Closing Bell - Closing Bell Overtime: Former PIMCO Chief Economist Paul McCulley On Weak Jobs Report; Goldman’s Tech Playbook 11/1/24

Episode Date: November 1, 2024

Former PIMCO Chief Economist Paul McCulley talks what’s next for the Fed after the weak October jobs report—and why he says there should be 150 basis points more of cuts. Goldman Sachs managing director Eric Sheridan gives his tech playbook after six of the Magnificent 7 have reported earnings and what trends he is watching in next weeks reports. Plus, Cleveland-Cliffs CEO Lourenco Goncalves on the company’s just-closed acquisition of Canada-based Stelco, the 2024 election impact on the steel industry, and why he calls the United States “sick” due to tariffs and imports. 

That's the end of regulation. Betterware ringing the closing bell at the New York Stock Exchange. First Responders Children's Foundation doing the honors at the NASDAQ. Well, November kicking off with a bang as stocks rally to start this new month. That's despite a soft jobs report. The focus now turning to the Fed and the election. We're still lower on the week for the major averages, though. That's the scorecard on Wall Street, but the action is just getting started.

Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. Yeah, we got a big Friday show coming your way. Coming up, former PIMCO chief economist Paul McCulley weighs in on the jobs number, how it could impact the Fed decision and the election. Plus, the CEO of Cleveland clips on his company closing its latest acquisition and how tariffs are changing the steel business. And Goldman's take on tech. Noted analyst Eric Sheridan breaks down the key takeaways from MAG7 earnings and how those results are informing his tech playbook into year end. But first, let's break down today's action with Jose Rasco of HSBC Global Private Banking and Wealth Management and Scott Wren

of Wells Fargo Investment Institute. Good afternoon to you both. We did have an update for the major averages. Scott, I'll start with you because you've been cautious both on equities and fixed income. What is it going to take for you to feel less cautious here? Well, Morgan, I think when you see what, you know, from the October 27th, 2023 low to, you know, the recent high, I mean, we're we're up 40 so we're trying to be patient here a little bit earlier this year a few months ago we took one step toward a more cyclical kind of a positioning because we do think the economy here and globally is going to be doing by the by the second half of the year but we're not chasing stocks right here i mean we do like financials we like industrials we like communication services. So those are all good positions that I think we're probably going to

carry for a while. But really, to be honest with you, I think there's still going to be some uncertainty over how many cuts is the Fed going to make? Is inflation going to inch down anymore? And I think after this big run higher, I think patience will pay off and we will have an opportunity to buy stocks at lower levels. And then, you know, we've talked to clients and we're locking in some of these higher rates. We, you know, at 360, 370,

we really didn't want to have a lot of interest in long bonds, but up here at, you know, 420, north of 420, we definitely do. So we've made a few adjustments, but I think that we'll look for other opportunities to take another step. Jose, how do you see this market? I keep calling it the three E's. We've got election, earnings, and we know Amazon really drove the major averages today, but it wasn't the only big mover tied to earnings. And then you've got econ data, which was a little bit of a mixed bag today,

but in general has been pretty resilient as we go into another Fed meeting next week. Yeah, let me let me take the other side of that. If you look at today's numbers, disappointing, right? Take out the weather, take out the strike. Today's payrolls are definitely growing slower. And if you have slower payroll growth, but you have almost three percent growth and more than three percent growth on final sales. That's the definition of productivity, right? For every employee, we're putting out a lot more stuff. And if you look at the numbers coming out from Faxit through the end of today, earnings look pretty good. Earnings look pretty good for the quarter. They look pretty good for

the fourth quarter. And next year, we're going from not only earnings going to 15% or more, we're seeing revenues expand from 5% this year to 5.6% next year. From our perspective, that gives the Fed the room they need to ease. Shelter costs are down from 8% to 4.8% from the peak to now. And if you look at that CPI, Morgan, we've talked about this before, that we felt 2% is a symmetric range between 1.5%, 2.5%. We're at 2.1%. So the Fed has the room to do what it needs to do. We think the markets look good.

