Closing Bell - Closing Bell: Rally Rising on Election Outcome? 11/5/24

Episode Date: November 5, 2024

What could the election’s result mean for this bull run? Our all-star panel of New York Life Investments’ Lauren Goodwin, iCapital’s Anastasia Amoroso and Charles Schwab’s Kevin Gordon reveal what they think is next for stocks. Plus, Glen Kacher from Light Street Capital tells us where he sees the mega-caps headed as we look toward the end of the year. 

All right, guys, thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. First polls closing in just about four hours time in an election that could very well shape where this bull market goes in the months ahead. We'll ask our experts over this final stretch where best to invest right now, no matter the outcome. Let's take a look at the scorecard here with 60 minutes to go in regulation. Majors have been strong all day long, off the best levels in some cases, but nonetheless positive by almost 1% on the S&P, a little bit above that on the NASDAQ. Every sector within the S&P 500 today is in the green.

Consumer discretionary the best following the strongest ISM services report in a couple years. Industrials are so solid. Of course, we check tech. It's up as well. We're still watching NVIDIA and Apple, by the way, battle it out for the biggest market shareals are so solid. Of course, we check tech. It's up as well. We're still watching NVIDIA and Apple, by the way, battle it out for the biggest market share company in the market. And we will, like we always do, track that through this final 60 as well. It does take us to our talk of the tape, the election and stocks and what the result will mean for this bull run. Let's ask our panel, New York Life's Lauren Goodwin, iCapital's Anastasia Amoroso, and Charles Schwab's Kevin Gordon.

They're all with me at Post 9. Lauren, I will start with you first. How do you feel about the events? Not so much what you think is going to be the result, but how the market backdrop is no matter what. Well, for one thing, we're coming off of an economic growth and earnings backdrop that's incredibly resilient. And that provides, I think, a bolster for the bull market and frankly gives whoever the next administration is a bit of time and a bit of leeway to enact their policies.

Now, as I think about what are the sectors and areas that are likely to do well regardless of the result, these are paradigm shifts, election-related ideas that have frankly been in place over the last couple of years. We know that trade is going to be a sticking point. We know that energy, data centers, AI are important areas of investment. Investors know what the themes are. I think we're likely to see some relief actually knowing the results so we can move on. Yeah. Maybe the market, you know, certainly the market hopes for a clean result and one that we don't have to wait for many days for and we shall see. Anastasia, UBS Today, equities are attractive regardless of the election result.

Piper Sandler reiterates their target of 6,100. In other words, they do too. Do you? I do. Look, and maybe that's what the market is trying to game out and sort of pre trading the fact that everybody knows at this point which is once we get past the election equities tend to rally no matter who ends up in the White House they tend to rally on average about 10 percent in the 12 months after that. We know that volatility picks up into the event but it subsides thereafter. We also know that yields should actually continue to decline if the Fed starts cutting interest rates.

I think that's exactly what the markets are positioning for. Look, and I agree with that. You know, we have to go back and look at the events that we had on the economic front today, which is services coming in better than expected. The rate relief that's on the way, the Fed is likely to cut 25 basis points tomorrow. We've got the buyback window, which is basically fully open again, and we're going back into the year-end setup. And if you go back to some of the fundamentals, 22 times multiple times $272 on earnings gives you $6,000 on the S&P. So I think that's what everybody's focused on once again.

Kev, do you think the backdrop is positive no matter what the result is? I mean, that's what the prevailing thought, I think, seems to be. Economy strong, as Anastasia said, underscored by yet another positive economic report. Services, we're a service-based economy, so it matters a lot. The Fed's cutting interest rates, the buyback window, pent-up demand for M&A. I could probably find a couple of other things. But what does the backdrop look like to you, no matter what happens tonight? Yeah, well, to the services part, I mean, the bifurcation that you've seen between services and manufacturing,

and it was, I think, even emphasized more today and widened a little bit, depending on which components you're looking at specifically for ISM. That's been a theme for this cycle for the past several years. It's taken a really long time for manufacturing to really get out of its slump and at this point even respond to directionally where the path of least resistance is for rates, which is lower in terms of the Fed still cutting rates. I would say from the economic and the market backdrop sense to the points that were made by Lauren and Anastasia, the backdrop is generally pretty healthy going into this. And in an economic sense, even if you back this up past several months, whether it's revisions you've gotten to GDP or GDI, whether it's the GDP report

