Closing Bell - Closing Bell Overtime: The Market’s Big Shrug 7/6/22

Episode Date: July 6, 2022

Stocks posted modest gains with the Fed reiterating it will do whatever it takes to bring down inflation. Ritholtz Wealth Management’s Josh Brown and Sofi’s Liz Young give their market takes. Plus, Jeff DeGraaf of Renaissance Macro Research breaks down the charts with the best – and worst – bets for your portfolio. And, according to The Wall Street Journal, only 2% of actively managed U.S. stock funds are positive over the last year. One of those top fund managers – Mike Morey of Viking Fund Management – explains his strategy.

Welcome to Overtime. I'm Mike Santoli in for Scott Wapner. You just heard the bells, but we're just getting started. In just a few minutes, we'll speak with SoFi's Liz Young about whether she thinks now is a good time to buy this market and how to go about it, where she might be seeing the most upside. But we start with our talk of the tape, the big shrug. Stocks posting modest gains today as the Fed reiterates it will do whatever it takes to bring inflation down, even if that means slowing the economy. Joining us now to discuss Josh Brown, co-founder and CEO of Ritholtz Wealth Management and a CNBC contributor. Hey, Josh, good to check in with you. I want to lay something out for you. You can tell me how it's wrong. We look at the action today. The market saw a very hawkish Fed minutes and basically said, we got it. We figured this out already. We're not afraid. Since these minutes, oil's down a lot. GDP expectations are off a lot. Credit spreads are wider.

Treasury yields are down. We basically said the market's kind of calling the bluff. S&P's 5% or 6 percent up off the lows. You've had afternoon rallies each of the past three days. The hardest hit parts of the market are actually holding above their lows. And you finally got a shakeout in oil and energy. So the last bastion of the overconfidence in this market has basically been undercut. Tell me why this is not perhaps the makings of something better on the upside.

I want it to be so badly, Michael. And as you and I talked about the last time we were on together on this show, you have to be open minded now. So I'm willing to get to a point where I say, look, nothing technically has changed. We've enjoyed a rally in a bear market, and that's great. We've had a bunch, and they've all led to lower lows. And this one is still guilty until being proven innocent. But we are doing a lot of the work. Like when June ended and everyone on Wall Street did their worst first half ever,

and the guy from Deutsche Bank did the 10-year Treasuries, worst first six months to a year since 1788. I don't know what his data source is. But like when those notes went out, the thing that we did was we looked at each other and we said, you know, this is the worst start to a year for 60-40 portfolio in decades, for straight up stocks, for any kind of stock you want to come up with, for stock bond mix, 60-40, 70-30, international. Like, we're living through that now. That doesn't repeat. Like, that's not, you're not going to have a second half that's as bad or worse because one of these asset classes has to win out.

So in the early going, it looks like it's going to be fixed income. So now you're getting decent yields. Barron's did its cover story over the weekend. Now there's actually yield in like seven or eight different places. That's a new competitive threat, I would say, for the stock market, because people still have money to put to work and they still have to choose. So that's why look at today, consumer staples and utilities leading and defense stocks, which never gives you the warm and fuzzy, not defensive, but like literally bombs and

guns. So if that's what's going on, health care looked pretty good today, too. If that's what's going on right now, just accept it. Try to be there also. You don't need a full market rally. We just need days like today to take some of the pressure off. Yeah, and honestly, you know, the average stock was not really doing much of anything today. The big caps did carry the indexes higher.

More stocks down than up. Equal weight, you know, is kind of blah. So, granted, you don't want to make too much of any one day or a string of days. And frankly, I wasn't necessarily saying we need to declare a low is here. And somehow I've been persuaded with this market. But it's interesting because like last week you were on here saying price is truth. It's a downtrend. Don't fight the Fed.

This market has told you not to trust rallies. And then I saw you yesterday on halftime and it was about the, you know, look, asset allocation, maybe benefits from mean reversion here. Things don't stay terrible for long. It's like those are the two wolves fighting in your heart. Now, which one are you going to feed the most right now? Either the sell the rallies hard or the, you know, maybe think about what might be right. Go right and have some upside risk to it?

