Closing Bell - Closing Bell Overtime: US Chamber of Commerce CEO On Markets & Election; Tom Lee On Bitcoin Surge 7/15/24

Episode Date: July 15, 2024

Fundstrat’s Tom Lee breaks down the move higher in stocks and crypto today. Our Steve Kovach on why Apple climbed 2% today. US Chamber of Commerce CEO Suzanne Clark joins to talk about the group’s 3% growth goal and its call for candidates to embrace growth. As Google considers its larger-ever deal for cyber company Wiz, fellow cybersecurity vendor Arctic Wolf CEO Nick Schneider talks consolidation in the sector and what it means for tech giants to enter the space. Plus, former Truist CEO Kelly King on the bank earnings so far and the recent run higher in regionals. 

That bell means the end of regulation. Parsons Corporation ringing the bell at the New York Stock Exchange. Massimo Group doing the honors at NASDAQ. The Dow closing at a record. But it was the small caps that outshined once again with the Russell 2000 gaining 2% even as the other indices came off their highs. And that's the scorecard on Wall Street. But as always, winners stay late. Welcome to Closing Bell Overtime. I'm John Fort. Morgan Brennan is off today. And coming up this hour, Fundstrat's Tom Lee is going to give us his latest market prediction as stocks sit near record highs and Bitcoin takes another leg up. Plus, we're going to talk to Chamber of Commerce CEO Suzanne Clark about her business focus message for the 2024 candidates as the RNC gets underway

in the wake of a failed assassination attempt. And as former President Trump picks J.D. Vance as his running mate and Apple hitting a record high today, we're going to tell you what's behind the latest boost for that stock. But first, major averages extended last week's gains with more record closes and a 52 weekweek high for the Russell 2000. Let's bring in our market panel, Charles Schwab, asset manager and CEO, Omar Aguilar and Deutsche Bank wealth management for the Americas, Deepak Puri. Guys, good afternoon. Omar, so politics went from dramatic uncertainty and a scary event over the weekend to a VP pick today. Elections can be 100 days out, a cause for volatility in the

markets, but we don't see it now. What do you think we get from here in the markets? Well, elections usually bring down a level of uncertainty. And I think you will see, and we're seeing already, as we get closer to the elections, we're going to see this bounce of volatility depending on how different surveys come out and depending on how the markets, you know, interpret the potential policy implications and what may have an effect on markets down the road. But in general, when you actually look historically, you know, it's really just, you know, reducing the level of uncertainty,

like the pick of a VP, that will basically tend to just favor the markets. You know, historically, over time, it doesn't really matter what is the outcome of the election, as long as the election is clear and precise, that usually tends to be a tailwind for the markets. Now, Deepak, fortunately, former President Trump was not significantly injured in this incident over the weekend. But, you know, scary nonetheless. You look at the market reaction today, you might not know that. Did we learn anything about the expectations that investors have, or just the dynamics in the global markets based on this reaction? Yeah, it's hard to argue that the markets really, you know, did anything based on the failed assassination attempt. I think the markets really took its cues from the macro

developments from last week, whereby we saw, you know, softening of the CPI data, which was really welcomed by the markets, because as we are getting closer to the secondening of the CPI data, which was really welcomed by the markets. Because as we are getting closer to the second half of the year, the soft landing scenario is becoming more and more entrenched into the psyche of the markets. The previous week, we had the non-farm payrolls number, where the unemployment rate went up to 4.1. And then we had this nice third linearly, you know, weaker inflation data. So in taking both in combination, it gives a very nice liftoff from the Fed's perspective to start getting, you know, greater confidence and start thinking about rates. And this morning,

you know, Chairman Powell sort of alluded to it when he said that the labor market dynamics looks very well balanced going to pre-pandemic, and he feels much more confident with regards to the inflation or the disinflation traction. So I think, you know, globally, hard to argue, but I think really today's market movements, to me, were more a function of the macro developments that we have seen over the last couple of weeks. Okay, that's the positive side. But, Omar, at the same time, you expect the economy to continue slowing down from here, laying the groundwork for that rate cut that Deepak was just talking about. Could it slow down to a degree that's concerning, especially as we get toward the end of the year?

