Closing Bell - Closing Bell Overtime: Let it Ride or Ring the Register? 1/23/23

Episode Date: January 23, 2023

It’s shaping up to be a big week for your money, with the rally very much in question. So, should investors buy into the move or take the opportunity to sell? New Edge’s Cameron Dawson gives her take. Plus, Microsoft earnings on deck tomorrow evening. Lo Toney – Plexo Capital Founding Managing Partner – gives his set up into the big report. And, Bank of America’s Chris Hyzy is back with a big money warning. He explains the key headwinds every investor needs to keep an eye on.

All right, Sarah, thank you very much, and welcome, everybody, to Overtime. I'm Scott Wapner. You just heard the bells. We are just getting started from Post 9 here at the New York Stock Exchange. In just a little bit, I'll speak to star venture capitalist Lo Tony on what lies ahead for tech. That space getting off to a pretty strong start so far this year. We begin, though, with our talk of the tape. This big day for stocks and a really big week for your money. Microsoft earnings 24 hours a day, Tesla coming, too, and all of it happening with the future of the rally very much in question.

Should you buy into the move or take the opportunity to sell? It's a big question. Only your money on the line. Let's ask Cameron Dawson what she thinks. The chief investment officer for New Edge Wealth. Welcome back. It's good to see you. Good to see you. All right. So we got over this first little hurdle here, right, of 4000 on the S&P. Been a month since we've closed above that level. We just did. Does this change your thought about this rally? Well, I think we have to get through the

most critical level, which is 4100. 4100 is the 65 day high. If we look back in 2022, we never closed above the 65 day high simply because we were in a downtrend. And that downtrend continued all through last year. Is it over? Well, let's see if we break through it first. You've got to get through 4,100 before you're willing to declare that? Well, look, I think the technicals can get us so far. You're a tough grader.

The technicals can get us so far. Positioning can get us so far. We know that we started with really light positioning. But then we have to turn to fundamentals. And fundamentals, we would need to see a change in fundamentals to really think that this rally can continue. Maybe we are on the cusp of doing that. If you consider, you know, Fed tightening, right, they're certainly near the end.

They may stay where they are for a while, but they're certainly near the end. Economy looks pretty good. I mean, I know the indicators suggest that it's weakening, which, of course, it's weakening from a pretty strong level. Yeah, let's start with Fed tightening because a pause is not the same as a pivot to all out stimulus. So to get you that 15, 20 percent upside in the market, you'd have to go back to trading at pandemic era level multiples, meaning 20, 21 times. Back then, money supply was growing 20%. Today, it's zero. The Fed funds rate is on its way to 5%. Today, or back in pandemic time, it was 0%. And so I think that when we

think about the potential upside, we have to realize it's unlikely we can go back to those bubble multiples without that kind of support from the Fed. So we need a rate cut. We need rate cuts to get us back to that level? To get to those level of multiples, certainly, yes, because we never saw the market trade up to 21 times plus in the prior cycle without that degree of stimulus. So what it means is that we have to grow into the valuations that we've reached over the course of 21, 22. And I think that's what caps our upside in this market. What about the valuation where we are now? I mean, you could you could make a case that

as some are suggesting, you need to go to a much cheaper multiple for the market still because earnings are going to fall off still and the economy is going to weaken still. Well, what if none of that happens? Can you justify the multiple we're at now? Some would call that a win in and of itself. Yeah, I think that if we don't go into a recession, then it means that we likely are trading at a valuation that is in line with average,

which is not too extended, but it doesn't mean that we're cheap, which gives you a big runway for upside. So I think that's where we have to measure our expectations because as we were trading at 14, 15 times, you'd go, even if we did have easier earnings or weaker earnings, you'd still buy into that simply because expectations are low, the bar is low. At what point can we at least feel confident about saying we're not going back to the October lows? We have to make that decision somewhat soon. Sooner rather than later, as Mike Santoli was suggesting in the prior show, right? You've got to make that call sooner or later. You either think we are or we're not.

Yeah, and I think that if we trade above that 4,100 level and kind of break that 65-day high, it would make the probability of retesting the October lows lower. But just because the October low isn't retested in the next month doesn't mean it won't be retested at some point in the next 12 months, because earnings weakness could take time to materialize. Look how strong the labor market is. Look how resilient it is. If we continue to see resilience in the economic data, maybe that earnings recession comes a little later than expected. Maybe it doesn't happen to the degree that people think. Maybe the economy was strong enough all along to withstand what the Fed has thrown at it.

