Closing Bell - Closing Bell Overtime: Policy Shockwaves Hit Oil, Defense, Housing as Record Run Takes Breather 1/7/26

Episode Date: January 7, 2026

Markets move as Washington takes center stage, with Eamon Javers reporting on White House actions rippling through oil, defense, and housing, including new limits that could keep institutional investors out of single-family homes. Tony Bancroft of Gabelli weighs in on proposals to restrict pay, buybacks, and dividends for defense companies. Victoria Greene of G Squared Private Wealth and Kevin Gordon of Charles Schwab break down the market action and talk positioning and risk. Venezuela’s oil outlook with our Brian Sullivan and the geopolitical stakes involving China with former U.S. Ambassador to China Nicholas Burns, before Tim Seymour rounds out the conversation with a look at international markets. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

That's the end of regulation intercontinental exchange ringing the closing belt the New York Stock Exchange. Weight Watchers doing the honors at the NASDAQ. The Dow hit an intraday high earlier in the session, but reversed to close down nearly 500 points. The S&P, as you can see right there on your screen, down fractionally as well. It looks like 6920 as we settle out here. The NASDAQ, the only major average to finish higher, albeit slightly. Big theme today, a reversal in some of the hottest parts of the market. Financials. for some of the worst performing sectors. Decliners include the volatile names within financials such as Robin Hood, Coinbase,

but also JPMorgan, Bank of America. All of these names have been trading near record highs. The metals trade also reversing today. Big losses in silver and in platinum especially. We've got more coming up on that. Let's also take a look at bond yields because the tenure down to 4.14% this morning's ADP report short, 41,000 jobs created. That was slightly less than the estimate.

The government jobs report comes out on Friday, and that technical level for the 10-year Treasury yield is in focus as we get more macro data as the week unfolds here. That's the scorecard on Wall Street. Welcome to closing bell overtime. I'm Morgan Brennan. John Ford is off today. Washington moving Wall Street today in three key sectors. First, oil falling today as the U.S. takes the first steps to import Venezuelan oil.

The president says that could be up to $2 billion worth of crude, which if it comes to the U.S., it won't be going to China. We're going to discuss those implications. And defense stocks, also moving lower. Lengthy post President Trump put out earlier today says he won't allow dividends or buybacks for defense companies, also placing limits on executive pay. That's not all. A proposal to block institutional investors from buying single family homes, sending a number of names in that industry into the red as well. Boy, do we have an hour plan for you. Let's kick it off with Amen Javvers, who has the detail on what we're seeing with the housing market coming out of Washington. Amen. Yeah, Morgan, that's right. It's been a very busy day here at the White House,

the president moving markets on a number of fronts. Taking to social media today to try to put a lid on housing prices, the president is, saying the American dream of home ownership has gotten too far out of reach for far too many young people. He writes on social media, I'm immediately taking steps to ban large institutional investors from buying more single family home. and I will be calling on Congress to codify it. People live in homes, not corporations. The president goes on to say, I will discuss this topic,

including further housing and affordability proposals and more at my speech in Davos in two weeks. Now, the White House so far, not providing any details on what steps exactly the president is talking about here when he says he's going to take those steps, or what the legal basis is for him to block investors from buying property.

Still, we saw Ohio Senator Bernie Moreno Moreno going on social media this afternoon to say, in fact, that he will introduce legislation in the Senate to codify this into the law. This idea, Morgan, it's been gaining traction in the president's MAGA base for some time. Now, the late Charlie Kirk pitched it publicly over the summer as a way for the president to deliver on affordability for young Trump voters, so that's an area where you're seeing some of the populist message around this administration coalescing. That plus the defense moves that he made today that you covered earlier in the day, Morgan,

indicate to me a real populist shift here in this administration as they go into 26, looking ahead to the midterms, very concerned about affordability. And you saw the president there saying that he's going to talk more about affordability at Davos in two weeks, so we can expect more ideas to be rolled out from the White House between now and then, Morgan. Yeah, the activist investor president. We're going to get into the defense piece of this in a little more detail here in just a minute, amen. But just to go back to the housing piece of this, because actually when you're talking about housing or you're talking about defense, you're talking about two topics that have been, I guess, political lightning rods, if you will, or talking points or areas of proposal for a number of years. With housing specifically, I mean, depending on the data you look at, it would seem, in recent years, in part, amid this affordability crisis, that you have seen investors take on larger and larger shares of the overall housing stock that's out there and available in the market.

