. So I think that's more important than any individual one or two offerings. But both are relevant. And the current environment is decent because, after all, the S&P 500 is up, I think, 14% over the last 12 months. And everyone talks about how high interest rates are. But by my own standards, over a long career, they're not really that high. So I think the environment is reasonably good.

And we should see a gradually improving year in terms of levels of financing, especially equities. Roger, I wonder how you're feeling about investing in Asia right now with China's impact. Is it even possible to sort of decouple China from Asia if you're an investor? And if it is, how? Well, John, I think it depends on what type of investor you are. So if you're a private investor or if you're, for example, a corporate investor who's focused on capital expenditures, it's quite easy to separate China from the rest of Asia. I was with some folks last night who were talking about a major commitment they've made, this is a pretty large company, to Vietnam, for example. And we're seeing a lot of focus on India as an alternative to China. So I think it depends on what type of investor you are. And as I say, if you're a private investor or a corporate investor,

it's not hard at all. Look, China... If you're not, how do you do it? Well, I think it depends on the size of your portfolio. It's pretty hard if you have a gigantic portfolio, because so much of the overall stock market value in Asia still is centered around China. But I don't think it's impossible. And the narrative on China, as we all know, has completely changed. Six months, 12 months ago, you know, China's unstoppable. And China's GDP is going to surpass America's. And it's going to be more geopolitically important year after year and all of that.

Now it's reversed. Demographic challenges, poor recovery post-COVID, inefficient state sector, excess public investment, you name it. And so I think there's a growing investor aversion to China, and that's unfortunate from China's point of view, and a lot of it's self-inflicted. Well, I also want to ask you about real estate, but not in China, in the U.S. With the expectation of higher rates for longer, what's the impact, not just on the housing market, but on the consumer, just that continued, I don't know, vice of interest rate pressure bearing down? To me, the consumer, John, is showing a lot of resilience. I mean, the watchword for the entire economy right now, really, I think, is resilient. Almost everyone I know, as I said,

six months ago, thought it would be a lot weaker today than it actually is. Too soon to say what the third quarter growth figure will be, but looks like it could be 2 percent or better. And this late in the recovery, that's remarkable. And it was 2.4 percent for the second quarter. And yes, the signs of some slowing. The pandemic-related excess household savings are coming down, but they're still big. And labor markets are starting to cool, but they're still tight. So to me, the consumer is pretty resilient. Now, there are some signs, credit card levels, household debt levels, that the consumer is pulling back some. But to me, those are small signs so far. Roger, finally, I have to get your

thoughts on the M&A landscape as well. It's something we've talked about multiple times over the course of this year. We know regulators have been very staunch in terms of what they've allowed to go through. We also know there have been a lot of high profile cases that have been challenged in the courts, much to the chagrin of some of those regulators in favor of the corporations. Do you think we're going to start to see an uptick now in more dealmaking? Yes, I do. But the regulatory environment is very challenging. And what people don't see, because it's not possible for them to see it, is how much activity the key regulators, the FTC and the Justice Department, already have deterred. People debate all day long how often the FTC, for example, has lost in court, Microsoft Activision,

and so forth. But they have succeeded from their point of view in deterring a really big amount of activity, and I personally have seen a lot of it, unfortunately. So, yes, I think dealmaking is beginning, it's picking up. You can see that in a various way, shadow backlog, all kinds of preliminary indices like that. But the regulatory environment is challenging and I don't see that changing. The regulators are pretty ideological and they're pretty committed to being so. Yeah, seems so for sure. And you would know, Roger Altman, thank you. Front seats to the M&A landscape. Up next, we should talk to an expert who called for $100 a barrel oil weeks before others on the street started mentioning that

level. We'll hear his updated forecast next. Welcome back to Overtime, our triple digit oil prices on the horizon warren pies of 314 research made that bullish call on our network a few weeks ago now we're in this window where the saudis and the rest of opec has finally gotten their act together in our withholding supply and i think their goal is to basically run these shorts out of the market. And by the time this saga is over, I think we end up touching $100 a barrel on oil. And ultimately, this is going to be a big driver for the energy sector in the near term. Oil's up more than 20 percent over the last three months, now trading near 90 bucks a barrel, closing in on it, we'll say. Other firms like RBC jumping on the bandwagon, saying $100 oil is possible if momentum in the crude market keeps