And these big recession fears don't materialize. Or maybe if we don't have a recession in 23, could it actually increase the odds of having one in 24? Perhaps. If you look at consensus forecasts, it's for very low growth in 23 and then a big acceleration in 24. If that doesn't happen, this willingness of the market to say, let's look through weakness in 23, maybe that weakness shows up in 24. So the willingness to look through kind of fades. Okay. So you're a show-me strategist at this point.

You're not willing to sound the all-clear. I get the 4,100 level before you need some more proof. But what about earnings? Because it's about to get real, right? Microsoft tomorrow. In an area of the market that surprised a lot of people the way that it started this year. I'm not going to call Microsoft and mega caps trash to treasure. But you know the point. A lot of stuff that was left for dead last year. High multiple tech Bitcoin all of that's rallying while the stuff

that led last year is is the laggards. Yeah. One of the things when we look at these big rallies in those beta names the losers from last year having a big surprise, is that has anything really changed? And if so, should we? Meaning that when we look at the liquidity environment, we look at the headwinds for a lot of these speculative, high valuation kinds of names, it's still very much a headwind. So there's still room for this beta rally to run. If you look from a technical perspective, we haven't quite bumped up into that resistance. But do you break away and break into a brand new uptrend without seeing the turn in the liquidity support that boosted these names all through the last cycle? So what about like the Microsofts of the world fall into that category, like fueled by liquidity more than anything else? And now

you have to reestablish that to propel these stocks higher? Well, I think that their valuation premium that they garnered in 2020 and 2021 was a function of liquidity. For sure, but it's evaporated now. It has evaporated. So at least we're not starting from such a frothy area. But if we look at value versus growth or growth versus value, it still trades at a 60% premium to the market. Back in the prior cycle, that ranged from 20% to 40%. Now it's down from 100%. So we've chopped a ton of wood. But does that mean that the valuation risk is completely gone? Possibly not. What else are you watching this week? Microsoft's going to get the headlines. Tesla's going to be in the lights. But what else under the surface? Because you do have a lot of other companies reporting this week. Yeah, here's a good wild card. Watch United Rentals.

Okay. So United Rentals came out in the third quarter earnings season and absolutely blew the lights out. Great report. And what they talked about is the strongest environment for big projects that they have ever seen. And this really set the table for a huge cyclicals rally. Look how well industrials have done over the past four months. So the question is, the weakness we're

seeing in manufacturing PMIs, is that showing up in the cyclical real data part of the economy? And URI, the rails that I'll report this week will be really important bellwethers for that. Okay, let's broaden the conversation. Let's bring in now Nicole Webb of Wealth Enhancement Group and Victoria Fernandez of Crossmark Global Investments. Great to have you with us today as well. Nicole, I'll begin with you. You're sitting right here with us. Is this real? Is it a head fake?

What's this rally now? You know, we went into the year expecting a little bit of tailwind for the soft landing bulls. We think the narrative has bode well for them, predicated primarily on the strong labor market and just the volume of the money supply post-COVID. Taking that into consideration and just kind of that influx of cash we still saw on the sidelines, still looking for a safe harbor. You watch some of these duration assets just really meet their maker last year. And so we poised ourselves for, yes, but the Fed may decide to stick this out and take demand destruction down to 2%.

And that is our fear heading into 2023. So the path of the Fed still prevents you from sounding the all clear. Because I know as crazy to some as it may sound, you have had some people come out to this point and suggest that we're in the early stages of a new bull market. Forget the bear market, a new bull market. So if last year was a reset of valuations, this year is going to bring a lot forward in terms of a reset on earnings. And where we are not confident is the narrative out of the Fed may be very clear in its indication of 25 basis points. I think that's pretty much consensus. We're there. We believe them. But how long do we hold? And do we really hold to a place where

they believe that they don't have to go back and fight inflation a second time? And that destruction, we believe, could be, to Cameron's points, a trickle through we see much later this year or next year. OK, so, Victoria, what's the story with this market? What's your thought here? As I said, we get above 4,000. We close above there for the first time in a month, right at the time that we're questioning the staying power of this move. Yeah, I mean, Scott, look, you can make a bear argument or a bull argument,