And so I do wonder what came first, the affordability crisis or the investors and how much they're feeding each other. Do we even have any sense of that yet? Yeah, well, we don't, and we're trying to get some more insight into sort of how this idea made it to the president's desk. We know that the vice president, Shady Vance, is sort of on the economic populist wing of this administration. So this might be something coming from the vice president's office, very much so. But one of the things that's different maybe with housing than with other issues in terms of affordability is that you have voters on both sides, a lot of voters on both sides, right? Because there are voters who are priced out of the housing market for sure, including young voters. But there's a lot of voters who own homes who like that price appreciation because they see that as their retirement nest egg.

So if you're going to take steps to lower prices of houses, you are putting a kibosh on the rising. home equity of those older voters who are looking at that as a way to cash out and have some retirements. So that pricing power, the voting power of the people who are charging prices doesn't quite exist in retail or other things because it's large corporations that are selling the goods that are being priced higher. In this case, though, it's voters on both sides of the transaction. That's what's so politically interesting about this to me. Okay. Amen Jabbers. Thank you from Washington. We just teased it. We're going to dig more deeply into it. Let's shift to defense, the sector ETF, ITA, taking a hit late in today's session after a post from President

Trump about the industry. The president writing, quote, defense contractors are currently issuing massive dividends to their shareholders and massive stock buybacks at the expense and detriment of investing in plants and equipment. This situation will no longer be allowed or tolerated. I will not permit dividends or stock buybacks for defense companies until such time as these problems are restricted. Likewise, for salaries and executive compensation, military equipment is not being made fast enough. A lot of exclamation points. This comes after the ETF hit a record high

for the third straight day just earlier in the session. General Dynamics, Huntington Ingalls, which is HII now. L3 Harris, RTX all hit all-time highs earlier today. Joining me now, Tony Bancroft, Cabelley Fund's portfolio manager. He's focused on defense and aerospace runs the Defense and Aerospace Fund over at Cabelli as well. Right here on set.

It's great to have you. Great to be back, Morgan. I mean, what a day to have you. to have this conversation. There have been an expectation that we were going to get an executive order as recently as a month, or I guess as long ago as a month ago on this topic. So perhaps not surprising to see the president posting about it, although as far as I know, we don't actually have an EO document in hand, at least not yet.

What does it mean for defense? I'm not sure. I think that, you know, obviously President Trump is trying to motivate the defense industry. to speed up production, which is greatly needed. We saw the news yesterday on Lockheed with the tripling of PAC-3 Patriot missile production. You know, I think there's a lot of sides of this. You know, the defense industry makes very complicated, highly technical weapons that, you know, it takes skilled labor, it takes security clearances.

And if you've never been through a security clearance, it takes a long time. You can't speed it up. It's like aging whiskey. And there's probably not a lot. It's hard to qualify to be an employee to defense contracting company. And on top of that, COVID, of course, increased prices. So inflation, that sort of is fluctuated contracts and renegotiating contracts. And then demands have changed.

The world's evolved since some of these contracts like the F-35. That was originally planned out in 2000. And they had to say, hey, there's a new threat. We saw that in Gaza. We saw that in Ukraine. Technology is improving. and our weapon systems need to keep up with it. So there's a lot of renegotiating contracts, and it's hard.

What the F-35 does is a very technical, highly skilled system, and no other jet that can do it in the world. So it's not as simple as I think of just waving a wand and making these things better. Yeah, and it does. It raises a lot of questions, including how do you actually define a defense contractor? I mean, the primes are one thing, but you also have some companies that have commercial aerospace,

businesses as part of the portfolios. you have the suppliers as well, and then you sort of have these new non-traditional entrance that are in the mix and contracting with the government as well. I was speaking to somebody in the industry just before the show started. And one of the things this person was noting was that so much of this hinges on the funding that you're getting appropriated from Congress, too. We can't even get past a continuing resolution or even a shutdown recently to be able to get to that place where you have a defense industrial base that's being shaped by one customer, the government, and takes years to. to come to fruition. So that's a key part of this, too, this idea that, quote-unquote, it's expensive to buy down risk. So how does that factor in? You know, it's like you said, there's one customer, there's a monosopy. You do not want to upset your one customer if you're a defense prime or any of the contractors. And you, you know, you're trying to work on new programs. You obviously during COVID, you heard, you know, lead times went from six weeks to 26 weeks.