I'm so glad you asked me that question. In 2013, they gave the Nobel Prize in Economics to three people at the same time. Two of those three people had research that was pretty much diametrically opposed to the other. So Eugene Fama talked about the fact that markets are efficient and most of the news is already priced in. And even if it wasn't, there's probably not that much money for you to make because it's on the way to efficiency. And that markets are basically governed by fundamentals. And Schiller's research says that emotions pretty much drive everything,

big swings, bubbles that we have all the time. And they couldn't disagree more, but they shared that prize. And when you think about the approach to investing would be more in line with the things that Schiller talks about, which is markets get way out of whack in both directions. Volatility is driven by fear and greed, et cetera, et cetera. So in a downtrend that you can see on any chart you want to look at virtually every time frame longer than three months, you do want to have that tactical piece out of the market, as little exposure as possible, because it's not helping you. However, in line with the way Fama thinks about markets, look, it's going to be

really hard for you to do that on a regular basis and get most of those tactical decisions right. So you want a large portion of your portfolio to be in stocks and bonds, rebalanced based on the rules, and just accept the amount of humility necessary to get through a multi-decade span. And part of that is dealing with the volatility that comes along both asset classes this year. So I think that that's really how you want to think about those two being pieces of a whole. And if you're an intelligent investor and you've been around for a long time, you understand that there are going to be years where one approach looks way better than the other.

But it's that offsetting non-correlated return that you're aiming for, whether we're talking about different asset classes or different strategies like what I've just laid out. Let's bring all that to a pretty timely example, an illustration of this, which would be energy. Because if the energy markets up until a few weeks ago were just saying, you know, this is a supply demand story. This is the market efficiently pricing to try and draw out supply and ration demand. And it's really all it's about. And now we're down 20 percent in a few weeks. Yes, unanticipated slowdown in demand. But clearly, there's some emotional component to that. There's some kind of positioning or crowding effect that also had. And what do you do with it now that it has had this break?

Very interesting that you ask that question. We don't invest directly in commodities, but we do have exposure to energy companies, most of which are oil and gas, at least on a market cap weighting basis. But we did, for argument's sake, listen to clients who asked us specifically about inflation and should I have commodity exposure? Should I own oil straight up or oil ETF? Or should we overweight oil stocks? And the answer, Michael, you probably would be able to guess this, but for the viewer, there was some diversification benefit from being involved in commodities anywhere from 10% to 30% of a portfolio, meaning you reduce the stock 60% and the bond 40%. There was some diversification benefit, but it didn't happen how you might think. It wasn't to the upside. It was just in the form

of less volatility. Once you go out past three years, there's nothing there. And we went five years, seven years, 10 years, rolling returns, any way you want to look at it. So I don't know that you want to look at energy and say, oh, a 20 percent dip. Let me make it a huge part of my portfolio, just like you should not have been doing that to the upside. The reality is energy is a very, very small part of the S&P 500. Even if these stocks double, it'll still remain that way, especially relative to consumer discretionary tech and financial. And if that's the case, you really have to think that you have a view on oil that somehow like is an edge. I don't think I have

that. So we don't play that game. And I don't think anyone really needs to either. Let's bring in Liz Young, head of investment strategy at SoFi joins me here. Liz, good to see you. Good to see you, too. You've heard what we've been kicking around here. I mean, where does the weight of the evidence, in your view, take you in terms of this moment? Because for all we can say that the market figured stuff out, you still have a market that likes to try and anticipate and look ahead and a Fed that says we need to see the evidence of inflation coming down before we really change what we're doing. Where does that shake out? Well, I think for the rest of the month of July, the market is going to continue to fight with itself. So we see mood

shifts every single day, right? I mean, even yesterday we saw a mood shift intraday. We opened the day down, finished the day pretty good. Today is a good day. That doesn't mean that the rest of the week is going to be that way. And you have to think about the sequence that's about to occur. So we're going to start earning season in a couple of weeks, and then that's going to heat up for the following three to four weeks, where I'm willing to bet that we're going to hear from a lot of CEOs that the second half of the year is not going to be great. And we'll get a lot of guidance downward. The market still has to digest that. So despite the fact that we have baked a decent amount of this fear in, we haven't baked it in all the way. And there's always going to be this sort of what happens

first, second and third. And what happens first is the market breaks. I think we can all agree the market has broken. That doesn't mean it's hit bottom, but it's broken. Then second, earnings bottoms. And then third, the economy follows. We still have not seen the bottom in earnings. We still have not seen the bottom in the economy. And I think the energy sector is actually a really good indication that we're checking off more and more things on that checklist. Makes sense. Yeah, it does seem as if there's not a lot of incentive for CEOs to be super enthusiastic, at least, if nothing else, with guidance. We'll get back to this, Liz. We do have some breaking news, though, on GameStop.

