Closing Bell - Closing Bell Overtime: The Waiting Game 06/29/22

Episode Date: June 29, 2022

Investors anxiously awaiting key inflation data due out tomorrow before the bell. Josh Brown of Ritholtz Wealth Management breaks down what’s at stake for the markets. Plus, Charles Schwab’s Liz Ann Sonders explains her second half playbook. And, Kevin Simpson of Capital Wealth Planning is getting bullish on the retail space. He makes his case and the individual names he is banking on.

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 Schwab's top strategist, Lizanne Saunders. She's opening up her playbook as we gear inflation data due out tomorrow before the bell. Let's break down what is at stake with Josh Brown, co-founder and CEO of Ritholtz Wealth Management. Josh, we saw the indexes there more or less idling today. You did have more stocks down than up. Seems like we're just hovering above last week's lows. Interesting that, you know, Fed Chair Jay Powell today at this forum in Europe said that the path to a hoped-for soft landing is now looking narrower. And the market said, no kidding, that's what we've been dealing with for the last few months right here. So what would you take away, if anything, from the action or from really the first half of this year, which has been historically weak? Well, you know I'm a price guy,

and I listen to all the same remarks that all the people make the same way that you do, but I do exactly nothing with that information. I focus instead on what's actually happening, because price is truth. And where the rubber meets the road, what you're seeing today in the market is very clear-cut. The most cyclical sectors are substantially underperforming and the most defensive sectors

are leading. So you have this nascent rally in consumer staples and the XLV names, while energy stocks are the most hard hit. And that kind of a day just speaks volumes about where the market's head is at in terms of the economic concerns. That trend could remain in place for a while. And there are going to be these like regular reversals of that trend. Some random Wednesday, all of a sudden the ARK stocks are leading or all of a sudden consumer discretionary catches a bid. But the trend is down. So those days are counter trend. They're noise. The bigger picture trend is down. And I think it's really tough for people Monday, Tuesday, Wednesday to like compartmentalize these mini rallies they see that give them hope. The big picture here is

there's a ton of indecision. The best chart I saw today came from sentiment trader shout to Jason, who notes that market volatility over the last five weeks is at its highest since the COVID lows and the 08-09 period. He's measuring market volatility by the number of 5% changes. We've had four plus or minus 5% changes in the last five weeks. The last time we've seen that, the only period with more of those is 1928. I don't mean to use that date ominously, but like there's just a ton of indecision. And in the presence of this much indecision, don't be surprised to see defensive stocks have the leadership position. That is true the most since 1928. But he also points out that the other times when you've seen this clustering of 5 percent weekly moves have been toward the end of bear markets,

which is not to say it's some kind of signal, but it's the kind of dramatic action that you see when the market is really kind of coming to terms with a potential trend change or inflection point or just, you know, some kind of liquidation, I guess, underway. So it's interesting. We've seen so many extremes happening. And I just wonder how to really put them in context. You know, we saw so many on the way up from the March 2020 low for the next year and a half. All we did here is say this market's never been stronger in a shorter period of time than it has been recently. And people would say in 2021, why is the market up again? Well, the same set of factors that made it go up yesterday. And so to your point, I think it's the ongoingness of the same challenges that

has the market in the current downtrend, which maybe doesn't help anybody in terms of the practical matter of whether to act, and if so, how? So I disagree. I think it's helpful to understand where we are for both groups of investors. For short-term investors who are putting on long-side trades, in this environment,

we're in a defined downtrend. 10 month moving average is negatively sloped. We know this. This is actually one of the only things we know for a fact. We know the S&P 500, the Dow Jones Industrial Average, the Dow Transports, the financial sector stocks, the Nasdaq, small cap 600, Russell 2000. We know for a fact that these are all in bear markets. So if you know that that's the environment, what are you doing with your short term trades? You're probably working with

tighter stops. You're probably not buying 10 ideas at once. Maybe you focus on your top three because there's no room for all of this debris in a portfolio. So there are definitive things that you would do as a short term trader, knowing that we're in this environment. As a longer term investor at my firm, we manage some of our assets in a tactical portfolio. What does that mean? We were out of NASDAQ at the end of February. I said it on the air. We were out of S&P 500 at the end of April. I said it on the air.