going. 314 Research co-founder Warren Pies joins us now. Warren, we just showed sound of you talking about this a month ago, but I think you actually first started making this call much earlier in the summer. You were ahead of the game. Why did you make the call? Are you sticking with it? Yeah, thank you. I appreciate playing that clip and giving me credit there. I am sticking with the call, you know, and our benchmark is Brent. And so that's the that's what we're watching. We're about 91 now. So we're getting close to, I would say, late innings on the call as everybody's starting to come into it. And you see like Goldman and RBC jumping on the $100 bandwagon and a little

bit over that, you have to start wondering how much juice is left. And so what we're watching are speculators in the oil market. The real reason we made the call is we thought that there was too much short positioning from hedge funds and other speculators in the oil market. And the Saudis saw this and wanted to push prices higher. Now we're hearing chatter they're going to sell a piece of Aramco at some point later in the year, maybe beginning next year. So you can see a motivation for higher prices there. So in the stock market, you don't fight the Fed. In the oil market, you don't fight OPEC and primarily Saudi Arabia. So I'm sticking with the call. I think it's going to continue to to be a good short term period for for energy and oil

prices. But we're going to watch speculators when they get too bullish, just like when they got too bearish back in the summer. That's when we'll look to kind of exit our position. Yeah. And here in the U.S., we've seen rig counts coming down all summer, too. I think today we get these weekly numbers. I think today was the first time that Baker Hughes reported a one, an increase of one since June, to your point about how the supply demand dynamic is playing out here. You're watching this at home to channel John Fort. How do you invest in this? You're not going to go out and buy Brent futures. What do you buy? Yeah, I mean, we have some specific energy stocks that we recommend to our clients but in general the energy sector has an overweight and this has been a call of ours for a couple years now is that

you want to have so the energy sector is about five percent of the s&p 500 give or take i think you need to at least double that in your equity portfolio in this period of time and the real reason is that energy is giving you diversification that really you're not getting that from other areas of the market that you traditionally do, specifically bonds. So you used to get this negative stock bond relationship because of the introduction of inflation. That's kind of gone away. So your bond book is not hedging your equity book. So we've done a lot of work. Even if you're not bullish on oil prices, just for the diversification purpose, you need to have an overweight in energy in your portfolio. So as we approach. Oh, go ahead, John. Yeah. At what point do you possibly reverse? So

as we talked about, you've got Saudi supply cuts for now. You've got China economic weakness. If we do get closer to one hundred dollar a barrel oil and those conditions haven't shifted, do you pretty quickly go short? Oh, wow. I mean, this is not an environment. First off, we run off an oil model that I really built over my whole career. And that's kind of what dictates our oil calls. And it hasn't been on a sell signal post-COVID. It's been neutral a few times, but it has not been on a sell.

And so that's going to be the guiding force. And within that is really, like I said, positioning, inventories, fundamental data that comes in through the oil market. And so we won't be flipping short, but we will be trimming our positions back. So especially if these energy positions run versus everything else, we'll rebalance. We do have oil traders on our service, and they might have a different view of the world. And we would say, square your books once we get up to that level. And so we've moved from our call was at 70. Back when we were at 70, we're going to be at 100 by the year end. I think that works out. And when it happens, I think you start looking for the exit door,

because there is a lot of supply that has to come back on the market. So this has been an OPEC engineered rally. And ultimately, that supply comes back and it's going to weigh on the price of oil. So this is not the time to get uber bulled up all the long term. OK, well, it worked for you. Good call. Warren Pies, thanks for being with us. Thanks for having me. Now let's get a CNBC News update from Pippa Stevens. Pippa. Hey, John. The Supreme Court is being asked to reverse an appellate decision that would end mail order access to the drug Mifepristone, the most common method of abortion in the U.S. This would be the court's first major abortion decision since overturning Roe v. Wade last year.