And just like was mentioned before, we've been telling clients to extend duration, capture rates as they bump up. The problem I think we have in these markets is a misperception on inflation and what's going on in terms of the government sector, debt ceiling, budgets, what's going to happen with the budget when we get to the end of the fourth quarter and then the election, obviously. But we think we're going to get through those and the fundamentals still look pretty good for both fixed income and equities. OK, well, Scott, how big a deal is this six month high in consumer sentiment ahead of an election that's arguably had a lot of shoppers preoccupied ahead of Black Friday coming up later this month? I think a lot of it's probably, John, has to do with gasoline prices coming off here. And if you certainly look historically, if you look at consumer confidence, consumer sentiment, what consumers say and what they do are two different things a lot of the times. And, you know, there's probably not too many times in history

where you've had an unemployment rate that's at 4.1%. You've had the economy growing close to 3% where, you know, confidence and sentiment, I mean, they're way, way off what historic highs have been. So that doesn't happen very often. I think it's, you know, people are focused focused on what the price general price level is out there. Inflation relative to what their wages have done over the over the last three or four years. I think that's what's kept sentiment at these lower levels. So we wouldn't expect sentiment to get up and just start running here. You know stocks aren't cheap. These big growth companies are probably going to keep driving things. And I would say that for us on the earnings front, we're not expecting anything near next year as far as a 15% increase in earnings.

And we're looking for, it wouldn't surprise us at all if you had two or three quarters here, maybe out into the second quarter, you know, quarter, maybe a little beyond where, you know, you've got GDP growth well below 2%. So I think that earnings growth is going to be restrained here. Jose, quick last one here. You say a Republican sweep would be good for stocks and a Democratic clean sweep would be more negative. Is a sweep in either direction likely, though?

And what's that likely to mean for stocks? No, look, bottom line is when you get a sweep, it's a problem for the markets, right? Historically, we do better when we have those checks and balances in place and you have a mix between the executive and legislative branches. That's historically the best scenarios. The point was, you know, the differences in potential tax policies. And clearly, you're going to need support of Congress to raise or lower taxes next year. I think if you look at it, though, on the face, on the first blush,

if you lower taxes, there is an opportunity there for the consumer who is seeing real disposable incomes positive for the first time in a long time, right? The last couple of months, it's been strong. And if you look at spending, it looks pretty healthy from our perspective. If we don't see the 2017 tax cuts continued or enhanced from where they are, then there's some slight fiscal drag on the consumer as we head into the second half of 2025, obviously. But I think that we'll see how that plays out. And there are a host of other factors at play. In terms of the consumer, though, John, I would focus on one thing here, which is let's not forget the stock market is at or near all time highs. That is a part of the sentiment indicators. And people

don't only feel richer, they in fact are richer. And a lot of times they can act on things from that perspective as well. So we think the consumer looks relatively healthy and, you know, certain pockets are certainly hurting, but on balance, consumer spending still looks relatively healthy. And we think that'll continue through 2025. And of course, we've heard that from a number of consumer facing companies this week, alone with earnings. Jose Rasco and Scott Wren, thank you both. Well, let's turn now to Amazon. It's the big winner of the session, helping power the major averages after earnings came in strong.

Cloud revenue grew nearly 20%. Kate Rooney joins us with more on the move. Kate. Hey, Morgan. So Amazon was really able to thread a needle in the quarter. Executives showed an ability to be hugely profitable while still investing in AI growth. Margin expansion and better operating profits were a bright spot in the quarter, especially for Amazon's retail business.

Overall operating income more than doubled, up 129% year over year. That really highlighted some of the cost-cutting efforts for Amazon starting to pay off. Ad business was strong as well. And then the all-important cloud business, AWS, grew 19 percent year over year, still with 38 percent margins. Some bullish commentary coming on the conference call to CEO Andy Jassy saying that AI is now a multi-billion dollar run rate business growing triple digit percentages. Here's how Jassy described that opportunity. It is a really unusually large, maybe once in a lifetime type of opportunity. And I think our customers, the business and our shareholders will feel good about this long term that we're aggressively pursuing it.