I mean, that really, you know, disrupts a production line. And if you've never seen, like, the F-35 production line, you know, it's a mile long, and everything works in perfect concert. And if you have one thing missing, you can't fly an F-35 with 99% of the parts. It just doesn't work. And I think that's a big part of it. And on top of what you said is a chicken or egg situation. You need the funding, you know, defense contractors are not home speculators.

They don't go buy a home and try to flip it, you know, 10 months later. These are long-term, long-lead programs. You know, they're still flying the B-52, and they're probably going to be flying the F-35 for the next 20-plus years. I mean, just buckle your seatbelt, because you and I are sitting here, we're having this conversation,

and we've got breaking news as we talk about it. Let's check out shares of R-TX, because that's trading lower here after hours. It's down 3% right now. Here's why. Because the president has just posted on social media that he's been informed by the Department of Ward that defense contractor, Rathion,

has been the least responsive to the news. needs of the Department of War. The slowest and increasing their volume, the most aggressive spending on their shareholders rather than the needs and demands of the U.S. military. Goes on to basically say that Raytheon seems to think this is the Biden administration, that this is, quote, business as usual. It's not. Either Raytheon steps up and starts investing in more upfront investment like plants and equipment, or they will no longer be doing business with the Department of War. This in some ways reminds me of late 2016 when President Trump then started tweeting about things like F-35 and Air Force One. But if you're an investor

in some of these names and in some of these stocks, especially since they have been trading right near record highs, and we do see this bigger, broader geopolitical threat landscape. And you do have orders coming in, not just from the U.S., but from abroad in bigger numbers as well. What do you do? What do you do with the stocks? I mean, you could look at it one way saying more demand And, you know, and then another way saying that, you know, when Raytheon built, first of all, the Patriot line has been running for, you know, multiple decades, right? So it was designed for a certain amount of production, annual production. And, you know, just like, again, like yesterday, Ohio Lockheed made an agreement to triple it, if you don't have some form of, you know, a future outlook on what your production is going to be, it's just hard to, it's just hard to go build a new plant. I mean, what if you're overcapacitized?

That changes all of your economics, your operating leverage, your profitability. And I think defense contractors need assurities, and I think it really comes back to what you said with a continuing resolution and, you know, getting funding and appropriations is a big issue. So if you see a down draft in these names, is it a buying opportunity in some of them right now, or you just need to sit on your hands because there's too much uncertainty? You know, how many months ago, a couple months ago, you know, Israel launched 100 Patriots. I think there's high demand for the Patriot missile system. I don't think that's going to go anywhere in time soon. And, you know, and Raytheon's a large, it's one of our largest positions in our GECAD, Gabella ETF, commercial space and defense ETF.

So we like it. We continue to like it. Tony Bankroft. Thank you. Thanks for being on set with me. Yeah, great to see you. Well, let's turn back to the broader markets. Big moves in tech today as well.

Intel is the best stock in the S&P 500. Christina Parts and Evelist is at the NASDAQ breaking it down for us. Hi, Christina. Hi, Morgan. Well, the NASDAQ was actually the only major industry in the green today, up about 0.16% and up, and up of 1.5% this month. I bring that up because it was largely driven by memory names climbing higher. But today, data storage and memory stocks were relatively mixed. Western Digital and Seagate pulled back after hitting record highs just yesterday. But Sandisk, you can see on your screen, buck the trend, closing about a little bit over 1% higher, even after yesterday's double-digit surge. Intel, like you mentioned, Morgan, closed higher on enthusiasm. enthusiasm around its new AI PCs built on its advanced 18A manufacturing process. But today's move could be more of a retail traders really chasing the next AI adjacent play. Yesterday it was memory, today, Intel, who's tomorrow? Alphabet, surpassing Apple and market cap today, making Google parent the world's second largest U.S. company behind InVIDIA in terms of market cap.