The drug's manufacturer filed an appeal arguing that federal judges should not second-guess the FDA on drug approvals. Oregon State and Washington State filed a complaint in a Washington court against the Pac-12 commissioner. The suit is seeking to prevent the departing schools from doing anything that could stop the effort to rebuild the conference. The Pacific Northwest schools are the last two members of the Pac-12 after the other 10 schools decided to leave for other conferences. And another example of why Taylor Swift could be considered an economic stimulus package unto herself. Data from an investment firm shows the singer's Eros tour boosted hotel revenue across the country. Average

revenue per room during the month of tour dates jumped 4% above the national average. An analyst from the firm dubbed the phenomenon Swiftonomics. Morgan and John, back to you. Okay. I want to see the Beyonce numbers too. Thanks. Treasury yields taking a breather today, but still sitting near their highest levels in years. Up next, Mike Santoli looks at where they could be heading next and the spread between government and corporate debt. We'll be right back. Welcome back to Overtime. Michael Santoli is back with a look at the recent bond sell-off. Mike.

Yeah, John, it kind of hesitated in the last couple of days, but you do see most bond yield maturities near their highs. Take a look at the one-year Treasury bill, which I think nicely encapsulates the fact that the market has more or less absorbed the idea that the Fed is going to probably keep short-term rates higher for somewhat longer. 5.4 is around the current yield. That's where we were in late June. So you're talking about, you know, two and a half to three months of the market saying, yeah, this is probably around where Fed funds will be in a

year implicitly. Fed funds right now, of course, between five and a quarter and five and a half. So it's kind of maybe they go up one, maybe they come down a little bit. The point is the market is pretty much on board with that, even though the Fed funds futures contracts are showing the chance for cuts. If you go out several months, at least thinking that there's a risk that something happens in the economy that forces that. I think more importantly, perhaps, to how corporate equities traders, how corporate bonds have held up relatively well compared to government debt. You can see that in a couple of ETFs. The Vanguard total corporate bond market ETF has been well outperforming the overall government bond portfolio. This is kind of a simplistic way of saying that corporate bond spreads have remained very tame. They've actually become more narrow, even though we've had a good amount of issuance

here. So, so far, at least, the corporate debt market is not sending up any particular alarms about the macro environment. Corporate balance sheets still seem to be relatively in decent shape, Morgan. To that point, you just kind of touched on it, but the issuance piece of this, with the deluge of issuance that we've seen this week, I mean, does that help explain the tameness? Does that help explain why we're seeing that right now? Yeah. I mean, it definitely was a good test of the appetite of the corporate bond market for lots of new paper. So, yep, right after Labor Day, a huge rush. In fact, some said over the two days after Labor Day was maybe the biggest issuance, 50 billion plus of new debt came out there. In fact, also, folks

thought that was one of the big reasons that Treasury yields went up, too, because it does create a little bit of a supply. You get some hedging in Treasury. So, yes, I do think it says the capital markets are still, you know, pretty flush. The blood's pumping through it. It refreshes corporate balance sheets. Now, that could change. We could basically have a little bit of a problem with spreads widening out if demand does flag. So far, not really seeing that.

All right. Mike, thank you. Yeah. Now let's turn to one of today's big under the radar winners. Productivity software maker Smartsheet was up six and a half percent today after an earnings beat. Very different reaction from last quarter for that stock. And part of the story is recovery in enterprise demand. More important, though, from here for the stock later this month, the company is going to be laying the groundwork for the 2024 AI product rollout. I spoke with CEO Mark Mader about why Smartsheet's AI pitch focuses on helping customers do what they already do, but faster and cheaper.