And guys, part of that aggressive strategy is spending. So CapEx for the year, he says, is going to be around $75 billion. Jassy says he suspects they're going to spend even more than that next year, guys. I mean, this is fascinating to me because in some ways it feels like classic Amazon playbook. They always have invested heavily into their business. And when investors start to balk at it, they pull back on the investments and they say, look, we have levers we can pull with this diversified business. And I feel like that was a big part of what we saw here, even as they do continue to ramp up their spending into this AI infrastructure build out, which draws into focus for me the retail business and the fact that they're seeing better margins

there. They're seeing strength there. And I wonder how much of a read through that is to some of the other big names in retail, like a Walmart, as we do see trade down by consumers. But these biggest players are continuing to hang on to that market share. I think it's a great point, Morgan, at least on the margins of North American retail. That was sort of the fear factor heading into earnings. If you look back at Q2, margins on North American retail compressed. So they were able to pull levers, able to improve some of the cost cutting there. And they are able to pull levers. So Amazon has some efficiencies that you might not get at other retailers. They have proven this time and again, as you said, those investments are able to pay off in the long run. They've really showed this and they have a track record of doing this. So I think especially when you look back to AI and

you hear Andy Jassy say, this is an opportunity, we're going to get aggressive. Investors are willing to give them a hall pass and say, OK, we have this muscle memory. We've seen you do this before. You know this playbook and you are going to get some sort of return on investment, whereas others don't have the track record that Amazon has and don't have the history of really losing money and then turning it into a massively profitable business. So Amazon really did nail it in the quarter. And some of the biggest fears going into it, they were able to say, guys, we're still profitable, so we're going to get this hall passed to go and spend big on AI. All right. Kate Rooney, thank you. Well, Intel, also a big winner in the Dow today,

reporting a solid revenue quarter once you look past billions in impairment charges. Yesterday, here on Overtime Before the Call, I asked Intel CEO Pat Gelsinger about customer demand for data center chips. Clearly, our Xeon 6 product line that is now in the market is starting to gain momentum there. And our overall position for the Xeon as the AI data center CPU of choice has definitely been a positive for that area of the business as well. Overall, very solid product execution. Data center revenue a little bit better than analysts have been looking for. Intel also giving encouraging Q4 guidance, although on the analyst call, Gelsinger said the adoption rates for its new Gaudi 3 AI accelerator slower than anticipated. As a result, the company will not achieve its half a billion Gaudi revenue target for this year. I tried to ask him about that.

And I think it's very notable that a company like Intel came on before the conference call to have that conversation with you yesterday. All the cool kids are doing it. That's so true. Own stock's up 8% today. All right. Well, coming up, an exclusive conversation with the CEO of Cleveland Cliffs on that company's latest acquisition and how the election and tariff landscape could affect his business. And after the break, next week's events that could have a major impact on your money. We're not talking about the election. Former PIMCO chief economist Paul McCulley joins us to discuss if today's jobs number changes the Fed narrative as we await that decision. Overtime is back in two.

Welcome back to Overtime. The major averages kicking off November in the green despite a disappointing jobs report with the U.S. adding just 12,000 jobs in October as hurricanes and the Boeing strike weighed on the headline number. Now, investors turning their attention to the election and Fed meeting next week. Let's bring in former PIMCO chief economist Paul McCulley. Paul, happy Friday. So you say no matter who is elected here, the yield curve is going to steepen, but with different implications, depending on which one. Explain. Yes, I think the yield curve is going to steep because the Fed's going to bring the front end of the curve down.

They've already signaled that. I think that is the clear, unambiguous path. I think they will ease next week and again in December and then again next year several times. So I think we have 150 basis points worth of cutting from here, and that's going to re-slope the yield curve. And that's because the Fed is mandate consistent on both employment and inflation, which means they should have a neutral interest rate, which I think is at least 150 below where they are. The slope of the yield curve, or more bluntly, where long-term interest rates are relative

to short rates, will be influenced, I think, pretty meaningfully by the election, both of the president and congress uh... and i think i can say with just on table that the you'll probably steeper uh... if mister trump uh... is president and hot if uh... uh... vice president harris is president

okay so this november jobs number and the revision of the previous uh... sorry october jobs numbers just now november first and the revision of the previous, sorry, October jobs number, it's just now November 1st, and the revision of the two previous months just a blip the way you take it, or is something more concerning to watch? I would concur with the consensus that I've been hearing all day, that there was a huge amount of noise in the data as there is month to month. But I think more fundamentally, there is a signal, and we've gotten

