Closing Bell - Closing Bell Overtime: Inflation Watch, Tariff Trends, and Retail Realities 1/14/25

Episode Date: January 14, 2025

Morgan Brennan and Jon Fortt lead the hour with insights from Bespoke’s Paul Hickey and U.S. Bank’s Eric Freedman on the markets, plus Steve Liesman breaks down the latest PPI and CPI data. Bernstein's Courtney Breen provides an update on Eli Lilly’s performance after a guidance cut sunk the stock. Marko Papic from BCA Research discusses tariffs and the TikTok debate, while Stephen Yalof, Tanger CEO, explores the evolving retail and mall landscape. David George from Baird dives into bank earnings and JPMorgan developments, and Contessa Brewer reports on the latest fire risks. Plus, key takeaways from ICR with On Holding co-CEOs and Planet Fitness CEO Colleen Keating in her first interview in the role, and an update on Firefly in "Manifest Space."

That's the end of regulation. PAG Seguro, digital ringing in the closing bell at the New York Stock Exchange. Connect One Bank Corp doing the honors at the Nasdaq. A choppy session coming to a close after a cooler than expected inflation report boosted the major averages this morning. But gains faded throughout the session for the S&P 500 and for the Nasdaq. 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. And coming up on today's show, a weight loss warning. Eli Lilly falling to the bottom of the S&P 500 today after the company said some of its most talked about drugs may be growing more slowly than expected.

We'll discuss if the sell off is a buying opportunity. Plus, bank earnings season kicks off tomorrow morning with Citigroup, Goldman Sachs, JP Morgan, and Wells Fargo set to report. We are going to talk to a top analyst about the names he likes the most into those results. And we'll hear from the CEO of mall operator Tanger about a potential trouble spot emerging in luxury retail. Let's break down today's market action with Bespoke Investment Group co-founder Paul Hickey and U.S. Bank Asset Management CIO Eric Friedman. Gentlemen, it's great to have you here as stocks settle. It does look like we had a mixed close with the Nasdaq down fractionally, the S&P up fractionally, and the Dow actually the best performing here of the major averages,

finishing up about half a percent. Paul, I want to go to you first because yields have really been the story that's been dictating what we see with stocks. But we also know we're coming off of two very strong years of gains for equities. So how to think about this and how much of this is profit taking and tax related selling as we do go into a new year and people are thinking about rebalancing their portfolios? Yes. So, Morgan, I think you teed that up perfectly. So, you know, we've had, there's a difference. The market is, the backdrop for the market and the economy looks very good right now.

Problem is the starting point. We've had two plus years of 20% gains. We had 50 record highs last year. We're entering the third year of a bull market, which historically has been weak. And in those prior two scenarios, when you have 50 record highs in year. We're entering the third year of a bull market, which historically has been weak. And in those prior two scenarios, when you have 50 record highs in a given year, you tend to see weakness in that following year. So we talked about this back last year, shortly after the election, is the market was rallying on positive news and positive backdrop,

but it was seemingly rallying on the same news over and over. So you get to a point where, you know, at some point you can't keep rallying on the same news and you need to pause. So we're in a new year. Investors are looking ahead to some uncertainty. They have every right and every excuse to take profits. So that's what we're seeing. The sectors did best last year and performed worse so far year to date, and the opposite sectors worst last year are doing the best year to date. So I think in that respect, it's just some consolidation here. And what we need is stabilization in interest rates. And this was shocking looking at it today. It's been 80 trading days since the Fed first cut rates in September, the 10-year yield has risen on 50 of those trading days. So that's unheard of. It's only happened four other times going back to the late

60s. So it's just this relentless, consistent rise in rates. But the plus side is that when you've seen these types of scenarios before where you had such a consistency of up days in the 10 year yield, it tended to occur near at least a short term peak in rates. So we need stabilization in rates for the market to get back on its footing. And we could see that going forward here with treasuries way oversold. Yeah. And of course, per usual, Paul, some great historical context there in terms of the behavior we are seeing in this market. Eric, I want to get your thoughts on that, especially given the fact that we have seen yields move higher, despite a Fed that started cutting in September.

And I realize that there's the narrative of folks just sitting on their hands, thinking the Fed's going to sit on its hands and hold now. But when I look at your price target for the S&P 500 for this year, it is 6480, which is about 10 percent upside from here. So what what gets us there? How do you position yourself for that? Yeah, we're really excited about it finally being earnings season, Morgan. This is a sort of shoulder months where we've got a new calendar year. There's a ton of macro data. There's obviously a lot of speculation about the new administration. But we do think ultimately this will be about earnings.