you got, at least the initial read for the third quarter, even some of the labor market data that is not necessarily corroborating what weakness you might have seen in October, all of that is still suggestive of a relatively healthy economy. And that's been consistent with, I would argue, a healthy market backdrop where you've got close to 70, 75 percent of S&P 500 members on any given day trading above their 200-day moving average, which I think is a healthy setup heading into this. Yeah, I would say the price action is really interesting today, Scott, because there's these twists and turns. First, we see the 10-year yields rising. And if you look at the Republican basket was outperforming ever so slightly. You saw some of the Trump trades outperforming. But now we're seeing some reversal of that. And the 10-year yields are back to 428. And you also

actually see the Democratic basket outperforming. So I think the markets are trying to game this out in position for this. But what's interesting is the markets are up. It is sort of an everything rally. And I think that goes back to the point that policy and politics are not likely to derail the economy. And if you look at one candidate's proposals versus the other candidate's proposals, they're offsets. There's pro-growth policies for both of them, and there's some negatives. But the net impact, economic impact of all of that is projected to be virtually neutral.

So I think that's why the market reaction is actually positive. We look at this as just a clearing event tonight. You get it out of the way and then you can actually focus on the backdrop. The Fed's going to remind you of what the backdrop probably is on Thursday, oh, by the way. And we'll see if we have an election result by then. But again, you get the clearing event out of the way and then focus on the fundamentals. I expect that's the case, and I certainly hope that's the case. I think the one risk to that, besides a contested outcome, which none of us can handicap, is the risk to long rates, essentially Treasury supply. And though both parties have pro-spending policies, the likelihood of a sweep in either direction is where I think we tend to see rates back up.

Now, I've been on the road a lot in the last couple of weeks, and one of the questions that has come up a lot is, you all have been constructive on moving out of cash and into bonds. Are we looking at a scenario where if we have a sweep in either direction, we have a bear market in bonds, where that is not the right strategy, where even the income that a moderate interest rate gets you isn't the right call. And I do think that we could see some near-term risk in the 10-year treasury over the next couple of days if we see that sweep and the expectation

of more spending, more growth, more inflation. However, I do think that's a fade. It's very tactical in the medium term. I'm still very constructive on the income generation opportunity of bonds. But even in the event of a big backup in rates, we're looking at a policy change that isn't likely to happen in any extreme way for many months. And so I'd fade that initial market reaction. 428 is where the 10-year Anastasia currently is.

What about the backup in yields? How significant of a risk is that to this rally? Well, it's interesting because the markets managed to persevere throughout it, because if you think about what's been driving yields, some of it is better economic growth. And if you do a chart showing the city economic surprise index, it's really led the move higher in yields by about a month. You know, part of it had to do with pricing out some of the rate cut expectations from the Fed. And I think that's much better line now to what the Fed actually tells us they're going to do by the end of next year. And some of that has to do with this election risk premium

and the potential for the red sweep. But what I actually like about the setup right now is if there's a range of fair value estimates for a 10-year, but that range is somewhere between 386 and probably around 4.2%. And so we're trading either right at the fair value estimate or right above it. So that tells me if we get past the election, especially if we don't get the red sweep, that we've appropriately adjusted for the fundamentals of growth and the fundamentals of Federal Reserve. So I might be looking to add duration at that point. What if the wild card, Kevin, this week is that there's more Fed risk than election risk, in that the market has certainly brought in its expectations on both the number of cuts that we

might get and the speed at which we might get them. What happens if on Thursday of this week we're led to believe that they might only cut once between now and the end of the year? Is there a risk in that? I don't necessarily think that's outright bad or good. I think it's the context that matters. I mean, if they stop and they maybe take a more methodical approach to their cutting cycle and they don't go as aggressive, historically, that's actually consistent with a better backdrop for the equity market. So I would argue that's probably a more favorable scenario. But also, you know, the risks from a stock, from a Fed perspective and an election perspective are totally different. I mean, if you have a contested election, not only is that really

hard to map out, you really just have sort of a sample size of one, at least in modern history, that you can point to and it's the year 2000. But by that point, you were already in a bear market, which started in March of 2000. And you were kind of on the heels of a recession that started in March of 2001. So unless you think we're in that similar backdrop, something that is really drawn out and takes a long time for us to figure out who the winner is, it's not a perfect comparison to more than 20 years ago. But from a Fed perspective, I think for some reason, if they saw really strong reflationary pressures that we're building, which is really tough for us to see, at least at this point, then I think it's pretty much smooth sailing, at least for the decision this week. To me, the more important part probably comes in December when you get the next SEP and when you