When I think about what we're doing with AI insights, which is enabling someone to go into a Smartsheet that tracks maybe a large manufacturing process and ask a question. They do that today. They build widgets. They put them on dashboards. Guess what? You can now ask it in a natural prompt. How many parts failed that were serviced by this third party over the last year, trended by quarter? That's the question you ask. And what comes back magically is a visualization that you can drop on a dashboard. I'm not asking you to understand a new concept. Take the thing you know, do it faster. And when I think about what our clients are asking us today, everyone is enamored with, what are the new things we can do with AI? There are many. The big question we're asking is, how do I drive down the cost of dot, dot, dot? That is the question many people are asking. And that is what we're serving up with

AI Insights, with our AI content generation, with our AI Formula Builder. These are all known things that people use today. And I think that is the fastest path to applying AI and getting people to adopt it. Important here, though, Morgan, he's being conservative on how the AI ramp is going to happen for Smartsheet. I've always got NVIDIA in the back of my mind, Supermicro, some of these other companies whose valuations are based on a real strong ramp continuing. Software folks whose workloads are going to have to power that, some of them are saying, don't know. I am curious, though, when he talks about cost coming down, if he's done any kind of or the company's done any kind of even internal forecasts or projections in terms of what that

cost analysis could look like as they roll out some of these products slowly or quickly. Well, I talked to another CEO earlier today of a company in the medical space who says that doctors are saving between 30 and 40 percent like of their work day, like hours a day, two, three hours a day using AI. Yeah. So you think about that and apply that to people who are working on models, who are pulling financial figures. I think the question is once they get that first bump of productivity from running AI, can they then take the output from that and get another bump and another and another? How quickly does that roll through? If it continues apace, then that helps the whole ecosystem. It's going to be fascinating.

It's going to be fascinating to see how it shows up in the macro data around productivity in the labor market, too. Yeah, we don't know how fast, though. All right, well, up next, Virgin Galactic sending another crew of tourists to space today, to the edge of space. But our aerospace and defense company is about to fall to Earth as another government shutdown potentially looms. We're going to discuss that next. Welcome back to Overtime. Virgin Galactic successfully launching its third commercial spaceflight earlier today, sending what it calls founder astronauts, some of whom who bought their tickets as far back as 2005,

to the edge of space, more than 50 miles above the surface of the Earth. Nonetheless, the stock fell today, down 2 percent to a fresh 52-week low. Well, it's just one of the events that investors have been watching in a very busy week for the aerospace and defense sector overall. Gabelli Funds Portfolio Manager Tony Bancroft joins us now on set. He runs their commercial aerospace and defense ETF and is fresh off of a conference, a symposium focused on aerospace and defense yesterday as well. Key takeaways from that symposium and from what you're hearing from companies and CEOs at this key moment in time. Yes, flying is fabulous and defense is in

demand. And we see a lot more of the same of spending in defense. And we see a lot of flying continuing. Just for example, Boeing and Airbus both expect about 40,000 aircraft to be built over the next 20 years. And on the defense side, spending continues. If you were to, if the NATO members were to spend at 2% of GDP, that'd be about 80 billion of annual spending increase. That's about a 7% increase. So, you know, we're in a good spot. It's about a Goldilocks scenario is what I'd call it. There is some issues with the supply chain

and labor tightness, but overall it looks pretty strong. We've seen a little bit of a bifurcation this year in terms of stock performance, though. The more pure play defense names have fallen or underperformed and the ones that are more skewed to commercial, to your point, and the recovery have really outperformed. So how are you thinking about that, especially since you do manage this ETF? how are you thinking about that in terms of investing right now you know i i think overall uh um you know we sort of we're bottom-up stock pickers and how our companies are positioned uh they're in the supply chain they're sort of usually tier one tier two suppliers and um you know there's a great amount of demand they're they're they're building at uh as high rates as they can.