I think, in this market with the data that we're seeing. My concern is that you're getting this feedback loop that you have here because you've got such a strong labor market which means jobs are plentiful out there wages stay strong when people are losing their jobs they've got another one paying them more in less than two months time you've got financial conditions easing you've got mortgage rates coming down a weakening dollar a consumer with real incomes doing better gasoline prices coming down right all of this feeds into itself to have a strong consumer and an economy that I think is better than what a lot of people are giving it credit for but saying that that means the Fed is going

to continue to hike rates and I think that is what's going to push us into a mild recession around the middle of this year that's what we've been calling for over the last six nine months. Is to have a recession in the middle of the year I think we get two

more twenty five basis point hikes at this meeting and at the March meeting and then I think the Fed holds for the rest of the year we're not going to get the rate cut I don't believe. That the market is pricing in this divergence between the

market and the fed. Is why we have all this volatility going on I hope I'm wrong and we don't have a recession we get a soft landing and then my outlook changes a little bit. But I think for now that. Thirty seven hundred to forty

one hundred range on the S. and P. it's key for your upside and your downside, and you've gotta be watching that, especially in earnings. So I'm thinking about what you're saying here, and I'm looking right now as we speak to see how much the major averages have rallied off of their lows. And the S&P, Nicole, is 15% off of its 52-week high, I mean, off their highs, 15% off the high, right?

So we've come a long way off the low. What determines whether we sit right in this spot where we're at now, whether you really feel like you can believe in this move or not? Because if you say, well, mild recession is base case, well, maybe that's priced in. The data that we're waiting for, the rollover data, the real numbers, is going to be just this hyper focus on the labor market. I was talking to Cameron earlier about just this resilience of the consumer, their sentiment around, okay, if I lose this job, I have all these autonomous jobs available to me.

I have the ability to bring income in. And if we continue to see that, the strength and resilience, I mean, to us, until there's a re-steepening of the yield curve, we don't believe we're headed towards that recessionary moment. And with that, we have to be long in this equity market. Even if we are going to have a recession, if it is, as Victoria suggests, could be mild. Is that priced in? No. What's priced in then? I mean, we're down a lot, right? On what? Something has to be priced in if you're down 20%. Different parts of the market are giving us different probabilities about recession probabilities. If we look at yield

curves, three-month, 10-year yield curve, 100% flashing red signal, we're going into a recession. At the other end, less than 20% probability of recession is currently baked into high yield spreads, so the riskiest parts of the credit market. Equities are somewhere about in between, meaning that we're about 50% probability. It means that the equity market isn't at these valuations pricing in a very dire outcome and certainly not at these earnings estimates either. And so really, we're stuck in this middle to see which way things break. And it really is a matter of time. But is a mild recession a, quote unquote, very dire outcome in your mind? I mean, it doesn't seem like that would fit that definition. To me, a mild recession is that at this point, base case. Deep recession would be

what you described. Well, it certainly doesn't mean that if we do have a mild recession, it would mean that we would have earnings estimates be lower than they are today. They're sitting at about 5% growth. And it would likely mean that valuations would go lower for a period of time until the Fed would step in and be supportive of markets of multiples, which means that the downside would be a retest of the October low if we had that mild recession. If we avert a recession, the question is, then do we see earnings be much more resilient, and does that mean a very tight Fed, which means that maybe we get the resilient earnings, but we don't get the boost from valuations. And I think that's the tradeoff and what keeps the current upside more limited.

Victoria, what's riding on tomorrow, 24 hours from now? By then, in overtime, we're likely going to have those Microsoft results out. Yeah, I mean, look, obviously there's been a huge debate on what to do in the tech space in these high beta names. You guys were talking about that earlier. And we think you need to have some exposure to high beta names in your portfolio, but you can't go all in at this point.

We'll see what Microsoft tells us. Obviously, last quarter, Azure had some problems. People are going to be watching that again because of energy costs. They're going to be looking at the margin component of Azure demand. There's a lot going on, and they've already given us weak guidance going forward.

So we have to see what happens there. But look, this week is not just Microsoft, not just Tesla. There is a broad range that's gonna give us clues to the strength of the consumer. You've got credit cards, you've got transportation, you've got tech. This is gonna give us a really good feel as to what the economy as a whole is looking like

coming out of the fourth quarter. So I think we have to pay very close attention. But obviously, Microsoft, 24 hours from now, is going to be a good omen. You are paying attention, Nicole, right, to these other companies as well. And Victoria is right. It's Visa, MasterCard, Sherwin-Williams, Kimberly-Clark, Chevron, United Rentals that Cameron was talking about, Freeport. There's a good swath of companies that give you a pretty good idea of what's happening across broad industries and broad, you know, countries and continents, too. Yeah, and let's not forget Lockheed and Union Pacific, two names that we're pretty keen on and think that will hit on the upside with their earnings releases this week. But I think for us, another trade that we're really interested in right now, and where the street often misses kind of that small incremental earnings growth,

and we see that trickling through in the mobility of the global consumer. So while there wasn't as much stimulus in China, we talk about this reopening. It's a different situation, so that attainable luxury. So these brands like Estee Lauder, Nike, Starbucks, we do see a real trickle-through effect of just the mobility trade, but also pairing with just that incremental accessibility that is very different than our post-COVID experience here. Are you surprised that the consumer has seemingly remained as strong as they have? Well, we're starting to see real earnings growth start to re-accelerate.

