Closing Bell - Closing Bell Overtime: Housing Outlook, Holiday Retail Trends, and the Future of Work 12/30/24

Episode Date: December 30, 2024

Tech selloff enters third straight day. Noted investor Dan Niles shares how is positioning to take advantage. Invitation Homes CEO Dallas Turner offers perspective on housing and pending home sales, while former Walmart US COE Bill Simon analyzes  consumer behavior during the holiday season. Pippa Stevens examines the natural gas market, and a discussion on AI, venture capital, and return-to-office risks highlights how businesses are adapting to evolving dynamics with former Evernote CEO Phil Libin.

That's the end of regulation. Advisors, asset management ringing the closing bell at the New York Stock Exchange. Wings for Growth doing the honors at the Nasdaq. Well, stocks closing lower on the second to last day of the year, but finishing well off the worst levels of the session. Thin volume playing a role as the Santa Claus rally flounders. That's the scorecard on Wall Street, but the action's just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. Back together again. Well, coming up on today's show, tech investor Dan Niles joins us to talk about the Santa Claus rally that hasn't come yet and if the volatility to end the year is a bad signal for 2025.

Plus, housing stocks wrapping up a very rough month as treasury yields rise. We'll get the outlook for the group in the new year when we're joined by the CEO of Invitation Homes. But first, let's break down today's market action with Bespoke Investment Group co-founder Paul Hickey and HSBC Global Private Banking and Wealth America's CIO, Jose Rasco. Great to have you both here. We have the S&P finishing down more than 1 percent and the Nasdaq down more than 1 percent as well. The Dow basically right around the 1 percent mark. It's great to have you both here. Paul, I'm going to start with you because, yes, we've got light liquidity, thin volumes. We don't have that manifestation of the Santa Claus rally. Mike Santoli was just talking about it at the end of the last hour, the fact that we saw a similar dynamic last year. We're still poised to finish up 24% on the S&P. What does history tell us about this moment in time? Yeah, so I mean, I think as far as the December weakness is concerned, I wouldn't put a lot of

weight into that. More recently, actually, the positive seasonalities of December haven't really been nearly as strong. Also, what's interesting to note is that this will be the of the fifth time that the S&P 500 was up 20 percent or more in an election year. And in four of those Decembers, the S&P has been down. And it sort of makes sense if you think about it. You go into the end of the year with the market up a lot. You're coming in with a new administration. So the uncertainty is going to be there. And you can't fault investors for ringing the register a little bit here. So I think in that respect, I wouldn't put too much weight into it. And as you said, we're going to be up 25% about this year,

which is the same as last year. And what's really interesting, at this point in the year last year, it's nearly the exact same percentage gain in the cap weighted S&P 500. And then if you look at the equal weight S&P 500, it's again, nearly the exact gains. They've underperformed by a lot with gains of about 12% this year. So in that respect, we've seen the same play this year as last year, but under much different economic backdrop. So you would think, okay, the Fed policy has been much different in both those two years. The path of interest rates has been different. Commodities have been different and the dollar has been different. But overall, we think you have to look into the broader perspective, not just a few macro indicators. And what we see for the year ahead is a positive

backdrop, which is keeping us invested, but recognizing the fact that we've seen big gains for the last two years. So it's going to be harder to see the gains going ahead. But the burden of proof is still on the bears going forward. Okay. Jose, how do you see 2025 shaping up? Is third time a charm? And I ask that knowing that we've seen a backup in treasury yields in the last couple of weeks and there is more, or at least investors are digesting the possibility of more monetary and fiscal policy uncertainty in 2025. Well, first of all, happy holidays, guys. And secondly, I would say, you know, unquestionably, we're going to see some volatility. Remember,

we have a new administration, new fiscal policy, uncertainty there, as you mentioned. But keep in mind, what did the Fed say to us in mid-December? They said if inflation stays flat next year or if it goes up, you know, which is what they're predicting at the core level, then we're only going to ease twice. Right. And I think we still think that there we could see a positive surprise there on the inflation front. We have the secular tech disinflation, which will continue or deflation. We have disinflation from imported goods. We have a strong dollar, which helps that as well. So I think we have some good signposts up ahead. And remember, we're looking for slower economic growth next year. So slower economic growth in real terms, usually that means slower inflation at some point. And last but not least, it's important to remember the S&P 500, the Nasdaq, these are slivers of what the economy is really doing.