We need the consumer to be perhaps strong. Well, that's precisely the softer part of the whole discussion. I think, you know, overall, you know, the more we continue to be in the situation we are now with interest rate high and we see that cooling of inflation and that slowdown of the economy, you know, the main concern that it's got to be for central bank at the moment is the fact that, yes, the consumer, especially on the lower end of the income statement, usually tends to get squeezed. And we see significant amount of challenges on that part of the market.

Now, in the aggregate, you don't necessarily see the consumption data being totally affected. But the reality is that that part of the market, the 40% bottom part of earners, is starting to actually feel that level of high level of real rates. What that means, though, is that in general, you know, the economy is slowing down, but the Fed is paying attention to wage growth and paying attention to the level of unemployment. And you think about the dual mandate for the Fed, you know, you're thinking about the fact, and Cheryl Powell said this morning, the path to that disinflation, getting to that 2 percent, seems to be on track. Now their focus will be on unemployment and the labor market dynamics.

So then, Deepak, you say strategically investors should start legging into small caps, non-U.S. sectors and financials, industrials as well. Fill that out for us. Yeah, I think that, and this is a case we've been making, you know, ever since I would say the last couple of months, you know, the big tech and the large cap, I mean, we're not saying to shun those particular assets, but I think it's really a function of new money. Where do you want the new money going in? And I think for new money, you know, for the last, I would say, almost eight, nine months

since we have seen this massive, breathtaking rally, both in NASDAQ and S&P, investors have followed two things. One has been to overweight on the technology side and then keep a lot of cash. So, that sort of a barbell strategy has worked tremendously over the last eight months. Going forward, when you look at this kind of a macro backdrop that we're talking about with heightened volatility, given it's an election year, I think it would make sense. And plus the Fed rate cut, depending upon anyone's guess, but it's definitely a second half of the year phenomena. I think you want to start legging in some of the laggards of this particular rally that we have seen here by, you know, small caps make a lot of the laggards of this particular rally that we have seen. Here by small caps make a lot of sense. They're trading at a 30%, 35% discounts to large cap,

much better entry point. The earnings for next year looks a lot better than what we have seen over the past couple of years. I think the regional banking crisis seems to be a little bit more of a muted point at this stage. Right. So that makes sense. And then the overseas markets, you know, something, again, a better equity risk premium in some of the overseas markets, especially Europe, parts of Asia, in particular India, and so forth.

So I think you want to broaden up your sort of portfolio at this point. Makes sense. Deepak Puri, CIO of Deutsche Bank Wealth Management Americas and Omar Aguilar, Charles Schwab, Asset Management CEO. Thank you both for joining us. Let's talk Apple now. Speaking of big tech, hitting a record high going back to its 1980 IPO, now up more than 20% since the AI keynote at the Worldwide Developer Conference back in June. Today's pop comes after bullish data on India and some upbeat analyst calls. And our Steve Kovach joins me now with more. Steve? Yeah, and just so much positive momentum with Apple after that analyst price target increases last week. And today it's Eric Woodring of Morgan Stanley renaming Apple as the firm's top pick, saying Apple's new artificial

intelligence features will spur or, quote, spur a multi-year device refresh cycle. Here he is laying out that case on Closing Bell just last hour. There has been no other time in history that Apple's installed base has been as large, that replacement cycles have been as long, and where Apple has forced you to upgrade your phone to get such a new and kind of pervasive technology at the same time. Okay, so there's the calculus behind his call, but some wild cards to pay attention to. It's unclear what Apple's AI rollout looks like. It's only going to be in the U.S. and in English at first, and many of the features won't be ready for many months, possibly well into next year,

and we don't have details on an international rollout yet. But another positive thing for Apple today, Bloomberg reporting Apple sales were up 33 percent in India in the March quarter, totaling about $8 billion. Apple has been making a big sales push in that country and expanding manufacturing there to loosen its reliance on China. Worth noting, though, the India business is growing rapidly but has a long way to go. For example, greater China in the March quarter, over $16 billion in sales. That's after the recent declines in the country. Quite a turnabout, Steve, from the checker. Oh, my goodness. The day of the keynote, you were like, ah, evolutionary, not revolutionary. Stock fell like 2% that day. But since then,

it's spiked considerably. It's interesting to me, this is the first time we've been talking about a strong refresh cycle possibility for the iPhone that doesn't have to do with the network or with the camera. It's been a while. It's an actual software feature that people are going to want. And this is like the old Apple, right? If you want, for example, when Siri first came out, you had to buy the iPhone 4S in order to get that. Now for these artificial intelligence features, you need a 15 Pro. Presumably the 16 lineup will be able to do it as well. And Woodring over at Morgan Stanley points out there are just about 700 million people out there right now with an iPhone that's at least three years old. And some of those people are going to want to maybe upgrade earlier than they normally would have.

