Closing Bell - Closing Bell Overtime: S&P Hovers Near Record Close 12/28/23

Episode Date: December 28, 2023

The S&P hovered near a record close but didn’t quite make it – though the Dow did notch its seventh record high this month. James Demmert from Main Street Research and Paul Hickey from Bespoke weigh in on this year-end market action. Plus, CNBC.com’s Tanaya Macheel breaks down what to expect from crypto in 2024. And, the CEO of Suntory – the company behind Jim Beam and Maker’s Mark – explains how a big tariff pivot could impact its bottom line. 

All right. A mixed picture for stocks, but a record high again for the Dow Industrials. The S&P hovering near a new record close, but not quite making it. It looks like we're about 13 points away here as stocks settle. For the Dow, it did notch its seventh record high this month. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan. John Ford is off today. Coming up, the global playbook.

J.P. Morgan's Joyce Chang will tell us the country where she sees the most opportunity to invest right now with U.S. stocks at or near record highs. And it's not last call just yet. More like happy hour. We're going to talk to the CEO of Suntory about what he's seeing from consumers and which whiskeys are selling the best. But first, let's bring in James Demert, Main Street Research Chief Investment Officer. He has $2 billion in assets under management. James, it's great to have you on. I'm looking at your notes here. You're bullish. You're bullish going into 2024. Why?

Happy holidays, Morgan. And we are very bullish about going into the year and even over the next maybe six to ten years as we envision a new super cycle sort of led by AI tech, if you will. And I think that here specifically, investors need to remember what does a new bull market look like? And if you really go back and look at history, you'll see oftentimes new bull markets sort of start like this one, has a little narrow,

then it starts to broaden out as we saw last quarter. And when it gets to these extremes, these heights, oftentimes investors get scared and they think, oh, it's gone up too much. Maybe I'll stop investing. And that would be a mistake in our view. We think that investors still have a lot of capital outside of the market from the bear that occurred. And we think January effect, if you remember that one, Morgan, is going to come into play as we get to the beginning of the year.

And that's usually where the market broadens out even more, goes up even more than people expect, and even brings the small cap stocks, obviously, which have been challenged. So we think that trading range that small stocks and the rest of the market have been in breaks out in January as money flows back into the market. Of course, the small caps, the Russell 2000 ending the day down about one third of one percent. But in general, as of late, have had a pretty strong rally. I do want to get back to your comments, James, about this AI led bull market. But first, let's expand the conversation. Let's bring in Paul Hickey, co-founder of Bespoke. Paul, the fact that we're on record watch here for the broader market, for the S&P 500,

assuming we hit that at some point here in the coming days, how meaningful is it to rack up a new all-time high for the S&P versus what equities do from that point on? Yes. Hey, Morgan. When you look at these periods when we go a long time without, it's been nearly two years without a new high, forward returns for the market have been positive 12 out of 13 times in the post-World War II period. So, you know, we talk about being at record, near record highs right now and how we've had the best November, December in a very long time. And it's been a very strong year for stocks. But at the same time, the market has gone nowhere in the last two years. The S&P is flat, and the Russell 2000, as James was just talking about, has been weaker, and it's been stuck in a range with 2000 was the ceiling. We've just started to break out of that range recently. And the key here,

I think, is for the broadening out of the market theory is the loosening of financial conditions, lower interest rates. Interest rates are still at restrictive levels, but it's the direction that's most important. They're going down. So I think in that respect, when you look at these prior periods where you've seen this loosening of conditions and such, the market overall has done well, but just as importantly, small caps have done very well as well. And you may look and say, oh, well, small caps have had this monster run in the last two months. But when we look back at prior periods, when you see a strong run in the Russell 2000 over a two-month period, it's generally been a precursor to further above

average gains. OK, James, I want to go I want to pick up on something that Paul just touched on, and that is the broadening of this rally and what that means amid loosening financial conditions. We've got a delivering alpha survey that was conducted. And one of the questions that was asked here is which will be the top performing areas in the U.S. in 2024? And among all the different sectors that were put forth to investors who took the survey, 35 percent, so the majority in the survey, said financial stocks will be the top performing sector. Do you see it the same way? I like that survey and I appreciate you bringing it up. You know, I think that where the best relative earnings growth is going to be

in 2024 is where you want to be as an investor. And I would suggest the financials. Absolutely. The valuations are almost historically cheap as is ours, our small caps. But the financials, absolutely, I would be in there. I also think You know, you cannot ignore the fact that it is an AI tech led new business cycle new bull market You've got to be in those tech companies, even if the valuations seem Expensive the growth is there to justify it. So yeah, we would go with big tech AI Financials I have to agree with consensus, which I usually don't. But yeah, and I would suggest definitely the small stocks as well and the industrials.