And if you look at revenue expectations for next year, they are up for the S&P. So that's telling us that that component of the U.S. economy looks pretty healthy. And to Paul's point, I think we see the growth value disparity remains a problem. And remember, in March, we have the government has to come to a conclusion in terms of the debt ceiling and the reconciliation process. And we have earnings coming out at the beginning of January. So a lot of uncertainty. I would. So a lot of uncertainty. I would look for a lot of volatility. It's a stock picker's market in that regard. But we think that growth value disparity is going to help lead to more of those relative value trades, something we saw in the summer, which led to some volatility.

Paul, what are the tests on the timeline of this positive thesis? What are the signals for investors that things might turn out differently than you expect, either positively or negatively? the tests on the timeline of this positive thesis? What are the signals for investors that things might turn out differently than you expect, either positively or negatively? You know, I think that's a good question. As you get into, we get into the middle of the month of January and, you know, we get past the repositioning periods of, you know, what investors are doing to their portfolios and earning season coming out, that'll be a tell. What is the inflation data gonna look like for December? So that'll be coming out mid January.

And what's really interesting on this front is that the sell-off since the middle of the month has been largely on the fact that the Fed is gonna slow down the pace of rate cuts. Well, leading into this rate cutting cycle cycle all we heard was that there's two paths of the market during a rate cutting cycle when the fed is aggressively cutting rates and when the fed is gradually cutting rates. Market performance has

historically been much better during periods when they're gradually cutting rates and not aggressively cutting rates. So the fact that we're slowing down the pace of rate cuts, in some respects, you could say that's more of a positive than a negative. OK, finally, Jose, to what degree is broadening going to be necessary in 2025? I mean, maybe not at all, but I'm thinking of it in two lines. One, the mega caps, the largest stocks versus everything else in the U.S. markets, and then the U.S. versus the rest of the world. The U.S. is doing so much better. Yeah, I would say look for more concentration on that one. But when it comes to the the Magnificent Seven versus the forgotten 493,

as I like to call them, I would look for some broadening out there as earnings are supposed to more than triple next year. Growth of 4 percent this year, 14 percent next year. Everybody's focused on the Fed to paul's point i mean you look at what happened in mid-month um and i think john it's very important to remember that during 94 to 2001 right the fed lowered rates marginally in 95 and kept them the average was 5.4 inflation traded in a range of one and a half to three and a half. The tech revolution was a secular tailwind. And we have several more in this cycle that we think help bolster earnings going forward. And remember, earnings next year is supposed to be 15 percent. And that is before

the Fed began to cut rates and before Trump got reelected, which means we extend those lower income tax rates for the corporate and household sectors. So we think the guidance you're going to get out of Q1 is going to be a key factor looking for the balance of the year. OK, well, an early happy new year, Jose. Paul, good to see you. Thanks for joining us. Thank you both. Now let's turn to senior markets commentator Mike Santoli for his take on this recent market pullback. Mike. Yeah, John, just to put it into context, here's the S&P 500 this year, along with its 50 day moving average, which I include because we've been kind of tussling with it for a little while here. You see we closed just below it. It's like 5940 ish thereabouts been kind of going back and

forth across that barrier. Now, there's no real significance in the very short term to spending some time below there. You see, we've done it a couple of times this year. But this does also show you that at a current level, we're going back to kind of early November levels. This is around where we kind of levels we got up through right around Election Day. So clearly, there's been a longer pause, a stutter step in this rally. And the average stock is actually underperformed here. So definitely some give back at the end of a very strong year, but nothing that changes the overall trend. Now, the bond market dynamic has been fascinating. You have had this pretty aggressive move higher in Treasury yields.

And in the recent bout of yield increase, it's come against a decline in the economic surprise index. So usually yields go up if it's for the right reasons because the economy is accelerating beyond expectations. We can somewhat deal with that better. Equity's got a little uncomfortable when it's not for that reason. So you see that divergence at the end. Now, always have to point out economic surprise means economic data relative to expectations. So it turning down doesn't mean the economy shrinking or the number is outright bad. It just means that it's not quite up to what was forecast. And therefore, you have to wonder if we're maybe getting to the limits of how much yields can move up without some kind of inflation surprise or further hawkishness from the Fed. Yields look