And even if they don't want the AI features, they just need a new iPhone. People are hanging on to their phones longer than they ever have. I think in this note they said on average almost five years now where it used to be, you know, every one or two years people would upgrade. So, yes, they're coming out with a compelling feature. We'll see if it actually plays out the way these bullish analysts are saying, but it really seems like there's a belief now that this is going to drive hardware sales. And we're not even talking about industrial design. I mean, no dramatic new design since the, oh, you never know. There's a rumor next year it's going to get a new design, but this year it's probably going to look the same as what we've been used to the last few years.

Steve Kovac, thank you. you well let's turn now to senior markets commentator mike santoli for a look at the once beaten down parts of the market that are seeing a bit of a resurgence mike yeah john we talked so much about this rotation specifically about let's say the russell 2000 small cap here is a russell 1000 so this is the largest 1000 u.s stocks on an equal weighted basis. And this kind of shows you just about poised to break out on a two year basis, although the all time high is back in November of 2021 at around 48. So it's still pretty close. But it shows you this really dramatic move to the upside we've seen over the last several days. It's still at this point just

taking you back to the upper end of the range. It's a sort of measure of how far there was to go if it was going to really catch up in a bigger way. Another area, community banks. This trades roughly in line with the regional banks. But I found it interesting that it's essentially going back to this level of two years ago, trying to get back above that sort of 50 and change level. So again, a chance that this can prove that it's something more than just kind of reversion to the mean. Let's grab the laggards for a little while. Obviously, a lot of news flow is favorable to the smaller banks here in terms of whether it's regulation or rates or soft landing in general, Fed cutting rates and all the rest of it. But at this point, I think it's still a show me story, John. Mike, when I look at the chart of the S&P 500 versus, say, that equal weight Russell 1000 that

you first, it raises for me the question, perhaps for investors, which thing is telling the truth, right? Is it that the smaller caps are going to catch up to what the hyperscalers and then the mega caps were doing or that the new normal might not mean that catching up at all. No, exactly. I mean, look, there's also this other possibility, which is broad weakness that, you know, kind of has a correction in the winners, in the S&P 500 market cap weight,

and the rest of the stocks don't really take up the slack. So that's got to be out there as well. I do think they tell you different things. If you have a market dominated by those, let's say, 10 biggest stocks that are a third of the S&P 500 or whatever it is right now, that's a kind of defensive move. So you're playing secular growth and defense as opposed to macro offense, which would be a broader revival in earnings growth. So I think it's a matter of what each type of market would be telling you, not necessarily that one is right today and one is wrong. Yeah, especially considering what is it, only about 60 stocks in the S&P 500 have outperformed the index itself. Mike Santoli, we'll see you again in just a little bit.

Now, after the break, Fundstrat's Tom Lee is going to weigh in on the records for stocks and the one part of the market that he says is the most compelling near-term investment right now. Plus, we'll head to Milwaukee for an update on the Republican National Convention as former President Trump picks J.D. Vance as his running mate. And Chamber of Commerce CEO Suzanne Clark is going to join us to talk about the business issues facing voters in November. Overtime's back in two. Welcome back to Overtime. Blue chips and small caps both rallying today. The Dow setting a record close and the Russell 2000 climbing 2%. Meantime, crypto saw a nice bounce as well,

with Bitcoin climbing nearly 6%. Let's bring in Fundstrat Head of Research Tom Lee. Tom, always good to see you. So we've got to start with the big picture, including politics. Fortunately, former President Trump was not significantly injured in this assassination attempt over the weekend. But just talking about the impact on investments as well, this overall environment. If President Trump were to win, you say it would be positive for Bitcoin and for cyclicals and commercial REITs. But I'm curious, why negative energy and health care? Thank you, John. I think the energy, the reason it's negative for energy is somewhat counterintuitive, but President Trump is favorable for drilling and he'd want to expand where we look for oil, but that would put downside pressure on oil prices.