And cybersecurity stocks really leading the NASDAQ higher today. Cantor Fitzgerald reaffirmed crowd strike in Palo Alto's top picks citing, A.I. Security demand and consolidation where companies want fewer vendors instead of managing dozens of different tools. This bodes well for those two firms. You can see closing over 4% higher. And we made a promise last hour an update on the AbbVie Revolution Medicine story. We reported just within about 30 minutes ago. Ab v. telling CNBC that they are not in discussions with Revolution medicines. Revolution medicines moving sharply lower after hours after closing up nearly 30%. You can see down 15% right now, Morgan.

moves. Christina Parts Nautilus, thank you. Now let's get a check on the metals trade. We had big losses today. Let's bring in Pippa Stevens for the details. Yes, big losses, but I could also just say we're taking a pause after some very big gains, especially we're talking about precious metals. Yeah, definitely a pause here, but we are seeing right across the screen. And there are some headwinds from the dollar ticking up, but the move really does seem to be largely driven by profit taking, gold settling off the worst levels of the session, but still down about three quarters of 1%, with silver and copper, both pulling back from yesterday's records highs.

City, though, thinks there is more upside for copper here, hiking its LME target to 14,000 over the next three months. Take a look at Platinum. That was the biggest loser today falling 6%. Now, today's moves come ahead of the commodity index rebalancing, which kicks off tomorrow, with the most selling expected in silver since it has been the top performer. Now, one metric that really illustrates that is the gold to silver ratio, which is now trading below 60 times for the first time since 2013. showing traders preference for silver. HSBC saying today that silver is fundamentally overvalued and, quote, they expect high levels of volatility

and frequent spikes to the upside on supply scares, real or imagined. Super interesting. All right. Well, stay on top of it for us. And that ratio, it's one that we used to talk about a lot and it's sort of fallen out of favor. It's back. It's interesting to hear it back again.

Pippa Stevens, thank you. Well, stocks are off to a good start so far in 2026. The Dow and S&P 500 both hitting all-time highs in the, session earlier today. Even with the losses today, we're just shy of major milestones. But with all the concerns looming, can markets continue to rally to new records? We've got that and so much more. Overtime's back in two. Well, joining us now, Kevin Gordon from Schwab Center for Financial Research and Victoria Green from G-squared Private Wealth. Great to have you both here. And, Victoria, I'll kick this conversation off with you. What do you think? You think we're going to power higher here? It's a strong start to the year, which tends to bode well for the rest of the year.

Yeah, I do, actually. I like it. I mean, we get earnings next week. It'll get us maybe off of some of this geopolitical. I mean, we did warn it's a midterm year, second year presidential cycle. A lot rock year. A little bit lower expected returns this year. But I do have a lot of faith in financials that maybe kind of rescue us next week. We're really bullish on that sector. You know, we're watching right now because we are having the markets go back to kind of the tariff tantrum days where we're kind of like, what's being tweeted? Is this what sector is safe? You know, is health care next to get some sort of on blast tweet, you know? And so it does put you a little bit on edge. But I'm not too worried about some of these because there's a lot to be worked out on the back end.

You know, what's happening in the home builders. You had a great conversation on the defense market. And so we look at this and say, take a little bit of a deep breath. we think you're probably going to have a little bit of investing by tweet this year and you just have to be prepared for a little bit more volatility, but overall remain bullish. And I think if today's any indicator to your point, I think that's very likely. Kevin, I want to get your thoughts on this investing landscape right now and where you'd be

putting money to work. Yeah, so, you know, I think that it could be a different looking year in the sense that if you think about some of these rotation trades that have happened over the past few months, you know, things like financials like Victoria mentioned, but, you know, even extending that out to deep recyclicals like industrials or materials, that's been a pretty strong rotation under the surface of the market over the past few months, even as tech has largely sat out. So I say that because it could be a year where if you do see broader participation by a majority of sectors, but it doesn't necessarily include tech or it doesn't

necessarily include parts of discretionary or communication services, your index level gains might not look as strong, but that doesn't necessarily mean that it's a weak market set up. So I think that's something to be, you know, paying more attention to, especially because now when you start to move down the cap spectrum, the earnings backdrop actually looks a lot better for even the small cap universe. Not to say that in absolute terms, it's amazing. But when you start to look at it relative to the past couple of years, earnings expectations have started to finally pick up for an index like the Russell 2000. And that's really been the missing component over the past two years for a cohort like small caps. And I think that's going to be a continued maybe shift where we see some of these, you know, really lesser loved parts of the market. that haven't participated in the past couple of years,

maybe start to catch more of a bit. Interesting. Victoria, in your notes, you say with geopolitical risk, you see this as a fat tails moment. What do you mean? So it's typically, we see it a little bit higher probability of bad events happening. So I'm not saying the sky is falling.