OK, Paul, there's been a lot of chatter and debate on our air in recent days about how overbought the market is right now and about whether we've seen a pull forward in performance for U.S. stocks from from 2024 here into late 2023. We know historically when you have a Santa Claus rally at the end of the year that that can be a good final burst for stocks to finish out the trading year and begin the next year. But how important is that rally and the context around that rally to setting up what the following year could look like? Yeah, so I mean, I don't necessarily buy the argument of pulling forward returns, so to speak. We are overbought in the short term, and everything has gone up in the last two months. 60-40 portfolio is on pace for a record two-month gain. International stocks are up. Small caps have

surged. Financials are even up, and they've been down all year. So in that respect, a short-term keeping investors honest, that wouldn't surprise me at all. But when we want to look ahead to the year as it is, we think the bulls are favored by a field goal, so to speak. And I think you're better off staying on the side of equities. And like I just said, we've come a long way fast, but we haven't gone anywhere in the last two years. OK, Paul Hickey and James Demert, thanks for kicking off the hour with me in what has been a mixed session for stocks. Let's get to senior markets commentator Mike Santoli now for his market dashboard.

Mike, I think we had a little bit of some foreshadowing about what you're going to tell us based on that market conversation. Picking it up right where Paul left it, Morgan. In terms of the two-year look at the S&P 500, I think it's just really worth emphasizing that as much as it seems as if the market has really been going straight up for a couple of months, it has been mostly a round trip over two years. What do we got here? This is a one year. Oh, no, that is two year S&P 500. No, it isn't. That's going up to 5200. We're not there yet. I don't know what's up with the chart, but we basically scooped out this low around October 2022, down 25 percent, up 33 percent, almost 500 days without making a new high. There are not that many periods in history where you've had that that longest stretch where you've you've been without a new high. Of course, some even longer, 2000 to 2013. The point being, usually you don't just tag an all time high and then and immediately turn lower.

We'll see if that changes this time around. Did also want to look at a couple of interesting risk appetite tells. One is the emerging markets outside of China. So EMXC is the ETF, along with the Russell 2000. Here's a two year look that basically is perfectly in sync. So it's suggesting to some degree that investors are treating small cap U.S. stocks as akin to being emerging market stocks. Very cyclical, subject to liquidity flows, subject to what Fed policy is, also very rate sensitive. So they have traded in sync. And it does give you this sense that there's so many charts look like this where big, big down in 2022 and then sideways bumping along a base for a while and then just peaking out to a breakout. You could do the ARK Invest fund looks like this.

The IPO ETF looks like this, too. So there is some sense out there that maybe some of the beat up areas of the market are just starting to actually break out of that range where they've really been doing nothing as the S&P 500 has had a decent run, Morgan. It's certainly an interesting chart and the parallels cannot be denied here. I do wonder, though, if there's another relationship to be pulled in, and that is the U.S. dollar and how the U.S. dollar has been treating and what that has meant for the Russell 2000 and emerging markets, whether there's a whether there's a correlation there or not.

100 percent. So that's another aspect of, you know, loosening financial conditions. And, you know, the U.S. dollar index, it's not far above the lows for the year. It's around 100. I think 99 and change was the low several months ago. And if you looked at that relative to bond prices, perfectly inverse. So bond prices go down, which means yields go up, which means the dollars, you know, is also going up. So all that stuff has absolutely worked together. I guess the question is, are we in a new regime with regard to financial conditions and liquidity as we get into 2024? Okay. We'll see you a little bit later this hour, Mike. Pulling double duty, triple duty. Lots of duty today, Mike Santoli. Up next,

we're going global. While U.S. stocks are near record high, several international markets are in correction territory. But J.P. Morgan's Joyce Chang is seeing some big opportunity in one overseas market. She will reveal where after this break. Stay with us. Overtime. With just one trading day left in the year, can you believe it? The S&P 500 is hovering near record highs, but it hasn't been a rosy picture overseas. International markets like Shanghai and Hong Kong are in correction territory. Joining us now is Joyce Chang of J.P. Morgan Global Research.