So that's why we think it would actually ultimately be negative for energy stocks. And for healthcare, I think it has a lot to do with, you know, potentially repealing Obamacare, but also just the fact that pharmaceutical companies and their pricing, I think, would come under a lot more scrutiny as well. Okay. Now, I've got to ask about your small cap call. I think you said a few months ago that small caps could rise 50%. We saw at the end of last week some interesting rotation into small caps. How much further in 24 can they run? I think the rally that started last week for small caps is going to be larger than the October to December rally of last year.

That was over eight weeks, almost a 30% gain for the Russell 2000. This time we have a larger short position by institutions. We have small caps even more oversold and valuations, whether you look at median P, which is now at 10 times 2025 earnings, even lower. So we think that this move could be something like 10 weeks and as much as 40 percent. So I think it is just starting. And a lot of it has to do with the fact that, you know, the June CPI was so astonishingly soft. I think it's giving the green light for small caps to rally finally because the Fed will ultimately cut hopefully by September. And how much do you expect the S&P to potentially rise over that same 10 weeks? That's a good question. I think July, our base case remains that July should be good for

the S&P 500. So, you know, something like 57, maybe even close to 5,800 in July. But I think that August is really going to be one where the rotation becomes more evident. And I think it's going to be a stronger small cap and maybe flat to slightly down for the S&P. Okay. And so that's what I was getting at is how strong can the small cap, say the Russell 2000 as a proxy, be versus the S&P 500? And you're saying after July, you actually think that there's going to be a significant outperformance of small caps versus that index? Yes. And that's kind of what happened in that October-December rally. That is, you know, the large caps actually really sputtered in late December and early January

because of that rotation into small caps. And I think, again, because the positioning is even more short relative to large caps, that it could be an even more sizable move. How much of that move is dependent on the Fed cutting in September? John, it is important. One of the reasons small caps rallied as much as they did last week is that the probability of a September cut went from 70 percent to 94 percent. So I think it's important for inflation to kind of continue to track pretty soft. I mean, we'll get some inflation reports, but I think the possibility of a July cut is there as well,

because we get retail sales tomorrow. And if that's soft and we get other soft indicators, a weak labor or inflation, you know, it could be a July cut as well. Okay. And how much of the durability of that small cap rally has to do with either the Fed indicating that it's open to continuing cutting and the overall environment not suggesting that they have to because the consumer has gotten so weak that that's a necessity. You know, either way, John, I mean, the reason the consumer is weak, and we already know parts of the economy are pretty weak, it's durable spending, like used cars are falling like a rock. And housing is kind of grinding to a halt.

And we know there's an inventory correction. These are three sectors of the economy that are super rate sensitive. So a Fed cut really does turn those things around. But I think most importantly, regional banks have been rallying. Mark Newton, our technician, says they've actually broken out. Finances are 40 percent of the Russell 2000. So I think you've you've already got a lot more support for a Russell, a pretty big Russell move from here. Tom, I love that you give us some specific picks and predictions.

And you've been right for quite a streak. Tom Lee from Fundstrat. Thanks for joining us. Still ahead, Google is reportedly in talks to buy cybersecurity firm Wiz for as much as $23 billion and what would be its largest deal ever. We're going to talk to a cyber expert about what the deal would mean for Alphabet and for the market overall. And we're going to head out to Milwaukee for an update at the RNC after former President Trump's selection of Ohio Senator J.D. Vance as his running mate. Over time, we'll be right back. Welcome back. Former President Trump officially becoming the Republican presidential nominee and naming his running mate this afternoon, Ohio Senator J.D. Vance.

The news comes two days after a failed assassination attempt at a Pennsylvania rally. Let's get to our Eamon Javers at the Republican National Convention in Milwaukee. Eamon. Hey there, John. We're waiting to see whether we hear from Senator Vance in any format here in Milwaukee now that he's been selected. NBC News is reporting that J.D. Vance discovered that he would be the vice presidential pick just 20 minutes before that announcement went out on social media. So he didn't have a whole lot of time to prepare for the onslaught of publicity that is definitely coming his way. I wanted to focus for our audience on a couple of the items about J.D. Vance's approach to economics, which I think are significant. J.D. Vance is somebody who's in the vanguard of a new conservative populist economics.