get an updated projection as to where they think growth, but maybe more importantly, the unemployment rate is. Yeah, Lauren, RBC today says a close contested election is the main tail risk for the market. Do you agree with that? I agree with that to an extent because it's very difficult to map out what those scenarios look like. I completely agree with Kevin that we don't have a lot of historical precedent. I think that a close election,

especially one where the president and the Senate are resolved this week, the House takes a few extra weeks because there are more close and contested races, that's an environment that I think the market can manage through without a whole lot of issue. A truly contested result is likely a recipe for more volatility. That's where the market backdrop, the strong earnings really do help. You know, it's interesting when you look at the average annual S&P 500 returns by the breakout

of Congress. I think many people would be surprised to learn that Democratic presidents split Congress. Again, these are average annual returns for the S&P 500 from 1936 until 2023. Democratic president split Congress 16%. Democratic president, Republican Congress, 16%. Republican president split Congress 15%. Democratic president, Democratic Congress, 16 percent. Republican president split Congress, 15 percent. Democratic president, Democratic Congress, 12 percent. Republican president, Republican Congress,

12. Republican president, Democratic Congress, 9. In other words, it's almost always close to the same. And, you know, mid, low to mid double digits. So maybe much ado about nothing, which is why we suggest that get the clearing event out of the way and focus on the fundamentals of the backdrop. And the backdrop's good. Yeah, the backdrop is good. And perhaps just as important, that 16 or 9 percent, whatever the number is, historically, we have seen some differences, especially in the couple of weeks after an election in the sectors that are winners or losers. But here's something that's different this time. Though the campaigns are very different on areas like trade, like immigration, like tax,

that certainly influence sector winners and losers, perhaps more importantly, they're both quite different from the past. So you think about the technology sector, for example, might typically benefit from a red sweep because you'd expect less regulation. Now we know that we've seen technology trade more to the downside along the threats of trade, for example, tariffs. These are sector bets that do not look like they did in the past. And so the knee-jerk reaction that the market has historically had to these

opportunities, they're going to look different. I think that makes this election very investable and more to the constructive side. You agree with that? I like the way that's put, more investable, right? I mean, you really have to, we're not buying a market, we're buying a market of stocks, and you have to be real clear on where you want to be by virtue of who wins and what the policy programs are going to be. Well, I think there are two points to make about that. First of all, the stats that you've listed suggest that there's market upside to be had regardless of who's in the White House and regardless of what the composition of Congress ultimately ends up being. So that's the first point. But the second point, Lauren's absolutely right. There is a big divergence

within sectors that we'll likely observe. And so investors are clearly trying to pre-position for that. I would say it's too early to pre-commit to some of those trades. But absolutely, once we know the outcome, once we know who the winner is going to be and what the makeup of Congress is going to be, then you can start putting in some trades. So investors should absolutely have their two lists ready to go. What happens if Trump wins? What happens if Harris wins? And, you know, there are trades that are cheap on either side of that.

You have lists, by the way. Sorry to interrupt you, but let's trades that are cheap on either side of that. You have lists, by the way. Sorry to interrupt you, but let's just put it out on the table. Harris trades, if she wins, long clean energy, discretionary, small caps, international and tariff exposed names, and the NASDAQ 100, thinking that yields would potentially be lower. So you'd want to look there. Tell me more. Yeah, that's right. So the Nasdaq,

I think, would outperform under Harris scenario for outperform, excuse me, under Harris scenario over the Trump scenario. And partially that's because of yields. You know, partially, I think, you know, some of the technology and the Nasdaq names are negatively exposed to tariffs. So you wouldn't have that threat under Harris. You know, you also look at international markets and, you know, it's really hard to invest in China when you don't know what the tariff policy is going to be. It's really hard to go international if you don't know the path of that. But under Harris scenario, you would go back into some of those international spots. Clean energy, Scott, has been such an unloved theme because we don't know what the investment credits are going to be, you know, after 2025.

And once we have that answer, those are some of the trades. But I also say there's really great trades to be had on the other side as well. Let's look at those. Yeah. Let's look at those. You know, if Trump wins, long financials, domestic companies with high percentage of U.S. revenues, industrials and small caps, crypto. Former President Trump's been talking a lot about crypto. What about cyclicals? Tell me about these. I think there's a lot to be said about that. So first of all, I mentioned that under Harris, you may want to go into the Nasdaq. Under Trump, I think you do want to go into the S&P 500 because we would expect to see a rebound in cyclicals,