We know that the consumer had savings to dip into all of last year. There was still some hangover from stimulus, which allowed people to keep spending. The consumer, from a debt perspective, you've seen total debt levels go up. But as a percentage of earnings, they're actually really mild. And if we look at consumers from a housing perspective, only about 5% of mortgages started this year as adjustable rate mortgages. That compares to 35% prior to the great financial crisis. So consumers are more resilient because they're less debt sensitive on the short end than they used to be prior to the great. One of the reasons also is they have jobs, right? And the labor market is super strong. That's kind of my point. As long as the labor

market remains strong, and I know we hear about layoffs almost every day. It feels like it in big tech, and you're likely going to hear about more. But more broadly, the labor market is pretty strong. Exactly. And this likely keeps the Fed in that tightening posture because you're not seeing the kind of easing in the labor market that would really cause them to want to take their foot off the brake. Unless they are. I mean, I can hear I can I can see your point. It goes to the conversation about a policy mistake. Yeah. Right. They're looking too much at what's a lagging indicator and saying, well, it's too strong.

We need to keep our foot on the gas, not paying enough attention to the leading indicators, which suggests weakness that says, OK, what if they over tighten into an already slowing economy? That's sort of the most dire scenario, like the one you were talking about. But right now, growth is actually accelerating. And we get fourth quarter GDP data this week, and it's likely to come out around three and a half percent. That compared to consensus last month of just one percent. So growth is better, and it's part of the function that financial conditions are easier. Financial conditions are easier today than they were when the Fed started tightening in March. That's pretty wild. After all of this tightening, 450 basis points of tightening.

And I think that's the real paradox here is that we're just not seeing it in the data yet. Well, inflation is coming down. We are seeing it in the data yet. Well, inflation is coming down. We are seeing it, Nicole, in that set of data. Do you worry about a policy mistake by the Fed sort of ruining everything? Absolutely. And I think the Fed has been very forthright in that there is a lot of obstacles to the labor market on a forward-looking basis. When you think about those age 55 retirees during COVID, that mass exodus, border policy put into place in 2016 and escalated by the restrictions on borders all through COVID, that changes the dynamic of the labor market on a look forward basis. Second to that, you know,

they're trying to be very cognizant of as we watch inflation or disinflation in some of these key areas, think rent, think gas, can that create more consumer discretionary spending ability and just continue to peak up or prop up that services inflation? They have a lot to tackle. Victoria, last and quick. Yeah, look, I mean, I think we have a bumpy road ahead of us. I think we'll see the market go up and down until we get a for sure definition from the Fed of when they're going to take a pause and how long they're going to hold it there. So I tell everyone, hold on, have a balanced portfolio with some staples and some cyclicals, and I think you'll be OK to ride it through. We still have that that that battle, I suppose, of the pause versus the pivot. Is the pause enough? We need to see the pivot. Is the pause enough? Do we need to see the pivot? And I suspect we're going to have this conversation in the weeks, if not months ahead.

Ladies, thank you so much. We'll see all of you soon. Nicole, thank you for being here. Victoria, and of course, Cameron, we'll see you again real soon, I'm sure, of that. Let's get to our Twitter question of the day. We want to know what best describes this year's big move in tech,

a sustainable bounce or a giant head fake? You can head to at CNBC Overtime on Twitter. Place your vote. We'll share those results a little later on in the hour head to at CNBC Overtime on Twitter. Place your vote. We'll share those results a little later on in the hour. We are just getting started, though, here in Overtime. Up next, inside the tech trade. Microsoft earnings, as we said, less than 24 hours away. Star venture capitalist Lo Tony is on deck with your setup for that.

Plus, where he sees the next big opportunities in tech. Don't go anywhere. We're live for the New York Stock Exchange, as always. And Overtime is right back. We're back in overtime. Big tech's first big earnings report. Less than 24 hours away right here in overtime. That's when Microsoft hits tomorrow. So much riding on that, given how the space has started, 2023. With more on what to expect, let's welcome CNBC contributor, Lo Tony, Plexo Capital founding managing partner. Welcome back. It's good to see you.