He's been talking about breaking up big tech companies, possibly increasing taxes on companies that ship jobs abroad, more tariffs on companies that manufacture in China. He's also somebody who said that he thinks that Lina Khan at the FTC might be one of the few officials in the Biden administration he thinks is doing a good job. So earlier today, we were talking with some analysts who suggested that a second Trump term might be good for business in terms of antitrust. Well, traditionally, business has liked less aggressive antitrust. J.D. Vance is somebody who is among the most aggressive Republicans on antitrust. He's praised Lina Khan on that issue, and he's in touch with a group of conservative

populist economics economists who view that issue very differently than Republicans of, say, a half a generation ago viewed it. So J.D. Vance, in going down to somebody who's 39 years old, who came up sort of after the Great Recession in American politics, after the Iraq War in American politics, shaped by a different set of historical events generationally than other picks that we've seen in Republican politics in past years. So I think this bears some some drilling down on, John, is J.D. Vance's approach to economics and how that might differ from what we've seen from Republican candidates in the past. Yeah, we'll see how much

influence he has there. Eamon Javers, thank you. Joining us now to discuss business issues in focus for the 2024 election is U.S. Chamber of Commerce CEO Suzanne Clark. Suzanne, good to see you. I don't know if you've seen this headline out today. I've certainly seen it out of The Washington Post that President Biden might be looking to try to cap rents at a 5 percent increase. Now, in the past, the U.S. chamber has been against price controls, including rent control. I wonder if you have a take on that. Well, hi, John, and thanks for having me today. You know, I have to say I'm relieved that we're having conversations about public policy today, given the tragic events of the weekend. So thanks

for this conversation. Look, I think as we look at the platforms of both of these presidential candidates and particularly some of the things that President Biden is doing, it's a really important moment for voters of all sorts and certainly for business leaders to be taking seriously what public policy initiatives we need to get back to real economic growth in this country. And you're right that the business community is certainly has a long history of not agreeing in price controls and letting markets work. But we'll have to see what the real proposal looks like. The past several years, economically, have been arguably very good for people who own stuff, whether it's homes, stocks, et cetera. But for those who are living paycheck to paycheck,

who are affected by inflation at the level of food and certainly housing, not so much. How does the chamber propose that we get beyond this bifurcation in outcomes? I think it's such an important question, and it's part of why we put this American growth and opportunity agenda together. When the country is growing at 3%, the American dream is more in reach. Home ownership is more in reach. Education is more in reach. Affordable childcare is more in reach.

When we are growing at 3%, a child born today doubles their standard of living by their early 20s. When we're growing at 2%, that same child doesn't double their standard of living until they're in their 30s. Economic growth is the most important agenda item that every candidate and elected official should be talking about. And what about the impact of these higher rates and access to capital for small businesses who will get pinched, right, by those rates and the cost of paying back debt at high rate levels. You know, as you know, we talk to small businesses every day across this country about the environment that they're facing and your right to hit on interest rates. They also face a real worker

shortage and a real problem finding skilled workers. And so, again, going back to a competitive tax environment, a more certain regulatory environment, a place where you can find skilled workers, a place where we can protect American innovation. These are the things that help small businesses grow and innovate and solve problems. And these are the types of things that they are looking for in the candidates that they're looking to hear out of the convention this week. What about the potential impact of tariffs if former President Trump gets his way on cost of goods sold for small business? You know, it's interesting that you raise that because what we find is that in both platforms for both candidates for office, we see a real alarming trend towards tariffs. And tariffs, as you know, are just taxes

that are paid by Americans. So to have a conversation about wanting to reduce inflation, wanting to reduce the prices that Americans pay, and then have a conversation about raising tariffs at the same time just doesn't make sense to American business. We understand the need to protect America, protect our national security. And there are places where being tough on other countries like China is really important.