Joyce, it's great to have you on the show. And the first place I do want to start with you is your outlook for 2024 after what has been a very mixed picture internationally for global markets. Yeah, it's been a really tough year for emerging markets. We've seen record outflows out of the bond markets and even out of the equity markets. But I think there is value here. The growth story in emerging markets has held in pretty well. And with the stimulus that China has done, they're also going to exceed their growth

target this year. So we do think that emerging markets, particularly on the local currency side, is looking more attractive right now after having a very challenging year. Now, some of that year was just the relative value with the developed markets was quite even. But if you look at the growth story in emerging markets going forward, we have more conviction that growth will hold in in the emerging markets than in some of the developed markets as you look to how 2024 will play out. So you would invest in China right now? I'm not so sure that China is the one that I would invest in right now. I think there's a

number of the emerging markets, middle income countries, particularly some of those that are benefiting from the supply chain relocation, like Mexico, some of the what we would call connector economies where supply chain relocation and foreign direct investment is going. Now, China's gotten pretty beaten up right now. That is one that actually could do more of a tactical pop right now. But I think over the longer term, you know, some of the countries like Mexico, India are probably going to be in better stead. OK. And of course, those are two markets where we have seen some outperformance this year. How about Japan? Because that has captured the attention of global investors this year, in part because of what we've seen with BOJ and the speculation that we could see

some monetary policy shifting as well. But in general, that equity market has truly powered higher. Can it continue? I think it can continue. Japan is a structural story right now. Japan is exiting deflation. It's had the first income gains and real wage increases. We think the financials are probably going to outperform when we look at other markets like Europe and even in the U.S. And they have first started in a very sequenced way with yield curve control and removing a lot of the restrictions on that. And I think the exit from deflation and from negative interest rate policy will be one of the stories in 2024. I feel like 2023, looking back on it, was a very macro year in terms of what investors were watching, what was moving the markets, what the conversations, market conversations were. Is that

something that's going to persist next year? Well, I think it's going to persist, but it is really like, is the easing cycle going to be as synchronized and how much easing is in store and when does it start? I think the market's getting a little ahead of itself. I mean, there's definitely some fear of missing out as we're closing into the year. But the growth story into this year still looks really quite strong. I think more of the questions will come up in the second half of the year. But one key thing to watch next year is the election calendar. Next year is a record year of elections, 77 elections, more than half of the world's population going to the polls, 60 percent of GDP. You start with Taiwan, you come to the U.S. in November. So I think that there are slowly to

still be a lot of geopolitical risks to watch in 2024, in addition to where we are in the easing cycle and when exactly that starts. Do you think investors are fully appreciating that geopolitical risk? I mean, there's the known risks out there, right? Like Israel, Hamas, Russia, Ukraine. You could even see that the tensions between the U.S. andas, Russia, Ukraine. You could even see the tensions between the U.S. and China, tensions around Taiwan. But there are these other hot spots that have been sort of simmering as well, whether it's China with the Philippines, whether it's Venezuela and Guyana, whether it's North Korea. Are there more risks attached to geopolitics than are being talked about or being priced into markets right now?

I think there are more risks than what's being priced in, but it's very hard to price in that risk because you really can't time it. Some of this is about longer term policy direction. And I would not say that deglobalization is yet a driver in the market, but we've seen supply chain relocation. We're going to see, I think, still more restrictions that are on tech, advanced tech in particular. And I think the political regimes and what the mindset is on the geopolitical risk will have quite a lot to do with how flows are going to play out over the longer term. And we've seen some of this. And this is one reason why emerging markets have had a more volatile year over the last 12 months. Joyce Chang, thanks so much for joining me and bringing us on a trip around the world.

Happy New Year. Happy New Year. Up next, are the stars aligning for Bitcoin? Well, the cryptocurrency lowered today, but some say there could be some serious upside for the space in the new year. A rundown of what investors should expect after the break. Welcome back to Overtime. Bitcoin moving lower today. Cathie Wood's ARK Next Generation

Internet ETF selling its more than 2 million shares of the Grayscale Bitcoin Trust, but buying more than 4 million shares of the Grayscale Bitcoin Trust, but buying more than 4 million shares of the ProShares Bitcoin Strategy ETF. So here to discuss that move and the outlook for crypto is CNBC.com's Taneya McKeel. Taneya, it's great to have you here on set. Nice to be here. Thanks, Morgan. So I guess let's start with the positioning we've seen from Wood and whether we're seeing similar types of positioning or at least anticipation of a spot Bitcoin ETF from investors ahead of what could be as soon as next month and approval.