I'm not saying sell everything. I'm just saying with fat tails, right, if you look at a normal probability distribution, you have a little bit higher probability of a bad event happening. So we're just saying, be careful. We could see this be very volatile. We could expect a five to seven percent

pullback because there's so much happening in the world right now. And you have a lot kind of lined up right now that we do see at risk. We have potentially Supreme Court having a decision on Friday, maybe on tariffs, maybe on something else. Got everything going on with Venezuela and Greenland and the whole new Don Roe Doctrine and how that plays out. We're still kind of waiting to see how China and Russia respond to that as tensions continue to ratchet up. And then obviously, you kind of have this, you know, new tweet impact on certain sectors. And so it's not lonely that that you have all of these risks out there, but you have a potentially aggressive administration looking to solve problems quickly in a midterm year, which should cause all these knee-jerk reactions.

So end of the world is probably not coming. It may feel like it in a short term because we see a higher probability of a bigger bad event risk. And Kevin, of course, the other topic that we've talked about, I feel like for years and years now, but continues to be front and center for this market is AI, the investment spend, the infrastructure build out, the deployment into the application layer, realization for corporate America. Where do you think we are in the cycle? And is this still something that's necessary in someone's portfolio? Yeah, I mean, we still think that, you know, it's going to be a dominant theme this year. But I just think that it's really shifting in terms of market composition and where it's concentrated in the stock market, especially if you're

looking at an index like the S&P 500. You know, I think a couple of years ago, it was pretty easy to say that it was just concentrated in the tech sector and maybe, you know, communication services and just those two. But now that you've seen more of this build on, you've started to see more of the adoption, you know, kick in and a lot of beneficiaries really start to use technology and use it to their advantage, especially in the past year where, you know, tariffs have really put a lot of pressure on companies, but they've had, you know, relatively stronger margins to absorb a lot of that pressure. That's really where we think the next phase is going in terms of where the market, you know, benefits are. But the interesting thing is you can probably say that

every sector almost in the S&P 500 now is an AI sector to some extent. I think to a less extent, maybe for an area like Staples, but even if you think about health care, for example, there are many use cases in a sector like that. And that's caused actually a decoupling in what is known as and thought of as is this classic, you know, defensive trade, where Staples, utilities, health care are not necessarily, I think, grouped together more in how we think of classic defensive. So I think that needs to be the lens through which investors look at something like AI. It's not necessarily, you know, just tech anymore. It needs to be looked at in a much broader way.

Okay. Kevin Gordon and Victoria Green. Thank you for joining me in a mixed session for the major averages, although not major moves in either direction today. We're sort of right below those record levels for the Dow and the S&P. Well, copper selling off today, but along with the other metals, it's been a red-hot area of the market. Mike Santoli is looking where the hot money is going now when overtime returns. Welcome back to overtime. Stocks mostly lower today. The down S&P 500 sliding late in the session after hitting all-time intraday highs this morning. The NASDAQ, however, holding on to a fractional gain.

An interesting development at the top of the MAG 7, though. Google passing Apple in market cap for the first time since 2019. And Constellation Brands reporting results just a few moments ago. The earnings of $3.6 per share, easily topping estimates. Revenue also better than expected. Its beer volumes, though, falling 2%. But saying its beer business continues to outperforms. the broader industry. And you can see those shares are up 2%. Oil, though. That's down 2%

today as the U.S. takes steps to get Venezuelan oil flowing. Brian Sullivan has been reporting on this all day from the Goldman Sachs Energy Conference in Florida, and he brings us the latest. Hi, Brian. You said consolation. I thought you were talking about consolation, energy, but you're talking about booze, not wattage. So color me confused. Morgan, Brennan, thank you very much. Okay, a lot happened today, folks. There are four big takeaways that want to leave you with from the Goldman Sachs Energy Conference. Number one, sanctioned oil to the United States, okay? The president's announcement on social media last night and some of the announcements, the news we broke this morning,

