Closing Bell - Closing Bell Overtime: Title: Are Markets Mispricing Geopolitical Risk?; MP Materials CEO On Stock Surge & Supply Chain 6/17/25

Episode Date: June 17, 2025

Stocks fall in afternoon trading as investors weigh intensifying Middle East risks, a looming budget showdown, and this week’s Fed decision. Scott Wren of Wells Fargo says don’t overreact to geopolitical headlines. Olaolu Aganga of Mercer offers the global CIO view on allocation right now. Market impact from DC from Pangaea Policy founder Terry Haines. Plus: MP Materials CEO Jim Litinsky joins exclusively to discuss why rare earths are national security assets, his company’s stock surge and the supply chain.

Well that's the end of regulation. Equifax ringing the closing bell at the New York Stock Exchange. LGI Homes doing the honors at the Nasdaq. Stocks ending the day in the red as tension between Israel and Iran intensifies but finishing off session lows. Healthcare and consumer discretionary with the worst performing S&P sectors. The 10-year yield falling six basis points. The energy complex moving higher on its continued attacks in the Middle East between Israel and Iran crude hitting the highest level since January. It's rallied more than 4%. Solar stocks though, those sank today. After the Senate's version of the tax bill cut wind and solar incentives, we've got more on that straight ahead.

Jabil leading the S&P after better than expected earnings, announcing a $500 million AI U.S. manufacturing investment. JetBlue though, sinking as the CEO said the airline will implement new cost cuts due to softer than expected travel demand. The defense stocks ending the day in the green as Middle East tensions ramp and Reddit among the best performing after rolling out two new AI-powered ad tools. That's the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort alongside Morgan Brennan.

Ahead, should investors be buying on any sell-offs related to the Middle East conflict, or are the risks too high? And Rare Earths continue to be a trade bargaining chip. The CEO of MP Materials joins us to break down why this sector is so crucial to those negotiations, also national security. Plus, the setup for tomorrow's Fed meeting. How will Fed Chair Powell categorize the impact of tariffs? Well, we start with the escalating conflict between Israel and Iran as the president meets

with his National Security Council in Washington. Eamon Javers joins us with the latest. And Eamon, this continues to develop on a momentary basis, it would seem. Yeah, that's right, Morgan. And we're told now that President Trump has just wrapped up that meeting with his top national security advisors

in the Situation Room on the evolving conflict between Israel and Iran. And through the day, the president has been stepping up his rhetoric against Iran on social media. In a post this afternoon, the president wrote, We know exactly where the so-called supreme leader is hiding. He's an easy target, but is safe there. We are not going to take him out, parentheses, kill, at least not for now.

But we don't want missiles shot at civilians or American soldiers. Our patience is wearing thin," the president writes. So that leaves open the question of whether Trump, who campaigned on the idea of ending wars, and who's really sought to position himself as a peacemaker, is considering bringing the United States into the war against Iran alongside Israel. At the same time, at least some Republicans on Capitol Hill this afternoon are expressing reservations on U.S. involvement

in Iran. And in another social media post, the president writing, we now have complete and total control of the skies over Iran. The president in that post doesn't say who he means by we and whether this refers to U.S. military assets over Iran or separate Israeli action. And now that this meeting has ended, it's unclear whether we're going to see the president on camera at any point this afternoon. Otherwise, we will keep an eye on social media to see if he has any more announcements to

make, guys. Back over to you. We know you keep an eye on it all, Eamon. Thank you. And as destruction in Iran and Israel continues, oil prices remain elevated. Our next guest says the higher price, the higher the price of oil, the more negative the impact will be on the U.S. and others. Let's bring in Wells Fargo Investment Institute Senior Global Market Strategist Scott Wren. Scott, good to have you. So the major

averages closed down nearly a percent today, the Nasdaq faring worst. It's not a reaction to the 10 year, which was lower today, it's a reaction to oil? Well, John, I think that's part of it. And certainly the market, especially if we have a big jump, $90, $100 a barrel or something like that, that's going to be a negative. But I think a lot of what's going on right now is,

stocks aren't cheap. We weren't all that far from the all-time record high, and a lot of people would say, well, gee, the fundamentals, you know, we're slowing growth, labor market's weakening a bit. Why would that be? So I think we had such a great move since the April lows. You've got a lot of geopolitical tensions out there.

