Closing Bell - Closing Bell Overtime: Is the worst yet to come? 4/11/22

Episode Date: April 11, 2022

Stocks closed near the lows of the day. Adam Parker from Trivariate Research says the upcoming earnings season may stabilize the market. Plus, is there an alternative for stocks? Anastasia Amoroso from iCapital makes the case. Walter Isaacson is working on an Elon Musk biography and says it’s not surprising that Musk decided not to join Twitter’s board of directors. And, Michael Santoli’s Last Word is “diversity.”

All right, Sarah, thanks so much. Welcome to Overtime. I'm Scott Wapney. You just heard the bells. We are just getting started right here at Post 9 today. And we do begin with our talk of the tape. The biggest question for investors right now, after yet another day in the red, led mostly by tech, which has gotten slammed lately, does it mean that the worst is still yet to come or is the end of the selling getting any closer? Let's ask Trivariates Adam Parker. I mean, look, risk just feels bad today, right? Tesla, beaten up. Bitcoin, beaten up.

Tech, beaten up. When does it stop? I think earnings season will stabilize things a little bit, Scott. I don't think earnings are quite as bad as the current price action. Some of the big cap stocks like Microsoft, they have a lot of pricing power. Stocks are off highs quite a bit. So I think the risk award is pretty good as we head into earnings. Obviously, we start first with banks this week and then move into tech the next two weeks.

But I'm pretty constructive that earnings will calm people down. And then earnings in 2022 will be above 2021. Here's what I understand. So earnings are going to calm people down, which are backward-looking, which we expect to be good. How can the commentary possibly be good in this environment? And I say a couple things to you. Bank of America, Savita Subramanian today says the last of the big beats for a while. David Koston and Goldman Sachs, we forecast downside risks to earnings estimates for the remaining quarters.

How can that not be the case? So you've got to get some perspective. On average, people think, the analysts always think earnings are going to grow. In fact, in January of the last 40 years, they thought it was going to grow 14%, the actual 6%. The street knows there's going to be downward revisions. The current consensus is 8% change this year. I think the real number is 4% or 5%. So I get the 5%.

I get a dividend. I get a buyback. It looks better than a lot of other things. So I'm pretty constructive. I'm not saying it's massively bullish, Scott, but I think when you get a Microsoft down this much and you know they have pricing power, I know they charge me more every year for what I do, I'm pretty sure earnings will be okay. And I think they're smart to give conservative guidance.

On the margin, if we're being intellectually honest, the outlook looks a little bit worse than it did three months ago. Oil up strong dollar is not a great cocktail for earnings, particularly the global companies. And maybe that's why the Russell kind of uncharacteristically down a little bit less in a risk-off tape. So maybe that explains a little bit. Well, you better hope that those mega caps like your Microsoft, which are charging you more, can stay up. Because if those start rolling, forget it. But the way their earnings collapse, if you look at the companies that have pricing power, you know, UnitedHealth and ADP and Salesforce, all those companies,

the way that they have an earnings cap is really just a recession and businesses go out of business. Without that, without a lot of small and medium businesses going out, they're generally going to be able to grow earnings with pricing power. It's like a bear market in tech, though. Don't you feel that? I think most companies are guiding to IT spending being fairly productive. They still want to handle productivity issues. So I don't think you're going to see a collapse in earnings. Less upside, sure.

I think that's the consensus view. But tell me how I'm supposed to fight the Fed. Here's what I'll get, OK? You're not. Right. I feel like people are telling me to fight the Fed now. I'm supposed to ride it all the way up. And when the Fed takes everything away, I'm supposed to come up with excuses to suggest why everything can still stay up, even though the liquidity is gone. I think the balance sheet's the key issue there, personally. I mean, if you look back

at the rising rates, there are periods of a few months of volatility followed by markets working, because usually when they raise rates, it's because the economy's strong. I think this time what's different is you have this fear of stagflation. You've got other things going on. I think the real issue, Scott, though, and I've always told you this, I think the Fed are smart. The people on the Fed are smart. What does that mean? Do they really think raising rates is going to kind of handle the supply-demand imbalances in semiconductors? Is it going to get, you know, the job shortages handled? The only way that happens is if you crush demand.

Are they going to crush demand for wheat to the point that's an equilibrium? I don't think so. They have to slow down the economy. Yeah, they're going to slow it down, but crush, I don't know. That's why I still take the under on 7, 8, 9 hikes. I don't see any way they do that because I think they're smart, and I don't think they're going to intentionally create a massive recession. Well, you're assuming, though, that they can pull it off. You're assuming that they can

throttle what they're doing so that they don't tilt the economy into a recession. What's the evidence suggesting that they can do that? I think the base case is that the consumer is strong enough, the bank balance sheets are strong enough, that there's a shot at it. History isn't great. I agree with you. Only three of 12 times in the last half century have they executed that. That's pretty poor. But there are some differences this time. The Constitution of the U.S. equity market being so much healthier, balance sheets of banks,

U.S. consumer in great shape, job growth, wages, et cetera. So I think they'll be close, and I think they'll risk on doing it a little bit less than consensus because if they don't, they're just going to crush demand. And who wants stagflation? That shouldn't be what they want. Of course not. But I almost feel like they want to beat down risk assets. They want to have stocks fall.