that 30 to 50 million barrels of rent as well and oil will come to the United States sooner than later because it's in storage, but more will be coming indefinitely. So in a commodity market, when you have more of something that tends to be in a lower price, that's what happened today. More oil in the global market, theoretically, we're going to see a lower price if Venezuelan production can get back up a couple hundred thousand barrels a day in a year or two, and that would be about the soonest Morgan. It could probably happen. Oil prices could keep going down. The big question that everybody here and others have is will American oil companies go back into Venezuela? Chevron obviously has continued to operate there for years. Conoco Phillips and Exxon

mobile. They left Venezuela in 2007. They have legal claims against that country. That's another issue. Either way, will they go back into Venezuela in the next couple of years? And if so, what would it take to get them there? That will no doubt be the topic of conversation at a big meeting at the White House on Friday around 2 p.m. Eastern time between the president, energy executives, CEOs, and others in the administration. Now, we spoke with the Secretary of Energy Christopher Wright, earlier today, live on Power Lunch. And I asked him a pretty simple question, Morgan. Why go back into Venezuela and capture Maduro?

Here's what he said. This is using commerce and energy to influence the trajectory of world events. We're going to try to take a poor, collapsing, kleptocratic nation and make it into a thriving American ally that's no longer a criminal threat to us. And we're doing that through commerce and energy. Because a lot of the money to Venezuela gets from selling oil, Morgan, as you know, is used to buy arms, it's used to buy weapons. They trade with Iran, they trade with Russia, and a lot of the oil bound for sanctioned countries. So that's the oil.

We're talking about sanctioned oil, not the oil Venezuela is going to sell to other nations around the world. Brian, it was a great interview. I watch the whole thing very intently, and I appreciate you bringing us the latest from Miami and this conference. Let's discuss the potential geopolitical ripple effects here. So joining me now, Nicholas Burns. He is the former ambassador to China under President Biden. He is currently a professor at Harvard's Kennedy School of Government. And Ambassador Burns, it's great to have you on.

Welcome. Thanks so much. That's exactly where I want to start with you. That notion of commerce and energy influence, influencing the trajectory of. world events. It feels like the foreign policy, the longstanding foreign policy playbook has been torn up and it's being replaced with something else. Your thoughts? Well, I agree with that. And I think that oil and energy is at the center of the nexus of China and the United States over Venezuela. China considered Venezuela over the last several

years to be, in essence, a client state. They had what they called an all-weather strategic partnership. And yet, the Chinese have lost face over what has happened over the last four days. You know, the Chinese had military advisors and diplomatic advisors all around Venezuela. They couldn't prevent the U.S. military from doing what they did to capture President Maduro. And in terms of energy, China is a major, of course, global importer of oil and gas, but its imports from Venezuela are only 4% of its total. So that's not decisive. What is decisive is if somehow China is completely cut off from the Venezuela market.

And that gets to the humiliation that I think the Chinese leadership feels right now. And it was interesting when I watched President Trump the very first day last Saturday, when he explained what had happened in Caracas, he said that he implied that the oil would keep flowing to China. And I think that's because Morgan, President Trump and President Xi Jinping have a very difficult relationship right now in trying to sustain the trade truce and the supply chain truce they're going to meet in April. I don't think either of them wants to rock the boat. So I would think that somehow this would be worked out that when push comes to shove,

the Chinese will probably continue to have access. Washington will give them access to imported Venezuelan oil. Okay. I don't think folks fully appreciate it and understand, and I don't think you can overstate how great and growing the influence is of China in the Western Hemisphere. You've got what, 24 signatories to the Belt and Road

initiative across Latin America now. We put out, the U.S. put out a national security strategy that re-implemented and reinforced a new version of the Monroe Doctrine, if you will. China turned around and right behind it put their own strategy out for Latin America. Obviously, Venezuela is the launch pad for so much of this. You have all the critical infrastructure and critical commodity investments that China has made throughout the region as well. What does this do to that dynamic? Well, it's something that the United States has been pushing against for a number of years. President Biden and now President Trump. This is interesting. In 2002, the United States was the lead