You have a lot of uncertainties. I think some people are just taking a little bit of money off the table. You know, this Fed meeting, very doubtful the Fed's going to do anything. I don't think the chair is going to change his tone a whole lot. So I think with the good run we've had, people are just more than willing to take a little money off the table, trim a little bit, and kind of go from there, see what happens. But you seem to be saying don't take too much off the table, and you advise in international

markets investors should favor Developed markets from here over emerging why? Yeah, yeah, well, I tell you I think on if you know emerging and of course China's the 800 pound gorilla there You know, we don't think that situation is going to turn much. We think the real estate market there is going to remain weak Developed markets, you know, they're cutting rates. You know, if trade picks up here a little bit later this year and in 2026, they could do a little bit better. But, you know, we're leaning toward U.S. assets. We have for a while. We think those are better quality. We think the U.S. economy in the long run is much more innovative and the European economy isn't really all that innovative.

So if we had to make the choice internationally, we'd take developed. But for us, we wanna be patient here. We certainly wanna buy on some pullbacks. We think there's a good chance. I mean, this is not a bold call, but easily from here, you could see five or 10% to the downside.

We'd wanna be stepping into the sectors that we like which would be energy, technology, communication services, financials. We even like utilities though so we're favorable on a number of sectors but it's not like we want to jump right in here and buy them. Scott the debate is fomenting that if you want to take out the nuclear enrichment site that's buried half a mile deep into a mountain in Fordow in Iran, that it's going to require American-made so-called bunker buster bombs that are delivered by American-made B-2 bombers to actually get the job done. Unclear whether the U.S. would actually take that step that would directly involve it in an offensive way into this conflict between Israel and Iran. But if

you were to see some sort of activities happen or evolve that would cause the US to take an action like that. What does it mean for markets? What do investors, how do investors hedge that risk? Yeah, you know, let's face it Morgan, you need certain planes to develop those What do investors, how do investors hedge that risk? Yeah, you know, let's face it Morgan, you need certain planes to develop those kinds or to deliver those type of bonds. And I think for the market, at least in the near term, it all comes down to the price of oil.

And, you know, the economies around the world are pretty slow, but a higher price of oil. And once again, you know, $75 is not gonna kill the economies around the world are pretty slow, but a higher price of oil and once again You know $75 is not going to kill the economies around the world But a hundred hundred twenty dollar oil certainly would and not that that would stick there very long I mean we like energy, but we're not married to that position We see something you know some super high price on oil that would probably be a good one to trim back But but I think that's as far as the market goes, these geopolitical tensions historically,

they come and go pretty quick. They're not long lasting. That's why we think if the market sells off, that's an opportunity to step in. We do know though that conflict is inherently inflationary, whether it is through oil prices and the energy markets, whether it is through increased government spending on things like defense programs. We saw that a couple of years ago when Russia invaded Ukraine.

So at a time where markets in general here in the U.S. are focused on the path of inflation moving forward and we have the Fed coming out with a rate decision tomorrow, how do you factor that in at this moment with all the trade negotiations and other geopolitical landmines in the background? Well, you know, for us, I mean, we've expected CPI to push higher. We've got a 3.5% headline number on CPI by the end of this year,

so we think inflation's going to be higher. We also think the unemployment rate is going to be higher than it is now. We've got a 4.8% number there. So the Fed's in a tough spot. We only think they'll cut one time this year, maybe one time next year, but they're gonna have to basically make the decision, is unemployment going to be the determinant

that makes us cut rates, or are we not going to cut rates because the inflation rate's a lot higher than where we expect? determinant that makes us cut rates or are we not going to cut rates because the inflation rates a lot higher than where we expect. So you know there's a lot of things going on out there but I think it's safe to say that the Fed is not going to give us a lot of indications as far as you know tariffs are going to have this impact on GDP. I mean we've got a 1% GDP number out there this year so you know there's there's definitely some slowing down going on.

2026 is gonna be better, but of course we have to get from here to there. And that's why I say, I think there's a good chance that there's going to be some sort of pullback here. You gotta be ready. You gotta step, you don't wanna get too defensive here. And you gotta be ready to step into some sectors that are gonna benefit from a better global economy, a better. economy at the end of this year and in 2026.