Steve Kovach has the story. Steve. Hey, Mike. Yeah, GameStop shares are up about 5% right now. On news that the board has approved that 4-for-1 stock split, this is that 4-for-1 stock split that we heard about a month ago, but it's sending shares up now anyway. It's going to go into effect on July 22nd,

with July 21st being the last day to trade under the current structure. And keep in mind, we're still in the middle of GameStop's quarter. Their quarter actually ends at the end of next month when they're expected to launch that NFT platform that they keep talking about. Mike, I'll send it back to you. All right. Thank you. Reflex tick higher in GameStop. We'll see if that lasts, given that sometimes this is recognized as old news when it finally hits again. But, Liz, you mentioned we have to get through the earnings season, make sure that, you know, the fundamental story doesn't really fall apart further than what we've anticipated. What about the idea that there might be more resilience to profitability this time because of various factors, whether it's, you know, sales growth should still be OK. We have inflation. You have some pricing power.

We're starting from a position in the S&P where, you know, the more kind of robust business models are in the mega caps and maybe that's going to hold sway. Or does it does it pay to play that game of anticipating those things? I think there's a decent cushion this time because we're coming into this with record high profit margins. Right? So businesses can absorb a little bit more pain than maybe in prior cycles. So maybe we don't get down to a huge contraction in earnings, but we could see a 5% to 10% shave off of the expectations right now. And that would take the market some time to sort of sort through. So it doesn't necessarily have to get as bad as historical periods. The one thing I would caution people on though about mega caps is that if you look at what's happening with the dollar

we're seeing still a ton of strength in the dollar. A lot of those mega caps depend on international revenue. That is going to take a hit if the dollar stays strong. So we can't rely so much on mega caps especially in this environment. Yeah and I mean arguably the sell side is a little complacent, too, on things like Alphabet and Amazon, where there's not a lot of, you know, anything but buy ratings. And so they think that they can weather anything that potentially can be tested in terms of implementing a strategy or rebalancing at this point, if you say July is probably going to be sloppy or maybe the summer is still going to be a wait and see and approve it market, you can acknowledge you're not calling a bottom and still say, I don't know, I want to be in place for when that does happen. Because sometimes when a stab down to the lows doesn't really last that long. Right. And it's really scary while it's

happening. So what are we doing today, if anything? Yeah, well, I will never call about him because that's a really quick way for everybody to tell me I'm wrong. But what I have been saying to people, and I will stand by this, when we saw what happened in March of 2020, we really did have a couple days where we stabbed down to the lows. And then we looked at it maybe three or four months later and said to ourselves, I wish I would have bought on March 23rd, or I wish I would have bought on March 16th, because it felt like you didn't get that opportunity again. We never went back down there. I think when we look back on this period, we're going to say to ourselves, I wish I would have bought at some point in the summer of 2022. Now, there's not going to be one particular day, one particular week, but this is a time when it's okay to start slowly averaging in.

I still think we need to get past the first few weeks of earnings. We need to get past that Q2 GDP print at the end of July and the next Fed meeting. And then we've got this built-in pause in August that could bring with it a pause in volatility. But start thinking about what you want to buy for the long term. Sectors that I like right now are healthcare, financials. And I think you can look at the consumer discretionary names that have gotten really beaten down. And I think we'll get beaten down a little further as earnings start. It's almost, Josh, like you'd be almost hoping that you were not buying at the bottom. Essentially, that if you think that this is just a process that where we have a couple of more chapters to play out, you know, let's hope that we get lower prices to buy at some point.

Although I keep coming back to this. Every time you do the historical studies, what happens when the market's already down 20 plus percent? What happens when the market is this disliked by investors in terms of sentiment? What happens when you've had this bad a six month stretch? And it's like, well, you were better to be a buyer unless it's 08 or unless it's a one right in other words there are these big glaring exceptions that say you think you're being smart and prudent and counter trend and it's just a stop along the way lower yeah look i i think i think i like what liz, though, because not every stock is going to bottom with the S&P 500.