What I would say to you on that is- Dudley said it last week. Now, he's- When have they ever done that before? When have they ever- I think it's the opposite. The phrase Fed put was invented because you know market goes down 15 or more, they're going to come in and get dovish. You think that still exists?

I do. I do think that the chance we get incrementally dovish is greater than the chance we get incrementally hawkish over the next six, nine months. And you can look at Fed fund futures, which have stopped going up at the rate they were, which is, in my mind, the sort of perception of rate change. We're talking about rate of change here, not level. Are people going to get incrementally hawkish from here? I really don't think so.

And the reason is not because we're going to get supply and demand imbalance. It's because raising rates isn't going to solve that unless you just cause a recession. Why would they just say, all right, guys, we're intentionally causing recession and crushing risk assets? They're not going to do that. How do you paint then the risk-reward equation right now? I mean, even those who are bullish, like Kalanovic over at J.P. Morgan, who was telling investors, you're too negative, you're too negative, you got to buy the dip, even now suggests I mean, even those who are bullish, like, you know, Kalanovic over at J.P. Morgan, who was telling investors, you're too negative, you're too negative, you got to buy the dip, even now suggests, well, maybe that's run its course. And the emerging markets are the place that you should consider looking now. I don't know about emerging markets. I've never found that risk reward to be

good because I can get exposure to that through U.S. equities. I've always liked thinking about it more holistically. You get the buyback, you get the dividend, you have a call option on earnings growth, 6% to 8% total return. That's going to be always my 12-month forward outlook. Underneath that, as you know, for the last year, and I'm still massively bullish on energy, massively bullish on metals. I think healthcare looks great. Biotech's oversold. Services have pricing power. So there's always lots of things to buy. And if I think about where I am versus history, I see more things to buy right now than I normally do. I mean, 50% of small cap stocks trade below 15 times earnings. There's tons of stuff to buy. Yeah, unless you think that the economy is going to deteriorate and then small caps are going to

go down. All I would say is anyone who consistently positions for a recession is out of business. All right. I want you to stay right here. Let's broaden the conversation out. Let's welcome in Ed Yardeni of Yardeni Research and Anastasia Amoroso, chief strategist for iCapital. It's good to see you both. Anastasia, I hope you've heard the conversation. Where do you come down? I mean, it's an ugly day. And again, if you look across what you would determine to be risk assets, whether it's stocks, whether things like Tesla, whether it's Bitcoin, it doesn't feel pretty good. No, it doesn't, Scott. And I think really the fundamental tradeoff between stocks and bonds is starting to shift here. And I think if you do some of that math, you really find out that stocks are just not as attractive as they once were. And you can look at the dividend yield

versus the 10-year Treasury. That's now at 2.7 percent. You look at the earnings yield, for example, versus the 10-year treasury. That relationship keeps collapsing every single day and is now below the 20-year average. So it's just not the same risk-reward. And then, you know what? It used to be that there was a TINA, there was no alternative. But I would argue that there's now beginning to be some alternative to stocks and places where you can earn yield. And I think investors are starting to look there. Take a look at, for example, the U.S. high yield bond market. And the yield on U.S. high yield was 4% to start the year. It's 6.5% today. By the way, if you're

trying to beat inflation, if you could at least earn 6.5% in yield, that's already something. If you look at the leveraged loan market that's now paying you close to 7% in yield, oh, and by the way, it's floating rates, so it doesn't have that duration exposure. I think that's another place that investors are starting to look at. So that risk-reward is shifting. And look, I agree that I think the bar for earnings has been reset higher, lower, rather, for this particular earnings season. But if you look through the rest of the year, consensus has not downgraded the second half of GDP growth. Consensus expects an earnings rebound into the back half of the year. And I think that's really

a big if, given what's happening across the consumption space. I'll get to Ed in a second, but you're shaking your head at everything that she said. No, I think you can buy shorter duration. So, yeah, do you want to buy the two-year yield, pick up 2.5% for a couple years? Sure. But holding stuff for 10 years and comparing to equities, I don't like that comparison. That's a lot of duration risk. So to say, well, it's relatively – we tried to shore mark-to-market versus a few weeks ago or a few months ago. But in absolute terms, I would not want to hold the 10-year yield for 10 years at 2.75