And so we're at a level where we think 24 times 270 is probably the most likely scenario. That's a little bit of a discount to market consensus right now. But we do think that probably the most important divergence to understand is what happens with consumers. We're past the holiday season. We have seen a lot of shifting, if you will, of tastes and preferences, a lot of divergences between higher income and lower income consumers. So this earnings season will be important, not just about what happened in Q4, but more importantly, outlooks. So I think that the stability that we've seen has been in tech and tech spending.

It's going to be cliche to talk about tech. We still really like it. We think that, again, there's a reason for premium valuations. You're seeing IT budgets continue to expand, especially business to business. And so we still like tech here. We think that interest rates are certainly an important story. We think fair value for the 10-year is probably closer to about 425 or 430. It's a little below where we are right here. And again, the market markets anticipating a little more clarity from the Trump administration about what's coming with tariffs. So bottom line is that we think that now

that we're finally in earnings season, we're going to start hearing a little more clarity about spending and obviously how consumers are doing. We still think consumers are in good shape. That's why we're still bullish on equities here. Eric, Paul, stay with us. We're going to bring in CNBC's senior economics reporter, Steve Leisman, as we get set for another big economic report tomorrow when the Consumer Price Index gets released. And Steve, we're talking a lot

about yields, about interest rates, their effect on stocks. We had the Producer Price Index and people initially cheered by inflation perhaps not seeming as ugly as feared. But what's at stake here with CPI? Well, yeah, and it was it was a good report. We haven't had an inflation win in a long time. I think that the PPI, what it did today was maybe take some of the edge off the concern about the CPI tomorrow. But I don't know that we're looking for a great number tomorrow. We're looking for 0.3 and 0.3 headline and the core, the actual year over year, which is what the Fed has said they're going to follow.

It's expected to go up. So that's not going to be good news. The expectation of the market, though, that matters, John, I think goes beyond this report tomorrow. And it's as follows that the January, February and March numbers could and should be better to the extent that we are kind of dropping out the surge in inflation or the increase in inflation that we got this time last year. So kind of a base effect thing. There were some good news in the report. Some of the boil came off the food on the producer price level. Some other components did better than they had been. Some inflation, John, is expected as a result of these horrific wildfires out in California right now. Obviously, that's not the main concern, but that's something that could have an effect down the road.

So I was interested, John, in the way that the bond market didn't move, which tells me a bit that the bond market's less concerned about inflation. Stock markets took a little bit more heart from these inflation numbers. They seem to be more tied and interested in what the Fed's going to do than the bond market, which looks to me more tied to what's going on with the deficit and the growth story than it is with the inflation story. Trying to figure out which is the tail and which is the dog, though, Paul, you were just talking about needing some relief from interest rates. We saw some of the reaction

impact from the jobs report on Friday. How important is the CPI report to that relief that you're hoping for? When you saw the late day sell off today and then we started to recover a little bit, I think a lot of people didn't don't want to be, you know, too exposed going into that CPI report. And as Steve was just talking about, market expectations heading into this report are very low right now. People aren't expecting much from it. So I think there's sort of a, you know, you could get a bad news, you know, you could see market weakness. But if you see a decent report or a better than expected report, because that's all about expectations, that could be, you know, that could help stabilize things and get us past that. And as what Eric was saying is we can finally

focus on earnings. We talk about, oh, the Fed, it's bad that the Fed is, you know, going to have less rate cuts this year. We've been pricing out Fed rate cuts for the last 16 months further out, further out and further out. And if you look at it, you know, call me crazy, but the stock market's done pretty well over that period. So I think, you know, you don't necessarily want rate cuts just for the sake of rate cuts because it means the economy is not doing great. So the fact that we don't have these rate cuts and we're able to push them out forward, I think, is something we can take heart in. And every study shows that gradually easing cycles, market performance is much better than in cycles where the Fed is just consistently cutting rates at a rapid clip. Eric, is U.S. still the place to be right now,

or do you diversify into other parts of the global economy as well? Yeah, we still think this is the best equity market for lots of reasons, accounting standards, shareholder friendliness, and certainly corporate governance. I think that the value that's been there in emerging market equities and developed market equities will still be there. And if you just look at the currency performance, especially the dollar, a lot of questions about what may happen from an exporter standpoint. So we still think while there is that momentum factor, we want to be careful about overstaying our welcome in the domestic equities are still very favorable. Really, what Steve mentioned is why I think it's important about the inflation bias uh that exists right now one of the most important data