Okay Scott Wren great to have you on with the S&P finishing down eight tenths of one percent back below 6,000 59.82 is the level there. Well now let's bring in senior markets commentator Mike Santoli for a look at the recent struggle that we have seen in the defensive sectors. Mike. Yeah Morgan, for as many of these reasons you've been citing why investors may have thought to play traditional defense, it hasn't really worked across the board. Here you see the equal weighted version of utilities, which actually is the only one of the traditional defensive that has worked, mainly because of those names that are leveraged to the AI power theme. But then you see equal weighted healthcare and staples really wallowing here, not really

doing a whole lot over the last year or so. So what does that mean for the overall market and what you get when you buy the S&P 500? Well, you buy a very kind of growthy and somewhat cyclical index. Take a look here at the percentage of the S&P 500 that is accounted for by Staples Energy, healthcare and utilities. About one fifth of it, just over that. This is according to Strategus.

The last time we were anywhere down near this area was near the peak of the market, tech dominated market and consumer discretionary dominated market back in the year 2000. I don't think it means one for one that we have this unsustainable kind of high market that we have to have a lot of punishment for and get cut in half the way the previous one does.

But it does show you the shifts around the edges and maybe it brings up the idea that there's a different kind of defensive sector or characteristic within the market that is proving itself out, which is some of those bigger companies that aren't really cyclical, but they are these big platform companies, Mag-7 or something like that, where it's the way investors are choosing to kind of hide in places that are not as exposed to either geopolitics or macroeconomics.

You took the question out of my mouth, Mike, which is, is the definition of defensive changing, especially when you do think about something like mega cap tech where it's a secular growth story and they're throwing off lots of free cash flow. It seems that on some level that is true. I think that there's two things that you might kind of use to complicate that story. One is that they are ultimately, at least hardware wise,

there are cycles within those broad long-term playing themes that are out there in technology. So you can't fully say, like semiconductors, they obviously have a cycle that they are subject to. But I think the other piece of it is, are people still just overweighted in those areas? I don't know that you can necessarily say that they are. I don't think a lot of professional managers

have 6% of their fund in Nvidia, another 6% in Microsoft and Apple because that would be market weighted. But I do think there's a risk of sometimes you get these periods when you're complacent about the Mag-7 and don't really account for the fact that when people just want to turn stocks into cash, those are the things they sell first.

Maybe that's why they don't act defensively in every respect. They didn't in 2022, for example, Morgan. Okay, Mike Santoli, thank you. We'll see a little bit later in the show. Well, shares of Rare Earthmine are MP Materials, which owns the only operating rare earthmine in the U.S., more than doubling this year. Up next, the CEO joins us to discuss the soaring demand

for these critical minerals. Plus, the Senate making major changes to the House's tax and budget plan, and it is threatening to kill President Trump's one big, beautiful bill. We'll break down the market implications ahead when Overtime. Shares of gene editing company Verve Therapeutics skyrocketing today on news that it will be

acquired by Eli Lilly for $10.50 a share. That's a 68% premium. Both companies already have a partnership to develop gene editing therapies to control or to lower cholesterol for people with heart disease. That deal highlights Eli Lilly's attempt to expand its portfolio beyond weight loss and diabetes drugs. Well check out shares of MP materials because those are up 25% in the last week.

Nearly 60% since the start of the June. Better than 150% over the past 12 months. This stock has been boosted by geopolitical tailwinds tied to China and a rare earth steel. Their MP materials is the largest rare earth producer in the Western hemisphere, making more than a dozen elements used in high tech consumer products in the military.

They make magnets. In fact, an F-35 fighter jet has more than 900 pounds of rare earth materials in it. So joining us now is James Latinsky, founder, chairman, and CEO of MP materials. Jim, it's great to have you back on the show. I'm gonna start right there because rare earths, you've been talking about it for a long time.

The fact that this was a big issue from trade and supply chain standpoint, from a national security standpoint, that people didn't necessarily realize or understand how dependent we are on China and how close you are to shutting down supply chains if China basically puts up export controls. What does that situation look like now? How quickly can MP fill the void? Hey Morgan great to see you and thank you it's nice to be back. That's exactly it as you know we've been

talking for a number of years since we've been public about the risk, the single point of failure in this supply chain around rare earth magnetics. I think it's fair to say we've been screaming from the rooftops. Unfortunately, what was once theoretical is now actual, right? And I think we did get some pressure alleviated coming out of the trade deal in London. But Morgan, what did we get out of London? What we got was a licensing regime from the Chinese. We got, essentially, the Chinese government now gets to decide what companies of ours get rare earth magnets. And to get those magnets, there's a pretty detailed