overbought. We have these kind of sort of lower highs. We'll see if that sticks. And of course, yields did come in substantially today. You had some buying in treasuries right at the open that held throughout the day, John. Seems like there's reason to expect that either reality in the data or expectations are going to adjust pretty early in 25, no? It would seem that way. Now, you know, there's nothing ironclad about this relationship. You can see that there were some gaps in the past. But yes, you would think if, in fact, the economy does slow, if we have another growth scare that will finally be felt on the long end of the Treasury curve or, you know, look, if the bond market has a right and this is just a healthy nominal growth economy and the Fed can do less,

then perhaps the data that are going to firm up in a way that confirms that. We will soon see, as long as we're still around. Mike Santoli, always good to see you. See you again soon. After the break, noted investor Dan Niles shares his take on the slide for tech stocks to end the year and which magnificent seven name he thinks will fare the best in 25. Plus, former Walmart U.S. CEO Bill Simon tells us why retail executives are turning their attention squarely to Washington now that the holiday shopping season is over. Overtime is back in two. Welcome back to Overtime. Tech stocks sliding for the second straight session, but finishing well off the lows. Chips were some of the worst

performers, although Nvidia was a notable outperformer. Joining us now is Dan Niles, founder and portfolio manager of Niles Investment Management. Dan, good to see you. So you think AI spending is going to see a bit of a slowdown in 2025. How does that affect some of the biggest names? How does that affect the overall indices? Well, I mean, I think if you look over the last couple of years, really since chat GPT was introduced at the end of 2022, AI has been the theme, obviously, that's driven the entire market and driven NVIDIA to be the most valuable company in the world at one point. So I think if you do have a spending slowdown in AI CapEx next year, it's going to be a big problem for the Magnificent Seven

because for those investors with a little bit longer memory, they remember that during COVID, you had this huge surge in spending. NVIDIA's revenues were up over 80% year over year in 2021 at the beginning of the year. And then by the end of 2022, as their big customers, Microsoft, Amazon, et cetera, went through digestion of that COVID spend, their revenues went from up over 80 percent year over year to down over 20 percent year over year. So as you're thinking about next year, when you've got big customers like Microsoft and the CEO of Microsoft was asked in the middle of December, hey, do you still have a chip shortage?

He said, no, I don't have a chip shortage. I have a power shortage, but not a chip shortage. And that's a very different statement than what Nvidia has been saying, which is we're going to be seeing more demand than supply for the next several quarters in 2025. So something's got to get. So we'll see what happens. But I think that's pretty negative okay or yeah companies next year so can you have that kind of a slowdown affecting the largest stocks in the market without it having a valuation impact on the entire market no you can't because obviously the biggest stocks have the highest valuation so if you

look at the Magnificent seven with with the exception of Meta, they're all trading at a low 30 PE. The S&P 500 is trading at a 25 PE. But if you look at the mid cap and small cap stocks, which people have forgotten about because they're not really AI plays, they're trading at around 19 to 20 times. And they've underperformed up until sort of mid-year when the performance has picked up. Because if you look at stocks since June 30th, basically, the S&P is up about 8%. But the NASDAQ 100 is only up 7%.

The Russell 2000 is actually up 10% after being only up 1% for the first six months of the year. So you're already starting to see this broadening out. And I think with the new administration really focused on domestic manufacturing, deregulation, et cetera, that's going to benefit the small to mid-cap names more so than names in the S&P 500, which also have to deal with other things like the dollar going from 101 to 108 since the end of the third quarter. And when you've got 30 percent of your revenues that are international, that's an immediate hit to your top line when all these companies start to guide for Q1 and for the rest of 2025 in some cases. Yeah. So, Dan, I hear you talking about small and midcap

and maybe steering clear of Magnificent Seven then for 2025, it sounds like. The Fed, you've been talking about this all year. Don't fight the Fed. What does don't fight the Fed mean in 2025, especially given the massive repricing that we've seen in the markets in anticipation of a Fed becoming perhaps more hawkish and cutting fewer times last year, especially given the fact that I don't think the Fed even knows where the Fed is going in 2025, at least not yet. You're 100 percent right, Morgan. I mean, if you if I were to tell you, hey, inflation is going to go from one point four percent to seven percent over 12 months, you're going to be like, oh, my God, the market is going to get killed. Well,

that's what happened in 2021. And the market was up 27 percent. So it's one of those things that the market doesn't care right up until it cares. And I think it started to care when Jerome Powell on December 18th during that press conference came out and said, you know, the Fed inflation forecast had, quote, kind of fallen apart. And when he said that, the market was like, oh, my God, the fact that, by the way, all measures of inflation had bottomed out in the third quarter and had been going up for several months. Nobody cared, right? The market kept going up. But as soon as he said that, much like in 2022, when you saw the market go down 19% as the Fed finally admitted