points from last week was you mish that came in at a 3.3 percent expected inflation rate that's too high for the fed to be happy with so if we see a cpi print tomorrow with a three annualized in front of it that is not going to be a good thing for risk assets. We'd likely be buyers on weakness, but we still think that domestically the story is better than what's in front of us with both developed market as well as emerging market equities. All right. Eric, Paul, our very own Steve Leisman, thanks to all of you. Well, Eli Lilly, the worst performer in the S&P 500 today, closing out its worst day since 2021, down about 6.5%. The company cutting its revenue guidance, saying the demand for its weight loss and diabetes drugs will not meet expectations. Lilly CEO David Ricks talked about those drugs today with Jim Cramer at the JPMorgan Healthcare Conference. We've seen ups and downs in various parts of the market, patients switching between

the diabetes form and the obesity form. Prediction has been tougher, but to be honest, the underlying fundamentals are incredible. The total GLP-1 market last year grew 45 percent. We grew 60, and we grew share in the fourth quarter. In fact, Jim, we're now the market leader in both diabetes and obesity in new patient starts crossing Novo. So we're in great position as we set up the year. Joining us now is Courtney Breen, senior research analyst at Bernstein,

which has an outperform rating on the stock, I believe $1,100 per share price target. So, Courtney, I'm guessing you're going to say this is a buying opportunity, but how patient are investors going to have to be? How much turbulence and so much is riding on these GLP-1s? Hi there. Great to meet you, John, and thanks for having me on today. Absolutely. We do reiterate that this is a buying opportunity for Lilly.

We continue to maintain our outperform rating, and we believe that this short-term demand signal that we're receiving right now doesn't necessarily change our long-term outlook on the GLP-1 total market, which we're anticipating to be more than $150 billion globally. What we saw today was Lilly provided more detailed guidance on the expectation for 2024 that fell short of where consensus expectations were by about $400 million. But as we look to 2025 and over the course of the year that we have ahead of us, their guide is $58 billion to $61 billion at a company total, which is above consensus by $800 million at the midpoint. And so as you think about that time horizon and the potential for Lilly to succeed,

we think Lilly are in a strong position to continue performing. I do recognize that over the course of 2025, considering the demand and supply challenges, as well as the inventory buildup and global expansions, we're going to see a bumpy prescription rate over the course of the year. But we do think 2025 is an exciting year for Lilly. Well, this stock has doubled in less than two years, I believe. So in a time where investors might be getting skittish about valuations overall, I guess if I were an individual investor, I might worry about whether there's valuation

risk here, whether there's going to be a period of doubt and how long this story is going to take to play out. Yeah, great question. A couple of things on that. So first, as we think about the story playing out in the near term, I think you heard Dave Rick say kind of they're performing with better market share and market share growth relative to novo in the midterm we're seeing that previous expectations comparing zep bound lily's obesity product with novo's new agrisema product uh is is kind of in a stronger position than what was expected we're anticipating in 2025 that we're bringing the first oral to market. We'll see that data in 2025 and are likely launched in 2026. And over the long term, still demonstrating a leading pipeline in obesity and beyond across the industry. Your point on valuation, I think, is an interesting one. Absolutely, when you look

at a multiple, Lilly is sitting head and shoulders above most of the rest of the industry and most of the rest of the sector. However, when you begin to consider the P.E. to growth ratio, that's when Lilly actually looks really great compared to most of the rest of the sector. And so what we're talking about here is paying for long-term potential and the growth that you have on the horizon. Okay. So whether it's Lilly with the news we got today or some of the other pharma companies and biotechs that we've been hearing from in the midst of this JPMorgan Healthcare Conference this week,

what has been the most compelling to you? What's your top pick? Great, great question. Lilly remains our top pick. We think they're in a really exciting position near and long-term. I think what's super exciting beyond obesity is this shift into neuroscience. We saw a number of deals beginning to play out in the neuroscience space outside of Lilly, but Lilly is investing here. This is where there is material white space, new TAMs to be created, new patients to be treated that aren't being treated today. And Lilly has the R&D spend at their disposable from the cash that flows off their obesity business to really begin to crack some of the toughest science in this space.