licensing regime. So just so the audience understands, what that means is whether it's an auto manufacturer, aerospace, or in our defense supply chain, if you want a rare earth magnet out of China now, you need to submit a detailed application to the Chinese government that includes specs about your product, potentially pictures of your product, and contracts. And so this is, although we don't necessarily have a short-term crisis, this is without a question a long-term industrial crisis for us. I would imagine China gathers a lot of intel through that licensing process. You've talked about it, that your mission is to restore

the full rare earth magnet, its supply chain to the US. What does it take to do that? Yeah, so we've been at this for a number of years, as you know. We've invested north of a billion dollars since we've been public. And we've basically done it. We mine, refine, and make magnets in the United States of America at MP. And the question now is, how quickly can we scale up this business? And so we think we can meet a lot of American demand, and as you can imagine, it has been

a feverish pitch of interest from industry and government on how we accelerate this as quickly as possible. But we have essentially restored this supply chain, but at very small scale. Now we need to just continue to execute an MP to bring as much of this online as we can. Yeah, I guess the question, Jim, from an investor perspective, there's already quite a bit of excitement around the stock and there's only so much stuff in the ground and only so quickly that you can get it out. So what is the accelerant potential here, whether it's assistance from the government

or from elsewhere that would perhaps bring returns for you faster than otherwise? That's a great question, John. What we've made clear is, given the scale of capital that we've invested in the years that we've committed and the team that we've built, as I said, the conversations, I have never seen it like this. I mean, it is feverish, like I said, from industry and government, and everybody wants us to move faster. But the reality is,

we obviously are a shareholder-driven company. We need to accelerate this in a way that's attractive for our shareholders. And so what that means is, I think you're going to see over time, these things don't happen overnight, but I think you're gonna see that our attitude is this, we're gonna have transformational evolution at our company via industry and government to make sure that we can build this out quickly. And what that means is just faster refining, more magnet production over time.

And the key piece of this that I think people don't fully appreciate as well is the recycling aspect of this. We've made clear that when it comes to recycling, refining is really relevant and matters because you need to be able to send material back to a refinery to properly recycle it. And that of course expands capacity in a market. And so right now there are two places in the world that you can refine at scale.

That's in the Chinese sphere of influence and at MP in the United States of America. And so we are a natural national champion. And so the question is, is how quickly can we build out this ecosystem? And again, we're going to do it in a way that's thoughtful for our shareholders. And these things take time. But, you know, I'm really optimistic about our business. I think it's fair to say that this highlights the strategic value of what we have, and so we'll just keep at that. Okay, well we look forward to updates along the way. Jim Latinsky of MP Materials, thank you for joining us.

Thank you very much. Well, Home Builders, among the hardest hit groups on Wall Street today, we're gonna break down the move straight ahead. And later, Mercer's US Chief Investment Officer tells us where she sees value right now and why you may have to look overseas to find it. Welcome back to Overtime.

Home builder stocks under a lot of pressure today with home builder sentiment unexpectedly falling to the lowest level in three years. All of the index's three components, current sales conditions, sales expectations, and buyer traffic are down. 37% of builders said they cut prices. That's the highest share since the group started tracking the number. And if that's not bad enough, Lennar missed Wall Street's profit estimates in part because

higher incentives weighed heavily on gross margins. Well, it's time now for a CNBC News Update with Courtney Reagan. Hi, Court. Hi, Morgan. Los Angeles Mayor Karen Bass lifted a downtown curfew that was put in place in response to the protests against the president's crackdown on immigration. She said today the week-long curfew successfully protected businesses and residents from robbers.

The curfew covered a square mile of the city around where the protests took place. Elon Musk's AI startup XAI is burning through $1 billion a month. Sources tell Bloomberg the startup is expected to spend about $13 billion this year with revenues of only $500 million in 2025 and 2 billion next year.

But according to deal terms shared with its investors, XAI is reportedly trying to raise more than $9 billion in debt and equity, and that's barely covering expenses. And CNBC has learned Meta is extending its partnership with Luxottica and releasing versions of its AI-powered smart glasses under the Oakley and Prada brands. The Oakley version could cost around $360 because they are more weather resistant than the Ray-Ban version.

Meta will also design glasses with Prada, though it's unclear when the deal will be announced. Morgan, back over to you. All right, Courtney Reagan, thank you. Our next guest sees big opportunities in the defense sector, but it's not US defense contractors on her radar. Why she's hunting for value overseas.