Yeah, it's getting really interesting heading into January 10th, which is the deadline at least for ARK's application with 21 shares. So the SEC by then needs to either reject or approve it. I spoke with Cathie Wood just a couple of days ago for Crypto World about this because that So the SEC by then needs to either reject or approve it. I spoke with Cathie Wood just a couple days ago for Crypto World about this, because that actually was the remainder of the GBTC shares in that fund, and she has been offloading for several weeks. So she told me, you know, she was pretty plain about this. She said this is plain portfolio management.

The price of Bitcoin has been rising rising and we do always take profits. However, as you sort of alluded to, it is interesting, you know, should she get the approval and it is very likely that if one issuer gets approval, several will also get approval. So that would make GPTC a competitor. And I, you know, would expect that should these issuers get approval that ARK's Bitcoin ETF would become the main Bitcoin vehicle for her other funds as well. OK, so one to watch there. Bitcoin's just had an incredible year, 150 percent plus gains this year, despite some of the controversies that have happened, some of the company implosions or at least leadership changes that have happened. There's an expectation that that could continue next year as well. How much of that is tied to ETF approvals? How much of that is other factors that are at play? Assuming it happens. Yeah. Well, yeah, there is entirely the

possibility that there could be an ETF rejection, although it is, you know, I think broad consensus is that is not likely. The Bitcoin ETF is a big thing. Things have really intensified. You set Bitcoin up 150 this year. It's up 57 percent just over the last six months, which is sort of the start when BlackRock came out and said, we want to do this Bitcoin ETF. And things have just been building and building from there, up 11 percent just for the month. It is expected, you know, the whole second half of the year really has been about the ETF story.

It is expected to be the biggest catalyst next year, and that's just the start of it, because just a couple of months later, we're going to have the Bitcoin halving, which historically drives big gains, and then, you know, we're also watching the rate environment, expecting to maybe see some cuts next year. We know that rate hikes have been hurtful to Bitcoin over the last couple of years.

So the setup is really strong. There are some concerns, though. It is feeling a little overheated. CryptoQuant has data out today showing that the market is a little bit overheated. They think it is possible that Bitcoin could correct to about $32,000, which is the short-term holders' realized gain. Yeah, the price has just been climbing and climbing. So all of these investors, short-term investors and miners, are sitting on these unrealized profits. And I think, though, also, it should be pointed out that even if there is a short term pullback, most investors agree that does not really take away from the bull case, which is that if there is an ETF next year, it is going to invite in all of these institutional investors that were curious but have been sitting on the sidelines. Yeah. And of course, we've seen

the Bitcoin mining stocks. Most of them are very, very small, but they have had huge gains in anticipation of all of this this year as well. The whole universe, it would seem like. Yeah. Even the big ones, you know, CleanSpark and Iris Energy up more than 500 percent. And then we're looking at Riot and Marathon up 416 percent, 720 percent. And, you know, that's going to be driven by the price a lot. OK. Taneya McKeel, thanks for joining me. Thanks, Morgan. Well, it's time now for a CNBC News Update with Pippa Stevens. Pippa. Hey, Morgan. Mexico and U.S. officials released a joint statement today saying they will work together to tackle the record migration at the border after Secretary of State Antony Blinken met with Mexico's president. The countries said they are looking to strengthen sponsorship initiatives for Venezuelan, Cuban, Nicaraguan and Haitian migrants to work on the

root causes of migration. The U.S. Census Bureau reported that the world's population grew by 75 million people this past year. The data predicts that the world's population will stand at more than 8 billion people on New Year's Day. The U.S. growth rate is roughly half a percent, adding 1.7 million people this year. A reconstructed version of Rodin's Thinker was built in Chile to answer questions about the future. Locals asked the statue questions about a variety of topics, including climate change and the scope of AI, and received a verbal response. The creators said they want the statue to help destigmatize AI. You got to wonder, Morgan, what Rodin himself would think

of that. Yeah, I'm not so sure it would be a positive response, but who knows? Maybe he'll roll around in his grave. All right, Pippa Stevens, thank you. Up next, tariffs on the rocks. Whiskey tariffs being put on pause. And it could mean a big boost to Centauri's bottom line. We're going to hear from the CEO of Centauri, the company behind brands like Jim Beam and Maker's Mark, after this break. Plus, why the winner-take-all rules no longer apply to some key sectors and what that means for the broader market.