Thanks for having me. Is this going to be the beginning of something good for big tech, or this is the first warning shot for the space? I hope it's not the first warning shot for the space? I hope it's not the first warning shot for the space, but I think it is important to really drill in to Microsoft's earnings because there's going to be so much information that could portend what we see next, not only across big tech, but in some of the other areas as well. Primarily what I'm focused on and what I hear our VCs and the Plexo Capital GP network focused on are three things. So looking at what Microsoft's results are with regard to the cloud, the Office 365, and maybe even Surface and some of the other hardware.

And let's start with the cloud. Why is the cloud important? Well, this could be the canary in the coal mine, both for how we should think about cloud earnings for the other players as well, but be all the talk in the enterprise about trying to manage to the bottom line, making adjustments to the spin, while at the same time trying to balance the need for digital transformation. So we'll be very focused on what happens with those earnings. And I think with the 365, you know, look, Microsoft had been extremely aggressive with their sales team in bundling a lot. And now I think a lot of the IT folks are taking a much closer look at, you know, how much do we really need? And are there areas where we can reduce cost because we're not needing all of these productivity tools that we purchased? I feel like there's there's so many different variables at play right now for big tech. The pull forward from the pandemic, how much of their valuation growth was due to,

and the stock growth was due to easy money from the Fed. Now we're in a more challenging environment. Yet you're hearing that enterprise growth is holding up well. But then I've got Satya Nadella himself telling me the next two years are going to be tough. And I'm not sure as an investor what I'm supposed to make of all of that. Right. And I think your point about easy money, that low interest rate environment that helped to provide a lot of the capital, not only in the public sector, but the private sector as well, that fueled a lot of the venture capital growth. And I think, again, we saw those pandemic tailwinds kick in and the big tech companies didn't plan on all of the activity that was going to be generated as a result of that.

And they hired extremely aggressively. And now we're seeing folks with a need to pull back. And look, let's be very clear. Any big tech company right now is also using this as an opportunity to be able to not only right size their organization, but I think send a message around people returning back to the office, the perks that people were taking for granted and being appreciative of the roles that they have. And so I think, you know, when you look to what Microsoft is trying to signal, what we should see is some indication about the enterprise and how the enterprise is

actually spending, as well as I think what we're also going to hear is a look towards the future from Microsoft, especially with all of the buzz around chat GPT, the proposed continued next investment by Microsoft into that and the integration of that AI technology into many of the different services that Microsoft provides. So they'll have to do a little bit of, you know, pragmatic talk about what they're seeing with their core business. Probably we'll touch on Activision Blizzard, but then I think the glimmer of hope is going to be what's going to happen with chat GPT and AI. I never thought we'd say this, but I feel like Apple is in some strange way the biggest wildcard this reporting season. It hasn't announced the kind of

layoffs that it's, you know, big tech brethren have, obviously. right? And what was generally deemed to be a supply side issue for Apple seems now to be morphing into a demand question issue. Are there demand problems now to worry about? I truly don't know what to expect from them. What about you? Yeah, no, great point, because we look to big tech and we think about them in the aggregate. And when we see the herd moving in a certain direction, Microsoft, Meta, Alphabet, all reducing headcount, the standout is Apple. And I think Apple is going to be the wildcard. Your point is spot on in terms of what we saw over the past 24 months or so were supply chain issues, trying to make sure that they could catch, Apple could catch up to the demand.

And now the question mark is, will the consumer be able to maintain that resiliency that we've seen? It was a combination of a lot of, you know, the pandemic effect, right? The government supplying capital into the economy and providing a cushion, not being able to go out and therefore increasing the savings rate. And also the really tight labor market.

And so that held up for the consumer. And now we don't know exactly where the consumer is. It looks like the consumer is still maintaining some resiliency, but we shall see. And this is going to be important looking ahead. I got to run, but I do want to get your opinion or your perspective on Salesforce and yet another activist emerging and just how somebody who's in the Valley views what's taking place, particularly within your sector, in your wheelhouse, right? Activists are now showing up at the door, and some suggest that tech is the place that's most

ripe for more to show up. What do you think? I do. I think that we used to look at tech in isolation. There wasn't a great understanding. But if you look historically at the places where activists had focused their attention, you know, I think it only makes sense to look at those income statements and those costs below the line and to really start to think, OK, these companies are announcing these layoffs. Can they do more to increase the margins? Love the conversation. Thanks so much for the time. We'll see you again soon, I hope. Thanks for having me. All right. That's Low Tony again. He's a CNBC contributor as well. It's time for a CNBC News Update. Bertha Coombs. Hi, Bertha.