But overall, tariffs can hurt small businesses. A lot of times you have a small business that's just importing a piece, a part they need to manufacture here. And yet a tariff on those parts makes them uncompetitive in the market. So these have to be sophisticated policies, not just political platforms and jargon. All right. Thanks for telling us where the chamber stands, Suzanne Clark. Thanks, John. Up next, Mike Santola is going to come back and put the current bull market into historical context with some clues about how long this rally could last. And later, the KRE regional bank ETF hitting its highest level of the year today. As a lot of banks gear

up for earnings this week, we're going to talk about how much more upside might be ahead when Overtime returns. Welcome back to Overtime. Mike Santoli returns with a look at previous bull markets that stuck the landing, to borrow a gymnastics term, and what they could indicate for the S&P's current path. Mike. Yeah, John. So this is bull markets, S&P 500 gains around a soft economic landing. So there's no official chronicler of what a soft landing is

and isn't. But here are a few. This is from Uri and Timmer at Fidelity. Obviously, that's the current episode. That's the market low of 2022. You see that in blue right here. That's where we are. That's how much time has passed. And that's how much we've gained on an inflation adjusted basis, by the way, in the S&P 500. So most of them didn't last terribly much longer, these bull markets, these cyclical bull markets, and also didn't go that much higher, except for the one that began in 1994. This is the one that really, I think, really coined the term soft landing. Just a couple of rate cuts after a one year tightening campaign. Obviously, we had a productivity boom in 1995 and thereafter, and that was responsible for all those gains.

So just something to keep it in perspective in terms of how much more luck we might have, even if we get that soft land. How much more do we have in common with with 94? Well, I think that there's a couple of things that people hope might be in common. One is we basically did not have rising unemployment through the tightening campaign. You were not too close to a recession by the end of the tightening campaign. And the cuts were just sort of marginal and optimal, just two cuts over the course of a year, maybe another one after that. In other words, it wasn't as if the Fed was trying to rescue the economy. What we didn't have in the mid-90s was a genuine inflation problem that the

Fed was attacking. What we had was the fear inflation was going to take off. So, you know, it's a little bit semantics, a little bit eye of the beholder here. And by the way, there are a couple of possible soft landings not listed, such as one in the mid-80s as well. And so, you know, you can kind of throw that one in there, perhaps. All right. Mike Santola. What we also had in 94 was my high school graduation. 30 years. We've got a reunion coming up. Montgomery Blair in Maryland. Thanks. All right. We have a news alert on crypto.

Let's get to Kate Rooney. Kate. Hi there, John. So the SEC will reportedly tell issuers looking to list some of these Ether ETFs that they will likely be approved by Monday, July 22nd. This is according to Reuters. They're citing sources familiar, industry sources familiar with the matter. They say here that the issuers still need to file those final S1 documents, but the spot Ether ETFs are likely, based on this report, to begin trading on Tuesday, July 2nd, next Tuesday. Again, this is according to Reuters. It comes after a flood of Bitcoin ETFs were approved earlier this year.

You can see the price of Ether jumping about 7% here, John. Yeah, 7% here. And again, Bitcoin has been up big this week as well. Back over to you. All right. Next Tuesday, that would be July 23rd. Kate Rooney, thank you. Well, retail stocks sitting out the rally today and two names

in particular are getting racked. Details are straight ahead. Plus, the CEO of cybersecurity startup Arctic Wolf on how Alphabet's possible $23 billion purchase of Wiz could impact his industry. They're an IPO watch as well. We'll be right back. Welcome back to Overtime. A pair of big retail names getting wrecked today on the suburban mall side of things. Macy's shares hit hard. You can see them down almost 12 percent after announcing its ending takeover talks with Arkhouse and Brigade over concerns about financing and valuation. The activist group had been offering nearly seven billion dollars for the department store operator.

And on the luxury side, shares of Burberry plunging. See those down 16 percent after the British giant announced weaker quarterly sales, issued a profit warning, suspended its dividend, and replaced its CEO because of a downturn in high-end consumer spending, among other challenges. Up next, CEO of cybersecurity startup Arctic Wolf on whether he thinks there will be more mergers in his industry with Alphabet reportedly in talks to buy Wiz for $23 billion billion and shares of SolarEdge slumping and taking a toll on the rest of the solar industry after announcing it'll lay off 400 employees to help offset slowing sales. We'll be right back. Welcome back to Overtime.