when I can take equities and hold it for 10 years. I mean, probability that works over a 10-year period, what, 5%, something like that? And your whole point of view is don't fight the Fed. Can I chime in on that? Go ahead real quick, Anastasia, before I get at any. Just real quick, I'm not suggesting that investors should be piling into the 10-year treasury, 30-year treasury. I will say that some institutional investors are absolutely stepping in. And those that are not marking things to market, like pension funds and insurance companies, are finding those attractive. Where I would be

thinking about a better risk-reward, again, is leveraged loans, floating rates. You don't have the duration exposure. And by the way, if you look at private credit, you can get 8% or 10% yield. So not two-year treasury, not 10-year, but those places. Yeah. All right. He was not he was nodding his head there. I saw that. He was agreeing with you there. And your point of view is don't don't fight the Fed. Well, don't fight the Fed. And we're in an environment where the Fed is fighting inflation. So it's it's even a more serious notion. Don't fight the Fed when the Fed is fighting inflation. And I think we need to see a peak in the inflation rate. And I think that's coming.

And I think it's going to be coming by the middle of the year. Tomorrow, we will get the March CPI. So it's lagged here. I think by the summer, we'll probably see the CPI inflation rate peaking. I think the consumption deflator is going to peak somewhere between 6% and 7% and then come down to maybe 3% to 4% by the second half of the year going into next year. So I think that's what the market needs. But right now, all we really know is that there's some evidence that used car prices have finally come down a bit. That was a major source of inflation and consumer durables. By the way, we're talking about Tina, and I think it's time to talk about her sister, TNAC. Not TNAC, New Jersey, but T-I-N-A-C. There is no

alternative country. The U.S. looks like a safe haven for global investors when you look at the crazy things going on on a global basis right now. Europe looks like it's a much greater risk of falling into recession. China's got the COVID problem and they're handling it very badly. I think you're going to find that one of the reasons that the U.S. markets hold up, both bonds and stocks, and the dollar, by the way, is that foreigners decide that they want some safety. They want a haven. And the U.S. certainly has that, I think. But you're trying to paint a picture in which inflation is either peaking or has peaked in many areas.

Are you suggesting as well as Adam that the Fed is not going to be at the end of the day as hawkish as the market expects? Because that's what it sounds like to me. Well, look how things have changed. You know, it's been an evolutionary situation. And I agree that the Fed's probably at max hawkishness now. So let's talk about peak hawkishness. I think we're just about there in terms of the market's fear of what the Fed's doing. And right now, it's all been squawking by hawks at the Fed, and even the doves are squawking like they're eagles and hawks. But look, I think we're going to find that the inflation rate does show some moderation. And that's when the doves will start coming back out and telling us, well, let's not get a recession.

Let's not go there. I just don't think this Fed has the stamina of Volcker to handle the kind of interest rate hikes that you would need to actually cause a recession because the consumer is actually in very good shape. Businesses are in good shape. And, Scott, there's a tremendous amount of liquidity out there. M2 is $3 trillion above what it would have been if you just extrapolate the pandemic, the pre-pandemic trend line. So there is liquidity. Corporations have a lot of it. These are going to either be the greatest calls ever or the greatest underestimation of the Fed of all time.

And I'm sure you'll remind us. Well, yeah. I mean, how could we not? He's read a lot of books, though. Look at his background. He's read a lot of books. One or two of them. Yeah, but I mean, look, you could criticize the Fed for a lot, and they deserve to be

criticized for being as late to the game as they have been. And they've admitted it themselves. But but Anastasia, they sure sound like they are on a path to get inflation under control by any means necessary. And if risk assets, if stocks go down a lot as a result of that, so be it. I think you're right, Scott. I think they're willing to let the market go down to some extent, because if you think about how this inflation has gotten generated, I mean, yes, it's us buying a lot of durable goods and not having enough supply chains capacity to process it.

But it's also inflation in the financial markets as well. So I think if you get a little bit of those valuations reset, if you get that bubble to process it, but it's also inflation in the financial markets as well. So I think if you get a little bit of those valuations reset, if you get that bubble to come out, I think that's probably a good thing in the eyes of the Fed. I find it very interesting that just after the market started to have some breathing room and this relief rally was underway, and we actually thought that we were already at peak Fed hawkishness because we've priced in night rate increases. The Fed comes out and says that now they're going to potentially wind down the balance sheet starting in May. So a little bit sooner than expected. Not only that,

but they might be selling T-bills in order to achieve the caps. Not only that, but they're talking about selling MBS outright down the road. So I think, Scott, there's a lot of validation to what you're saying, is the Fed doesn't mind letting this market pull back somewhat. Yeah, I feel like Brainerd was talking, and you had your hands over yours, like, I am not listening. I think that index level confuses people. When you look at the S&P, you think, wow, the index should be down way more. But let's pull back the covers. I mean, MidCap Biotech is down 75%.