They continue to get new contracts and we're seeing strong, strong spending. So overall, I think we're pretty well balanced in our in our portfolio. If we get a government shutdown within 12 months of an election and if defense stocks get hit, is that anything but a buying opportunity? Because, I mean, does anybody really think that Washington's going to stay shut down for an extended period of time with all the blame that would move around? Yeah, I don't. I think in the long in the on the run on the long term defense, a government shutdown doesn't really do do too much to defend spending. I'd say maybe for some new contracts or new programs, obviously that's going to have an impact in the near term. But, you know,

on the other side of that token, the suppliers that do the aftermarket business, you actually, you know, you get these sustainment contracts that have to keep going. So those sustainment contracts run longer. So it actually benefits some companies in some ways. And, you know, eventually I think it all, it does work out. You know, the world's not getting any safer. And I think, I think the defense spending and, you know, is probably going to increase, you know, going forward. Yeah. We had the CEO of Aeroenvironment on earlier this week, in this hour with very similar message about the strong demand they're seeing for their products too. Yeah. Tony Bancroft, thanks for joining us. Thanks Morgan, thanks Sean. Thanks. On Monday, don't miss my exclusive

interview with Northrop Grumman CEO and Chair Kathy Worden for more on the health of the defense industry and an inside look at the company's fast-growing space business. It actually has the largest space portfolio, largest space business in the world of any company. And be sure to check out CNBC's Investing in Space newsletter, which I guest wrote this week. You can sign up now at CNBC.com slash space newsletter. You'll also find a link to the Manifest Space podcast there. All right. And the dollar's closing higher for the eighth straight week. It's longest weekly winning streak in eight years. We are going to discuss if that

rally is starting to get stretched when overtime returns. It's about two months of gains for the dollar. That's the longest weekly winning streak since 2015. But our next guest says the rally appears to be stretched. Joining us now is Katie Stockton, Fairlead Strategies founder and managing partner and a CNBC contributor. Katie, so it's stretched, but if it falls, maybe not too much, not to the lowest of the lows? Well, recently we saw the dollar index clear its 200-day moving average. It's also made a higher high. So we do think that this is a pretty meaningful shift that we've seen to the upside. But of course, after eight weeks of consecutive gains, you could

naturally expect some kind of consolidation or pullback. For us, the overbought condition should yield that pullback. And yet the 200-day moving average now is a gauge of initial support after having previously been resistant. So we think that there will be a higher low in the dollar on the back of this near-term consolidation phase. And you're watching the euro as well? Right. The euro has some signs of downside exhaustion per the DeMarc indicators. The DeMarc indicators are counter trend and they tend to flash signals after something is overstretched. And that's what it's treating the euro as on the downside. So it's all the more reason to look for

a pullback in the dollar index. But now, again, we are looking at that as potentially counter trend. The long term momentum still hasn't shifted to the upside behind the dollar yet after sort of a long time being somewhat weak. But we have seen a reaction now to the long term oversold condition. And I think that is meaningful. So we're now looking for that higher low and ultimately a stronger dollar. OK, Katie, I want to shift gears to another chart you're bringing us, and that's the iShares DJUS Home ETF, the ITB. What are you seeing there? Well, it's really the first corrective phase that's been meaningful

since around this time last year for the home building sector, and that's why it has us paying attention. There is very much a secular bull trend in place for the home building sector. And yet this corrective phase does reflect a loss of intermediate term momentum that to us suggests that the corrective phase has longer to go, sort of more downside from here near term. The initial support is not terribly far from current levels for ITB. It's around $81. But below that, if that's broken, then we're talking about potentially $74 as secondary support. So naturally, that's enough downside potential that we're

somewhat uncomfortable with positions right now. For those who are looking to invest in the home building sector into weakness, our message to them is just to wait until we have support discovery and oversold conditions returning there. Gotcha. I mean, I look at that chart and I hear your analysis of it. It almost feels like the conversation we've been having about the broader market in general this year, that we've seen this big rally, this big move. And now now things look like they could at least potentially in the near term be a little bit exhausted or at least plateauing. And it's coming at a time where we have very weak seasonal influences behind the market. If you look

at September over the last 5, 10, 20 years for the S&P 500, it's consistently the weakest month. But what that does also mean is that it tends to give way to an entry, usually late September, early October for a decent October, November rebound. So that's what we're hoping for from the market. And we hope even further that that rebound is something that can get the S&P 500 through resistance of about 4,600, because that to us would be a nice positive catalyst that might have a little bit more duration to it. Okay. Mark your calendars. Katie Stockton, thanks for joining us. Great analysis. It was a week that Apple investors would love to forget, but will next week's product event turn things around? We're going to talk