inflation wasn't transitory, I think that might have been the wake-up call, which is why I think Q1 could be a really rough time for a lot of the market as a whole, but a lot of the mega cap stocks as well, as we have to kind of price in the fact that the Fed might, you know, they might pause or they might even raise next year, which I think that's a 50-50 shot of whether they cut or raise or hold. So you think the reigniting of inflation is a very real risk here. What does that mean, not only for stocks, but for other things like the dollar, which you just mentioned, and the bond market and other asset classes? Yeah. And that's really what I'm looking at, because I've written about this for, I don't know, several months at least, that the thing

I'm watching the most is 10-year Treasury yields. And the Fed now has cut about 100 basis points. 10-year Treasury yields during the same Fed now has cut about 100 basis points. 10-year Treasury yields during the same time have gone up about 90 basis points. And if you say, okay, CPI is at 2.7%, what has the market multiple been in the past when CPI has been 2.7%? The S&P multiple has been 19 times. Right now, it's setting at 25 times. So you don't have a lot of valuation support. The other thing is 10-year treasury yields have typically been over 100 basis points higher when CPI has been at this level. So you could argue, hey, there's potentially you could lose money in both bonds and stocks next year.

I mean, obviously, this is a very light last you know week of of the uh... year this is gonna get a lot more interesting when everybody's back from vacation in early january and you combine that with hey we've got these massive gains that we wanted to postpone until this until you know this year when we might get maybe lower taxes with

trump back in office, who knows, that you could have a big sell off at that point to start the year as those gains get postponed. So stock, sector, asset, what are you most excited about for 25 then? Cash. I think investors should think about going into next year with a fair bit of cash on the balance sheet because of some of these things. And we haven't gotten into things like there's no election. Well, there was a huge amount of spending in the fourth quarter. That goes away in Q1. So that makes it kind of tough for Meta and Google.

Easter shifts out of March from March 30th of this past year to April 20th, or March 31st to April 20th this year. So that makes it tough for an e-commerce name like Amazon. So I think cash is a pretty good thing. I'm looking at small mid-cap ETFs. Those are good places to be if you feel like you have to be invested for some reason. But I'd be very cautious of the momentum names that got us here because that might be where some of your risk is if people want to rebalance to some of these other non-sexy, non-EI places like smaller mid-cap stocks. Okay. Some actionable insights there. For our viewers, Dan Niles, thanks for joining us.

Happy New Year. Happy New Year, guys. After the break, trouble on the home front? Housing stocks have had a rough month, but could a turning point be coming in the new year? We're going to ask the CEO of one of the country's largest single-family homeowners, Invitation Homes, next. And later, 2025 could mark a major shift in return-to-office mandates. We'll talk about why some blue-chip companies are cracking down on remote work, and if employees will have the power to push back. Welcome back. November saw pending home sales increase for the fourth straight month to their highest level since early 2023. And this comes as home construction stocks are on pace to close out

their worst month since March of 2020. But joining us now is Dallas Tanner, Invitation Home CEO. Dallas, it's great to have you back on the show. Welcome. Hi, Morgan. Good to see you. Happy New Year. Happy New Year. So you were on with us back in May and you talked about the fact that you were seeing insatiable demand, that you were seeing the lack of housing supply was was helping to fuel that. You expected additional pricing pressure on housing for most of the year. What are you seeing now as we head to 2025? And even though we've had a Fed that's cut a couple of times,

we have Treasury yields and thus mortgage rates still very high. Yeah, interest rates have proven a little bit difficult to forecast. I think everybody's dealing with that near term. What we found is sort of the mid part of the year, we start to see demand definitely start to normalize, which we view over the long haul as something that's extremely healthy for the consumer. What's been, I think, most interesting along the way has been this propensity for customers that are in place or have housing solutions figured out to continue to renew and are continuing to stay in the for-lease business longer and longer. Seems like the homebuilders are getting a little bit of that, you know, kind of coming back to earth process happening as well. But it's still incredibly healthy. There's not a tremendous amount of supply in the marketplace.