Do you think the sales outlook and pipeline? So take that hyper growth factor, ARK, or whatever you want to describe it. Those stocks are down 75%, 80%. Is that a little bit? Not if you hold them. So I think some of the air has been taken out of the most speculative parts underneath the covers. When you look at kind of holistically, energy earnings are going to grow, materials earnings are going to grow. There's stuff out there where it's going to be

hard for you to get earnings collapse. What makes earnings collapse are when the company spent too much money and then revenue falls off the cliff. I really don't think you're going to see earnings decline, and that's going to anchor me at least through this earnings season, and we'll recalibrate if we get new information. But I think it's very unlikely earnings in 2022 will be down from 2021 for the biggest 500 U.S. companies. Let me just jump in and point out that earnings are getting a lift from inflation. The stocks are an inflation hedge. Yeah. So you don't think, the last word, you don't think we're going to go back below the lows of late February, early March? We could, but I don't think so.

You'd make a whole case for the entire conversation that we're positive. I don't think so. I don't think they will. It's possible. I'm not a technical guy. I don't think that really has a lot of predictive value. But when I look out 6, 12, 18 months, we're going to be higher. You did study statistics.

You have a doctorate there. Adam, thank you. Good to see you. Yeah, you as well. Bye, guys. Anastasia, best to you as well. Ed, thank you so much. I'll see both of you soon, I'm sure. Let's get to our Twitter question of the day. Now, we want to know, where do you want to be invested in a rising rate environment? Is it tech? Controversial to say the least. Financials,

utilities, or other? Head to at CNBC Overtime. Cast your vote. We'll bring you the results at the end of the show. We are just getting started here on Overtime. And up next, Elon Musk's big about face on Twitter didn't shock everyone. The man literally writing the book on Mr. Musk, calling it the least surprising story of the day. Biographer Walter Isaacson joins us live in two minutes to explain that. Plus, much more on today's tech sell-off. You'll hear from one big money manager who says growth can work in a high interest rate environment. The key names he is betting on right now. All that and more when Overtime returns.

Welcome back to Overtime. News that Elon Musk decided not to join Twitter's board of directors caught many by surprise, except for our next guest. Walter Isaacson is a CNBC contributor and distinguished fellow of the Aspen Institute. He is also working on a biography of Mr. Musk. As we said, he is with us live. Walter, it's so good to have you with us, especially that, I mean, the timing couldn't be any better. Thank you, Scott. Great to be with you again. You know, it's so odd.

He's tweeting all weekend and then this news breaks. And today you tweeted yourself. This was the least surprising news of the day. Why so? Well, what's the upside for him having just one board seat? Yeah, it comes with a whole lot of constraints, a whole lot of restrictions. You can't buy more stock if you've done that. You can't disparage the company or make suggestions. And so he's not the type of person who loves going to board meetings. He's been on one board, which was Endeavor, and I think he lasted less than a year. So I think he doesn't need any of the restraints. He can be influential about what happens with Twitter without having

that one board seat vote. Well, you're you're suggesting that he didn't know all that when he when he decided to join the board or or agreed to do it. I'm just thinking about he had to have known what goes into being on a board. Maybe it was he underestimated how much influence he could have right away in the boardroom with Twitter executives who maybe don't like his style and as public as he wanted to be. He's been buying stock since January, and I think he was buying stock not because he wanted a board seat, but because he cares a whole lot about Twitter. He cares about the debate over free speech and censorship. And at a certain point, he was friendly enough about it. I know he, as he said, he talked to Barad and they said, have a board seat. So initially he says yes.

And then I think you're given quite a few restrictions when you say yes. And you're told what restrictions you have to obey. And I'm sure he just had second thoughts and said, excuse me, why do I need this? This is not going to help me influence Twitter. And I'm sure he just had second thoughts and said, excuse me, why do I need this? This is not going to help me influence Twitter. And it's just going to be very constricting. I mentioned the biography that you're working on, and I know that you've spent a lot of time with him, particularly recently. What's that been like? Well, the Giga Rodeo, I spent some time there, is pretty awesome. It's probably the greatest manufacturing plant, especially for cars ever made. By volume, it's the largest in the world.