Google parent Alphabet reportedly in talks to buy Wiz, a cloud detection response vendor, for up to $23 billion. It's not the only one in that space. Arctic Wolf has a valuation north of $4 billion that was set a couple years back. Rapid7's public, $2.5 billion. Let's bring in Arctic Wolf CEO and President Nick Schneider. Arctic Wolf ranked number 18 in this year's CNBC Disruptor 50 list. Nick, good to see you. First, give me a sense of overall demand and how that's trending from cyber from the enterprise

because look at AT&T and some others. It seems pretty durable. Yeah, I mean, the threat landscape has never been higher than it is today. You know, we have a bunch going on, obviously, with the election, with the Olympics, a bunch of things happening geopolitically. So it's a enormous demand environment. I think the problems continue to get more and more complex. And I think you're seeing that in the way in which the market's moving. So curious about exits, then. You've been talked about as a potential IPO candidate for quite a while now, but you haven't come out.

Why not? Yeah, I mean, we're still paying attention to the markets. Obviously, the market wholesale is doing fairly well. We're paying attention to what we need to do as a business to, you know, grow what we're doing into the best it can possibly be and get it ready for the public markets. I think we're still waiting to see how a few of the more recent entrants fare. And then obviously there's a few things happening kind of within the market itself that are, you know, interesting for us to pay attention to as we kind of move forward here. Well, speaking of, OK, Rubrik went public a few months back. That stock has chopped around a bit. You're sort of a white glove concierge

service helping companies to implement cybersecurity among the other technology that you have. How does this conversation about Wizz and Alphabet Google impact the market overall? And how do you think the M&A versus IPO calculus is shaping up? Yeah, I think it's an interesting conversation. Obviously there's a lot of work that still needs to get done on this potential deal, but it's certainly showing that the cloud service providers,

the larger technology players in the space are taking a keen interest as to how cybersecurity plays into their overall, you know, strategy and the overall landscape. I think if this deal progresses, you know, or even just the rumor of this deal as it stands today will certainly pique the interest of some of the other larger players in the space. And I think that will play into the M&A markets. You know, I think when you marry that with what is a current trend of kind of moving away from best of breed tools towards, you know, broader platforms, specifically platforms that can leverage AI in a meaningful way, you kind of get a perfect storm of M&A opportunity in the market. And I think we'll see some more of that as we move forward

throughout the year. Nick, we were talking to Matt Garman, the new CEO of AWS, just a couple of weeks back, and they're trying to use security to differentiate themselves versus Microsoft. As we move further into this AI era, how much does the conversation about security shift? Yeah, I think two things are happening. One, you know, customers are trying to move away from a best of breed multi-tool approach. So these organizations that have moved from 50 or 60 different security tools down to looking for a vendor that can provide them a variety of different security operations outcomes on a centralized platform is really key. And then when you marry that theme with the opportunity with AI to gain operating

leverage, but also provide, you know, additional benefits to the customer, you really get a perfect storm of opportunity for large platform players, players that have built a platform that can provide multiple outcomes to the customer, to then also leverage AI to provide, you know, higher efficacy to the customer or, you know, provide more efficiency to their bottom line. And how different is it for Arctic Wolf and for your employees implementing security for a customer that's largely deployed in the cloud on a hyperscaler versus how it is when they're on-premise? Yeah, I mean, the problems are very much the same, right? So at the core, most customers are looking to protect their environment, whatever that environment might be.

And that includes both protecting their on-prem environment, but also their cloud environment. And the vast majority of folks are still in some semblance of a hybrid environment. Certainly, there's different workloads. Certainly, there's different abilities for the attackers to exploit on-prem versus cloud environments, but making sure that you have a holistic security operation and that operation can account for all the sources of potential threat in your environment is really what's paramount for companies today. Earlier, you mentioned the political cycle of the election year and the rise in threats. Either based on what you're seeing right now and the type and intensity of threats,

historical precedent, how long do you expect this period to last? Yeah, I mean, we've seen it come and go in certain, you know, waves over the past, you know, few years. I think we have a few things happening all at once that are making this a particularly active time with regards to the bad actors. So I suspect this is going to last at least through this calendar year and into subsequent years. And frankly, I think cybersecurity is one of those industries where there really isn't a de facto winner in the space. There really isn't a defined endpoint for when the circumstances will change. So I expect this will be a conversation for many, many years to come. Chances are, Nick Schneider, CEO of Arctic Wolf. Thanks for joining me. Thank you. On the markets today, regional banks rallying to the highest level since December. Up next, former

truest CEO Kelly King on what to expect from regional bank earnings, which pick up steam tomorrow. And don't miss a first on CNBC interview with Bank of America CEO Brian Moynihan following his company's results. That's tomorrow, 10.30 a.m. on Squawk on the Street. And because you love overtime and you want even more of it, we've got a QR code for you. Scan that. Follow us on LinkedIn. We post exclusive content there. And for now, overtime, we'll be right back. Welcome back to Overtime.