it from a number of months, which is the labor market is in really good balance. It's not overheated, generating inflationary pressures like it was a year or two ago, but it's also not underheated. In fact, I would say amen to Steve Leisman's comment today that it's about as close to a Goldilocks labor market as you can get. So I don't take any negative implications from today's employment report. It's a imbalanced, sturdy labor market in the context of effectively achieving the Fed's inflation objective. That is a really, really nice story. Paul, I want to go back to the yield curve for a minute. Why can you say pounding fist on table that it's going to be steeper under Trump? We just

had another market guest on who said the opposite. For a number of reasons. First is, I think, that Mr. Trump, assuming he's got a Congress that would allow, would increase the deficit more than Ms. Harris would. So that's the first reason. So you'd have a higher risk premium, if you will, for long-term debt uncertainty. But more fundamentally, Mr. Trump wants to put on tariffs, and tariffs are a prescription for stagflation. They take purchasing power out of the consumer's pocket, and at the same time, they give producers, domestic producers, pricing power, which is inflationary. So a stagflationary consequence of Mr. Trump via the tariff conduit would be, to me, unambiguously, a steeper yield curve as we need to have additional risk premium for a stagflationary outcome.

So I would give you two reasons for a steeper curve underneath Mr. Trump as opposed to Ms. Harris. The flip side of this is that he's already tasked Elon Musk, if he wins, with trying to cut some of that government spending as well to the tune of $2 trillion, which I realize is easier said than done. We'll see. We'll see how it all plays out next week. Paul McCauley, thank you. Thank you. After the break, Cleveland Cliffs completing its merger with Canadian steel company Stelco today.

We're going to talk to Cleveland Cliffs CEO Lorenzo Gonsalves about how the deal fits into the company's strategy and how the outcome of the election could impact his business. And later, widely followed market strategist Ryan Dietrich gets you set up for next week's trade and explains why we're entering a historically strong part of the calendar for returns. We'll be right back. Cleveland Cliffs today closing its $2.8 billion acquisition of Stelco, which is the largest steelmaker in Canada. I spoke exclusively with Cleveland Cliffs CEO and Chairman Lorenzo Gonsalves earlier today,

and I asked what this enables and why he is keeping the assets in Stelco name as a wholly owned subsidiary. Have a listen. We are still going to extract $120 million of synergies at the very least. So we make no mistake, we're going to integrate Stelco. But Stelco will be operated as a separate entity because that's the way to do it. And that's the way to maximize the impact of being in a different geography, operating with a different currency, and taking advantage of things that are Canadian-specific. So the synergies will happen in terms of feedstock, in terms of commercial, but Stelco will be Stelco and they'll be subsidiary owned by Cleveland Cliffs.

This is your third major deal for the union, that's extremely important. And when you have the governments involved, supportive of what you're trying to accomplish, things happen. And that's the recipe for success. You have a good target and you have the surroundings working in your favor. The main thing for this is the union. I can't thank enough the USW for being with us from the get-go, from the very beginning. And we are very, very pleased with the welcome that we are receiving from the government of Canada

in all levels, federal, provincial, local. So we are super excited what is coming ahead for Cliffs owning Stelco. So Cliffs is the largest producer of steel for the auto industry, which, as seen in automaker earnings, including a number of them this week, is facing challenges.

Stelco is not an automotive, which Gonsalves says is, quote, the main reason that he pursued the acquisition, because it expands cliffs into other end markets. I also asked him how he is preparing Cleveland Cliffs for potential outcomes of the U.S. election, which is just a few days away. We are just a few days away from the presidential election. How are you navigating those potential outcomes? How is Cleveland Cliffs prepared to or thinking about how that's going to play out for the market for steelmaking and for your end customers next year and beyond? I think we have done a good job in explaining what steelmaking is for the country, and we did a good job on both sides.

So Harris or Trump, for us, is not going to make a big difference. And that's probably one of the big exceptions on a litany of things that can be really night and day, depending on who is the next president of the United States. We don't see that on steel. I believe that the importance of manufacturing and the importance of steel at the very basis of the very foundation of manufacturing in the United States is abundantly clear, both to the Harris campaign and to the Trump campaign. So we're very pleased with what we have done. We believe that we launched good basis, good foundation for what's coming. And we can't wait