And Musk has always said it's not just about creating a product. It's about creating thechip, the way he's designed this factory, so that it will really be able to be incredibly efficient and churn out cars. He's also been incredibly successful recently with SpaceX. A whole lot of launches, including in this whole past week, when everybody's distracted by many things, he sent four more astronauts to this international space station. So it's like drinking out of a fire hose, being able to sort of travel along with him and be by his side. You know, an analyst by the name of Dan Ives, who covers technology and he covers Tesla, he tweeted the following today. And I want to get your opinion on it, because I think it speaks to maybe what happens next. He says this now goes from a Cinderella story with Musk joining

the Twitter board and keeping his stake under 14.9 percent to likely a, quote, Game of Thrones battle in the months ahead, which I'm wondering what you think about that. If you're inside Twitter, particularly an executive, are you feeling better or worse today? Better because you don't have to deal with, you know, him revealing all this stuff on Twitter or worse because now he doesn't have all the restrictions that you said he didn't want in the first place. So look out. He believes that Twitter is sort of a central nervous system for the conversations we're having. And I think he sees a lot of ways to improve it, not only to broaden somewhat the free speech and reduce the OK, you've reduced subscriber growth because you get rid of all these bots and crypto scammers. So I think there's a lot that he thinks he would want to do with it, including the fact that Twitter has been a good product, but it hasn't been a great product. They haven't gone there. If you follow Elon Musk's day, he's hardcore, seven days

a week, 24-7. At 10 at night, he'll be doing meetings about the Raptor engine design for his Starship spaceship, or he'll be doing a FSD, full-service drive meeting with Tesla. I think he would bring that same type of hardcore mentality. That's what his tweet since deleted about the headquarters of Twitter being vacant most of the time. I think he's somebody who would say, if we're going to make this a great product, we have to work a hell of a lot harder. What do you think he's going to do now? Do you think he's going to become a full-blown activist with Twitter? Do you think he could partner with somebody and do something more dramatic? I find it hard to believe that the person that you are painting is just going to sit by the side and be happy with the stake that he has now.

Yeah, I don't think he's a sit-by-the-side type of person. I think he feels strongly about Twitter and its potential as a product. And I think you're going to see him be active now, whether or not that means he's going to go full bore and try to buy the company or whether he's just going to push for a whole lot of new things. We'll have to see. I'm just wondering, you know, if we're being, I think it's fair to ask if we're being critical enough of this kind of maneuver that he pulled off. And if it was another

executive or a CEO, a founder at another company, we would have a much sharper tongue about all of this. Here's a guy who he accumulated a large stake. He was tweeting about it. He joined the board or said he was joining the board. And then sort of at the last minute after tweeting all weekend long, Walter, all of these ideas then says, you know what? I don't want to join the board after all. Is that fair? Is it fair to be more critical of a maneuver like this? Are we just writing it off that, oh, it's just Musk. It's just the way he he does stuff. That's just who he is and how he goes about business. Well, I don't think it was a premeditated maneuver.

I don't think he planned all this out the way that he just cared about Twitter and started buying it. And you express it right, Scott. That's who he is. This is the way he is, the way it did. He just cared about Twitter and started buying it. And you express it right, Scott. That's who he is. This is the way he is, the way he operates. It's not like he has a methodical, calculating, Machiavellian approach. So these things happened that look kind of sloppy, but I don't think it was some grand scheme. I think that's just who he is. It's the way he operates. I don't either. I'm just suggesting that if it's fair to say it's just irresponsible at some degree to act in the manner in which he did.

Well, it was pretty straightforward. He was open about it. He was buying chairs. He's offered a board seat. He thinks about it, says he's going to do it, and then decides there's no upside in doing it. I mean, you know, I think we've all seen people act that way. I don't quite get why that's such a shy, as I said, is one of the least surprising things that has happened over the past week is that he'd say, wait a minute, why am I taking this board seat?

What use is it? Well, you know him better than most. As I said, you are writing the biography and we cannot wait to read it. Walter, thank you so much for being with us on Overtime. Thank you, Scott. All right. That's Walter Isaacson joining us up next, playing the pullback. Our next guest is making the case for technology, believe it or not, despite this sell off and the wreckage that we've seen, why he's not worried about the rate shock hitting those stocks. And later, the big debate breaking out over the banks, how you should play the financials heading into earnings this week.

And don't forget to follow the Closing Bell podcast wherever you get your podcasts. Overtime, we'll be right back. Welcome back to Overtime. It's time for a CNBC news update now with Contessa Brewer. Hi, Contessa. Hi there, Scott. Here's your news update right now. Philadelphia is reinstating its indoor mask mandate. Health officials say new COVID cases have been jumping and it's time to take steps against what could be a new start of a COVID wave. The new rules go into effect next Monday. Kind of a backtrack there. President Biden reloading efforts to crack down on ghost guns.