There are going to be, like in the fullness of time, when we look back, there are going to be companies, like big ones, that will have bottomed six months before the S&P. We're not going to be trading in lockstep every stock. There's going to be dispersion. So if that's your game, like if you're somebody that's looking at individual names instead of indexes and ETFs, this is like a great environment for you. It really is. On a market wide level, I'll just share with you, this is from Michael Batnick. I think it's the most important thing. The Fed is going to get inflation under control, whether it costs them a recession or not. They just confirmed that today. So they're acting in such a way as though they almost want a recession to just get it out of the way. Because if they do 75 again in July, and then they do another 50 in August, and they give

no hint at all that they're planning on stopping, like they are going to produce the desired effect. And the way it'll happen is because home prices will be down huge, so will stock prices. That will affect psychology amongst managers all over the country, business owners, et cetera, and they'll get their way. You might not like how they get there, but they will.

And the thing about that is, very often the stock market has already priced that fully in by the time it becomes apparent in the data. There's such a huge lag in the data that we look at to determine a recession versus how quickly stocks react. So that's one. And two, CPI is going to be falling for the second half of this year. It might not fall as fast as we want it to, but the data is unambiguous. People talk about is high inflation bad, low inflation good? No, no, no, no, no. It's not high or low. Is inflation falling or rising? That's the thing. So even inflation falling, inflation at 10% sounds terrible, right? But if it was just at 12%, actually, it's not so bad for stocks. Go back and look. So inflation, we're probably like 8%.

But if we're at 7%, it's still terrible. But 7% down from 8.5%, stocks historically like that. So you have to balance those two opposing thoughts in your head. The Fed will get what it wants, no matter how much destruction it has to cause. And stocks will cheer the falling inflation that results from that. And if you can do that, I think that's the ticket to getting through the rest of 22. Yeah, I mean, the market's saying it's going to be successful the hard way or the easy way. I mean, that's what the market based inflation expectations are telling us. And yes, stocks will have figured it out before the data, but we still got a few months before the data are going to be dispositive. So we got to we got to leave it there. We'll pick it up again next time, I'm sure. Liz,

Josh, thank you very much. Now let's get to our Twitter question of the day. We want to know where is the most attractive place for your money over the next six months? Stocks, bonds, or cash? Head to at CNBC Overtime on Twitter, cast your vote, and we'll bring you the results at the end of the show. Up next, we're looking to the charts for some big opportunities. One top technician says this sector could be a screaming buy right now. What it is and how you can play it. And later, beating the market, you'll hear from one money manager who is outperforming the S&P 500 over the last year. What he's betting on to stay ahead of the game.

All that and more when Overtime returns. We are back in Overtime. Biotech finishing lower today after a big recent run. The IBB Biotech ETF is up more than 6% in just the past month. And our next guest says this sector could be spring loaded for even more gains. Let's bring in Jeff DeGraff, Renaissance Macro Research Chairman. Jeff, great to see you. You too, Mike. So biotech, you know, kind of sneakily has started to get some traction and outperforming. Some parts of it really got overheated in early 2021. So kind of, you know,

kind of fell apart before the market did now recovering. What's to like about it? What does it say even about where we are in the cycle? Yeah, I think that's the big one is, you know, health care tends to do well on a relative basis at this part of the cycle. And, you know, what does that mean? It means that we're probably in the contraction phase of the economic cycle, at least as the market sees it. That tends to be bad news for energy. It tends to be bad news for materials. But it's good news for health care. We've already seen it in a lot of the pharma names. But, you know, as you mentioned, just recently, we started to see it pick up in biotech. Now, you know, there's there's a little bit of a curveball here because biotech tends to be the more speculative part of the spectrum of health care. And that's not really where we are from a credit condition standpoint.