Why were we out of these things? Not because I have any better idea than Jay Powell about when inflation will peak. It's because we're in a defined downtrend. And when you are statistically in these defined downtrends, the other thing we know for a fact is that historically, the rates of returns are lower. Volatility is higher and returns are lower. Now, this will change. At some point, this will bottom. The moving averages will turn higher. The trend will turn higher. It'll be really hard to see that happening in real time.

But there's no evidence that that process is underway yet. So why act as though it is? So we try to focus on what the evidence tells us. There's no doubt about it. And so if you want to be rules-based, if you really basically want to have a disciplined trading approach, that's the way you do it. However, in early January, the world was applauding the massive cyclically strong message from this market. And all anybody wanted to do was buy banks and yes, energy along with it. One ended up being a flop. The other one worked. But the idea that we should get cyclical was predominant and it was confirmed by the charts into January.

So my point is, things can change fast, and it's not as if you're going to get the message that it's happening. Well, if it were easy, then everybody would have, right, everybody would take those inputs and they would have a win rate of 100% and there'd be nothing to talk about. So you're dead right. Things do change quickly. And this is why if you're going to use technicals, you have to align those technicals with a timeframe that's reasonable enough. So then you're not chopping yourself to pieces every time the market whipsaws. Like it's no good doing risk management using trends

if you're using a 10 day or a 50 day because you're going to be bullish one day, bearish the next day, then bullish again. Your net return will be worse than if you had done absolutely nothing at all. So that part of it, I wish it were science. It's not. That's the art. You have to choose what level of volatility you're willing to accept and not react to. And I don't recommend that most people do this on their own. It's not that easy. Let's bring in Dan Greenhouse, chief strategist at the key question, you know, for an investor here is, am I going to be compensated likely for taking on more risk across various asset markets at these levels after a 20 percent move down, after we've been marinating in recession fears for a while, after the Fed has been tightening for several months and tells us more is to come. Yeah, I mean, you're certainly your forward expected returns are certainly better when

the multiples down by a third of the market's off by 20 percent from all time highs than it was at the time. And Josh, to his credit, was one of the few people at the time observing that we were maybe not going into a bear market. But once it became clear that we were in a bear market, was noting that we were indeed in a bear market, but once it became clear that we were in a bear market, was noting that we were indeed in a bear market. And I think, again, now as a longer-term investor, and that's ultimately what we do, you're certainly looking at forward returns that are much more attractive. However, you are still running up against further tightening on the part of the Federal Reserve,

inflation that hasn't as of yet proven itself to have peaked out, giving them some leeway to ease off the gas, off the break. And so you are still likely to have economic turbulence and with it market volatility over the next few months while this all sorts itself out. And in looking at the signals from different markets, Dan, we talked to Scott Minard yesterday of Guggenheim. We thought that you're getting paid OK perhaps in corporate bonds, even if things get a little rougher in the short term. And the credit part of this story is somewhat interesting because equity focused people say, I'll look at what the stock market's telling me. If credit is confirming it, I put a lot of weight on that. Now, your argument has been that credit has not priced in maybe as high a recession risk as equities have. So are they now the follower market? Does that have to

get worse before it gets better? How does that shake out for you? Yeah, I mean, listen, traditionally, and a lot of this is built on the 07 period when the credit market was, for lack of a better word, imploding as far back as the summer and the equity market obviously did not peak until October. It's not to say that the credit market hasn't had any weakness right now. It most certainly has. If you look at overall high-yield spreads, for instance, they're up well north of 500 basis points, depending on the index that you use. That's pricing in a good amount of recession risk. My point is, it's just not pricing in as much as the equity market is priced in. But also to be clear, when we talk about the equity market being overly valued or dismissive of any concerns, you look at it primarily through the prism of the PE multiple.

That was really, really high. When you're trading at 21, 22 times forward earnings, that's just a really excessive level of valuation. And so it's come level of valuation. And so it's come down a lot. And so by definition, it's priced in more. But again, both markets are dealing with the same thing, which is a likely hit to earnings over the next couple of quarters or earnings expectations, I should say. Hey, Josh, I know you've pointed out in the past that you look below the surface of the mega cap dominated S&P 500. And it looks like a lot more valuation work has been done.

Right. Small cap 600, like 10 times earnings has rarely been lower. Clearly, there's earnings risk implied by that. Today, you have a day where it seemed like nothing was happening. But under the surface, it actually was kind of weak. And the Russell was down more than 1 percent. Equal weighted S&P was down more. It's impossible to say, OK, it's done. You know, you can kind of you never know when something's rolled all the way down the hill in these instances. But would you be looking for those areas that have kind of let us lower as a way to say maybe the odds are more in my favor as a buyer?