Straight ahead. Plus, show me the money. Coming up, why more and more investors are demanding excess cash be returned to shareholders and the number one way they want to receive it. And overtime comes right back. Welcome back to overtime. Well, here's where we end of the day. Stocks closing in the red as the Iran-Israel conflict worsens. Although we did close off of the session lows, healthcare and consumer discretionary were

your laggards there. Oil ending higher by more than 4% on those mid-East tensions. Energy was the only sector ending in the green. ExxonMobil, Chevron, Phillips 66 all closing higher for the eight straight day Silver hitting the highest level since 2012 pushing the mining ETF SLV higher as well We've seen a real breakout rally in the last couple of weeks in silver a number of retail stocks though moving to the downside After today's retail sales data fell more than expected under Armourour, RH, Macy's, Kohl's were among the worst performers.

Now despite a down day though, there were some names that hit all time highs. Darden Restaurants, Cardinal Health, RTX, and Spotify. Well Bank of America's latest fund manager survey out today showing investors are expecting international stocks to be the best performing asset class over the next five years. The emerging markets ETF is outperforming the S&P 500 so far this year and our next

guest sees potential in non-U.S. companies. Let's bring in Mercer US CIO, Alaluaganga. Great to have you back. Thank you guys for having me. So what's the smart thesis for investing outside of the U.S. right now? How much of it has to do with where a company's customers are versus where its workforce is? Yeah, I mean, the fun flows this year in particular

has been clear, right? Like we've seen great outperformance in the U.S. due to the Mag-7, that type of thing. And fun flows have been to Europe, or at least we've seen that this year. For us, where we've been doing a good amount of work is really based off of themes, just because we wanna make sure

that the investment thesis persists. So one in particular is called the security of everything. Now, security of everything controls, or at least it goes over a few different sectors. So whether it's energy transition and the opportunity set is richer in Europe, so we do have to acknowledge that. It also touches on a number of different areas. So defense, now defense is either in the US or in Europe, so we do have to acknowledge that. It also touches on a number of different areas.

So defense, now defense is either in the US or in Europe, but some of the defense sectors that are critical and then critical assets. So logistics, transportation, those types of things. And then of course, cybersecurity. So a number of different areas all playing into the same theme, which is the security of everything and that we think has a decent amount

of opportunity set overseas as well. With U.S. markets having outperformed for so long, where are you seeing the biggest valuation mismatches, the biggest kind of price opportunities? I mean the biggest valuation mismatches is obviously between the U.S. and frankly every other area. Now emerging markets, China in particular, was somewhat depressed. We did see fund flows out of that area. So the spread between the US and emerging markets, China in particular, has widened for quite some time.

But Opportunity said there's still a lot that's happening that is unclear with regards to politics and then geopolitics obviously is top of mind. So we are cautious on leaning into some of those areas. It is more the clearer themes that can be harnessed and companies invested back to defense and energy transition. And of course, when we talk about this geopolitical landscape, the security of everything, it makes sense

because it does reach out into so many different areas. I am curious about energy transition opportunity in Europe and why it looks more attractive there specifically. Europe has been more leading with regards to clean energy, clean tech, that type of thing. There, the company said, and the environment has been more conducive over the last few years. I know here, obviously in the U. US, we had the Inflation Reduction Act that the policy at the time made some of those areas attractive

and now we need to wait and see with regards to that. So Bank of America's Global Fund Manager Survey finds that investors are the most underweight on the US dollar in 20 years. Does that make sense to you? And if so, what are the ripple effects to these other markets? So the spot performance for US dollar, we've seen a decline.

There's been a bit more of a diversification with regards to currency effects. But if you were to look at the dollar paired on some of the other global currencies and baskets, the dollar is actually still relatively elevated in terms of valuation. So we look at longer term trends with regards to some of those patterns, the dollars versus some of the other global currencies in pairs is elevated. The spot market though, yes,

we've seen a bit of a decline. What are the best defensive plays that you're drawing up for investors right now? For us, we don't drill down to the particular companies, but defensive plays, I think asset allocation very much is still private market, there's still areas where you can get yield and coupon. We've talked about private credit a little bit.

There's still a lot of opportunity set there. And even in the U.S., some of the legislation is opening up to be able to make that available to investors, even the retirement plans. Yeah. When we talk about some of that legislation or some of the regulatory environment shifting, I just think about something like permitting. You've come on here and talked about the opportunities and infrastructure.