But I like what we're seeing. And certainly, you know, when clients ask us about tech and some of these other areas to be sniffing around in, we absolutely think that health care has a much better chance at this part of the cycle than, say, technology. And certainly, as we see breakdowns in materials, breakdowns in energy, we want to make sure that we're adding to our exposure in those health care names that are breaking out. And just to drill in on that, I mean, you actually, you know, were kind of ahead of the idea that the market months ago was saying this is a late cycle environment, now implying we've tipped into something beyond late. So kind of, you know, the end of cycle type of backdrop. So you think that energy and materials are basically busted at this point? Yeah, I mean, energy is a tough call.

I mean, we're a little flat footed on that one because it hasn't really distributed like we expected to see. But without question, I mean, look at the copper chart. Look at Freeport. I mean, those are top formations. Those are this tug of war that we had between bulls and bears for the last six months, rolling over now, taking out those necklines, taking out support. It's really very par for the course. It's following the script very, very well. And then just look at the 10-year yield, right? We peaked out around 350.

We're down almost 75 basis points from that peak. We know just from our historical work back to the 1950s that that energy, that materials, that yields will peak about six weeks prior to the peak in the data. And so far, that's really holding the script. And I think that's an important message as we go forward. To Josh's point earlier, I don't think inflation is going to be the market's problem as we look into the rest of the second half of 2022. Now, you mentioned the credit markets and what they've been saying, obviously sounding some warning about the macro outlook. At the same time, you know, investor sentiments already kind of on the mat and you've seen a pretty good reset in equity valuations. How do those things fit together in terms of figuring out when this kind of bearish cast of the market might be working its way through?

Well, I think you understated it. Bearish on the mat. I think it's pinned and probably cemented in there. I mean, sentiment is by far the most bullish thing that we see for equities right here. And so we always try to look at what is driving sentiment. Is it the Fed? Is it inflation? What is that? And I think you hit the nail on the head that that's an important part that's probably pre-discounted. I do concern

myself with the idea that we're not seeing any type of relief in the credit markets yet. And they don't have to lead, but usually they're in sync with the equity markets. And we just look at high beta versus low beta, and that's not playing itself out yet. So I think the one distinction that really almost all of us that are in the business still haven't really seen is a bear market ending when the Fed is still tightening. That's a pretty unusual circumstance. And when we look at where we are in our market cycle clock, usually growth has really taken a much bigger hit before we have some type of equity market bottom historically. And this is data going back to the 1940s. So I still think that there's a little bit more there. I like sentiment. Sentiment to us is like valuation. It's a conditional factor that supports a bull phase. But until you see momentum, until

you see some type of definitive change in trend, I think you have to be a little bit more cautious. And that still steers us more towards defense, of which health care is a part of that, versus cyclicality. If we started to see an improvement in things like discretionary, a big improvement in things like financials, those are early, early cycle sectors. We're not seeing that yet, but those are things to be watching for in terms of a turn where the market's now saying, hey, we're close to the growth trough and looking at that rebound. All right. Good stuff to look for, Jeff. Really appreciate it. Thanks, Mike. See you soon. Thank you. Coming up, finding opportunity in the face of a recession. Morgan Stanley Wealth Management's Lisa Shallott is with us.

How she's navigating the market for the rest of the year. Overtime will be right back. Welcome back to Overtime. Time for a CNBC News Update with Shepard Smith. Hi, Shep. Hi, Mike. Thanks from the news on CNBC. Here's what's happening.

Police in Highland Park, Illinois, say the shooting suspect confessed in detail to the July 4th rampage. Confessed to climbing up the fire escape to reach his sniper's perch, confessed to firing on the crowd below and to planning it for weeks, and that he drove to Madison, Wisconsin after the shooting with more than 60 rounds of ammo and considered another attack on another celebration there, but didn't do it because he said he hadn't researched the event. He's charged with seven counts of murder, held on no bail. Boris Johnson's own cabinet members told him today, you must resign. But the British prime minister refused to do so, unprecedented in history in Great Britain. That from our sister network Sky News, the calls after a series of scandals and 36 members of parliament resigning

over the past day. A committee could change the rules and force another confidence vote, which Sky News reports Johnson could not win. And Apple just announced a special feature designed to stop hacking software. It's called lockdown mode. Apple says this new option should be used only if you think you're being personally targeted in a sophisticated cyber attack. Tonight, a key witness agrees to testify in the January 6th probe. And the space race with China gets tense on the news. Right after Jim Cramer, 7 Eastern, CNBC. Mike, back to you.