for 2025. There's a lot coming our way in 2025. We're super excited. And as far as steel, we're going to be OK, no matter who is the next president of the United States. We have seen tariffs implemented on certain types of steel imports into the U.S. over the years. That started under the last administration, the Trump administration. We've seen those largely kept by the current administration, even ratcheted up to a certain extent, depending on the products. Are tariffs working? And is that a piece of the puzzle that you expect to continue into next year and beyond? Yeah, tariffs work, but tariffs are, let's put it like this, tariffs is medicine. And it's important not to get sick. And we are sick in the United States. We don't

understand, we as a country, we don't understand how bad it is for the country to allow for imports to destroy the economy, destroy the economy. Just to give another good quarter to a company or two or ten, you cannot destroy the fabric of capitalism by allowing Chinese, Japanese, Germans, French, all these people to come to this country, particularly coming through this country to a back door in Mexico and basically destroy what we have here, complicate the lives of the middle class in the Midwest. And just because the big picture is OK, the lives of Americans are not okay. So that was the biggest accomplishment of this last year in showing that the Chinese are not our friends. Everybody knows that. Now they know that the Japanese are not our friends either. So that's what we're going to have in 2025, a more realistic approach. If tariffs are necessary, I am sure that both sides,

Harris or Trump, will be ready to deploy. I hope we don't even need to do that. We're going to block them from accessing the U.S. market through the back door earlier. And then we don't even need tariffs. Line, Consalves is positioning Cleveland Cliffs as a North American steelmaker, betting that global supply chains continue to become less integrated and that domestic production and manufacturing continues to carry greater priority. This, even as the company has been able to, well, we'll say benefit by acquiring assets at lower values, given the hollowing out of American steelmaking over the past four decades.

John, shares finished the day up 2% as this deal closed with Stelco. Yeah, very interesting. Well, time now for a CNBC News update with Bertha Coombs. Bertha. Hey, John. Elon Musk has lost his bid to move the Pennsylvania lawsuit to shut down his $1 million a day election sweepstakes to federal court. A district judge in Philadelphia denied the bid today, which keeps the trial in a state court. The ruling did not address the legality of Musk's lottery. Iran is ready to change its policy on nuclear weapons if it's faced with an existential threat. That's according to an

advisor to the Iran's supreme leader, who told a Lebanese broadcaster today the country has the capability to build nuclear weapons and increase the range of its ballistic missiles. The U.S. intelligence community has yet to respond to the Iranian advisor's comments. And Lyft has agreed to pay $2.1 million in fines for planning deceptive or running defect deceptive ads according to the ftc the rideshare company made misleading statements on how much lyft drivers could earn lyft stated on its website that it has made changes to tell drivers just how much they can make back over to you john John. Bertha, thank you. Well, six of the magnificent seven stocks

have now reported earnings, with Nvidia the last name in the group still waiting in the waves. Up next, Goldman's tech expert, Eric Sheridan, gives us his playbook into year end. And as we head to break, check out shares of satellite communications company GlobalStar shooting higher today on news.

Apple is committing $1.5 billion to fund the company's expansion of its iPhone services. Shares finished up 31 percent. Welcome back to Overtime. Six of the Mag7 names are in the books for this quarter's earnings cycle. The tech names posting strong earnings and revenues, but the investor reaction more mixed. Microsoft Meta and Apple negative for the week. Amazon finished strong. Joining us now is Goldman Sachs Managing Director Eric Sheridan.

Eric, happy Friday. So cloud growth across the board with the hyperscalers pretty strong. CapEx spending appetite seemed to be, too. So with Meta, we know what some of the upside of AI spend is with how it's optimizing engagement of reels, feed, ads. You actually asked Mark Zuckerberg about that on the call. How much does that matter to be able to at least conceptually draw the line to how the spending pays off? Yes, thanks for having me, John, and I think that's absolutely critical. Investors want to see correlation, a dollar spent, and when can I get a return or a yield on that dollar in terms of revenue growth. So when you see these cloud computing businesses like Alphabet and Amazon have and they accelerate

their revenue growth, we find that investors have a greater appetite for those capex increases because there's more of that direct connection back into the cloud businesses. And even in addition to the cloud computing revenue these companies are reporting in their 10 Q's, they reported revenue backlogs that also reaccelerated and are very strong indicators for what growth will look like over the next two years. So the less visibility and the less linear views you have about where the return profile is going to be, your earnings report almost has to be perfect to get a positive reaction in this kind of market environment. Okay. Moving across from the mega caps, why do you like Uber from here?