Has the door blown open on that in terms of investing, particularly in the private markets? Not quite yet with regards to permitting. So we're seeing a slow movement with regards to that real estate, which is part of the real assets continuum, is one that we think has bottomed up. We're looking at that and investing in that ourselves in this type of inflationary environment. That's actually a pretty good area for us to focus on.

All right. Allalu, thank you. Thanks. Allalu Agonga from Mercer. Well coming up, one big ugly fight could be emerging on Capitol Hill over President Trump's one big beautiful budget bill, how that could impact the market straight ahead. And later, we'll look at the latest odds of a Fed rate cut tomorrow and what you need to listen for when Jay Powell kicks off his news conference. Stay with us. Welcome back to overtime. The Senate releasing its version of President Trump's one big, beautiful budget bill and

it is setting up a massive battle with the house. Emily Wilkins has the latest. Emily. Hey John. Well, yeah, the opposition to the Senate's version of the Trump megabill is growing both in the Senate and in the House. Now, the Senate bill makes dozens of tweaks and changes to what the House passed last month.

Several of them are causing headaches, raising the question as to whether this can actually get done by July 4th. Senator Tommy Tuberville told reporters that negotiations are continuing. The reconciliation is ongoing, and it's going to be interesting. It's going to be very hard for us to get to 53, I would say right now. But a lot of people have a lot of questions. Senators did huddle with Vice President J.D. Vance today and discussed several sticking points.

Now, those include the overall cost of the bill that has turned off a few senators who say that they will oppose it if there aren't further cuts. It includes how quickly or slowly to phase out some of those clean energy tax credits which senators tell me still could change. They're still negotiating it. There's also been a lot of debates over cuts to Medicaid, notably a limit on how much states can tax health care providers that has concerned some members, particularly in rural areas, and a state and local tax deduction, that SALT cap.

Now the Senate's saying that it's going to be less than that $40,000 cap that the House has agreed upon, and that has led to immediate pushback from the House. We've seen at least four Republicans who say that they will sink the bill in the House if the Senate makes that change. Now Senate Majority Leader John Thune initially said he wanted the bill on the Senate floor next week. We will see guys if that is able to happen or if they're going to need some more time. All right, Emily Wilkins. Thank you. Well, for more on how this might impact markets and investors, let's bring in Terry Haynes. He is founder of political forecasting firm Fangia Policy and former head of U.S. Policy and political analysis at Evercore ISI.

Terry, it's great to have you on. Let's start right there. Can we get a bill across the finish line here by July 4th and how much now hinges on the Senate bill going back to the House to do it? Good afternoon, Morgan and John. Firstly, I think it's entirely possible that they can get it done by July the 4th. You know, this is the time in the play on Capitol Hill where the conventional wisdom says,

oh, it's very, very hard. Everything's very difficult. Well, they've got, even though they have a short legislative week this week with the federal holiday on Thursday, doesn't mean they can't continue to work, firstly. Secondly, they've got two full weeks before you even get to July 4th, and Leader Thune has already talked to them about staying longer if necessary. I think that's

plenty of time they can get this done. Most of what, I mean, I subscribe to everything Emily just said, but I also will say that most of what's being discussed, not all, is very much kind of like the ornaments on a Christmas tree the fundamental the fundamental structure is was very much intact and And we'll go forward but to sort of making these adjustments in a variety of these programs is really what brings us over the finish line and you know the Senate's not You know kind of party line division the Senate's not kind of party line division the Senate's really kind of 53 CEOs at this point so there's a lot of horse trading

going on. Something else that's wrapped in this broader bill is defense spending so at a time where we're seeing this conflict between Israel and Iran ramp up on a daily basis and now increased talk or speculation that the U.S. could more directly involve itself by providing the weapons that are necessary to take out Fordow. How do you game that out? How likely is it to see a situation like that occur? And what is the role that lawmakers could or maybe won't play in it? Well, firstly, you know, there's been a lot of talk on the street that defense spending

was going to go down. My advice always, always, always from right after Trump was elected was defense spending is going up substantially. And sure enough, it's going up to around a trillion dollars. Secondly, I think what's going to happen on the US course of action going forward, whatever, Congress will be advised of that, Congress will be read in. Congress is not gonna play a co-equal branch of government role in this. Whether they should or not, it's a constitutional question,

but as a practical reality, they're not gonna do it. And I imagine the president will have a lot of support for whatever course of action he chooses. The most aggressive course, though, the one that's being talked about with the potential for United States direct involvement from bombers and the like, is going to be something that Congress is going to have to be consulted on more formally than if we were simply to hold back, though. I guess we'll see.