We'll be right back. Ambition when I was starting out survival. I love the word ambition. Ambition is passion. It's a key ingredient of greatness. To me ambition is being undaunted by the impossible. I'm ambitious for the nation. I'm ambitious for its people. I'm ambitious for my people. My ambition has always been to seek the truth. To learn as much as I possibly could. To make an impact.

I believe in dreaming big. I always have. My ambition is to show gratitude. Ambition. It's got America written all over it. Ambition really is the foundation of capitalism. I wanted to do great things in this country. My ambition is to do very well in business and to take those profits

and recycle back in society to try to make the world a better place. Everything can be a reality. I see ambition everywhere. In many ways, ambition, human ambition, is what drives the world. Welcome back to Overtime. Mike Santoli returns with a look of or look at signs, I should say, of risk seeking behavior among investors. Mike. Yeah, Morgan, so much attention in the last couple of months about the kind of reversion to the mean with the majority of stocks coming back and catching up to some degree to the big seven Nasdaq names that led most of the way. Well, it's also happening at the sector level. This is J.P. Morgan relative to the broad S&P 500 bank sector.

So you see, especially through the first part of this year in the regional bank crisis, a massive premium opened up, a record premium of J.P. Morgan, considered to be the leading bulletproof balance sheet in the banking sector relative to every other bank. And now you've seen it starting to erode. And by the way, that's not happening because J.P. Morgan shares are weak. They're basically at a record high as well. It's just that the rest of the group is trying to catch up in a pretty dramatic way in the last couple of weeks. Also happened in pharmaceuticals for most of this year. Eli Lilly, because of the weight loss drugs that it had leveraged to, was considered to be the only safe name to buy in big pharma. That built up a massive premium. It's only about eight percent below its high. Lilly is, that is. But if you look at it relative to the overall pharma sector, which had

a terrible first half of the year, again, it's coming off the boil. So it seems as if there's this sort of group by group going after the one elite anointed name in the sector and maybe saying it doesn't deserve quite as much of a premium. For now, it's happening while holding the overall index pretty harmless, given that we're just a little bit from an all-time high. OK, so maybe it's not like the best thing for these individual stocks themselves if you're starting to see them trade a little bit lower. But but is it a sign of increasing health for the market more broadly if you do see this rotation into other names? Yeah, absolutely. I mean, I just think it sort of says something about that. This is pent up economic potential in parts of the economy that wasn't getting credit

for it. And it could just be a liquidity move. It could just be those are the under-owned areas of those sectors. And of course, heavily shorted names have had a big springboard effect as well. But I do think all else being equal, you'd prefer to see a lot more kind of participation by the rank and file stocks as opposed to just, you know, the one crowded name that everybody is able to love in the group. Okay. Mike Santoli, thank you. Coming up, the CEO of Centauri, the company behind Jim Beam and Maker's Mark, joins us to break down how a big pause in tariffs is impacting its business. That's after the break.

And do not forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We will be right back. Welcome back to Overtime. The EU recently announcing it will delay tariffs on U.S. whiskey until March 2025. The move avoids a 50 percent tariff going into effect on January 1st. Joining us now, Suntory Holdings CEO Tak Ninami. The company owns dozens of brands across wines and spirits. It even owns Orangina. But it also includes Jim Beam and Maker's Mark and its portfolio. Tak, it's great to have you on the show. Thanks for joining me. Thank you very much. So I do want to start right there with whiskey because because it has over the last couple of years and this dates back to the Trump

administration, it had become one of those key areas where we had seen taxes, we had seen tariffs levied. Those were lifted a little over a year ago, but then there had been this anticipation that it could actually go back into place, a greater tariff in January. That's been averted. What does this mean for the market and for trade flows of whiskey, American whiskey? Okay, two things. One, U.S. market loves to drink still scotch, which is raining, as a matter of fact, over years. But we'd like to expand our portfolio of American whiskey to European continent. I think it's been very successful. So I'm so worried about if the tariff goes up again. So hope the negotiation will be materialized successfully

so that we can expand American whiskey to the continent. But it's both. We'd like to sell more scotch, which is one of our key portfolio and produce a lot in Scotland. And we just launched a new blended scotch, which is a brother of Hibiki, which is a Japanese well-known whiskey. But we produced in Scotland instead of producing in Japan.