financials, industrials. And I would also say that domestic companies is something to focus on. Within that, I particularly like financials. Lending activity is likely to pick up. Yield curve is likely to be steeper. Less regulation, obviously. Less regulation is really key. You want to take a stab at that? I mean, what do you make of the breakdown? I'd probably take the other side of the sector argument, just from the standpoint of if you were to use the past two administrations as a sort of a thought experiment. You know, conventional wisdom would have told you back in 2016 in Trump's first term

that he's going to be really friendly if you want to use one sector in particular to the energy sector because of policy proposals, because of the way he talked about it. So worst performing sector under former President Trump. The only sector that was down, it was down by 40%. But if you flip that on its head, and not just to pick on one administration, the best performing sector since Biden took office has been energy. Right. The only one in the S&P that has doubled, more than doubled,

it's still up more than 100% today since his inauguration day. And even beyond that, if you were to sort of broaden it out to other cyclicals, the sixth worst performing sector under Trump was banks. And it's not like they've swung higher and they're the best-performing industry under Biden. So I think that it's really tough to, you know, even after the person who gets elected, after you know what the policy proposals are, it's really tough to game that out and map that out.

So I think, you know, back to the broader discussion we were having at the beginning of this, taking a look at what the economic backdrop is and looking at the macro forces at play, that, I think, is the more important scenario, not necessarily who comes in and what policies they're coming in with. So I think a lot of the cyclically oriented trades, you know, make sense. But I think that regardless of who ends up taking office,

unless there is some sort of extreme policy that takes you, you know, to the other side of things where the economy then materially slows, then I would alter my view. But the fact that you're not getting any sort of a wake up from defensives in the market, the fact that you are seeing really relatively strong participation, even in financials, specifically equal weighted financials, I think that's much more of an important sign in terms of the underlying breadth that has really underpinned this rally. Just one quick point on crypto. I do think you can see a pretty significantly positive reaction

if there is a Trump win. That's a continuation of the crypto trade. But what's interesting, too, it's not just former president trump that has talked positively about crypto and the deregulation of the space but also harris has alluded to that as well so that might be to your point a winner under both sides near 70 000 on on bitcoin technology wins under both because it did up 93 percent under President Biden, up 173 percent under former President Trump. And now it's a real question mark within the market. Right. We're coming off mega cap earnings. So we're trying to figure out, you know, the monolith has been broken, I feel like, and forget today's action in price. But these have started to differentiate themselves. Yeah, if we take a step back from the sectors

that won during these last couple of administrations and to the policies that made that possible, that gives us clues at what we can look at in terms of potential more durable sectors this time around. So going back off of what Kevin said, trade. Trump began the trade wars, but the Biden administration did not roll them back. This is a policy that's unlikely to change.

Similarly, energy security. Trump drilled plenty. Biden's, the Biden administration drilled more. This is an environment where what we're really looking at is a re-globalization of supply chains, a technology productivity boost through artificial intelligence that's fueling demand for energy. A re-globalization of supply chains or a de-globalization of supply chains? Because, I mean, if you're going to start manufacturing chips and more of them on U.S. soil, in a sense, you're deglobalizing the global supply chain, no? I think it's reglobalization in the sense that what's really happening is that companies and governments globally are saying, look, the efficiency and just-in-time nature of supply chains of the past era is no longer what we need. We need security and access. And in some cases, that means reshoring. But in some cases, it means broadening your exposure to different countries,

doubling down on manufacturing in multiple different places. All of these trends are capital intensive. And so if we look at sectors that then benefit from those types of trends, that really, again, it's policy moving away from where it was in the past, moving into a new direction. That's potentially constructive for infrastructure along the semi-supply chain, energy, likely defense as well, cybersecurity. What about discretionary, Anastasia? I mean, I think I saw an interview earlier today with the head of the National Retail Federation. He was talking about the impact of tariffs and the declining spending power that would result for consumers. We need to think about that. Yeah, I think those are different outcomes for consumer discretionary, depending on

who wins the election. Under a Harris presidency, we would expect a positive outcome for discretionary if she's able to pass the child tax credit proposals that would generate something like $100 billion in additional household disposable income income so that would clearly be a positive and of course the tariffs which by the way i think would be enacted carefully with the notion in mind that you can't really derail the american consumer but nevertheless that would detract from consumer discretionary um but scott can i give you one last trade that I think works? Yes, please. Leave us with something actionable, Anastasia. One last trade that I think works in a Harris or Trump presidency scenario if you get the split Congress. I love that the 10-year treasury moved as much as