Terry, does the market care about the details that you mentioned around the edges of what's ultimately in the bill, or is it mostly that it gets done with these tax provisions? Well, it's mostly that it gets done and that it's permanent. A lot of these things are being made permanent, and that's very important. I think markets, there's been a battle between equity markets and bond markets here over the last month or so about how they feel about this bill. And I think equity markets are winning, frankly. The desire for immediate gratification is beating the potential concerns about increased debt and deficit.

So there's that. Beyond that, though, there's rooting interests in a variety of these provisions, not least of which is SALT, which even back in 2017, I got a ton of questions about because people have their own personal rooting interests in this, in the markets. It's not just professional. How much of a chance is there that the bond market hasn't been a revenge after this gets done though? Sure, that's a possibility, but I think people are generally staying quiet and you've seen,

number one. Number two, you've seen even though you've had concerns, you've seen more positive reactions on the long-term treasury auctions and things like that. So I think that's certainly a possibility. One of the things I think the bond markets are digesting though is the idea that the Senate is running from what's known as current policy baseline, which essentially means in real English is that you're not adding to the deficit substantially

instead of using these static models where it appears that you are. Terry Haynes, thanks for joining us. Thank you, Morgan. Well, the countdown to the Fed's interest decision is on. It's up next. Steve Leesman breaks down what to expect and what investors need to be listening for. And because you love overtime and you want even more, you can scan that QR code on your screen. It's been a while. And follow us on LinkedIn where we'll post exclusive content. We'll be right back.

Welcome back to Overtime. A dark day for solar stocks today as the Senate's version of the one big beautiful bill would phase out solar wind and energy tax credits by 2028. That's four years earlier than what was expected. Residential solar stocks were hardest hit with a lucrative 30% tax credit expiring 180 days after the bill's enactment. Sun Run and SolarEdge posting their worst days ever. And Endphase Energy, its worst day since 2023. It was also first solar's worst day in 14 years. Guggenheim calling the move disastrous for the industry. Look no further than your screen to see the double digit responses lower we saw in the sector. John?

Yeah, indeed. While the Federal Reserve takes center stage tomorrow, when its latest decision on interest rates will be revealed. Steve Leesman joins us now for more on what to expect from Jay Powell and the group. Steve? Thanks, John. Yeah, Fed officials facing a series of conflicting forces pulling on both sides of their dual mandate ahead of that statement tomorrow. Among them, well, you've had pretty quiet inflation numbers the past several months. You still have many economists expecting tariff effects to come in the months ahead. We got some weaker consumer data this morning. Could have been a payback from the

pull forward for the tariff front running and also now as you've been reporting higher oil prices could be an inflation factor. In our Fed expectations from our CMBC Fed survey. Nobody expects a rate change tomorrow, but the probability of recession did decline by three points. So it's now 38% down from mid-May, but above the 23% from January. You can see two cuts expected. That's your 390 number there for 2025, but only one after that that or one fully priced in after that for 2026 suggesting the Fed remains above the long-run neutral rate from this survey of 3.3 percent Diane Swanship economist KPMG writes it says the Fed

is treading a high wire without a net balancing the risk of rising inflation escalating unemployment hoping not to slip. Well here's the GDP forecast. It's up just a bit from where it was at 1.1% from 0.8 but you can see it's down from that 2.4% we had in January but good rebound expected for 2026 maybe we'll get beyond the uncertainty that we've had. It was almost 2% in May. The timing and the magnitude of the tariff impact is key to the Fed outlook, obviously, and a majority in the Fed survey believe the Fed will feel confident enough in inflation or maybe worried enough about unemployment in the economy to cut come September, guys. Yeah, but Steve, that unknown effect of right now unquantifiable tariffs, is that still the big

wild card? And how can you forecast September cut if you don't know what those tariffs will be or whether they'll be showing up in the data by then? It's a great question John but I think you have to take a position on this if you're in this market somehow some way where you're trying to figure out what the future is going to bring and by about four to three John, 43% to 32% our panelists or forecasters believe that the tariffs will be a one time price effect. If it indeed proves to be one then the Fed will be free to cut.