And so if you have something, you're probably in a in a position where you want to hold on to it. If they're if you're fighting for that customer today, you have to fight a little bit harder than we did maybe back in May. Interesting. So we know that the inventory has continued to be tight. We also know homebuilders have stepped in to at least begin to make up some of the difference, even as mortgage rates have stayed high and existing home sales and and and sellers that have low mortgage rates are basically golden handcuffed, quote unquote, in their current properties. What does it take to see that balance out and that piece of it normalize more? And I ask that knowing that you have in the process struck deals with some of the home builders to be able to acquire more inventory yourself. Yeah, we've got an incredible business right now

in building new product. We have roughly 2000 units under under contract or in contract to be being built at this point in the marketplace. And it feels like with our national homebuilder partners, there's an opportunity to probably do a lot more of that here in the future. I think, you know, the mortgage rate thing's been really sticky, right? And in our markets, for example, at the end of Q3, it's about $1,000 on average cheaper per month to lease than it was to own. Now, that's not an indication of where home builders or for-lease product might be at any given time, but it certainly weighs on people in their near-term decision-making. As you think about that, if you're a family, $12,000 a year cheaper to lease

than maybe to own, that probably does hurt some of the retail sales market. But again, it's been such a lack of supply over the last five years, six years. Builders have done really well. I think on the for lease side of it, we've got to continue to lead in, build more of what people are calling BTR. These fully stabilized, you know, fully encompassed rental communities where families can be completely down payment light. Right. Build a credit through positive credit reporting and also have that same lifestyle. But be not out as so much upfront in your upfront costs. Dallas, an interesting column in the Wall Street Journal last week pointed out that in the

U.S., a record 4.1 million people a year are going to turn 65 each year for the next three years. So what's that going to do to existing home inventory based on any downsizing trends that you might have seen into the type of demand for new homes? It's a really good question, John. So, you know, what we've seen is we have seen boomers or some of these preferentials, as we like to call them internally, choose to lease in other markets or have a second home as part of their flexible living. I think it's TBD in terms of how many of those boomers actually become sellers or completely change the way that they think about living. I do think it adds added pressure, though, in the for-lease markets as people want. And we've all seen it, especially since the pandemic. A lot of people want to spend

more time in warmer markets. And if you look at how our portfolio has been constructed, we're largely Sunbelt and Southeast markets with higher density in markets like Florida, Georgia, and the Carolinas. Those are excellent places for people to retire. So we'll expect that we'll have continued pretty high demand in those markets. And I think for our preferentials or people that are aging out, that's a really interesting decision that we'll have to watch how those demographics shift. And even funnier stat, John, is that something like 12,000 people a day are turning age 35. And our average customer is 39 today. That is like our sweet spot from a customer demographic perspective. So for the next 10 years, there are 12,000 people a day turning 35

that are making these decisions around flexible living. Do I want to own? And I think the market's going to keep adjusting. You see it in the type of product that new construction and what they're building, the home builders, they're not building really small homes, you know, in infill. They're building two to three thousand square feet, a little bit higher price points, which is much more of a move up or maybe even a third buyer. So, you know, demographics are definitely going to be part of what everyone's going to have to figure out over the next several years. Demographics are destiny. Dallas Tanner, thank you. Thanks. Well, it's time for a CNBC News update with Angelica Peoples. Angelica. Hey, John, the Justice Department said today that more than one hundred and thirty one

million dollars has been distributed to more than twenty three thousand victims of Bernie Madoff's Ponzi scheme. The agency said it's the 10th and final disbursement from the Madoff Victim Fund, which has now returned over $4 billion to more than 40,000 victims. Venezuela's top court fined TikTok $10 million over viral challenges that killed three children and injured dozens of people in recent months. In today's ruling, the court said that the fine must be paid within 10 days. This comes after the court ordered TikTok officials to address the deaths in person last month.

TikTok has yet to comment. And by New Year's Day, the world's population will hit just over 8 billion people. Estimates released today by the U.S. Census Bureau show that the world's population increased by more than 71 million people in 2024, almost one full percent in the U.S. Census Bureau show that the world's population increased by more than 71 million people in 2024, almost one full percent in the U.S. The Census Bureau says there will be a total of 341 million people in the country at the start of 2025. Back to you. Consumer discretionary stocks pulling back today and a looming tariff fight in Washington could put more pressure on retailers in the new year. We're going to discuss what's at stake with former Walmart U.S. CEO Bill Simon next. And later we'll talk about whether or not a comeback is in the cards for energy stocks after a dismal year of returns.