trade partner of nearly every country in Latin America. And right now, China is a leading trade partner, I think, with every country in South America and many others in this hemisphere. And so obviously, the administration signaled in the national security strategy that taking back that influence in the Western hemisphere is important. And that can't happen just through diplomacy and certainly not the military. It has to be American investment. Private American investment has got to leave this. And the conditions have to be right to do that. And so you heard the interview with Secretary Wright, and obviously the administration now is making oil, the centerpiece of what happened last weekend, not talking about bringing the domestic opposition

to Maduro's regime back into power, not talking about human rights, but talking about oil as a center piece. It's clearly part of this larger strategy to gain back some influence in the Western Hemisphere for the United States. Does all of this make China more likely or less likely to make a move on Taiwan? I think the Chinese do feel, I think they feel humiliated because of what's happened, but they also feel at the same time emboldened. They're painting the United States with their massive propaganda network as a rogue superpower. And And, you know, unfortunately, that has some residence in places like Cuba and Colombia that President Trump has threatened over the past couple of days.

The Chinese don't believe that they need a legal definition, a legal treaty to go in and take over Taiwan. They believe Taiwan, this is their case, not ours, is a province of China. But I think they do feel emboldened now when they see the United States acting as it has in Caracas, when they see President Trump threatening our ally Denmark over Greenland, they'll feel emboldened to make the argument, well, if the United States can act that way in its hemisphere, why can't we act that way in Taiwan, in the South China Sea, the Spratley's and Paracels, where the Chinese have acted illegally against the Philippines and Vietnam, even in the

East China Sea, perhaps in the future, where the Chinese have their eyes on Japanese administrative control of the Sinkaku. So I think it has opened up an opportunity, unfortunately, for the Chinese to make that point. We could spend another hour or more on all of this. But unfortunately, we have to leave the conversation there. Ambassador Burns, it's great to have you on. Thank you. Thanks so much.

Thank you. Still ahead. We will discuss whether earnings growth expectations and fed rate cuts will help justify elevated valuations in this market. Welcome back. Now let's go global. International markets outperform the U.S. for much of last year. This year seems to be starting off no differently. So, how should you play this outperformance? Let's bring in Tim Seymour from Seymour Asset Management and a fast money trader. And Tim, it's great to have you back on the show.

It's great to be here, Morgan. Happy New Year. Happy New Year. So, I mean, international, this is your expertise. It's kind of my thing. It's kind of my thing. Yeah, talk to me. Well, it, 25 was extraordinary. Amazingly, the international markets existed for many investors, including Guy Adami, who seems to be making his way over here. By the way, Guy has some really exciting news coming up on fast money. I just want to point that out. It's what we call it T's in TV land. There he is. He can't hear us, but he's looking happy. Morgan says hello.

Apologies. So the dynamic for international markets for 26 is similar to 25. The Fed, I think, being the one central bank of the majors in the world that is. cutting rates or at least in easing mode. That's dollar negative. That's certainly going to be a tailwind for investors. I think some of the deregulation trade trends that we talk so much about in the U.S. If you look at European Money Center banks, they are even more exposed to deregulation on a relative basis. I would argue European money center banks are cheaper on a price to book, probably 1.1, 1.2 times versus U.S. 1.8, 1.9 times. Bigger capital give back in terms of dividends and buybacks. European yield curves are actually steeper. So the money center

banks look interesting. Some of those great global, excuse me, U.S. trades that investors want exposure to here, whether they be utilities, whether they be AI data center. If you're talking about ASML, NXPI, ARM, some of these same companies globally, I think, are very interesting ways to get that exposure. Internationally, gold miners are mostly global. Nuclear is very much a global energy trade. I think the lower energy prices around the world are, tailwind for big developed economies like Japan and Europe, so I think they're a real catalysts. Yeah, it's interesting to hear you say that you think there's going to be more deregulation in other markets versus the U.S. That feels like a contrarian take to me.