Jeff, thank you. Stocks closing higher on the day after the Fed reaffirmed its commitment to fighting inflation. But while fears of recession are still in the air, our next guest says it could be less severe than some may think. Joining me now is Lisa Shallott, Morgan Stanley, CIO and investment strategist. Lisa, it's great to have you to sort of fill in some of the blanks here because, you know, this recession discussion, sometimes it seems very binary. Either we have one or we don't. As opposed, it's almost an academic discussion. What does it actually mean in terms of the character of whatever slowdown or downturn we might have? Looks likely. And then, you know, what does it mean specifically for investors right now?

Sure. Thanks for having me on. You know, at the end of the day, we have to remember that, you know, recessions are about a material slow down and growth. And before we get to that material slowdown, we have to understand where the accesses were built up. You know, over the last couple of cycles, we've gotten very used to these kind of severe recessions that were really driven by credit excesses, where demand either for technology products, you know, back in 2000, or for housing-related investments in 2007, 2008, allowed us to build up these huge accesses. As we know, the current crisis or the current recession, if it occurs, is going to be prompted by a tightening of monetary policy related to fighting inflation. And that's a very, very different phenomenon.

We have an inflation problem today that is being driven both by supply shocks as well as excess demand. And the reality is, is that as Fed policy has begun to tighten, we're already seeing some of the effects. The reality is that most of the excesses that have been built up in this cycle are not in the real economy. They're not infrastructure related. They're not housing related. They're not tech investment related. You know, to whatever extent we've had excesses, they've mostly come in financial markets. And a lot of that has begun to get wrung out. So our thesis here is if you go back in history and you look at cycles that were more inflation-driven, where policymakers were slowing the economy intentionally,

more often than not, the hit to profits is actually more modest. And the reason is, is that in an inflationary environment, you have some pricing power. And that certainly helps cushion the profit drawdown. So, you know, whereas we may have seen, you know, profits collapse in prior recessions by as much as 30 to 50 percent when it's credit related, when it's inflation related, that number is a lot more like 10 or 15 percent. And so that's kind of our base case right now. Yeah, it seems reassuring for sure. I wonder, though, what the implications of that might be for the fact that maybe that means the Fed can and will choose to become more restrictive because it's not creating, you know, these financial accidents or meltdowns or consumer stress

elsewhere with its policy. And is that a hazard right now? Or do you think that equity valuations have adjusted enough for what the Fed has to do? So, look, I think we know that equity valuations have adjusted quite a large amount. And as recently as, you know, 10 days ago, we're in fact, you know, viewed a Fed funds rate that was going through the neutral rate. You know, we were pricing as much as 3.8 percent on Fed funds by the middle of next year. Now, that's come in pretty aggressively over the first week of July here. We've come in 75 basis points on Fed funds futures, where folks are suddenly viewing a Fed that may, in fact, not end up being as restrictive as their guidance. But certainly when you're fighting inflation and fighting the levels of inflation that we have, which are at 40-year highs, I mean, 8.2 percent or 8.6 percent, I apologize, which was our last reading, is a far

cry from their 2 percent target. So I do think that the Fed is going to be on a path towards normalization. I don't think that today's Fed minutes did much to dissuade investors from the path that the Fed seems to be on. And frankly, our call is that that's probably the right path. We do need to bring inflation down and having some higher interest rates that are mostly priced in markets, you know, helps us get back to a more normal footing. And then in terms of ways to be positioned for these scenarios, is it too early to start looking ahead for the upturn or, in other words, continue to play somewhat more defensively? Or is it time to say, like, look, we can see our way to the end of this process?

Yeah, so I'm a little bit more constructive than my colleague, Mike Wilson, who I know is on the program often. You know, Mike still wants our clients to be ultra defensive. For me, who spends more time with our wealth management clients, you know, I'm more inclined to start thinking about a barbell where certainly we have some defensive positions, but we're beginning to look at some of the opportunities and cyclicals, which have sold off really aggressively here. One of the bargains, in fact, right now, aside from financials and industrials, which we've been talking about, is suddenly energy. Many of your viewers may not have realized that literally in the last four weeks,

the energy sector, which has led, is now approaching its own bear market from its highs. And while, you know, oil prices certainly have come down a little bit here on slowing demand and, you know, some of the actions of governments to release strategic reserves and provide some supply. Our view is that that's going to prove to be short lived as, you know, summer ultimately ebbs into, you know, the autumn and winter. We still have a supply problem globally and energy prices are probably going to be higher for longer, especially if China recovers as we're forecasting. All right. So maybe a time to try and play for the turn in some cyclicals. Lisa, great to speak with you. Thank you very much. Absolutely.