We'll be right back. Welcome back to Overtime. Retail stocks getting hit in today's pullback with names like Kohl's, Macy's and Five Below all down more than 3%. Now, it comes after a strong holiday season, but tariff risks are weighing on the minds of retail executives and consumers alike. Joining us now is former Walmart U.S. CEO Bill Simon. Bill, it's great to have you back on. Before I start getting into what you're watching for 2025, I do want to get your thoughts on what we have seen this holiday season so far from the early data we've gotten, especially since between Thanksgiving and Christmas, we had five fewer days. Yeah. Hey, Morgan, good to be with you. You know, by credit card data is up significantly.

And anecdotally, store checks show that sell through on seasonal merchandise is as good as it's been in three or four years. And both of those would bode well for a good sales report for the holidays. Traffic at the malls and discounters and department stores, particularly even in department stores, hadn't seen robust traffic in a while, all look to be up as well. So I'm encouraged by the holiday sales. Do you think that continues into 2025? I mean, we saw a jump in U.S. credit card defaults to the highest level since 2010. And now there is tariff talk. You know, the consumer is nothing but resilient and they sort of figure out how to move forward, given whatever's happening in the economic world that they live in. I think one of the things that I'm looking for in the coming year is food prices.

If food prices stay stable, I don't think they're going to go down much. But if they don't go up much, I think there'll be more disposable income for consumers for some of the other segments. So I think that's a positive. As far as tariffs go, you know, this is really just round one of the tariff discussion. You know, somebody fires a shot across the bow. Somebody fires back. They negotiate. They may or may not end up with a tariff.

And ultimately, in the end, the consumer decides if they're going to pay the, you know, the added premium for the product that has a tariff on it, or are they going to change their purchase, their purchase and buy something else? But Bill, on consumer behavior, shopper behavior, last week I was out in Orange County, California, Irvine Spectrum Mall was packed. I mean, just really packed. What has changed since before the pandemic, if anything, or are we just back to in-person shopping, at least for the nicest malls being a big thing? No, look, I do a series of store checks, both pre-Christmas and post-Christmas, just to gauge. And I wasn't in Orange County. I was in urban, suburban, and even some rural markets. And I saw very robust traffic everywhere that I went. You know, my view is honestly that after a really, really difficult and chaotic election

season, whatever your, you know, whichever side you're on, it's finally over. And I think people are breathing and and shopping and sort of back to living. You know, the both sides said democracy was going to end. Well, it it hasn't. And we're moving forward and they're moving forward. How long it lasts, I think, you know, your guess is as good as mine. What about the mix between goods and services? I think that, you know, there was a real, real push on services, you know, pandemic, post-pandemic for several years. And that pendulum is starting to swing back. I think people are realizing that eventually you do have to buy some apparel and, you know, things like that, those hard goods, soft goods that were on pause

for so long. We're starting to see movement in those categories now as well. Finally, how closely are you watching the rising risk of a port strike come January 15th? Yeah, you know, we get to the, you know, the precipice here with port strikes, you know, periodically, we had one not too long ago and walked back from the abyss. Look, if there's a prolonged port strike and it will disrupt the supply chain and cause havoc. If it's a day or a week or even a couple of weeks, the supply chain has the ability to absorb that. I'm a believer that they rattle sabers and then settle. And I think that's what's going to happen. All right. Bill Simon, great to have you with us. Happy New Year. Happy New Year to you. Thanks, guys. Well, if you thought the action in equities was volatile

today, just look at natural gas prices, which surged double digits. We're going to break down what's behind that big move next. And check out the biggest decliners in the energy sector in 2024. Apache, Devon Energy, SLB among the biggest losers. Stay with us. Welcome back. Stocks broadly pulling back in today's session, but it was a different story in the energy markets where natural gas prices surged higher. Pippa Stevens joins us with a look at what's behind the move. Pippa. Hey, John.

Well, not gas surged today as much as 20% at one point, breaking above $4 and hitting the highest level in nearly two years before easing back a bit. Now, there were three key factors that drove today's move. The first and most important is updated forecasts showing the coming weeks could see extremely cold weather across much of the country and more heating demand means more gas demand. The second is a stalemate between Russia and Ukraine over a gas transit agreement set to expire January 1, which could

see gas stop flowing from Russia through Ukraine, which could boost demand for U.S. LNG. POK Financial's Dennis Kistler said that, together with the cold weather, is creating a buying frenzy. Finally, this contract just became the front month contract, and so there was a bit of a catch-up trade after the January contract rolled on Friday. Now, NatGas did boost the broader energy sector today, which was the only group in the green. EQT, one of the largest gas thrillers, was the biggest gainer, rising 5%. Morgan? Pippa Stevens, thank you.