Okay. Here domestically in the U.S., there's been a lot of reporting that whiskey popularity has been falling among American consumers, that American consumers have been opting for more clear spirits or agave-based spirits like tequila and mezcal, for example, which have overtaken whiskey in popularity. Is that what you're seeing in the U.S. market? Is there more opportunity internationally, especially when you do talk about some of these American brands? Absolutely. By the way, I think still there is a huge demand to the super premium and ultra premium American whiskey, which is more or less rare American whiskey. And you're

right. I think trading down to the premium from ultra premium and premium to standard in terms of American whiskey in the States. In the meantime, there's a huge potential for us to expand our footprint of American whiskey, such as Asia and even China, you can imagine. So I think that there's a huge, huge potential and markets which are waiting for American whiskey to promote in Asia to other countries to make our whiskey available in other markets like Asia. Okay.

So then what is your outlook for whiskey and for wine? I guess for spirits in general, as you look to 2024, what do you expect, whether it is in the U.S., whether it is in China or other Asian markets globally, are there certain trends that you expect to play out really internationally? Well, one key area, which is ready-to-drink beverages, such as a salsa. We, Suntory, is number three in the world and I think this market of RTDs will be expanding. One key reason is a younger generation is drink less and they prefer RTDs more. So this is a world trend.

And plus tequila. And tequila is now very popular in the continent of Europe, UK, and Japan, Asia. So I think tequila, even tequila, is going to global together with the American whiskey. To shift gears here, you're the chairman of the Japan Association of Corporate Executives. You're a member of the government's economic council. In a year where we have seen Japanese stocks outperform most of the world's markets, where there has been keen global investor interest in what the Bank of Japan does with monetary policy, signs that maybe inflation is coming back to life in the country,

what are you seeing as you operate in Japan and your outlook for next year? I think Bank of Japan will change its monetary policy. As a matter of fact, it's been messaging to the market. They say we will change the market. I mean, the market, I mean, the interest rate scenario from negative interest to perhaps positive within 24. So the question is when. I think the latter half of 2024, they will change. The reason is, it's not because of cost-push inflation, which was prevailing last year, I mean this year. But the next year, because of the huge type of labor, that will push inflation toward the 2.8% to 3%, I think that will be a huge factor for Bank of Japan to change its policy to a positive interest rate.

Well, that would affect the market of the stock for a while, but it's good for Japan, I think, because of the consolidation of industry and metabolism of industry, which will give the good market perspectives of the stock. So I think over the long run, Japan will enjoy the impetus for a robust economy eventually, I believe. Okay. And maybe it'll make consumers even thirstier for your beverages. Tak, Ninami, thanks for joining me. Thank you. Up next, your 2024 IPO playbook. It's been a relatively quiet year for the IPO market, but our next guest is flagging strength in that space in the new year. He's going to tell us the names he'll be watching for.

That's coming up after the break. Overtime, we'll be right back. Well, it was another big year for space, even as capital dried up and consolidation came. SpaceX racked up more milestones to Starship flight attempts and a launch record, 97 if 2023's final three do go as planned, including tonight's Falcon Heavy military launch of the secretive X-37B robot space plane. More astronauts, both government and private, traveled to space. Virgin Galactic finally started commercial service. Starlink access proliferated and Amazon put its first satellites in orbit.

Rocket Lab recently returned to flight and is the year's top-performing space stock. NASA racked up asteroid successes, and work on the Artemis program to return Americans to the moon continued. It's all fueling interest in space. space and converting that interest into a pipeline of future talent is what Aerospace Industries Association CEO Eric Fanning is now very much focused on. We have to do things that excite kids to pursue STEM. I mean it's it's it's one of the clearest things historically in terms of exploration and space the linkage between kids going into STEM, getting excited about STEM, and what's happening in space, specifically what NASA is doing.