We like Uber as a revenue growth compounder with rising margins and increasing return of capital to shareholders. Over the last three or four months, there's been a lot of volatility in Uber's stock as there's been concerns. And at points in time those concerns have been alleviated about how autonomous vehicles could impact the existing ride-sharing networks and in this quarter in particular there was a slowdown in the bookings growth for the mobility or the ride-sharing business it was not outside the bounds of what we expected but I think when you see a bit of a slowdown in a core segment that is subject to some investor debates, there again is not a lot of room for error on the day of earnings.

That being said, if you take a step back, we are still talking about mid-teens or better mobility growth, better growth than that in terms of their delivery business with a rising margin profile. And on our numbers, Uber can produce 250 in excess of 250 of gap earnings in 2025 and in excess of 350 of gap earnings in 2026 against right around a $70 stock price. That's a pretty compelling price to earnings ratio for a company that can produce this kind of growth, we believe, over multiple years. If we expand this out, just looking to the state of the consumer through your digital lens this week with earnings from a number of companies, including online travel platforms, you mentioned

Uber, DoorDash. You could even put Amazon in that category, too, with the retail side of the business. What is it telling us about the consumer? Yeah, it's a great question. And there's been a couple of key learnings this week. Number one, there's still a preference for services over goods with the digital consumer. So you saw strong results from the delivery businesses, the travel business within booking. Secondarily, when you move into goods, it's discretionary is very volatile, discretionary behavior by consumers. So you need to have discounts. You need to have lower priced items. So Amazon highlighted that lower priced items and where they presented discounts to the consumer allowed them to exceed forecasts and produce better results.

But then you saw more tepid results from companies like eBay and Etsy that are very discretionary in nature as opposed to household items and non-discretionary items. So those key fault lines between services and goods and within goods between discretionary and non-discretionary behavior was very much on display this week across a whole array of earnings reports. With nearly a fifth of the S&P reporting next week still, what are you watching most closely in your coverage universe? I think we're going to build on the travel narrative. We're going to get results from Airbnb and Expedia. We'll follow up the results from Uber with Lyft. We'll continue to hear about the digital advertising environment via Pinterest. So those are going to be some of the names as we look out to next week.

Again, continuing this theme of how is the digital consumer behaving? What are some key fault lines or differences between business models? How is the holiday season setting up? Because it's interesting, it's a shortened holiday season, which we think can cause some risk for commerce, but where marketing intensity might be better for the digital advertising name. So those are some of the key themes we're looking for with earnings next week. All right. We'll be watching as well. Eric Sheridan, thank you. Thank you. Up next, the CEO of NerdWallet, which climbed nearly 30% this week on whether there are any signs credit conditions could soon ease from any cash-strapped consumers. And check out shares of Cardinal Health.

That's one of the big winners in the S&P 500 today. The health care services provider beating on the top and bottom lines and forecasting strong full-year guidance. Shares finished up 7%. Stay with us. Welcome back. Investors betting today's soft jobs report increases the likelihood of continued rate cuts. Today, John takes time out with a CEO whose customers would welcome that relief. John. Yeah. Tim Chen is founder and CEO of NerdWallet.

It's a fintech company with a billion dollar market cap. NerdWallet's marketplace matches providers of financial services like credit cards, loans and insurance with people who need them. Times have been especially tough lately for the working class. And Chen can relate as the son of immigrants who had to get creative as a kid selling Magic the Gathering cards to buy new shoes. Maybe that's part of the reason why I was selling Magic cards growing up, right? Buying and selling Magic cards and things like that. I definitely wanted to figure out how to get the things that I wanted.

One of my most vivid childhood memories is really wanting Nikes. And my parents refused to buy them from me. And then one day during PE, I just ate it. Like I was running across the floor. I had these shoes that were, I think like 10 bucks. The soles had worn off and I just ate it, had really bruised knees and was so angry. And I think not long after I stopped buying lunch with the lunch money I was given and went and bought magic cards with it. Now, when NerdWallet reported earnings earlier