So we see them setting themselves up well for the long run as well in these new areas too. Okay. Courtney Breen, thanks for joining us. With shares of Lilly down 6.5%, perhaps a buying opportunity. Well, still ahead, we'll talk more about the wide-ranging impact of weight loss drugs when we hear from the CEO of Planet Fitness with some surprising comments about how GLP-1s are impacting her business. And after the break, a slow roll for tariffs. A new report says President-elect Trump could opt for a gradual increase in duties

to avoid an inflation spike. We'll talk to geopolitical expert Marco Papic about that potential idea next. Overtime's back in two. Welcome back. President-elect Donald Trump's proposed tariffs could have a slower rollout than expected. That's according to a Bloomberg report which says his advisers are discussing using emergency powers to gradually increase tariffs each month. Joining us now is Marco Papich, the macro geopolitical chief strategist at BCA Research. And Marco, it's great to have you on. So welcome.

Same. Thank you. So I want to start right there with this report, because we've seen some other reports about tariffs and we've actually seen the president elect bat those down. But this report moved the markets. And I just want to get your thoughts on this, because on Thursday, we've got Treasury Secretary nominee Besson in front of the Senate. And there is this focus and concern, perhaps, from corporate America about what the tariff rollout is going to look like. Two to five percent per month doesn't actually sound that that lower gradual to me. It isn't. It's not low gradual at all. It's actually been originally proposed by Stephen Miran, who is an economic

advisor to President Trump in a paper that anyone can download online. And it argues that this is a way to sort of allow the markets to digest the tariffs. But also in the same paper, there's a suggestion, which is an obvious one, that it could also allow for negotiations. So instead of going straight up to 20 percent, there's a timetable that doesn't actually just help corporates or the markets, but actually helps the rivals of the U.S. understand that there is a time frame during which they can come up with some solutions to supposed President Trump's demands. What would actually be potentially more inflationary, gradual tariff increases or a one-time blanket implication, application across the board?

Well, you know, I actually am in agreement with most of President Trump's advisors in that I don't actually think tariffs will be that inflationary. There are currency effects that will, you know, give away that will allow for some of those tariffs to not really have a massive inflationary impact. So that's the first thing I would say. And I think inflation will also depend on a slew of his other policies. Far more inflationary than tariffs, in my view, would actually be tax cuts and the widening of fiscal deficits. That would probably add growth that the U.S. doesn't need. But tariffs themselves could either be netted out by currency or could actually be disinflationary if they lead to less investment domestically in manufacturing

as other countries retaliate and just generally less global growth as well. Okay. So, Marco, first 100 days of the Trump presidency, what's going to be the most investable either action or lack thereof that you're watching? So I think that right now, you know, I'm in the camp that believes tariffs are a tool of negotiations, not an end in themselves. However, I do also feel that I'm pretty much in a very much sort of a consensus camp. Everyone's come to this same realization, and that does worry me. I think that the U.S. dollar will probably have more upside, and, you know, global stocks will probably have more downside as President Trump gets serious about implementing tariffs.

And he has to. He has to because in order to use them as a tool of negotiations, everybody has to believe they're not a tool of negotiations, that they're here to stay. And so he has a really huge interest in being pretty severe early on in his term. So that's the first issue. The second issue is that I think we're spending too much time on tariffs, not enough on fiscal policy. And I think that actually a big surprise for investors over the next three to six months is going to be that President Trump is not going to be allowed to spend as much as he planned. So deficits are not going to widen as much because the bond market will continue to put pressure. And so I think at some point in the first, maybe later first quarter, second quarter, there'll be a bond buying opportunity and a

dollar selling opportunity. We're not there yet, but I think that's going to be like a second quarter moment. We'll watch for it. Marco Pappage, great to have you. Thank you. Thank you. When we come back, the latest on the California wildfires as the region faces warnings about heavy winds. We'll get a report from the ground when Overtime returns. Welcome back to Overtime. The National Weather Service issuing a red flag warning with a, quote, particularly dangerous situation designation for the wildfire ravaged Southern California region. Contessa Brewer joins us now from Pacific Palisades. Contessa.

Yeah, Morgan, I was here to give you this whole big update about where we stand with the wildfire situation and to tell you no active flames burning. And look who drove in, Jay Leno, in this old-fashioned fire truck. What are you doing down here? Well, 1941 is not an old-fashioned fire truck. What are you doing down here? Well, 1941 is not an old-fashioned fire truck. It's a 1941 fire truck. Fires have always been in fashion, believe me. Yeah, it's pretty cool.