Yes, I think Dan made a really good point about valuations, but he probably, in his next breath, if we gave him more time, would then point out the fact that we have yet to really see the E part of the P-E ratio budge. And that process, once it gets underway, it rarely takes place for a quarter or two. But I wanted to ask Dan this question, actually, Mike, that I think dovetails with what you're asking me, which is, unfortunately, we're going to have this or we're having this huge shift where the consumer is going from buying things to spending on experiences. Experiences don't show up as much in S&P 500 earnings. So a lot of the indexes profits are coming from buying TVs and dishwashers and cars and houses, etc. So that's one issue that you have. Even if we have a quote unquote good economy, it maybe doesn't benefit the S&P to the same degree that the 21 economy did. The second part of that is be careful with peak and trough earnings. So you might be in a period of time where multiples on, for example, small caps get down to 10 times.

But the reason they've done that is because the small cap index is very cyclical. And what we're really looking at is peak earnings that are about to roll over. So be careful about, you know, just nominal P.E. ratios as being quote unquote high or low, what's going to happen with earnings is really what's going to matter. Dan, what do you think about that concept? Yeah, no, I can always use more time and another breath. And on that front, yeah, obviously the E has to come down, although I will note yet again, outside of energy, you have seen earnings expectations come down and revenue expectations, more revenue than earnings. So you have seen some of this materialize.

To your second point, absolutely, it's one of the main arguments that a lot of people have been making. Well, I should say not enough people, that the market is much more goods or the equity market is much more goods oriented than the economy, which is a little more weighted towards the services side of things. And so you could see and probably are seeing already a bifurcation between the two. But again, I want to come back to the main theme of all this for traders and investors that are watching, that your ability or one's ability to thread this needle between this handoff from goods to services is going to be incredibly difficult and overwhelmingly likely, again, the Federal Reserve tightening as much as they have,

as much as they are likely to, is probably going to end up, or I should say almost surely going to end up with a higher unemployment rate, a lower level of consumer spending. And I imagine by year end, you're going to be talking about growth rates, both for earnings and for GDP that are below where current forecasts are putting them. Yeah, I mean, Dan, clearly there's a risk of over-anticipating that moment when bad stuff seems fully priced in, right? You can just obviously never quite get there. And time is a missing element. We can look at the implications of what the bond market is saying

about the path for the Fed policy, right? Oh, it's going to peak at maybe 3, 3.5. Then they're going to price in like three, three and a half. Then they're going to price in like a half point of cuts in 2023. Distant projections by, you know, by the Fed funds futures market obviously are less reliable than the near term ones. But it doesn't mean that that, you know, we've already kind of traveled that path and gamed it out in the proper way. No, my favorite chart that all the banks put together, the bond strategists,

is the history of bond market forecasts. This would be the treasury curve, but you could substitute out the Fed funds curve. All the bond market forecasts over the last 30 years, both at the top and the bottom, are just completely incorrect. Everybody gets this wrong cycle after cycle after cycle. And the Fed fund futures curve or the euro dollar futures curve is probably as reliable as the oil future curve, which is to say not very reliable. But again, what we do know is that we are heading into or already in what will probably be the steepest tightening path that we've experienced in our lifetime. We're all roughly the same age. I'll say I'm the youngest just for the fun of it. But it's just the idea, again, that these guys can thread this needle and we can all go about our day on the other side of this. I just disagree with it. But I will add, because I brought up the three of our ages, this doesn't imply that the stock market needs to fall

by 50 percent. This doesn't imply that credit spreads need to blow out to a thousand wide. You can have a normal recession and just be a little bit worse in credit and equity than you've already realized. Yeah. And I will cop to being the oldest of the three of us. And I do remember the last super steep tightening campaign in 94, 95, which everyone wants to see a repeat of. And I will say during the during the tightening, during 94, people didn't say, wow, this is a well-managed process. This is going to go well. There's no risk of recession. We're going to be fine here and we're going to have a perfect soft landing next year. So you don't know it in the moment of how it's going to go. And Josh, you know, I did your point about