All right. Up next, we're tracking the biggest movers in overtime. Christina Parts of Nevelis, what's on deck now? Well, we've got new details on a bigger and maybe better Apple Watch, a new partnership involving spaceships, and GameStop shares trying to fly to the moon. All those details right after this break. We're tracking the biggest movers in OT, Christina Partsenevelis. They're here with those. Hey, Christina. Hey, Mike. Well, shares of Virgin right now are moving 3% higher,

and a Reuters report that Virgin Galactic and Boeing subsidiaries, or a subsidiary, are working together on the next generation spaceship. Boeing subsidiary Aurora Flight Sciences will build two new carrier planes with the goal to fly some 200 flights per year. You can see Virgin Galactic up over 3%. And we've also got a new Bloomberg report that says Apple will be launching its biggest sports watch yet geared towards fitness buffs. It will have a larger screen, almost two inches diagonally, a metal case, and will last longer for those intense workouts. The model is planned to be announced later this

year. That's going to mean a lot more fitness metrics. And then lastly, shares of GameStop climbing over 4% after the board officially approving the stock split, which will happen on July 22nd officially. But as our Steve Kovach points out on Twitter, the announcement was made over a month ago. It's today the board is approving it. And that's why shares did climb higher and shares have climbed more than 6% in the past two months. Back over to you, Mike. All right, Christina, thanks very much. Just 2% of actively managed mutual funds saw gains over the last year. After this break, one of those top fund managers joins us with his strategy and where he's putting his money to work right now. Overtime, we'll be right back. Only 2% of actively managed U.S. stock funds are positive over the last 12 months, according to the Wall Street Journal. That compares to a 12% loss in the S&P 500.

And our next guest is one of the few money managers beating the spare market. Joining us now is Mike Morey, portfolio manager at Viking Fund Management, whose integrity dividend harvest fund is up almost 6% in the last year. Mike, great for you to join us today. Talk a little bit about the particulars of this fund strategy and exactly how you do try and capture dividend yield and, I guess, protect capital in the process. Yes, good morning, Michael. Great to be on your show. So, you know, we have a very unique process here at Integrity Viking Funds for the Integrity Dividend Harvest Fund, where we are seeking out companies with long histories of growing incomes, not just paying dividends, but actually growing it on an annual basis.

We seek out above average dividend yield and companies with a lot more And in solid free cash flows that. You know have proven historically and- we assume on a going forward basis a rising dividend income strength. You know so when you look at market pullbacks this strategy has provenly been successful in creating alpha-

you know over the over the broader market. We're seeing some of- you know the top holdings in the fund AbbVie Broad the broader market. We're seeing some of, you know, the top holdings in the fund, AbbVie, Broadcom, Verizon, Pfizer. Did want to get your take, though, on energy, which I imagine this strategy has taken you in that direction to a fair degree and how you would be thinking about the opportunities there after this little gut check we've had in the sector. Yes, I mean, it's certainly been a whirlwind in the energy sector, significantly outperforming throughout the year.

So going back about, I'd say, about 18 months, you know, we begin actively adding to our energy position just because of the supply and demand picture on a global basis was really getting tight. Even into this year before Ukraine we saw energy as a buying opportunity so we did increase our exposure most recently when energy was kind of peaking like after after the first quarter we began to reduce our exposure a little bit there you know but this material pull back you know could present an opportunity, and we're always looking for value opportunities.

And looking at the energy sector, it's trading at the lowest forward price earnings multiples out of any sector in the 500. So there is an option there, but our fund traditionally is overweight. You know, your defensive sectors like consumer staples and utilities and health care, you know, that have the attributes we're looking for in a in this strategy, you know, of having the ability to continue to increase their dividends on a consistent annual basis. Sure. What about financial stocks? Obviously, banks are going to got clearance to raise some dividends on some level. Do they qualify in big numbers? Yeah. So, you know, there is certainly opportunities within the financial space. You're getting a much lower dividend yield out of that particular group.