You came down to the command center. Why? Well, we're giving out food. We're feeding the firemen. And, you know, people bring them box lunches and say, we got nice hot food. And it's like giving away free money. It's like, oh, my God. You know, they're so excited.

And believe me, these people can eat. Oh, my God. So you come down here, but you've seen the damage. I've seen the damage, yeah. It's horrible. I mean, it's, you know, if there's one part, you're trying to find the positive side and the positive, the sense of community here. I was at Bagram Air Force Base in Afghanistan. This is exactly like the, these LA fire departments, probably the best fire department in the world

because it's set up just like a military. You have a hospital area here. You got guys sleeping in tents over here. Food is here. This is this. Everybody knows exactly what they're supposed to do. They're all highly trained. I mean, it's really done with military precision. And the idea

of people want to blame this guy and this person didn't do this bill, these are 100-mile-an-hour winds with fire in them. I don't know how you stop that. This is unprecedented. It hasn't happened before. The last time it happened, I think, was 62, but all those people are dead. And they're out there mopping up the hot spots right now. And Cal Fire told me they actually sleep out there. They're out there. They lay down in the dirt for a couple hours and try to sleep a little bit

and then get back up and go back at it today because the threat's not over and those Santa Ana winds, the red flag warnings persist. John? Thank you, Jay. Thank you. Yeah, great to see Jay Leno as well. Contessa Brewer, thank you. Well, jewelry retailer Cignet having its worst day in four years after cutting its sales forecast as consumers sought out lower prices. Up next, the CEO of outlet owner Tanger, which counts Cignet as one of its tenants, on what that news signals about

the state of luxury spending. We'll be right back. Welcome back to Overtime. Cignet as one of its tenants on what that news signals about the state of luxury spending. We'll be right back. Welcome back to Overtime. Cignet Jewelers losing some shine today, having its worst day in four years after slashing its Q4 guidance on the back of weak holiday sales. Our next guest says he's seeing broader warning signs across luxury brands. Joining us now exclusively is the CEO of outlet owner Tanger, which has Signet as one of its tenants. Great to have you, Stephen Yaloff. So let's talk not about Signet first,

but about food and beverage, because you're saying that you're seeing that as something that's driving longer dwell times, which is leading to more sales. Food and beverage, not quite as expensive as diamonds and pearls. What's so attractive about it? Well, you know, interesting. It's a strategy like anything else. And first of all, thank you for having me on. I appreciate it. But, you know, if you think about the strategy of growing our business, and, you know, we're

primarily we're an outlet founded company that's now we're in the full price business as well. We've added a couple of new shopping centers over the last few quarters. But what we're finding is as we re-merchandise our centers, we're making them more attractive to more people. And that's really what it's about. It's about driving traffic to the center. And the beautiful thing about being the owner of the shopping centers, you get to merchandise the property. So it's not just a jewelry store or just a restaurant. It's a whole complement of uses that you put together in one large venue so

that a lot of customers will come for a bunch of different reasons, but hopefully stay and interact with all the different uses that are available on the site. It's what a department store used to be, but now I guess it needs to be disaggregated, which leads me to, is Sephora the new anchor tenant? I don't know if you deal with Sephora specifically, but whenever I go into one, young people, they tend to be packed, all kinds of age ranges. What's the role of beauty in that vision you just outlined? Well, beauty is a great driver of traffic right now, especially for a younger consumer. And again, as we are re-merchandising our shopping centres to get a wider array of people to come in, we have our core customer. You never want to alienate your core

customer. So we've got the brands that they've always come to love and come back for over and over again. But to get a new customer off the couch and into a shopping centre, there needs to be a number of uses that appeal to them. And Sephora has been great. In fact, we just added six Sephoras to our portfolio that have only been open inside of six months. They opened up extremely strong. As you know, they're a Louis Vuitton brand. And because of that connection, you know, we now have an open line to that business and better communication with them. I also think that the luxury product in a Sephora or in a cosmetic store is really bringing customers in right now. I do want to go back to diamonds and pearls. And specifically the luxury customer or the customer that's going to spend more on a purchase in a place like Signet or elsewhere.