experiences being less reflected and services in the S&P 500, even where you can find plays on the experience economy, like hotels. I was looking today. Marriott, Hilton, they look great. They held up perfectly into April. And then it's just they felt they fell out of bed. So it looks as if that was when the market decided we're not necessarily going to have this very kind of seamless handoff of the baton. Yeah, Morgan Stanley, Morgan Stanley cut their price target on Carnival Cruise Lines today in half, citing weaker demand than expected and elevated costs. And those two things are not solely going to affect the cruise lines. It'll be universal throughout the experience

economy money is money and I would just point out the 94 example we did have Chris Farley around to make us feel better and Nirvana so it wasn't all bad right well that doesn't help us now in either case does it so see unfortunately this time Josh and Dan appreciate appreciate it. Good discussion. Thanks very much. All right, let's get to our Twitter question of the day. We want to know which of these second quarter losers looks most attractive right now. Royal Caribbean, Netflix, Caesars, or Nvidia? Head to at CNBC Overtime on Twitter, vote, and we will bring you the results at the end of the show. Still ahead, the upstart downgrade, shares tumbling on the back of a

critical call from Morgan Stanley. The analyst behind that note joins us after the break. And later, your second half playbook, Schwab's Lizanne Saunders is with us here. Where she sees opportunity in the market as we head into the next six months. Over time, we'll be right back. We have a market flash on RH. Steve Kovach has the details. Hey, Steve. Hey there, Mike. RH revising its fiscal 22 outlook down. The chief executive officer, Gary Freeman, blaming, quote, the deteriorating macroeconomic environment for this revised outlook. Also, they're going to take their fiscal 22 net revenue growth and revise it down to negative two to five percent. And then

second quarter net revenue in the range of negative one percent to negative three percent. And also saying they expect demand to slow throughout the year. Looks like shares are off about 6%. They're down as much as 8% here in the overtime. Mike? Yeah, Steve, and that's on top of about losing two-thirds of its value from its high. Gary Friedman famously was downbeat on the last earnings call. I guess things got worse before they are getting better.

Thank you, Steve. Fintech lender, meantime. Upstart falling sharply today. Analysts at Morgan Stanley downgrading the stock to underweight and slashing its price target in a big way, going from $88 a share to just $19. Morgan Stanley writing that rising interest rates will hurt demand for loans while hurting Upstart's ability to scale. Morgan Stanley analyst James Fawcett, who made that call, joins us now. James,

great to talk to you. Thank you very much. I mean, the stock obviously responding to your call now down more than 90 percent from its highs. Get to the crux of what has, I guess, eroded in the fundamental story as far as you can see from here. Yeah, look, I think there's a lot that can be said around the macro and the lending environment. Your previous guests were talking about the credit environment. But when we look directly at Upstart, our biggest concern and what catalyzed us to move to Underway today is that when we look at the data that we can see on some of their loans, the loan performance and the delinquencies, et cetera, are rising. And now,

you know, Upstart kind of has always talked about being able to use artificial intelligence and extra data to underwrite loans, especially for subprime borrowers, better than traditional FICO. But in the last year, year and a half, what we've seen is that that outperformance has deteriorated. And now, at least some of their loans are actually performing worse than FICO-based loans of a similar quality. Does that, I mean, undermine the idea that Upstart was something of a better mousetrap for making personal loans, underwriting auto loans and things like that? Well, I think it certainly in our minds undermines the idea that you could continue to scale that, right? And so the analogy I always like to use is if I have an apple orchard, I go into it. If I have a specific set of criteria,

I can always find a handful of apples that are better than the orchard as a whole. But as I keep picking more and more apples, on average, my collection is going to look more like the orchard itself. And I think that's probably what's happening is that certainly when they're smaller, their mousetrap works better. But as you scale it up, it may be harder to maintain that outperformance. Right. So they can no longer as easily cherry pick the good apples to mix metaphors, I guess, on that. Is there a concern, James, that you point out that the that the the market for the wholesale market for these loans has become more demanding, right? The demanding higher spreads, more compensation for the risk, which is the way they finance the business, which does seem to be moving in the wrong direction, too.