Regional banks hitting their highest level since December today, and this after Goldman Sachs was the latest of the big banks to report results this morning. On deck tomorrow, we'll hear from Bank of America, Morgan Stanley, PNC, and State Street. Joining us now is former Truist CEO Kelly King. Kelly, always good to see you. What's your assessment of the results so far and the difference between what we're likely to hear from small banks and what we've heard from the big? Well, good to be with you, John. I've been encouraged with what we've seen so far, very limited, and as you know, the very largest institutions,

volatility around their investment income platform, but overall really strong and likely to be strong throughout the year, barring some collapse in the economy, which I absolutely did not expect. I think the smaller bank earnings will be pretty good. I think you'll see benign credit quality. I think you'll see some relief expressed from the CEOs around net interest margin. You'll see, I think they've talked about beginning to feel the lift of repricing upward assets. And, you know, if not downward pressure, a definite reduction in upward pressure on the liability side. So I think we may be at the top with regard to NEM. That's really good for

all banks, really, really good for small banks and likely to set up a situation where over the next several quarters, maybe two or three years, things are going to look really good for banks. Tell me more about what you're seeing on net interest margin. I've been somewhat surprised, not concerned, but surprised that more customers of all different sorts haven't been chasing better rates on their deposits than they have. And I mean, maybe this is the peak of them doing that. What do you see? Yeah. So over, you know, John, a 50 year career in banking, I've observed how clients think about interest rates a lot. And frankly, it's not the way, you know, you and I think about it on earnings reports. Most people don't spend a whole lot of time worrying about the level of interest

rates until rates get really low or really high. When they're in the normal moderate range, people don't make decisions about where they put their money based on interest rates. They don't tend to move money around a lot because of interest rates. If rates get extremely low and they're depending on the income, they get more serious about it. And if they get really high, then they begin to shop around because it becomes a meaningful portion of their income. So right now, I think you're seeing still a heightened level of focus, not as much as it was six months or a year ago. I think that will begin to wane as we go forward over the next several quarters. And that'll give the banks the opportunity, you know, to have a little less pressure on their

amount. Okay. So we're getting pretty close to 54 on the KRE, the regional banking ETF. And if we get there, it'll be the first time, I think, since March of 23 that we have been there. Does that signal the reality that the regionals aren't as vulnerable as many feared back when Silicon Valley Bank collapsed or maybe complacency? And we haven't seen the worst of it yet. No, no. I think the public in general and those that are investors in stocks, and particularly bank stocks, are realizing that the, you know, the quote-unquote bank scare was not a systemic issue. It was isolated to a few institutions that had idiosyncratic issues that was worried that it might be contagious, but that has not proven to be the case. I'm not at all surprised about that.

So I think people are beginning to see that, number one, banks are resilient. Number two, they didn't have the kind of exposure that people were really scared about. And number three, when the economy is doing pretty good, which it is, and you potentially are right on the cusp of lower interest rates and maybe a better regulatory environment, it's getting to look really good for banks. And I think people are seeing that. Does that mean we're not going to see the M&A and regionals that many expected? Oh, you will be. Absolutely. If we get a change in Washington from the regulatory environment, as you know, over the last two years or so, they've had a real big wet blanket on M&A. In many cases, appropriately because of the carryover from the pandemic and lower capital levels because of interest rate rises.

But that is all correcting itself very quickly. Banks' capital level are very strong. The regulators tend to want to overcapitalize. In their view, you kind of like cannot have too much capital. That's a huge mistake. If you have too little capital, that's bad. But it's just as bad, maybe worse, to have too much capital. Because think about it. When you have too much capital, you restrict the banks being able to help the economy grow. Got it. Well, we've got to leave it there. Kelly King, former Chua CEO. Thank you. And I got to mention also on tap tomorrow on the earnings front is Interactive Brokers. Chairman Thomas Pederphy is going to break down those results right here on overtime before he dials into the

analyst call. And that'll do it for overtime. Fast Money starts now.