We're starting to get luxury retailer earnings as well from some of the Europeans. What are you seeing in that area of the market from a retail perspective and a consumer pickup perspective? Yeah, you know, I think that the consumer, there's still some uncertainty in the consumer's mind right now. You know, there was a big bump post-election that we thought, you know, sort of stabilized and gave the consumer some certainty. But then there was some movement in the interest rates again. And I think that uncertainty always causes a little bit of problem on either the high end or the low end of the market. And so as far as the luxury brands are concerned, you know, I think perhaps apparel, maybe high end handbags might be having a rougher

time. But we're finding that the cosmetics, you know, Chanel has their own line of cosmetic stores, and there's a number of locations that they have across the country. They seem to be performing really well. And again, going back to the Sephora story or the Ulta story, I think it's those great brands, those luxury names that are really driving that customer in. And, you know, perhaps we shouldn't be surprised should we see cosmetics in the front door and on the front counters of some of the luxury stores across the country as a lead in to bring new customers and existing customers in to those stores as well. What are the brands that you're seeing the most traction and the most pick up and that are coming in as newer and bigger tenants in your facilities? I mean, it was with Fran Horowitz of Abercrombie & Fitch. She was on this show yesterday. Stock took a nosedive because they issued guidance that was better

than what they had before. But the street has been so keen on what their growth rate has been for the past two years. I mean, is it brands like that? Is it some of the upstarts that are not publicly traded that are taking over now? Well, you know, it's interesting because a number of the brands that have really had a great quarter going, a fourth quarter, are some of the brands that took a nosedive yesterday. And, you know, Fran's doing an unbelievable job with Abercrombie. We also see American Eagle. And again, you know, they had a tough day yesterday, but American Eagle seems to be doing a great job and driving a lot of customers in. You know, you talked about a younger consumer. Those are brands that a younger consumer is looking at, too. I think a lot of people are going back to work now.

So they're, you know, where maybe they were in the office two days, now they're going back to three days and some instances four days a week. So we're seeing brands like Brooks Brothers and Callhan doing a really good job now getting the customer in because they're addressing people again for work, but there's, you know, great value, particularly in the outlet space.

And we saw a lot of these outlet brands really outperforming perhaps other venues going through the holiday selling season. Stephen, thank you for being here on set with us. Great to have you. Great to have you. Well, we have a news alert on Warner Brothers Discovery. Julia Borson has the details for us. Hi, Julia. Morgan, Warner Brothers Discovery adding two new board members, Joey Levin and Anthony Noto will both be joining the Media Giants board of directors. Anthony Noto, CEO of SoFi. Before that, he had held senior roles at Twitter as well as at the NFL. And Joey Levin is currently or just as of yesterday, no longer going to be CEO of IAC Interactive Corp. Yesterday, IAC announced

the spinoff of Angie's List, excuse me, Angie, which Joey Levin is going to be chairman of. And so as he steps out of the CEO role of IAC, Joey Levin taking on this board role at Warner Brothers Discovery, as well as his role as an advisor of IAC and chairman of Angie. Back over to you. All right. Julia, thank you. Much more in the state of the consumer still to come. When we hear exclusively from the co-CEOs of the athletic footwear and apparel maker On Holding, find out how they plan to keep growing their direct-to-consumer business.

Plus, earnings season kicks off with a bang tomorrow when big banks, including JPMorgan Chase and Citigroup report. A top analyst tells us whether you should bank on strong results when overtime returns. Welcome back to Overtime. J.P. Morgan, Wells Fargo, Citi and Goldman kicking off a big bank earnings season tomorrow. Let's get you set for that trade right now. Joining us is David George, a senior research analyst for U.S. Banks at Baird. David, I want to get right to the controversial, thought-provoking part, which is

your sell ratings on American Express and J.P. Morgan. They've been doing very well, especially American Express. To me, they signal sort of the higher-end customer, whether you're talking consumers or business. Why are you bearish? Yeah. And good afternoon. Thanks for having me, John. So to give you some perspective, these are stocks and not companies. So our expression of sell, John, is a function of our views on the stocks. J.P. Morgan, we downgraded to a sell right after the election when the stock was up 15%. The stock was at 2.6 times tangible book. It has never been more expensive than it is today.

Same with American Express. And so those are really views on the stock. So we are not particularly constructive, as you mentioned, on those two particular names. The fundamentals of both of those companies should be fine to good. But from our perspective, and just thinking about the stocks, we've got fairly limited upside relative to the downside potential, in our opinion. But that's what I wanted to get from you, maybe a little bit more color and detail there, because I think those who want to be bullish about the market always tend to assume that it's fairly valued at the point where they want to put money in. It's never expensive. You're saying, hey, company's doing great, but they're expensive.