But is there a risk with the stock down so much, it having pretty heavy short interest here, about 37 percent of the shares short? It seems like the streets kind of turned its back to a degree on the stock that, you know, that things could, I guess, somehow surprise to the upside or just not be as bad as expected? Look, I think in terms of the positioning, as you referred to it, there have been episodes specifically with Upstart where you have seen those kinds of squeezes. Most recently, going back to when they reported the December quarter results in February, you could see that that stock price spike just under those conditions. And so I think that's always a risk, as you said, when so much of the investment community is on one side. Now, the reason that we decided to go underweight is that we think that with the mousetrap

showing some weakness here, particularly at this size, and the other indicators that we're seeing in the broader credit market, we think ultimately there's going to be a rationalization. Could it be volatile around positive surprises, perhaps? But ultimately, we think that the market is going to get it to a more appropriate valuation in our minds, which is kind of that $19 price target we set. If there is a scenario in our bear case where you actually have to shrink the size of the business to really return the performance and normalize that, then you could be looking at even more downside than that. Yeah. So still close to 40 percent down to your price target there for the bear case.

Appreciate you bringing it to us, James. Thanks for running through the rationale. You bet. All right. Up next, your best bets for the second half of the year. Charles Schwab's Lizanne Saunders is with us. How she's positioned heading into Q3 and beyond. And don't miss a moment of overtime. Follow the Closing Bell podcast on your favorite podcast app. We'll be right back. Welcome back to Overtime. Time for a CBC News news update with shepherd smith hi chef hi mike thanks from the news on cnbc here's what's happening at noon tomorrow the supreme court will swear

in its newest justice judge kataji brown jackson will replace justice stephen breyer he has announced that he is retiring announced so earlier this week or this year i should say and sent a letter to the president saying he would leave the court at noon tomorrow, just hours after the court set to release its last two opinions of this term. The R&B star R. Kelly sentenced to 30 years in prison this afternoon. The singer and songwriter convicted of racketeering and sex trafficking last year. The judge handed down the sentence after several of Kelly's victims spoke of the lasting impact of his abuse. R. Kelly still faces child porn and obstruction of justice charges. It was the deadliest peacetime attack in French history. 130 people killed in a series of

bombings and shootings across Paris. That was in 2015. Now the only survivor of an ISIS terror cell that carried it out, sentenced to life in prison today by a Paris court. It's the most severe sentence allowed under French law. Tonight, fallout from yesterday's January 6th hearing testimony. Putin responds to NATO expansion and why China's buying farmland near a U.S. military base. On the news right after Jim Cramer, 7 Eastern, CNBC. Santoli, back to you. All right, Shep, thank you very much. Wall Street on pace to close out its worst first half in more than 50 years.

And our next guest says get used to the volatility, especially as second quarter earnings season gets underway. Joining me now is Lizanne Saunders, Charles Schwab, chief investment strategist. Lizanne, great to see you. It sounds like a 20 percent, you know, six month decline. Bonds haven't been much help to investors most of the way here. You don't really think it's time to pull away from a somewhat defensive stance or to skew toward things that are more stable? Well, I think this is an opportunity to take a factor approach. And I think there are factors that have been working consistently and I think will continue to work consistently, like low volatility and positive earnings revisions, high cash on the balance sheet,

strong free cash flow. So I think there are going to be opportunities in those kind of high quality areas. And if you have a long enough time horizon and a decent risk tolerance, there's no reason not to nibble. You know, in the case of the S&P, the average stock in terms of maximum drawdown from 52 week high is 30 percent. It's 50 for the Nasdaq and Russell. I just think the market hasn't reflected yet the likely weakness that is to come both in terms of earnings as well as profit margins. So that that could be the next leg of volatility that we have to wade through. Yeah, I mean, it certainly seems as if perhaps if it ended here, that would be kind of the lucky scenario. And maybe the whole process has not

worked its way, worked its way through fully. You talk about a factor approach or rotating, rebalancing into certain factors that have sort of quality attributes, as you mentioned there. You know, we've been talking a lot as we get to the end of the quarter about this idea that, well, stocks have underperformed so much, big asset allocation portfolios will be rebalancing into equities because it's the end of the quarter. Are you, I think, advocating a different approach in terms of when to decide to reshuffle a portfolio, not just based on the day and the date?