So when you think about the NASA budget, a lot of people will try to compete it against other things. But it's hard to think about how broad the impact of the NASA budget is. And part of that is the Apollo program, the Challenger program, now the Artemis program. That gets kids excited, and they want to know how they can be a part of that. So AIA advocates policy for hundreds of aerospace and defense companies, and Fanning, a former U.S. Army secretary, thinks national security space will take on even greater importance next year, given the geopolitical landscape. But there will be missions in 2024 to inspire future talent, too,

including the first flights of ULA's Vulcan, Sierra Space's Dream Chaser, and possibly Blue Origin's New Glenn. The first commercial lunar landings, human space flights from SpaceX, and finally, Boeing, and yes, even an Artemis mission to fly astronauts around the moon for the first time in nearly 50 years. You can catch the full discussion with the Honorable Eric Fanning on this week's episode of Manifest Space, which is available wherever you get your podcasts. But if we stick with SpaceX here, it is one of the private

companies some investors hope will go public soon. They may have to wait a bit longer. And there are a number of high profile names expected to go public next year. In addition to that, names like Sheehan, Panera Bread, and Reddit. In the meantime, though, investors are looking for ways to get exposure to some private companies that have not yet listed. The Private Shares Fund is one way to do that. It's up nearly 46% since its inception, though it's down about 8% so far this year. Christian Manafo manages that fund. He is the chief investment officer with Liberty Street Advisors. Christian, it's great to have you on. And I'm just going to,

before I get into broader outlook, when I look at your top 10 holdings, two of them are space companies, Axiom Space and SpaceX, which we know is one of the most highly valued private companies in the world. Your take on those companies or that sector as you look to 2024. Yeah, great to see you again, Morgan. Yeah, I enjoy listening to your manifest. I would add Relativity Space, too, had a very successful launch this year of the first 3D printed rocket and use of liquid methane in this hemisphere. Yeah, look, the space economy for us is a significant opportunity. We've been in SpaceX for about five years. We've been an Axiom for several years. We think there's

a massive opportunity when it comes to launch infrastructure. Obviously, national security, as you mentioned, is increasingly important. But there's a lot of other services and analytics and experimentation going on in the space economy as well. So we just see it as a massive investment opportunity. And unfortunately, as you noted, there's not many ways to get access to it. It's one of the key themes for us in our strategy. Okay. Largest IPO backlog on record is what you're forecasting or what you expect as we head into 2024. What does that mean for you and for your fund? And what does that mean for the IPO pipeline, perhaps finally getting back to life in a more meaningful way?

Yeah, look, it certainly seems like as we head into 2024, sentiment is shifting from the investment side as well as to the liquidity side. And in conversations we're having with our portfolio companies, with investment bankers and key investors in the ecosystem, it does appear that there's going to be more activity in 2024. I wouldn't expect the floodgates to open. It'll be measured. There will be different waves of it. But we are absolutely expecting there to be companies test the public markets. We think we're going to span a variety of different sectors. We have 18 companies in our portfolio that were recently listed by a third party called CB Insights as likely candidates. Next year, we'll see what happens. But I'll give you some names. I know it's something that your subscribers and viewers would like to hear. So there are cybersecurity companies we think are prime candidates, such as Arctic Wolf.

Rubrik, I saw Morgan was on your list, even companies like SNIC. There's also a car sharing company you noted called Toro, which is another one of our holdings. There's obviously the data management companies and artificial intelligence players like Databricks, another very high quality company that's expected to potentially go out this year. A company called Betterment, which is in the kind of next generation financial advisory. And then you mentioned SpaceX. And so we'll see if they try to take Starlink public, which is for your viewers purposes, is their satellite internet constellation business.

There's been rumors about that for years. We'll see what happens. As you know, Morgan, it's becoming a very large business independent of SpaceX's launch capabilities. And then there's other companies like Stripe and Reddit, which are other likely candidates we would expect. I know Elon Musk threw some cold water on the possibility of taking Starlink public anytime soon, just recently on X, but who knows? We will see. It's certainly one that investors would be very hungry for.