Hey, Scott. Here's what's happening at this hour. The death toll from the mass shooting at a dance hall in Monterey Park, California, has risen to 11. Los Angeles County officials say one of the people who was hospitalized has died of gunshot wounds. Three others remain in the hospital, one in serious condition and two others who are recovering. Four members of the far right Oath Keepers group have been convicted of seditious conspiracy during the attacks on Capitol Hill on January 6, 2021. They were also found guilty of two other conspiracy charges. The verdict comes weeks after a different jury found Oath Keeper's founder, Stuart Rhodes, and one of his lieutenants guilty of seditious conspiracy. Also today, another January 6th protester claims he did not get a fair trial.

Richard Barnett, who was photographed with his feet on a desk in the office of then House Speaker Nancy Pelosi, was found guilty on eight charges, including felony civil disorder. He says the trial should have been moved and that he plans to appeal. Scott. All right, Bertha, thank you. That's Bertha Coombs. Up next, prepare for a grind. That's the big money warning from Bank of America's Chris Heise.

He is here to tell us exactly what he means and most importantly, how he's positioned his earning season gets ready to kick into full swing. Overtime is back right after this. We're back. Stocks kicking off the week higher. The major averages posting their second straight session of gains. But our next guest says buckle up because the next few months are going to be a grind. Joining us now, Chris Heisey, Maryland Bank of America, private bank CIO. Good to see you. A grind. Those are your words. What does that mean for me, the investor? Well, for the investor is, you know, Scott, we talked about this before, but, you know, coming into this year, coming out of the year of 2022, obviously 60-40, if you want to look at that, one of the worst years and possibly decades, if ever. And then you're coming into this year and you're looking for a few signs

that it's over. And unfortunately, you're not going to see all those signs. Like, that's just not how it works. You're going to see the hard data turn the other way. The soft data continue to suggest that things are OK. Bond market pricing pricing in one thing the equity market pricing in another and when you get those two competing forces together and not a lot of clarity not to mention what's going on the debt ceiling negotiations and other things around the world it's a grind so we're at that tail end now with the final bottoming process everybody's looking for science and scott, you know this. This is the most telegraphed, most debated, discussed recession of all time, perhaps. And now everyone's trying to find the perfect data to suggest it's all over. And we need a few more months and more clarity on 24,

let alone what's going to happen in the next few months here in 23. Yeah, but it's rare, Chris, that you see all the signs in advance, right? That's why investors listen to people like you and to, you know, other big name investors who come on the network, because they're looking for the signs that they need to see before the obvious happens. And some would suggest that even just listening to everybody now is one of those signs. Why? Because everybody's so negative. And that's a counter trend sign to some. And if you look at the other metrics that you can build a case around, why isn't now the time to start getting more positive? Yeah, I do think one of the ways to kind of really think about it is look at the

on the ground, you know, economics that are occurring first and foremost, you know, what companies are doing to protect March. That's really important because the knee jerk reaction is we're slowing down. We're going to go into a recession, even if the recession is delayed. Consumer is relatively healthy. The Fed is ultra tight right now. Money growth has just turned negative, which really nobody's talking about. We know inflation is coming down. But when you put all that together, your checklist of, OK, first, valuation falls. We had that. Maybe there's another shoe to drop on valuation. But there has to be new information that comes in that we don't know about to take valuation lower again. And what happens if rates come down sharper than expected

at the back end versus the front end's hand? Then then all of a sudden valuations don't look so bad. That's why we say stay balanced. Don't be overly defensive, not overly on your front foot on risk assets. We do think there's more big buying opportunity coming. And that's when leading economic indicators do ultimately bottom. OK, that's what I want to know, because you told the producers there are going to be two more, quote unquote, large opportunities to add risk this year. You're telling me that one of them is where the leading economic indicators bottom? Yes. Yeah. The first sign the leading economic indicators bottom, the clues there are usually within the bond market. And we're not there yet. And ultimately, we're playing catch up on the other economic statistics. We would not be waiting for earnings to bottom. Markets generally bottom before earnings do. So if you wait too long and you're a long term investor, OK, that's OK. You buy into the

downswing once. The downswing comes when the realization is that we are growing slower. The big companies you're seeing right now are trying to right size their business models for a slowing growth environment. Then ultimately the Fed pauses and then you start to think towards 2024. And the second buying opportunity is usually on the upswing, Scott. And then you kind of put out your risk assets, you look at what your risk profile is and you get ready for the next long-term bull, which is, in our view, earnings driven. Unfortunately, that's not until 24. All right. Make that the last word. Chris, I appreciate it as always. Chris Heisey. We'll see you soon. Up next on the attack, Salesforce shooting higher as another big