Right. And there are a lot of individual investors. Certainly the mutual fund world tends to do calendar-based rebalancing. In the case of mutual funds, it's every quarter. So it does breed opportunities. But I think for individual investors, to the extent that they can manage it in terms of the implications of turnover, tax implications, there are a lot of considerations, but volatility-based rebalancing. So maybe movements in certain asset classes outside of strategic allocation ranges, that's one way to take advantage of volatility by, you know, adding low and trimming high. You know, we continue to think the rallies look a little bit more akin to bear market rallies, counter-turn rallies. I think we've had the washout in

attitudinal sentiment measures, but we haven't yet seen it to the same degree in behavioral measures, be it the put-call ratio, even the VIX, fund flows. And that may have to be the next leg, hopefully the final leg. I mean, bear markets don't end in perfect playbook fashion. If they did, this would be really easy. And it's not really easy. But I think that there's probably more volatility to come, especially during our next season and, of course, ongoing Fed concerns. Well, exactly. I mean, tomorrow we're going to get we keep talking about the PCE inflation indicator. But, of course, that comes alongside personal income and spending all part of the same batch of reports.

So it's going to be saying something about both big concerns, right? Whether we're stalling into something like a recession and whether we've seen peak inflation. Where do you think we are in both of those potential processes? Yeah, and I agree with you. I think personal spending and income is particularly important, especially given the pretty significant downward revision to the consumption part of Q1 GDP from plus 3.1 to plus 1.8. That's still positive, but that's a big hit. And that had been one of the primary pillars of support for the non-recession camp folks, that we had this maintenance of a high level of consumption. And some of that kind of got knocked out with that revision. And the trends are not looking great in the second quarter. I think recession is the more likely case, just given the extremes of monetary policy, as well as just

combating a 40-year high in inflation, the fact that we already had a contraction in growth in the first quarter and simultaneously trying to shrink a $9 trillion balance sheet. I'm just not sure how that needle points more towards soft landing. And if it is a recession, it is possible just based on how the NBER goes about the declaration moment and the dating moment, which could still be down the road. We may find that as you and I are having this conversation that we're already in one. If indeed the aggregate peak in the data they track, which includes personal income, includes industrial production, payrolls and business sales, has already peaked or is in the process of peaking. Yeah, certainly it's always retroactively defined, right? A recession or at least the start of one is.

Where does that leave, though, the market's role as anticipating or at least running a little bit ahead of the possible recession that might be here. Meaning a lot of times people say once it's clear that it is a recession, the market has done most of the work by that. Yeah, especially given that it's an average of seven month lag historically from when the NBER says we're in a recession and the point they go back to date it. It's even longer. It's about a 12 month average from when they declare that the recession ended to whatever date that was. And I think we have seen, obviously, a tremendous amount of weakness. And I think the market weakness does largely reflect at least a mild recession scenario. It probably doesn't reflect the profits hit to come. But the fact that the market is down this amount

over basically a six-month period of time, the combination of those conditions, weakness plus time, there's never not been a recession under those circumstances. So if you simply were looking at the market and using history as a guide, that's pointing firmly toward recession, not soft landing. Yeah, I did see you cite that that historical pattern before, which is very interesting, obviously leaves out things like the 1987 crash where you were down, which was short in duration. Right. Right. So it's the combination of weakness and length. Yeah. So that was that was an outlier, obviously. This gets us to that to that threshold,

you know, obviously. And I guess the other piece of it and we heard some discussion about this earlier is the nature of the recession, not just maybe severity, but the fact that, you know, nominal growth or assuming inflation doesn't go to zero, is going to remain reasonably healthy, considering we were just in labor shortage. Obviously difficult to try and handicap how all of those factors play out. But I just wonder what it might seem and feel like and what that means for market pricing. Well, at this stage of the game, a recession is unlikely to be anything resembling global financial crisis era, that there aren't major, major dislocations in the financial system. Even as housing is rolling over,

it doesn't look like an 08 crisis situation, given the lack of systemic leverage in the financial system. We don't yet know whether there's sort of a whale that has yet to come to the surface. And that often happens when you're in an aggressive tightening cycle. But all else equal, I wouldn't expect this to be a severe one. And quite frankly, I find sometimes when people say it's not a this year story, it's a next year story. If we're getting a recession, I think you'd rather it happen now or already be underway than pushed off to 2023. That would actually suggest that we may be closer to, I don't like to try to call tops and bottoms in the market. I think that's a futile exercise. But

that's a better scenario, in my opinion, a recession now or very soon versus a recession in 2023. I also don't understand the methodology around 2023. That would almost suggest you get a lift in growth and then you peak and roll over because the MBR goes back to the peak in the data. But again, that's that's the lesser of two evils, I think, is a recession now versus a recession next year. Yeah, you wouldn't want the market to be spending 18 months trying to look ahead to a recession and anticipate it. And price is usually not the way it tends to go. So, yeah, maybe sooner, better than later. Lizanne, always good to talk to you. Thank you. You too, Mike. Nice to see you. All right. Up next, we are tracking some big stock action in overtime, including a big retail mover on the back of that RH guidance update that we just got.