With all the names that you just mentioned, what's very striking to me, and this is what we saw in terms of the handful of companies that did go public this year, and you used the word quality, high quality. What is this going to mean in terms of the companies that do come to market potentially? The need for the ability or at least the path to profitability, cash flow being higher quality. Are lower quality or more riskier types of startups going to be able to make that transition next year? Or is this really still going to be a bifurcated market? No, we think it's going to continue to be bifurcated. And when you hit it on the head, it's a balance between growth and profitability. Investors don't just want to see

growth. And frankly, they don't just also want to see profitability they want to see a balance of the two and i think the good news is if you look at the backlog of companies that are in the queue you have one of the highest quality backlogs we've seen in a couple decades and so we think that many of these companies are exhibiting superior operating metrics than what we've seen in prior ipo waves again we need to be patient we need to Again, we need to be patient. We need to be disciplined. Investors need to be selective, and they will be. But it will continue to be bifurcated, and the best companies will be the ones you'll see go out first. Okay. You know, we talk a lot about how much market, public market performance matters to sentiment for startups to want to actually go public as well. But, you know, I was meeting with some private

equity executives not that long ago. One of the things they pointed out to me is that when it comes to private companies in the private market, the S&P doesn't matter as much as the Russell 2000. Is that true? And if we are having a rally that potentially continues into 2024, how much does that set the stage? It absolutely does. Yeah. I mean, that's actually one of the benchmarks we use for our strategy because the companies we focus on in the late stage venture and growth segment of the private markets are typically doing hundreds of millions to billions in revenue. It's not your prototypical two guys or gals in a garage in Palo Alto trying to whiteboard the next great idea. These are very large operating businesses, but their market caps are more similar to

what you'd see in the Russell 2000 as opposed to the S&P 500. And so that's where you see similarities there. And so to your point, we think that the recent runoff in the Russell actually is a great signal for our portfolio and our fund and our clients, as well as for other investors in this ecosystem. Christian Manafo, thank you so much for joining me. Happy New Year. Happy New Year, Morgan. Thank you. Up next, the one-spot lithium trade has fizzled this year, dropping 80%.

But could there be a turnaround in store for 2024? We're going to discuss that when Overtime returns. Welcome back. Lithium plunging this year, but could there be some upside ahead? Pippa Stevens is here with that. Pippa. Well, Morgan, lithium is, of course, key to the EV vehicles of our future. And as EVs have had a wild ride this year, so too has lithium. At the beginning of the year, spot prices topped $70,000 per ton, according to Benchmark.

Today, they're trading under $16,000 for a decline of nearly 80%. Now, prices started rising at the beginning of 2021 as forecasters said there would be shortages, which pushed prices up nearly 800% in the span of three years. But now, there's too much inventory, slowing EV demand, and surprising supply growth. When prices were rising, battery companies stockpiled lithium, which they're still working through just as that demand slows. Plus, supply came online faster than expected, in part because sky-high prices made projects

that would otherwise be too expensive economically viable. As Citibank put it, it is a perfect storm of headwinds. And there could be more declines ahead, given we're entering a seasonally weak period before China's Lunar New Year in February. Now, key players like Albemarle, Liven and SQM catching a bid this month, but still in the red for 2023. So the bottom line here is that there could be some weakness, but then at a certain point, there has to be a turnaround because not all these projects can turn a profit with lithium now at $16,000. So this is very much your classic supply

demand dynamic here. Exactly. And the reason why we had prices soaring, because we were in a period before where prices were very low, and so then upstream players weren't investing in new production. It's the same thing we talked about with uranium just the other day. Prices go high, everyone thinks they can make money, prices get inflated, and then demand comes down and the whole thing starts right all over again. Okay. Are there other areas within the EV supply chain, when you look at the commodities, I'm kind of putting you on the spot here, that maybe have fared better in this process or no, it's sort of across the board with these different materials? Well, I think there was so much momentum behind all these battery technologies and lithium has really been the poster child of

that since it is the lithium ion battery. And even if you swap out other materials like cobalt or nickel, you still have to have lithium. So other ones have also seen declines, but nothing is the same magnitude as lithium. Okay. Pippa Stevens, thanks. You've been on double, triple, quadruple duty today too. Appreciate it. All right. It was a mixed picture for stocks today. The S&P finishing the day up fractionally higher. We remain on record watch. We did get a record for the Dow Industrials. NASDAQ, small cap, Russell 2000 finishing the day down slightly. Tomorrow, it's Chicago Manufacturing PMI that's going to close us out. Final trading day of the year. That does it for us here at Overtime. Fast Money begins right now.