about what typically happens to the stock in the aftermath of an iPhone launch when overtime comes Time comes back. Welcome back. Apple shares closed fractionally higher today after a two-day slide that wiped off nearly $200 billion in market cap. But could more pain be ahead after next week's product announcement? Well, we ran the numbers, and Apple stock has traded lower a week after event announcements, iPhone event announcements, in four out of the past five cycles. Over the full 16-year span, there's no real pattern. Drops of 3% following the launch of iPhone 12 and 13. Joining us now is Srini Pajuri, Raymond James Senior Research Analyst. He has an outperform rating on Apple. Srini, do you think the reaction here might have a lot to do with pricing since there's been so much rumor about that?

Because Apple has a way of changing pricing without changing entry've had some news out of China in the last few days that the Chinese government is basically banning the use of iPhones at work. That has impacted the stock. And there's another piece of news that one of Apple's local competitors, Huawei, which was restricted, you know, which was facing export restrictions from getting U.S. 5G components, they have somehow figured out a way to make their own domestically manufactured 5G chip, and they just announced a new 5G phone. So more competitive risk. I think those are the two factors that have impacted the stock price in the last couple of days. But as you said, you're right. Usually, you know, especially a year like this where the stock has done quite well, it's not unusual for us to see a little bit of a, you know, a profit taking ahead of the announcement or right after the announcement. But in Apple's calculus, too, if they're not dramatically changing the design of a phone, they can make it a lot more efficiently and a lot more profitably.

And perhaps there's less pressure on them to charge more in order to make the profit that they want to make. So assuming we don't get a big redesign, which I don't think a lot of people are expecting, should investors keep that in mind as well? Yeah, I think consumers have gotten used to not expecting too many changes from Apple. We're expecting some incremental changes this year. But what works in Apple's favor is that if you look at their ecosystem and if you look at their install base, there are about 2 billion iOS users. We think that at least a billion and a half of that is iPhone users. So if you look at the age of those, age of that installed base, you know, it's probably turning over every four or five, six years. So that'll give Apple at least, you know, 200 to 250 million unit demand in a given year, even if they don't attract any new customers. So that's what helps them. So that is one reason

they can essentially get away with not, you know, reinventing the phone, if you will. So, you know, that's probably one of the reasons why, you know, they don't try too much every generation. OK, we just looked forward. Let's look backward. All these reports about China banning iPhone and other foreign made devices from from governments, from government workers in government places in that country. How big of a risk is this, especially given the fact that it's a key market for Apple from a consumer standpoint, but it's also a key source, the biggest by far source of its supply chain? Yeah, I mean, look, if you look at Apple and China, China is roughly about 20 percent of their sales. So in total, Apple ships about 230, 240 million units a year and roughly 40 to 50 million of those units come from China domestic. So it is a meaningful risk. But again, you know, if you look at what the impact from this new regulation sees that if you assume that it assume that it's only going to impact the government employees,

we don't think it's a huge deal. You know, if you look at the data, government employment accounts for about 55 million or so, the total employment of about 800 million. And they have, of course, 1.4 billion people in that country. So it's a small number. But the risk is, you know, does it spread beyond the government employees? You know that we don't know yet. So we have to wait and see.

OK, Srini Pajuri, thank you. We will see in that Apple announcement coming on Tuesday. Next week, we're looking ahead, Morgan. I'm going to be focused on small and medium business fintech. I mean, I know we got some macro numbers coming with this. I wasn't expecting you to say that. I know. We're going to have some guests. We're going to have some insight. There's some things going on that affect, I think, the banking arena and the regional banks. Yeah. I mean, and to your point, macro, CPI, inflation reads where we go from here. Fed goes into media blackout over the weekend. So we're not going to be hearing from officials the way we did so actively this week ahead of the FOMC meeting. So how all of that continues to play out over these final months of the year? A real test of the luxury consumer coming with that Apple news,

perhaps watches too. We'll see if they want to buy it. All right. Well, that's going to do it for us here at Overtime. Fast money starts now.