Monster move this year for NatGas, up more than 50%. For more on energy, let's bring back Mike Santoli. Mike? Yes, Morgan, tremendous move off what actually historically is a very low base. Here's WTI crude oil relative to natural gas over the past decade, mostly in cadence with one another, although, of course, they do separate out from time to time. So you see, this is really a big catch up move, really oversupplied gas situation for a while now, maybe a little bit more so than crude. And obviously, this is going to get priced into, to some degree, those stocks

levered to domestic natural gas production already has today, as those laggards did have a huge bounce. Now, take a look at the valuation of the overall S&P 500 energy sector based on its free cash flow yield. So essentially, this is just the inverse of the price to free cash flow. And you see here, of course, we are at massive highs in free cash flow yield during the pandemic when they were earning money or expected to continue to earn free cash flow. But of course, the stocks are very depressed because prices were so low. We are still at the very upper end of this range. This goes back about 15 years. So it shows you that the market has this valuation cushion in the stocks. But it also could mean that the market's unwilling to extrapolate forward the

sustainability of this level of cash flow. So if you want to bet on that whole laggards move, which often does work in the early part of a year, you do have a little bit of backing from the cash flow story with commodities at this level, Morgan. It's worth noting that WTI has done basically a round trip this year, and that's despite all the geopolitical tensions and everything else that's been going on. It's down less than 1% now on the year. And to your point, energy stocks, though, it's I think third worst performing sector year to date. So I guess how does that set us up for 2025? I think expectations are low. I think a lot of investors, especially professional investors, because energy is such a small part of the S&P 500, now they feel they're kind of free to ignore it.

I think of it as, you know, you want to have a shareholder return story when it comes to buying the energy stocks unless you want it to be a pure levered play on the commodity. And that's what the big majors have going for them. They're buying back stock. They don't have ambitious plans in terms of ramping production. And they do generally pay above market dividends. So it's a little bit of a different story than just sort of playing, let's say, the China consumption growth story or something like that from past cycles. All right. It's amazing what a difference a couple of years makes for these companies. Mike Santoli, thank you. Still ahead, is remote work about to become

a thing of the past? We'll talk about potential risk that companies could face if they push employees too hard to come back to the office. And check out the action in Fannie Mae and Freddie Mac surging in the final hour of trading today after Bill Ackman posted on X that he expects the Trump administration to remove the secondary mortgage market companies from government conservatorship. Be right back. When we come back, all remote and hybrid jobs and endangered species. We'll talk about a push by big companies to bring workers back to the office. And if employers risk losing top talent by enforcing those policies.

And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We will be right back. Welcome back. Do workers need to add return to the office to their 2025 resolutions? In recent months, companies like AT&T, Amazon and Dell giving certain workers a five day a week in office mandate. The federal government could also see a stronger push to get back in the office when President-elect Donald Trump returns to the White House. But do companies taking a no-holds-barred approach risk losing top talent? Joining us now is Phil Libin. He is a co-founder and former CEO of Evernote, currently CEO of

Video Platform, made for hybrid work. Phil, welcome. I don't remember another founder at Evernote, but what do I know? Phil, good to see you. So I know you're pro remote work and all, hybrid work. I like people. I mean I was just talking about how I was at the mall last week. There were all these people there. I like it when there are people at work. I think it tends to be good for younger workers to figure out how things go. I mean, is that wrong? I like some people, John. It's not like I just hate everybody. Look, I think return to work is a fantastic way to get people to quit.

And if lots of organizations are doing it, that seems to be the point. Certainly in the federal government, a few other companies, they've really hit upon this amazing way. If you want people to quit, force them back to the office. Looking forward to whatever they're going to try next, maybe a mandatory dodgeball or something. But, yeah, if your goal is to get rid of a bunch of employees, then a return to office mandate for people who haven't been at the office is probably an effective way to do it. If your goal is to improve the quality of work, then maybe it's maybe less so, right? Maybe then I would be a little bit more intentional. I think certainly being back at the office has massive advantages in some things, like you said, massive disadvantages and other things. So I think you just have to, you know,