Well, it's all a relative change to where things are. No one would dispute that European regulators have maybe choked off a lot of innovations, certainly have been a headwind to industrials and banks. I would argue also in Japan, and Takeichi and a new prime minister and the dynamic around deficit spending. These are trends both in Germany, Japan, other parts of the world that are very much trends people have gotten excited about in their counterparts in the U.S. So deregulation is happening, and it's probably happening in a way that's more substantial than people could have expected off of a lower base. How much of this hinges on what happens next with the dollar? And I will ask that and then ask that question broadly, but then also ask you about China specifically, which really seems to be supporting its yuan versus the dollar right now, which perhaps is more

of a China policy shift towards consumption story more than anything else? International investing is not based upon a weaker dollar in my view. I think it's a tailwind. I think EPS trends and growth around the world are going to be as interesting as they are here for some of the same efficiencies that people talk about here. I think Asian currencies probably have the most to gain against the dollar. I probably wouldn't count the yuan just because I think it's the most manipulated of the major global international currencies. But I do think the Korean won or even the yen, I think, as much as we've always been waiting for the yen to finally appreciate it, we don't want that to happen too fast because that's probably

a risk off trade. I actually think that that's going to continue to strengthen against the dollar as well. All right. We just covered a lot very quickly. Great to be here. Tim Seymour. Look forward to seeing you at Fast Money and to that news for Guy Adami as well. We're really pulling for Guy. It's going to be big. Okay. Sounds good. We look forward to it. Up next, Mike Santoli's back. He's looking at some areas of the market outside of tech that are starting to look A little more pricey right now, too. Stay with us. Back to overtime. Valuations remain front and center. The market may look reasonable at first glance, but dig a little deeper, and not everything's trading at a discount. Mike Santoli is looking at that. Hi, Mike. Yes, mortgage, so here's what we'll hear about valuations in general.

What we are hearing among strategists and investors, which is, yes, the forward PE of the S&P 500 at 22 times is elevated relative to history. It's only been higher during COVID briefly and also during the tech bubble, but valuation is a poor timing tool, and valuation often does not really come down if earnings are still growing and the Fed is cutting rates. All of that is true, but there's really no path away from the fact that if you're buying it a higher valuation, you should expect to some degree to pay that back either in terms of lower forward returns or some kind of declines before too long. The other thing you'll hear is the average stock's not as expensive as the overall index. That is true. Here's the equal-weighted S&P at around 17 times forward earnings relative to about 22 on the headline S&P. However, the equal weight doesn't tend to get much higher than this. Historically, this is around the ceiling. When it was in COVID, it was because earnings forecasts were collapsing. That's one of the reasons that the PEs were so high. It wasn't just that the market was so strong. So I do think you have to be careful in thinking that there's a lot of valuation upside to the average stock out there. I just picked a few high-quality stocks that are more cyclical that are showing that they're at pretty high valuations compared to their own history. So take a look here at American Express for one, which of course is a financial and is at like 22 times forward earnings at this point. So basically a market multiple. William Sonoma, I wanted to get

some high quality consumer name in there. And then PACR, of course, industrials, truck engines, things like that. So clearly the market appreciates a lot of the non-tech companies that are performing well and arguably is paid up front for some of the earnings growth that we're all expecting to see come through over the course of the next few quarters, Morgan. Cool. Well, and to your point, I mean, you have, you know, new highs in S&P financials, health care, and industrial. It's not just been the broader S&P 500. I'm looking at this note that just pushed out from Sam Stove all over at CFRA Research. And, you know, he points out that the equity performance rotation is favored mid and small caps over large caps to start

the year and that value over growth. So perhaps this goes right back to what you're saying. Well, it does. I mean, I do think everyone acknowledges that there's perhaps a little more opportunity outside of the mega caps. You are going to see a little bit less of a monopoly on earnings growth from those big AI-driven companies. I guess my question is it's not so much that they're overvalued, but they're just not as cheap and unloved as you might expect they would be considering the underperformance of the average stock and mid-caps and small caps have had over the last few years. So look, Maybe the math is different. Maybe earnings are going to surprise massively to the upside, and stocks are not as expensive as they look right here. Productivity gains are going to enable us to pay more for stocks, whatever it might be.

I'm just saying it's not as if there's a lot of real bargain merchandise even below the surface. Okay. Mike Santoli, thank you. I want to take another look at defense stocks here because we have reversed course. We're moving higher, notably higher here in overtime. Even RTX, which was targeted very specifically by name by President Trump just earlier this hour. He wants to limit stock buybacks and dividends from these companies, but also just posted that he wants to increase the federal defense budget by 50% to $1.5 trillion in fiscal 2027. And you can see stocks responding to that. There's so much more here. We'll dig into it tomorrow that does it for us here at overtime.