It's not clear how much change is coming while Congress remains deadlocked on reforming gun laws. The president also said any police reforms must improve public safety. The answer is not to defund the police. It's to fund the police and give them the tools and training to support they need to be better partners and protectors of our community's need. The Lakers have fired championship-winning head coach Frank Vogel. The move follows one of the most disappointing seasons in NBA history. The Lakers were expected to have a shot at another title. Instead, they didn't even make the playoffs

and ended the season with a 33 and 49 record. On the news, the tragic death of Steelers quarterback Dwayne Haskins and what one eyewitness says he saw at the scene of the accident right after Jim Cramer, 7 p.m. Eastern time on CNBC. Scott, I'll send it back to you. All right, Contessa, appreciate it. Contessa Brewer, thank you. The Nasdaq continues to face selling pressure. As you know, the index is down 8 percent in just a week. Yet our next guest makes the case that you can still own tech stocks even with rising rates. Jason Tauber is portfolio manager of growth strategies at Neuberger Berman. You know, I looked at the notes. It says preference for growth over value. And I'm like, how? Great question. So I think when we think about rising

rates, historically, the argument has been to buy value stocks during rising rates. And the theory is that the economy is accelerating and that's why rates are increasing. In this case, we're dealing with like a ton of huge supply shocks, right? Energy, materials, commodities, labor, all of these costs are going to be disproportionately hitting value companies relative to growth companies. When you think about what you want to own in this type of environment, it's companies with clean balance sheets, you know, not a lot of debt, limited operating leverage, not a lot of fixed assets, and also companies that have pricing power, which is going to matter tremendously in this environment. So I think this time is different. And you

definitely want to start rotating into growth because, frankly, the economic outlook is deteriorating. I mean, we just it's just something that the Fed has to do in order to help get some of this inflation under control. There are there are many stocks that would check all of or most or all of the boxes of which you just laid out. Yet you could make the case that their valuations were still way ahead of themselves. And even though they've come back to earth, that they still need to go even further. How do you counter that? Well, OK, for one, I think you have to separate out kind of large caps and then you have to separate out kind of mid cap growth. So starting with the large caps, I think that, yes, they've had kind of a rough start to Q1, but we have to consider the fact that you had three major earnings disappointments.

You had Facebook, you had Netflix, you had PayPal. We're still kind of dealing with a little bit of this COVID overhang, right? So there's a little bit left there. And people are starting to question that now, you know, today in terms of semi-lands, the land of semiconductor stocks. If you think about SMID cap growth, I mean, obviously this area has been completely decimated, but they also went to stratospheric heights that were never justified, right? We had kind of a boom and bust period there. The market responded to that euphoria with a ton of new issues, and there's been a digestion phase. What's really remarkable is last year, small cap

growth underperformed large cap growth by 25 percentage points. We haven't seen that since 1999 when everyone was crowding into the CISCOs of the world. So there's definitely some interesting value or better valuations now in that space. And what was interesting in terms of what we saw today is that you saw all that pressure in large cap tech because of a few notes, but you saw strength in smid cap tech because you had the Toma Bravo deal. Let me ask you this. Let's get some stock picks if we could try and give some people some actionable ideas. Zoom Info is one stock that you like. Is it ZI? Z as in zebra and I is the ticker symbol? ZI is a ticker. Yes. You know, this is a remarkable company. Just on its face, look at the financials of this company. They grew 50 percent organically last year with

30 percent free cash flow margins. What they've done is they've created this proprietary professional information database and they've married it with applications that make salespeople more effective. And the product basically sells itself. That's why they have the financials that they have. You know, in software we talk about long-term value to customer acquisition costs.

Three to five is considered good. These guys are at 10. So there's a huge opportunity for salespeople to be more effective, use this in parallel with Salesforce.com and other applications. But it's truly disruptive and what we look for. And one more before we go. Avonix? Avianix. Axonix, yeah. Axonix. Oh, yes, Axonix. I'm sorry. You know, this is a SMIDCAP healthcare tech company.

And this sort of highlights what we're trying to do with our disruptor strategy, which is to focus on companies that are disruptive, but aren't necessarily in the speculative phase of investment, right? So they are taking a proven technology, which is sacral neuromodulation that historically only lasted three to five years. And with their technology, it's now lasting 15 years. So the market can really take off. Let me ask you one more real quick. The way that NVIDIA gets downgraded today, is that a warning flag at all to you about this trade in general, that a stock like that with a market cap like that gets downgraded today and that maybe it's time to

sort of second guess where a lot of these stocks are, even the most loved? Look, I think investors are antsy. We're in this sort of purgatory period where we need to hear from companies. NVIDIA has a fantastic long-term secular growth story with a little bit of cyclicality. There's a little bit of cyclicality in semis, but there's no question, if you look at the long-term performance, frankly, of semi names, that this industry just keeps getting better and better, and NVIDIA is just kind of leading us into the future for so many disruptive technologies. All right, we'll leave it there.

Jason, take care. I'll see you soon. That's Jason Tauber. Thank you. Neuberger Berman. Still ahead, a harmonious rotation. What Mike Santoli spotted in the market today that could point to some signs of stability

following today's drop. Overtime's right back. All right, welcome back. Let's get to Christina Partsinello's tracking some movers in the OT. Hi, Christina. Oh, hi, Scott. We're seeing shares of Starbucks right now in the red, and this is after votes were counted this afternoon revealing that Starbucks workers at two Boston locations voted to unionize.