Overtime, we'll be right back. We're tracking the biggest movers in overtime. Christina Partsenevel is here with that. Hi, Christina. Hi. Well, we're seeing shares of Williams-Sonoma falling right now in the OT, down over 4% right now. The retailer moving in tandem with RH after it lowered its fiscal 2022 outlook. And that was on the deteriorating macroeconomic environment. That was a quote from their statement. The furniture retailer said they revised lower because of weaker than expected demand since their prior forecast.

And so we can see Williams-Sonoma also falling. Switching gears, shares of Miller Knoll climbing higher in the OT, up almost, oh, look at that, soaring almost 9%. And this is the maker of the famous Herman Miller chair, you know, the leather one that a lot of people have over five grand for the chair. Well, they posted a Q4 revenue beat with orders hitting $1 billion, surpassing last year's amount, which was about $689 million. And then we've got another dividend increase. Starbucks board of directors approved a dividend of 49 cents per share of outstanding stock. The dividend will be payable on October 26th of this year. These shares, though, are down unchanged right now, but down 35 percent this year alone.

Mike? Christina, thank you very much. Thanks. Up next, shopping for opportunity. One five-star fund manager sees real upside in the retail route. The names he's betting on over time. We'll be right back. Consumer discretionary stocks are the worst performing S&P sector this year, falling roughly 32 percent. But one five-star money manager is starting to see opportunity

in a number of retail names. Kevin Simpson is the founder and CIO of Capital Wealth Planning, and he joins us now. Kevin, great to speak with you. So what in your investment process is bringing you to this group, which would seem to be, I guess, vulnerable if the recession fears are well-founded? Yeah, well, I think, you know, Sir John Templeton said it best, you've got to buy when there's blood in the street. So retailers have certainly been taking a few punches. Even just over the past hour, we've seen Williams and Sonoma, we've seen Restoration Hardware just getting whacked. And my thinking is now is the time to start putting together your shopping list, Michael, for fourth quarter holiday season and into 2023.

Okay. And what would be on that list? I mean, you know, you can go across the span of retailers and find them that have been punished. They look kind of cheap if you believe that the sales and earnings are going to come through. And obviously there's hazards. Bed Bath & Beyond today, in addition to RH, in addition to Williams-Sonoma, suggests that hard goods are going to be on sale for a while. Yeah, they are. Now, Mike, I followed you for a long time. You put together some of the best charts I've ever seen. So I tried to create one for you today that compares some of this information for us. I mean, we're all looking at CPI and saying when CPI peaks, that's going to be our green light to move forward. But my thinking is we've got to look at consumer sentiment because that's what this is all about with respect to the retailers. And we're at an

historic all-time low on consumer confidence. So as you start to think about it and looking at this chart, you say, you know what, this gives me some reason. If it is a forward and leading indicator, that maybe the markets can go down a little bit more. Maybe we can retest the recent lows and maybe we could go down even 10% further than that as we go down a little bit more. Maybe we can retest the recent lows and maybe we could go down even 10 percent further than that as we go through a bottoming process. And when that's happening, that's when we have to identify companies that we want to take a look at. Home Depot, Target, Walmart, Lowe's.

These are stocks that should be on a shopping list. Now, I sold Walmart back in March. I do own Home Depot, adding to it on weakness. But if we look at these things 10% lower from where they are now, so they drop another 10% from here, Home Depot goes down to 243. The dividend jumps up to 3.1%. And you've got a PE ratio somewhere around 15 or 16. And I'll just give you one other quick example on Target, because that's had such headline news as of late, not much of a good. If they drop

another 10 percent from here, you're under 130. You've got a three point three percent dividend and you've got a P.E. somewhere around 10 or 11. So if we're looking for opportunities, these have to be something you start to think about down here because they're just getting so inexpensive. Would you just really sit back and wait for those levels or would you try and, you know, maybe sell options and get you in at lower at lower prices if, in fact, you know, we get toward them? Yeah, I mean, if it was me, I would certainly be selling options. But I think from the standpoint of real wealth creation, like not market trading, not two or three months out, looking two or three years out, you start to build positions here, you add to them on weakness. I mean, these are volatile times. It's not just volatility as a backdrop. This is an