name activist takes aim. We're going to break down what's driving all the activist activity when we come back. We're back in overtime. Salesforce jumping today. There it is. Look at the chart on news that Elliott Management has become the latest activist to emerge in that stock. It comes after Starboard Value announced a stake back in October. So what is driving the activist activity in that name and elsewhere? Let's ask Kenneth Squire. He's the founder and president of 13D Monitor, a CNBC contributor. It's good to see you. I mean, I feel like we picked up in activism across the board. Now we have four in Salesforce. What do you make of the Salesforce story first? So, yeah, there's there there is three for sure

and reportedly four activists in Salesforce. I think most of them, I think they want the same thing. They want costs down, margins up, and work on succession plan. The interesting thing, though, Scott, is when there's multiple activists in, the company can basically choose which one they want to put on the board. I think they all would like to have a board seat. And it's hard to really run a proxy fight against a company that just put an activist on the board. You know about, you know, how this all plays out better than most. When you have this many

activists in one name, do you expect them to be in communication with one another? Would they work together in some respects to try and get what they want? Or as you suggested, if everybody wants a seat at the proverbial table, how does that play out? Well, there's definitely some sort of communication going on between between the four of them, or at least, you know, some of them. And I think, yeah, I think most of them would would want want to board CIPA, would be happy to have any activist on the board. And, you know, they're obviously never going to be a group, but they they they are like minded and they want similar things. I'm wondering also, you know, it feels like and I spoke with Lowe Tony, venture capitalist, who was with us just a short time ago about, you know, the idea that activists are showing up at Silicon Valley's door in a big way and whether you think that tech is going to be a major target, you know, companies that hired a lot of people during the pandemic. So some would

suggest their size is bloated. You know, the valuations have come down a lot. Stocks that have gotten crushed. Are they ripe for activism more so than other stocks and other sectors? I wouldn't say more so than other stocks and other sectors. I would say more so than they were years ago. Yeah, their stock has gone down. Activists are generally value investors. And when the stocks come down, it makes a larger gap between price and value, even in some of these growth stocks. But what you see at Salesforce, and you see it other growth-like companies that activists get involved in, is companies that are growing at, for instance, Salesforce at 38% over 20 years, and their growth slows down. And now they're not really a hyper growth company, but their margins are low. So they need to become a

value company or a growth company. And you need to get either the growth back up or the margins down, the margins up and the cost down. I mean, in some respects, it's a bear market phenomenon, too, in some respects. Right. I felt like there was almost a dearth of activism for the last handful of years while you were going through a Fed induced bull market. If like if you're an activist, what are you going to complain about? The whole market's ripping. The stocks that you're in are ripping. Now everything's sort of falling apart to the point where it's easier to pick and choose at where the damage is. Yeah, there's a huge premium on activists in flat markets and down markets where, like you said, you can't just rely on the markets for your return. You just can't put your money in an index fund to get 20 percent. An activist catalyst is really

valuable in markets like that. And also in markets like this, it's easier to see, to spot bad management and much easier to get the support of other shareholders. So, yeah, I expect to see a ton of activism in the markets coming up. Yeah. I mean, forget about spotting bad management. It's certainly easier to blame bad management when your stock is getting ripped apart. Ken, I appreciate the time. We'll see you soon. That's Ken Squire, 13D, and of course, a CNBC contributor as well. Coming up, we're tracking some big stock moves in overtime. Seema Modi standing by with that. Hi, Seema. Yes, we are, Scott. Earnings season continues. We've got the biggest movers plus a major cybersecurity firm. Given a sell rating, we will tell you which one right after this very short break.

We're tracking the biggest movers in overtime. Seema Modi is back with that. Seema. Scott, high peak energy has resumed trading after being halted on news that its board is exploring strategic options, including a potential sale. That stock moving higher in the overtime by 10 percent. The CEO saying it's an opportune time to capture value. Let's take a look at Zion's Bancorp shares off by more than 5 percent right now, but they had been up better than 8 percent just a few minutes ago. The regional bank reporting strong fourth quarter results. Earnings handedly beat Wall Street estimates. However, the CEO is saying the bank is continuing to build its lost reserves due to the prospect of a slowing or recessionary economy in the coming months. And just in the last 20 minutes, Guggenheim Securities initiating coverage of Akamai Technologies with a sell rating price target of $75, which is a 16% downside from where it trades right now. The stock is down in the overtime by around 1%.

Worth noting, security names have underperformed the broader tech sector this year. The iShares cybersecurity ETF iHack, for example, has returned just 1% in January compared to the NASDAQ, which is up 7%. Scott? Seema, thank you very much. Still ahead, Santoli's last word. We'll find out what he is watching as we gear up for earnings, including Microsoft tomorrow in overtime. We're right back. It's the last call to weigh in on our Twitter question. We want to know what best describes this year's big move in tech. A sustainable bounce or a giant head fake?