This vote follows a series of other unionization efforts in Starbucks stores across the country. You can see shares inching closer and closer, almost 1% lower. And now for a retail bright spot. We've got raw stores that added one point to the Nasdaq today after a price target raise to $125 from Credit Suisse. The analyst over there really loves the stock. And there's a slew of M&A activity in the software space. U.S. private equity giant Tom Abravo is acquiring cybersecurity firm SailPoint in an all-cash deal worth $6.9 billion. You can see the stock surged today, well above 20%. Tom Abravo right now has 24 security-focused firms in its portfolio,

according to its website. And another leveraged buyout today. This time, it's cybersecurity firm Datto, I should say, that said it would be taken private by security software company Kaseya for $6.2 billion. These shares, too, up well above 20% today. So two leveraged buyouts and possibly a shift of power change over to baristas. Scott? Yeah, we'll see. Tough space, tough market.

Still getting deals done. Christina, thank you. Christina Partsinevla. Still ahead, betting on a turnaround. This bank stock is down 15% this year. However, Pete Najarian says this is the name to own heading into earnings. He joins us ahead. But first, a message from junior achievement president and co-CEO Jack Koskowski as CNBC celebrates financial literacy month.

At Junior Achievement, we believe that all schools should be teaching young people about money and savings at very early ages. And it up. Like most other subjects students take in school, you don't all of a sudden advance to a master class without having the underlying pinnings of knowledge. We feel strongly that young people need to be exposed at a very early age about managing money and all the things that go into budgeting and finance. In today's Halftime Overtime, the volatile markets have dramatically impacted the deal and IPO markets, which is likely to show up on the bottom lines when banks report their earnings this week.

That puts Goldman Sachs and Morgan Stanley squarely in the spotlight. Investment Committee member Bryn Talkington owns Goldman, says she's not going anywhere. Goldman's off 25 percent from its highs. I like the company. I'm not going to sell it. But I do think we're in this weird conundrum right here that, you know, you have global GDP will be slowing. That's going to happen if we have investment banks slowing.

But yet then you get a yield curve steepening. So that's why banks are up today. So I think we have like a confluence of pluses and minuses. I'm going to hold it, but I'm not loving the position. And I don't have a high conviction that it's going to all of a sudden turn around this year and just have a spectacular return. All right. Well, MarketRebellion.com co-founder Pete Najarian just started a position in Goldman Sachs, which is why he is with us live. Pete, why did you choose Goldman? Yeah, it was last week, Scott. It was Thursday. And just looking at things that were going on within the markets, I've always got my list out. I was looking at some

of the different names. I was looking at William Sonoma. I was looking at Best Buy. I was looking at, you know, Restoration Hardware. I was looking at Goldman Sachs and Morgan Stanley. And when I looked at those, Goldman Sachs really did stand out for me. And the reason I say that is I've been looking at this name for a really long time. It was at a 52-week low. It started at 400 at the start of the year. It's gotten all the way down. It was a little bit beneath 310.

I got it around 312. But what I liked about it right now was not only 52-week lows, but I was looking at the price to book. And in the past, the price to book with Goldman Sachs, anytime it's been anywhere near one, that's been the time to buy Goldman Sachs. That's exactly where it was. It basically has done very, very little. That's trading right at book value. And when I look at the investment banking side, I think Bryn is exactly right. We know that slowing. I think that's part of the reason why we're seeing Goldman and Morgan trading where they are right now. But based upon JP Morgan, which is trading about 1.8 times book, I look over at Morgan Stanley, trades about 2 times tangible book.

I look at a lot of these various names. Goldman still trades cheaper than the rest of them. And I still think they're a premier in the financial space. So because of that, it just made sense to me. So I bought that. Plus, when I look at the implied volatility, Scott, then you know that I'm always looking at that type of thing. And I always sell calls against my long stock positions. When I look at Goldman Sachs and suddenly I'm looking at the implied volatility at about 35, the highs of the year

in the past year have been about 39. That gives me a little bit more comfort as well. I can sell a lot of premium to the upside against what I'm doing when I'm buying the stock right now. So that's exactly what I did last Thursday. The old covered calls. Pete, thank you. It says something when you buy a stock, right? We talk options all the time. But when you buy the actual shares, that's a statement in and of itself.

Pete, thanks. I appreciate it. I'll see you. Up next, Santoli's last word. Why today it's all about diversity. And later, our two minute drill. You'll hear from one money manager who's betting on a turnaround for this beaten down software stock. We'll bring you that name when overtime returns. It's that moment. It's time for Santoli's last word today is, well, diversity, if I had to put a word on it, which I guess I do.