There are a lot of big, successful kind of luxury dealing companies in the market. I'm thinking about Apple. I'm thinking about Nvidia that are expensive right now, but a lot of people are afraid to sell. So how, when you look at the bank specifically, how are you looking at what expensive means given the macroeconomic and general economy conditions that you see? Yeah, it's a great question. So we really like to think about banks, John, through the cycle and what is what is considered to be normal. Banks income statements can be very volatile. It's largely a function of the volatility in credit costs and the income statement. And banks grow revenues 4% to 5% a year, and they grow executed quite well, we believe there's better value in some of the smaller regional banks. Obviously, the volatility within banks has given us a lot of opportunity to get constructive, particularly on some of the more smaller regional bank names. But from our perspective at the mega cap level and JP Morgan American Express in particular,

I think are the epitome of this is where the big cap stocks are super expensive again they have never been more expensive than they are today so we would be sellers of JP Morgan and American Express these are two stocks that we've recommended as buys but again these are stocks and not companies so it's important to kind of differentiate between those two when thinking about making a call on stocks. It does seem like we're poised for a Goldilocks scenario for the banks. And investors have certainly been trading the banks or piling into the banks post-election, maybe with that in mind, whether it's what a Trump administration is going to mean for

the financial sector and the smaller banks, the possibility of M&A and the possibility of unlocking investment banking in a bigger way, what it could potentially mean for loan activity, what it potentially means for the economy. And then this also this idea that you're going to have rates higher for longer and you have a yield curve that's normalizing. You talked about smaller banks and seeing the opportunity to buy and invest there. What are the banks? Well, some of the banks we like Morgan on the more regional end would be Comerica is one that is under earning. J.P. Morgan, American Express, we think are over earning. Comerica trades just over 1.1 times tangible book. The stock's just over 60. We think they've got normalized earnings power of up to nine dollars

per share. So that that is a significant uh significantly attractive risk reward from our perspective relative to some of the bigger banks we also like citizens financial cfg pnc financial pnc as well as m&t bank mtb all right david george thanks for joining us thank you up next the ceo of planet fitness on how weight loss drugs are impacting the gym business. You may be surprised by our answer. Stay with us. Welcome back.

At the ICR conference in Orlando yesterday, I sat down with the co-CEOs of ON, Mark Maurer and Martin Hoffman, the sneaker and athletic apparel company, giving positive commentary on the holiday season, with the co-CEOs saying they were, quote, extremely happy with how the holiday season worked out and that 2025 is starting strong. At a time when product innovation is front and center, especially as Nike looks to engineer a turnaround, I asked Maurer and Hoffman how they're navigating a sneaker category that is getting more crowded, especially when it comes to running. I think this is, you know, we grew as a running brand first. And I think we cut through the noise through visible tech which is our cloud technology and

through continued innovation and through a very very unique design that we bring to the market and so this is the journey we're on and we'll continue on that journey and if you look at the light spray product which is you know a very new upper logic that we're bringing to life, I think then this is cutting through the noise. And consumers are appreciating us for not bringing old stuff again, but for really bringing new innovation to the market and for making you feel better when you run as a runner. I do feel like folks know, consumers know on for the sneakers.

You mentioned apparel, still a small piece of the business. Do you feel positioned to grow from here? What is the feedback been so far? The feedback is really strong now. We had to learn a lot. We first started with apparel back in 2016 and really had to learn that it is a different business of building an apparel brand than a footwear brand. But in our own retail environments, apparel already makes about 15% of sales. It works very well on e-com. It's not yet the first purchase where customers find the brand, but it's a follow-up purchase. And so we are very happy where it is. At the same time, it's still a small part of our business. We have the goal to bring it to 10 over the next two years and and then grow it from there but i think if we look in the in the future distance apparel needs to play a strong role in our business you mentioned

e-commerce e-commerce has been growing strongly direct to consumer in general growing very strongly how do you balance that against wholesale especially given the fact that you do have distributors like Foot Locker and Stix. For us we're really trying to look at it as an end so in the end you know we're trying to reach many different consumers and communities at their preferred point of sale and so we we grew on through wholesale but we always had our own e eco mansion as well and it's about bringing the right product to the right consumer at the right time through the right

channel and you know over the last years we've been able to grow both channels in parallel in a very positive way always with our own channel slightly outgrowing the wholesale channel now also especially driven by own retail, where we're able to bring a very differentiated consumer experience and consumers are appreciating kind of visiting our stores and, you know, getting a very unique proposition in there. How are you gaming out the growth opportunity in China? I mean, we're hearing a lot about the softness in that economy and with consumers there. I mean, ON is still relatively small in China compared to the market.