You know, but we you know, we have been actively increasing to our financials exposure, but it had kind of pumped the brakes on that a little bit with the potential for a recession could be either in it now or could happen in the next 12 months. So we're going to be company financials, you know, like J.P. Morgan or BlackRock, you know, that have, you know, the ability to make it through recessions, continue to pay, you know, increased dividends. And, you know, again, that's those are the those are the quality companies that we're looking for. Mike, I appreciate you giving us a look. Thanks very much. Mike Morey of Viking Fund. Thank you, Michael. Have a great day. All right. We'll do after the break.

Three market moves to make if we dive into a recession. We're breaking it down in our two-minute drill. And don't forget, you can catch us on the go by following the Closing Bell podcast on your favorite podcast app. Overtime. We'll be right back. Last call to weigh in on our Twitter question of the day. We want to know where's the most attractive place for your money over the next six months? Stocks, bonds or cash? Head to at CNBC Overtime on Twitter. Cast your vote. We'll bring you the

results. Plus our two minute drill after the break. Overtime. We'll be right back. Welcome back to Overtime. Let's get the results of our Twitter question. We wanted to know, where is the most attractive place for your money over the next six months? 54% said stocks, only 9% saying bonds, 36% cash. That shows you folks hate bonds more than they fear stocks. Right now, that's been consistent for months in the surveys. Time now for our two-minute drill. Joining us is Dory Wiley, president and CEO at Commerce Street Holdings. Dory, good to see you. Good to see you. You know, you pretty much think it's more or less a done deal that we're in a recession of some description, I guess. What does that mean for your investment posture at this point? Well, well, we are, are you know if you saw the GDP now numbers- they've been adjusted down to a minus two point one

percent we still have three weeks to go. There's a good chance based on history that that number can be adjusted down more. Given the one and a half percent loss in the first quarter word. Decreasing- our economy growth. At a- increasing

rate so that's a problem. Now, on an investing side, it creates more fear in the market. There's not enough hikes in the rates yet. The Fed's looking at 75 basis points coming out next month. That's still, what, maybe a 2.5% target. That's below the 10-year. We need a yield curve inversion before the market is comfortable in saying that, hey, the Fed is dealing with this correctly.

In the meantime, that creates some really good buying opportunities in the stock market. Yeah, I'd imagine you'd be looking at certain stocks or areas where they've already kind of discounted something pretty tough. Pioneer Natural Resources, pretty timely given what's going on in energy. What's the like here? Yeah, I really like that a lot. You know, oil is falling off. Anytime oil falls off because the news is based off demand, that's a good buy signal because we don't have a demand problem. We have a supply problem. The secretary general, unfortunately, passed away of OPEC, passed away Tuesday night. And his last public comments were, the industry faces problems in the output,

which is supply, due to years of underinvestment. You know, that's a good clue right there. So when we look at something like the Permian, which has a lot of independence, a lot of independence away from the government, and someone like Pioneer, maybe the biggest producer out there with the lowest cost of breake away from the government, and someone like Pioneer, maybe the biggest producer out there with the lowest cost of break-even on a well,

that stock is trading at a single-digit EBITDA multiple, which is incredible. It's six times. Then you buy that stock based off of forward projections for 2022. At $100 a barrel oil, you're getting 13%. If oil did go down to $60 a barrel, the company projects, you'll have 8%. That's a great yield. Yeah, and exactly. 8% dividend yield at the moment. Now, Micron, real interesting situation

here because they had a bad revenue guide and yet the stock did not fall apart. Yeah, it didn't because they beat all their numbers, right? And at some point, there's a bottom and there's a buy signal. And I think Micron is it and technology. But there's a lot of negative fear based off of inventory and demand and semiconductors. And here you have a company selling for less than three and a half times EBITDA. A private equity company would do anything to buy that if they could. It's probably too big. So I think that's a really good buy signal for Micron. And it's probably oversold here. Could be an interesting tell on exactly how earnings and guidance come the second quarter

reports are ultimately received. We'll see how that goes. Dory, appreciate the time today. Thank you. You're welcome. All right. And that does it for Overtime.