And diversity, generally healthy, desirable state of affairs. Right. You know, diversity of opinion, genetic diversity, ethnic diversity creates resilience, balance. That's what you want. The market today showing hints of it. I don't want to over extrapolate from one day, but you had the Nasdaq 100 down 2.4 percent. The equal weighted Russell 1000 down just 0.8 percent. A lot of give and take. You've also seen something called implied correlation, which is kind of the market's estimate of how correlated different stocks are going to be. If we're in a macro panic, if the whole market trades as one, that usually means it's a high stress situation.

That has now come well off its highs. And that's usually a good thing. And earnings season, if anything, usually contributes to this trend of, you know, a little more kind of offsetting currents of individual corporate news moving things as opposed to macro. It's hard to get or it's hard to, I guess, make a broad statement about any trend just given the volatility that we're witnessing. Right. As closely as you watch things, you're not running out to make any grand statements yet. No, it's very much the tape itself does not really give you a whole lot of conviction because it seems vulnerable. The biggest stocks are still a bit of a weight on the overall index. It's also hard to see your way clear to where all of a sudden people decide that, you know, we're going to be taking a lot more risk.

We see a clear path toward further upside. We think we're going to have multiple expansion. None of that seems in the cards. So that's why I do think you're going to be back on your heels. But watch to see if you start to see, you know, internally things firm up, even if the overall indexes don't. I noted this, you know, the correlation in some respects to risk, like a Tesla, for example, down 5 percent today. Bitcoin got slammed today. So, I mean, it's still those correlations still do exist. Bitcoin and the Nasdaq 100 has been really tight. I mean, it's not going away. And that's probably all you need to know exactly on a day to day basis. But again, you know, it gave an oil and semis and fang are down big and the overall market kind of shrugs.

We have a big number tomorrow with the CPI. We'll see how it comes. By the way, the last word doesn't have to be a word. It's just like sort of your last word. So it gives you a little more flexibility in the future. Let me see. Like, you know, the last phrase or something really catchy. There you go. That's Mike Santoli. Those are his last words.

How about that? Still ahead. Our two minute drill. Why our next guest sees even more upside for this stock. Giving today's given today's following today's nearly 8 gain, and last chance to vote in our Twitter poll, we're asking you where do you want to be invested in a rising rate environment? Head to at CNBC Overtime to weigh in. The results are next.

And coming up on Fast Money, the most important trend line in the market right now, according to one technician. You're going to get those details in about six minutes or so. We're back in two. To the results now of today's Twitter question, we asked you, where do you want to be invested in a rising rate environment? And frankly, I'm surprised by these results. The majority view have picked technology. Despite the fact the rate's been going up, tech has been going down. But nonetheless, we'll honor the results. Financials come in second at 29 percent.

Very interesting. Thank you for voting. Now it's time for our two minute drill. Joining us today is CapTrust chief investment officer Mike Vogelzang. It's good to see you. Let's run through some names that you like. Speaking of tech, Adobe, which, look, software has been a questionable space to say the least. Yeah, no doubt. Yeah, we like it a lot. We think, frankly, it's a blue-chip technology name in the next two to three years. It's growing quickly.

They have a number of levers that they're pulling to increase pricing, for example. They've got a bunch of new products in the works. Something that's fairly unknown is they've got a markets analytics business that's already a quarter of their total. We just like that a lot, right? That's a premium charge. We think they're sort of customer acquisition strategy by giving away free versions of things and then rolling them into their businesses is terrific. You know, the stock was 700 bucks. It's down to 430 something. You know, back to sort of long-term averages, 30 times earnings. That's a stock I want to own here. OK, AT&T. Yeah. On the other side of the equation. Right. You got a deep value name here.

You know, we just like the fact that this is a streamlining company. They got all involved in this drama with content and with, you know, trying to compete with the studios and so on. And they finally figured out, look, we need to be a telco company. We need to be what we are. So they've spun off, you know, as of today, the Warner Media business. And you see the market's reaction. I mean, it's got a super dividend. It's a little leveraged, but we expect them to deleverage over the next two to three years. It's really an arbitrage play against what the valuation on Verizon is. You can pick up a couple of turns on the multiple. They're talking about raising prices without creating a whole lot of churn. We like the deleveraging and we like the fact that they're

focusing on shareholder return for a change instead of the egos of the guys who run the business. You've got to be quick and please keep that in mind. S&P Global, last pick. SPGI, look, good business. It's a combination story with IHS market. They're they're they're getting all the leverage out of that business. And they're buying 12 percent back of their total market cap this year. Hard to beat that story when you're growing at the rate they're growing. Mike, I appreciate your time very much in the two minutes. That's Mike Vogel's big interview coming up tomorrow. I want to tell all of you about ARK Invest.

Kathy Wood will be here live in overtime. Given everything that's going on right now in technology, including the ARK funds, you cannot afford to miss that interview. Four o'clock Eastern in overtime tomorrow with Kathy Wood. That does it for us tonight. I will see you in OT tomorrow. Fast Money begins right now.