Head to at CNBC Overtime to vote. The results plus Santoli's last word next. To the results of our Twitter question, we asked what best describes this year's big move in big tech. The majority of you saying it is a giant head fake. All right. Mike Santoli is here for his last word. That's an interesting response. It is. Maybe throw some cold water on the idea that this move in the market is is legit and not a head fake in and of itself. It also seems to suggest people are not rushing to get overexcited about what's happened in three weeks. That's, I think, a net positive. What's interesting about this moment is for most of the last, I don't know, eight months,

you were able to say bears had a lot of conviction because you could say the market's in a downturn. They had all the evidence. Technically, the Fed is tightening into a slowdown. What more do you want to argue with, right? I mean, essentially, it's just that has to play out. Now you have a little bit of a challenge to that because the market is challenging that downtrend. I mean, we've kind of vaulted above some significant levels.

Maybe we can hold there. And the Fed is finishing up a tightening campaign into what might not actually be a slowdown, at least on a short-term basis. You might be in this window where growth looks OK. So Neil Dutta, I know over at Renaissance Macro, was saying the Fed is stopping into a better growth period right now. So it's almost the inverse. Doesn't get you free and clear naturally. But I think it's very interesting that, you know, it's challenging people's most comfortably held positions coming into the year.

You said earlier, I think I heard you say that we've got to decide soon, right? You've got to figure out the answer soon, whether this is legit or not. Why do you suggest that? Well, you have to decide soon if you really want to be right about what the emerging trend is, because you have the S&P 500 at that exact downtrend line. Everyone's looking at it, 4,000, 4,100, whatever it is, the December highs. And you've done the work, I think, on valuation. Everyone wants to say the market's not cheap. Of course it's not cheap. It's not a bargain. But if I go back one year to January of 2022, the strategists on Wall Street were happy to say it's a 21 times earnings and we're going to go up 5% to 10% this year. That was the consensus. So valuation doesn't tell you which way it's going to play. So right now, what the market has done ahead of a Fed meeting is try to maximize the uncertainty

of both bulls and bears. Technically, it's improving, but not necessarily escape velocity. And fundamentally, it's just hard to know if all we're doing is, you know, getting comfortable before the recession actually proves itself here. As Microsoft, which reports, just to remind everybody again tomorrow, you know, 24 hours from now here in overtime, have they left anything to doubt or surprise at this point? Nadella himself's come out in the next two years, going to be tough. How should we view this? You wouldn't think so. No, I don't think they have. I think the big question is, are those types of companies still going to be in the penalty box just because they got too expensive, just because they've still held more of their value

than some of the others? I don't know that fundamentally it's interesting because Microsoft's one of those where it's just this black box that produces EPS beats. I mean, that's kind of the way a lot of investors see it, as opposed to Tesla, where people thought there was a real long-term thing that they were actually seizing upon and they wanted to be a part of. Microsoft was just kind of like, look, they're going to make the numbers, and we're okay with that. And now you're paying 22 times earnings for it.

So the question is, is that too much? They're ringing the bell, or they're doing something with what sounds like a bell in advance of tomorrow? You mentioned Tesla, though. It does come this week. Yeah. As well. What about the so-called high beta stuff that's that's rallied to start the year? Is that the least if you want to say is that the least believable of everything? I mean, Bitcoin's up huge. Yes. I would say I wouldn't say the least believable. It might be the least trustworthy or suspect. Yes. I would say I wouldn't say the least believable. It might be the least trustworthy or suspect. Yes. To a degree. You want to really just say is, hey, this is January.

This is kind of how January is. You want to see if it settles out. A lot of people have been able to seize upon, oh, you know, the the steel stocks have been working, too. You know, it's not just been the flimsier fundamental stories that have been ripping just because they got washed out late last year. Well, to, I guess, the overall point of where we started, it's been kind of broad-based. Very broad, yeah. Which adds to the validity that maybe it is actually something more. Right. So what it increasingly tells you is the market is acting as if October might be, in retrospect, a reliable low. But you're up 15 percent. That's always the way it goes. You can never quite give it credit until you're already 15, 20 percent off the low. And that's why people

say either don't try to time it or just be open minded about which way it breaks next. Yeah, well, this time more than most could be hard at a time because the signals that tell you what it might be doing to be hard to come by. We'll see you tomorrow. See how it all shakes out. That does it for us. Have a great evening. Fast money's now.