you have to be intentional about what parts you want remote, what parts you want in the office. I get the sense that some CEOs are trying to reset the corporate culture expectation about remote work. So the expectation should be you're here, and then maybe they'll make exceptions. Whereas things had shifted to the expectation was maybe I'm there three or four days a week, but certainly you don't expect me to be there every day. Yeah. Look, I think companies should be free to do whatever they want. They should experiment. Most CEOs, like when I ran Evernote, our average commute up in the Bay Area was about 80 minutes per person

each way. So it's almost three hours. Now, I didn't have an 80-minute commute, right? The CEO, I live 10 minutes away. And that tends to be the case in a lot of these places. The headquarters are within a 10, 15 minute commute of the CEO. And actually one of the greatest things you can do in terms of quality of life is to not commute for more than 10, 15 minutes in a day. Now, there's clearly lots of jobs that should be done all in person in the same place. If you work at a hospital or a restaurant or if you're assembling rockets or something. And those companies should be

placed in locations where employees can afford to live within 20 minutes. The thing that I think the world should really try to minimize is multi-hour commutes. So like, well, I am never again going to ask an employee to commute to waste three hours every single day sitting in traffic. I don't think that's humane. I don't think that's fair. I don't think that leads to high quality work. So if I'm ever going to have a business that requires people to be there in person, I'm going to locate it in a place where people can live within 20 minutes and pay them

enough to do so. Otherwise, I'm just going to hire people remotely like I have been for the past few years. So Phil, given the fact that over the last four years and nine months, it really has been this grand experiment in remote work and now into in the return to office policies as well. What are the lessons learned? What can be improved upon to actually find a new normal or an equilibrium to this entire debate? I think I think from both an employer and an employee standpoint, the most important thing is to be intentional about it, to really ask yourself that question. What kind of a company do you want to have if you're an employer? Or what kind of a life do you want to have if you're an employee? And be intentional about it, because you could find both. If you want to have the kind

of quality of life that lets you live wherever you want to live, then you should do that, and you should pursue that. And you shouldn't entertain seriously jobs that ruin that. But if you want to be in an office for all the benefits that that has, then you should be intentional about that. And the same thing for the companies, right? Like we hire everyone remotely. And so we have hiring superpowers. You know, for years now, for decades, since I've been CEO of various things, when you go to CEO school, they teach you that whenever somebody asks you what's the hardest thing about your job, you have to say hiring great people. That's the only answer CEOs are allowed to give. You have to say hiring great people. And so for decades, I've been saying, you know, hiring great people is the hardest thing.

And then I've been given the superpower, which is I could hire people regardless of where they are in the world, which makes it ridiculously easier to hire. And I'm going to give that up like I've been saying it for decades. So, again, like there's advantages and disadvantages to both. But I think the key thing is to be intentional about them and decide what kind of a company, what kind of a life you want to have. So if we stick with the hiring great people piece of this, we have an incoming Trump administration and quite a few technologists and venture capitals that are in the mix,

either officially or unofficially. And that was really cast into the spotlight over the past week with the H-1B visa debate. I want to get your thoughts on that. Well, I'm an immigrant myself. Actually, I came here as a refugee in 1979 under a program that Jimmy Carter had. And I think that immigration is a great superpower of this country. The fact that so many people in the world, so many really talented people in the world want to be here is a superpower that we ought to exploit. We ought to get as most out of it as possible, which obviously means we need to have ways that are legal, that are authorized, that are, you know, that are controlled. But the idea of bringing in really talented people so that we can expand the,

the, the amount of opportunity, the number of jobs in this country seems great to me. Now I came over, not an H-1B. I didn't have any useful skills. I was eight years old. So I was, I was a refugee. My parents were musicians and neither of, none of us had any like particularly useful skills. We wouldn't have gotten in under any H-1B system. We just, you know, love this country and work really hard and try to be a positive contribution to it. And I think we should lean into that superpower that this country has of attracting great people. All right. Phil Libin, always good to see you.

Thank you. Nice to see you. CEO of, interesting Morgan, speaking of H-1Bs, Satya Nadella, CEO of Microsoft, was on H-1B at one point when he gave up his green card so that he could have his wife also come over because the green card didn't allow that. So people think, oh, only the most skilled, you know, have other things, not the H-1Bs. Well, he's pretty skilled and he was on H-1B. Yeah, there's a lot of context, a lot of nuance and a lot of personal experience, particularly out of the tech world when it comes to this topic. So it's been interesting to watch that.

We had another down day for the markets, all the major averages finishing down 1% or greater. That's going to do it for us here at Overtime.