The trouble becomes if it's something that spreads more broadly we have to look at sort of non tariff goods are they seeing a rise in prices or the opposite which could be an offset that is you spend more money on things that are tariffed you may spend less on others so it ends up keeping the inflation under control the feds going to watch that but remember john the fed has to talk tough here it wants to keep inflation expectations under control. So we're talking about a fourth straight meeting with no rate cut at a time where other major central banks across the world have been cutting in part

because they are concerned about trade and tariff effects on their economy. Case in point, European Central Bank just lowered its rates for the eighth time in a year. The fact that we've seen this divergence in monetary policy between the Fed and other major central banks tells us what?

Well, looking further than the tariff policy, the U.S. is the one that's creating the barriers around its shores, essentially. Minimum 10% tariff, that is not true in Europe, it's not true in Canada, it's not true in Mexico. In fact, Morgan, you could imagine that other countries are going to import disinflation. Think about the Chinese production and where that ends up. It could end up in Europe. It couldn't end up in other places. So they could have a downdraft in prices and it would be one of the most unusual times because typically the U.S. would import that disinflation from other countries but when we raise those tariff barriers we cut off our ability to

import that disinflation. In addition you have the weaker dollar that also raises the prices of imports as well so those are two factors that really disconnect us from the rest of the world even while for say the past several decades the world has been connected in this regard. All right, Steve Leesman, always with the key insights. Thank you. Well, money talks and investors are listening and demanding more of it from companies with excess cash. Up next, Mike Santoli breaks down how shareholders

are hoping to get that cash. Welcome back. The desire for cash cream as Wu Tang might say is increasing among investors, but how should companies go about it? Let's bring back Mike Santola for more. Mike. Yeah, John, assuming companies even want to satisfy investors by sharing more of their cash. This is one of the kind of below the line questions in the Bank of America Global Fund Manager survey.

They ask these professional investors, what would you most prefer companies do with their cash? One choice would be pay down debt, another would be perhaps do more capex. Well, this is the net percentage of those investors saying, no, we would like cash return to us, either in the form of stock buybacks, dividends, or also cash M&A.

And you see this percentage is as high as it's been in about a dozen years. So over that period of time, investors have wanted a little more capex and maybe some debt pay down earlier in the last decade. What's interesting is how the market has rewarded various types of shareholder returns. So take a look here at a couple of different ETFs relative to the S&P 500.

One is the buyback achievers ETF. That's this right here, the blue line really has outperformed quite nicely over the last year or so, while the underperformances come from the dividend aristocrats. Now the buyback achievers, it's not based on just the gross dollar size of the buybacks, it's actually those companies that are buying back the highest percentage or most consistently a high percentage of their own shares. And it actually is skewed toward a lot of financials,

some industrial companies. So the sector mix is probably what accounts for a lot of this. You look at the dividend aristocrats, which have raised dividends for lots of years in a row. Tons of consumer stable companies in there and not very much in the way of technology. So, you know, maybe that accounts for it,

but it is interesting that the market prefers buybacks to dividends at the moment anyway. So does that mean, Mike, that investors want the actual money or just that the cash signals health? Yeah, I think it's mostly the latter. I think that investors basically don't want companies at this point for example to plow more into capex which may or may not be malinvestment, right? They've they kind it's kind of like a loss mitigation thing. We'd rather you just

Distribute the cash rather than make a mistake with it. That's part of it. But also it is just a signaling. You'd like your companies to feel as if they have excess free cashflow. And you know, all of the above is an option too. There's a lot of companies out there that don't really face hard choices.

In fact, a lot of the Mag-7 was in that position until recently when companies like Microsoft and Alphabet have been spending so much on CapEx that it's really pinching their free cash flow growth. All right. Mike Santoli, thank you. Well, John, tomorrow we get the FOMC decision, which we've covered. We get U.S. housing starts, building permits.

We also get U.S. weekly jobless claims because the markets are dark for Juneteenth on Thursday. But the other thing we get is VIXpiration, the expiration of the VIX. And Jonathan Krenzke over at BTIG basically said they found the last 11 VIXpirations that the S&P has either been down on VIX expiry day or down in the days following it. So one to watch, especially given the geopolitical dynamics we're seeing play out in real time in the Middle East. Things have been unusually calm, though, given all of that macro backdrop with the VIX being you know kind of closer to 20 or sometimes below that level that signals call.

Yeah a lot of the gyrations happening in the crude oil market right now even though production hasn't come offline. That does it for us here at Overtime. Fast Money starts now.