So we're not so exposed to the overall consumer demand. And what we're observing is that, you know, we're getting access to better retail locations than ever before. We just had a very, very strong double 11. So while overall consumer spending was rather difficult, ON almost doubled. So we were very, very happy with that. And we can do that as a premium brand at full price and so in a

rather competitive and you know price driven environment we continue to bring a premium brand to life and we're very excited about the growth opportunity in China and how how the Chinese consumer is appreciating the own brand gotta get your thoughts on the competitive landscape. Nike has a new CEO, has been tasked with a turnaround plan at that company. There's an expectation, at least among investors, that at some point it starts to grow again. What does that mean for On? It doesn't change what we do. So we focus on our products, on innovation.

Sustainability is very important. Light spray, I think think is a great innovation where we can really revolutionize the industry, how product is made, how product looks. And so we focus on that. I think customers can expect that they see more brands in the retail stores, gives them more opportunities, more choice, which I think is a plus as well. And we have grown in times where a lot of brands were very strong, and so we will continue our path. Shares of On are up over 95% in the last year.

I also sat down exclusively with Planet Fitness' new CEO, Colleen Keating, for her first on-camera interview since taking the job about six months ago. She's overseen Planet's first price increase since 1998 on some memberships for new customers, a dynamic that helped the gym chain realize 5% system-wide same-club sales growth when preliminary results were released yesterday at ICR. I asked Keating how the boom in GLP-1 weight loss drugs is impacting the business. We see GLP-1s as a net tailwind for our business. When you think about somebody taking a GLP-1, we know that prescribers are advising their patients that a complement of fitness, particularly strength training, is important to combat loss of muscle mass with GLP-1s. And also someone taking a GLP-1 is feeling good about their fitness and wellness and well-being.

And that's that gym intimidation that people might have about walking in the front door of a gym. We think people might feel even more inclined to join a Planet Fitness or enhance their fitness routine. And it's interesting because they're actually changing some of their formats to accommodate more strength training as well. You can catch the full version of both of those interviews at CNBC.com. Up next, the CEO of Firefly Aerospace on the first Blue Ghost lunar lander mission set to blast off on one of Elon Musk's SpaceX rockets tomorrow. 2025 is kicking off with a series of highly anticipated space flights. In addition to the maiden launch of Blue Origin's New Glenn rocket, which is now scheduled to happen Thursday,

several lunar lander missions are getting ready to launch. It starts tomorrow with Firefly Aerospace. We're really excited because we have a really cordial relationship with all the commercial payload lunar services program NASA competitors. We call each other, we talk to each other, we give lessons learned to each other. We're going to learn a lot from Blue Ghost 1 and the subsequent Blue Ghost missions and we want that to be readily available for everybody because we want this lunar ecosystem to really be endearing. Now Firefly's commercial spacecraft, Blue Ghost, will launch on a SpaceX Falcon 9 rocket for a 60-day voyage that will include landing on the moon.

The lander will carry payloads and run experiments for NASA as part of the agency's commercial lunar payload services program, or CLPS. But Blue Ghost is just the first, hitching a ride on the same rocket as Japanese company iSpace's lander, which will take a longer route to get to the moon. And in coming weeks, publicly traded intuitive machines will attempt to send its second commercial lander just over a year after it made history with its first. For Firefly,

Blue Ghost is the big milestone mission on tap, but new CEO Jason Kim, who took the helm in October, says all of the $2 billion startup's businesses, which also include rockets and space tugs, are generating revenue. A lot of people like to focus on the rocket engines or focus on the satellite software. I focus on the business and creating a business that's enduring and sustainable and growing.

So what I believe is companies like Firefly are going to continue to do really well as long as we execute. And also, we also have spacecraft and rockets. And having the end-to-end seamless capability for our customers really helps. And also on tap tomorrow, another test flight of SpaceX's Starship. For more on Firefly's CEO,

check out Manifest Space right there on your screen. Quite a lot, quite a lot of reporting. They're all in the middle of the night missions too. No sleep. That's gonna do it for overtime.