incredibly difficult and challenging period. And you have to manage your portfolios very, very carefully. You can't pick the bottoms, you can't pick the tops. But looking for these opportunities, building positions, I mean, that's true wealth creation. And there's an opportunity here for all of us to do that and take advantage of it. And are there anything, you know, any areas outside of pure consumer that you would also look to pounce on? Yeah, I mean, absolutely. Financials, we've been talking forever about how they're going to go up in a rising interest rate environment. All they do is get beaten up and down, you know, 20 percent, 25 percent, 30 percent%. So if we look at Goldman Sachs, for example, they came out this week, they increased their dividend by 25%.

If I'm going to go through a period of waffling, wafering, choppy market for an extended period of time, I want cash on cash. I want rising dividends. I want companies, and I say this all the time, I want to get paid while I wait. So I want to know that I've got rock solid balance sheets. And really the only way to outperform in these types of markets is to lose less in the bear market, because that's how compounding works. If we can make sure that we're hedging a little bit of the downside, then we're going to be able to really navigate this very, very successfully. Yeah, upside will tend to take care of itself in the next advance. Kevin, thanks very much.

Appreciate it, love the chart. Thanks, Michael. All right, up next, betting on biotech. Two picks for your portfolio. That is in our two-minute drill. And coming up on Fast Money, is a Ponzi scheme destroying the housing market? That's the warning from Pantera Capital's Dan

Moorhead. He'll break down his call at the top of the hour. Overtime, back after this. Last call to weigh in on our Twitter question. We want to know which of these second quarter losers looks most attractive right now. Royal Caribbean, Netflix, Caesars, or NVIDIA? Head to at CNBC Overtime on Twitter, vote, and we'll bring you the results right after the break. Plus, your two-minute drill. Overtime, we'll be right back. Let's get the results of our Twitter question. We asked which of these second quarter losers looks most attractive right now. NVIDIA, the overwhelming winner with 74%

of the vote. Boy, the fan base remains very strong for that one time semiconductor moonshot. It is time now for a two minute drill. Joining us now is Jessica Inskip, head of product and education at Options Play. Jessica, good to see you. You too, Mike. Thank you. You know, health care has been one of the strong spots in a weak market. I know you're finding some opportunities in the sort of biotech specialty pharma area. Detail some of those. Yeah. So biotech is definitely one of my higher picks, health care specifically. I'm looking at one pick, Jazz Pharmaceuticals. So it looks like it's well positioned for the macro environment. Now I'm screening for something technically. This is showing bullish divergence. I've got a short term price target about ten

dollars above the current stock price. So right now this is a good pick due to the macro environment and technical bullish divergence that it's showing based on the charts. And Biogen, another one and also another one, by the way, which fundamentally screens out as looking kind of inexpensive. That's correct. And that's the same thing. So I'm looking for things in this biotech sector because of the macro environment and then a chart that is going to amplify bullish divergence. So it's something I can trade in the short term and also hold for the long term. And Biogen is showing those same factors that I screened for. So you say short term 214, target 224, somewhat longer term. So maybe the run can continue there.

Alibaba, interesting play. Now, the Chinese market has actually looked like it might be bottoming. China Tech working better. Talk about Alibaba and how that's set up. Absolutely. So different technical environment, and that's extremely important. So I wanted to look for something with the Shanghai reopenings that perhaps the bottlenecks could be resolved. And like you said, that bottoming and signs of that. Alibaba has the most beautiful chart. Every indicator that's indicating upward momentum and bullish divergence has been confirmed. It has a short-term resistance level that it needs to surpass in order to confirm that. But once it hits that, that's the last checkmark on the list to see really well upwards

momentum. So this one's really, really technical. And what would that level be that it needs to surpass, do you think? That's 122. So that's $6 up from here. Yeah, that's it. And so that's 22. So. Mm hmm. So old support dollars up from here. Yeah, that's that's it. And so that's not that far. And so it's short term resistance. And the way resistance tends to work once you surpass those levels, it's going to become new support. And then hopefully we'll see an upwards trend from there. All right, Jessica, thanks very much for the ideas. Appreciate it. Thank you. All right. That does it for overtime today. Fast money begins right now.