this week, the stock spiked largely because of growth in NerdWallet's insurance-related business. But there are other troubling chins in the economy, Chen said, like an increasing number of working class borrowers who are underwater on their car loans. A lot of people owe more money on their auto loan than their car is worth because, you know, during that inflationary period, there's a shortage in cars and car prices went up so much. And that's really unfortunate. And so we're seeing a lot of consumers actually unable to afford selling their car and opting into extending their loan terms. Again, paying more money over more years, but trying to get that monthly payment down. So there is real stress on the consumer, especially the more paycheck to paycheck part of the population. So the timeout takeaway, credit crunch. A strong jobs market for now has shielded the consumer

driven economy from the effects of inflation and higher interest rates. But pressure is building, and it looks like 2025 will partly be a story of whether conditions ease fast enough to help these borrowers who are painfully stretched, Morgan. It gets back to the restrictive conversation we're just having with Paul McCulley and that neutral rate. John, great stuff. Up next, a top space investor on how the outcome of the presidential election next week could impact the future of the space industry. And Supermicro keeps getting hit hard as a result of Ernst & Young resigning as its auditor over accounting concerns. The stock is now down 40 percent this week. It's now in the red here to date.

What does the U.S. presidential election mean for the future of space? I think that a lot of people go through this sort of awakening, right, where they think that space is all about commercial space stations and space tourism and rocket launches and things like that. You know, like these emerging areas, apart from rocket launches, you know, these emerging areas like lunar transportation, space stations, whatever, that really makes up like 1% of what's going on. Although it's like really fun to talk about, right, and it captures the imagination. The real opportunity is, again, leveraging this satellite infrastructure for the benefit of terrestrial markets and life here on Earth. Well, Chad Anderson is the founder and managing partner of venture firm Space Capital. He says previous administrations have experienced that awakening. What's different this time? Both candidates already have space policy track records,

as Vice President Kamala Harris is the current chair of the National Space Council of advising on policy across the federal government. And it's actually been on a similar path to the previous administration, when then-President Trump revived the council, also stood up the U.S. Space Force. Regardless of who wins, Space Capital, which tracks quarterly data, says after several years of sluggish activity,

signs of a rebound in investing are emerging. We are in what you'd, you know, in space terms, what you'd call max Q, the period of maximum aerodynamic pressure on the vehicle. That's sort of what we're feeling in the space economy right now. We're nearly, we're making our way through that. And like I said, we've got a lot of signs, a lot of reasons to be optimistic about 2025. But I think, you know, companies have a lot to do to regain the trust of investors after the SPAC frenzy of 2021. Now, interestingly, SpaceX has not tapped the capital market since 2022, even as it has rapidly expanded. Starlink spends billions of dollars developing Starship. China? There's $330 billion invested since SpaceX came online into 2,000 unique space companies. And 50% of that has gone to U.S. companies.

25% has gone to Chinese companies. So that leaves 25 percent for the rest of the world. And and there's not really, you know, third place is pretty, pretty far off. Now, China has been investing a, quote, breakneck speed, according to Anderson. So geopolitics will also factor into any space policy we see moving forward. So for more, check out my podcast, Manifest Space. That is available wherever you get your podcasts, or you can scan that QR code right there. Love a QR code.

Up next, a top strategist on how Tuesday's presidential election could impact Wall Street, the Fed, and your money. And make sure to tune into CNBC's all-night coverage of the election with some of the biggest names in business. It all starts Tuesday, 7 p.m. Eastern from the New York Stock Exchange. Welcome back. We just wrapped up the busiest week of earnings season, but there's a ton of market moving action coming next week for investors, including the presidential election, a Fed decision,

and even more earnings with nearly 20 percent of S&P 500 companies getting ready to report. Let's bring in Ryan Dietrich, chief market strategist at Carson Group. Ryan, it's great to have you on. The other piece of this puzzle is seasonality. We just finished up October, which is historically notoriously tumultuous. We did see that sell-off yesterday coming into the close. And we've started November pretty strongly. Is this a turning tide that needs to be factored in? Yeah, we think so.

TGIF, everyone. So you think about it, October in an election year is the worst month. So is it surprising that the five-month win streak ended last month? We don't think so. And then you look at November, and this is just seasonality, yes. But 11 of the last 12 years, stocks were higher in November. This is 1950, the best month, the last 10 years, the best month. In an election year, it's the best month.

So we can get into some of the weeds of this, but we really do think once we get through the uncertainty of this election, and the Fed is going to cut, I'm not only going to rock the boat there, this upward bias, this bull market price still has a lot of time left, but maybe a little bit of a trick up his sleeve in November is what we're thinking here. All right. So in light of that, how do you position yourself for all of these potentially market moving events next week? What matters most or you really sort of have to game it all out? Yeah, I mean, listen, let me answer this way. We're taking to the dance who got us here, right? We like the cyclicals, right? We don't see a recession. Look at the data we've seen, the economy slowing. Yeah, there's some slowing, but your industrials, your financials, this week,

small caps were higher, okay? Mid-caps did well. The Dow was flat. I know the headline says stocks were down, but the reality, again, this broadening out theme is really taking place. We'll talk about the Fed for a second here. So the Fed's going to cut next week. That's fine. We took a look. We're 2.3% away from an all-time high, by the way, right now. We looked, Morgan, when the Fed cuts, when the S&P is within 2% of an all-time high back to 1980. All the listeners need to know, stocks were higher a year later 20 out of 20 times. So if we're near all-time highs, the Fed cuts next week. That's just one other way to look at it, that the Fed is no longer a headwind. They're a tailwind for sure here. Ryan, I hear what you're saying about history, but if we can pull up a year-to-date

chart of the S&P 500, if you show people this, I mean, it doesn't look like October is the worst month because it's hard to tell exactly where October is on that. And I would be shocked. I've been shocked before, but I would be shocked if November is the best month of this year when we've seen this kind of gains. This is different, isn't it? Well, great point there. And this is like the best election year ever going into the election, right? 1980 was better by the end of the year, but this year isn't over.

I want to talk about the VIX for a second here, because great point. Everybody knows there's going to be volatility next week, or at least you assume there will be. So the VIX has obviously been higher, even though we've been kind of calm. I know we had the big drop yesterday, but for the most part, the last 30 trading days have been really calm. Once you get through the election, all those kind of put buyers and all the VIX calls that we've been seeing, John, those could unwind, right? Those people have to kind of unwind those. And again, that's why we think this upward bias is still alive. And I'm with you. We probably don't gain 10% this November. I'm not saying that. But can

stocks gain a couple percent here in November or maybe even into December? Yeah. We really think that this is still a chance for investors to enjoy this bull market. So how does, though, an investor put on some protection without being pessimistic, optimistic? Yeah, great question. So we manage money, Carson Group. But diversified portfolio is the easiest way to do it, right? I mean, we're overweight equities. We have been since December of 22.

Wasn't popular when we did it, but now people have kind of come on. But we do have some bond exposure, right? People can own some gold. You can own some cash. You can own some of the more defensive areas. We don't like those defensive areas as much, as I said. But I think it's just really important for your average listener out there who's got a 401k, puts it in every two weeks. We're going to have volatility.

That's fine. But the next six months, November through, I guess, the end of April, it is the best six months of the year. And when you have a good sell in May, go away period like we just did, the returns get even better. So, listen, there's always something to worry about. Diversified portfolio helps a lot of that, but this is still a bull market, we think. All right. So Ryan, the other thing we haven't talked about, which is not domestic, is China. You've got this MPC meeting next week. We're expecting more policy details regarding stimulus. How much does that matter? And how much of that is potentially a dark horse more broadly to equities?

Yeah, listen, I guess it depends how much EM exposure someone has. I'll put it this way. We haven't liked EM for a while, mainly because we're not crazy about China. Now, there are some slow growth issues. China has a ton of debt. I know they're trying to grease the wheels, get things going. But overall, that can cause some volatility. But I think at least for the U.S. and someone who's U.S.-centric, like probably a lot of

listeners are, what happens here with the Fed and the election matters more. But with China, we're still underweight. We're still not buying it yet. We still need to see economic growth. We're just not seeing that yet. All right, Ryan Dietrich, thanks for joining us. Thank you. Tee up next week, which is sure to be very, very action-packed. We also have some geopolitics percolating in the background with reports that Iran is preparing a strike against Israel in light of Israel's recent actions as well. So one more thing to watch. And you've seen that pop up in crude markets. Certainly. And Ryan mentioned, you know, 401k every couple of weeks. Next year, you can put in $500 more into your 401k. People should note that. So we did have a higher day for markets, but a lower week overall for equities. Busy, busy week for earnings, lots of surprises. And for now.

That's going to do it for us here at Overtime.