it has. I love that it reprised back to fundamentals. But if you end up with a split Congress, you're probably not going to end up with the worst case scenario for budget deficits. So TLT. You like that trade? I like bonds, even as a stock guy. So, yeah. All right. Good stuff. We'll leave it there. Everybody, thanks so much. Kevin, Anastasia and Lauren, thanks for being here on this busy and important election day. Let's send it to Kate Rooney now for the biggest names moving into the close. Kate. Hey there, Scott. Let's start with Palantir leading the S&P today after the defense software company topped earnings expectations, helped by demand for AI, and then government software. Palantir also raised its revenue outlook on the year, shares of that

company on pace for a record close today. Heading into the close today, we're going to talk about Cleveland Cliffs next, sliding after the steelmaker missed revenue expectations for the quarter, citing weaker demand and pricing in autos driving tighter margins. Still, Cleveland Cliffs does say it expects steel demand to rebound in 2025. Scott, back to you. All right, Kate, thanks. Kate Rooney, we're just getting started. Up next, Light Street Capitals. Glenn Kacher is back. He'll tell us what he's forecasting for the mega caps now that earnings are in the rearview mirror. We'll game out the election as well and what it means for those stocks. We're live at the New York Stock Exchange.

You're watching Closing Bell on CNBC. Welcome back with the NasDAQ leading the market higher today. All the mega cap names are in the green. Can the AI driven tech trade maintain its momentum after rallying more than 30 percent this year? Let's ask that to Lightstreet Capital founder and CIO Glenn Kacher. Welcome back. It's good to see you and good to have you back on this busy and important day. Thank you, Scott. People are trying to game it all out, you know, in part what it's going to mean for the tech space. How do you think about that?

Well, no matter who wins, I think the outcome of the election, our republic strong. We have a great one, some of the greatest capital markets in the world. And I think both sides, Republican and Democrats, are highly incentivized to keep America as the leader in AI technology and cybersecurity specifically. So we think it's going to be a great, great night either way. Are you sizing up various trades based on the outcome, though? Well, as you know, we've had a huge position aimed at the shift to AI infrastructure for the last year or two. And we think that continues to do extremely well. You know, earlier this year, or beginning of this year, I pointed out to you kind of my AI5 basket of stocks, NVIDIA, AMD, TSMC, Microsoft, Avago. That's up 66% year-to-date versus 46% for the Mag7.

I see that continuing through the end of the year. I think what we learned in earnings over the last several weeks is that mega-cap tech companies are taking that AI infrastructure investments, taking those investments they're making, and they're using them to create new profits and better services for their clients. And as a result, we don't see that spending slowing down this year or next year. Do you have to be more selective, though, now? Was that the lesson of earnings, if you will? Well, I think our selectivity was already pretty high. I mean, our top picks have been NVIDIA and TSMC. I do think, you know,

we're still betting on AMD, for instance, and I think their best days in terms of their exposure to AI are still in front of them. Investors are a little bit nervous about that. And you saw some volatility as a result, but I still think AMD is going to be a big winner from AI as well. Well, let me ask you about that, because, I mean, there is legit doubt in the market, right? I mean, we saw that after earnings. What makes you so sure that they're going to be, if not at the finish line, close to when NVIDIA gets there, you know, soon enough? Well, you talk to the customers, Scott. I mean, I think if you look at it, if you talk to an Amazon or a Meta or Microsoft, it's very strategic

for them to have a second source. And, you know, they need to keep NVIDIA's pricing in check. I think NVIDIA, to their credit, while prices have gone up and margins have gone up, they have not taken advantage of their customers. And I think, you know, they've profited from them greatly, but they've not taken advantage of their market situation. But the buyers, we're talking about, you know, hundreds of billions of dollars here going into AI infrastructure. They need to make sure there's a competitor. And we've already seen, you know, the AI category for AMD growing to a five billion dollar market for them over the next year. How do you assess Apple? I think we're trying to figure out exactly what Apple intelligence is going to mean for an upgrade cycle.

How are you thinking about that? Yeah, I think it's going to be great for them ultimately. I think as you've watched the company for decades and as we have, and the company is known for being a fast follower. They have an incredible set of users. consumer users access to AI tools. So they're taking it slow. They have that position that enables them to do this without spending nearly as much in AI because they can partner with a Google, they could partner with some of the other leaders in AI. So, you know, we really see their position as still very strong, but they're going to take their time. You talked about cyber. We looked at your latest filing. It doesn't show that you own CrowdStrike or Zscaler, but you do like those stocks. What light can you shed for for disclosure's sake uh for us we do own them yes and uh so and we do think that this is a an interesting uh trade for uh the election so um

yeah those are new positions for us yeah i mean relative relatively new um within within the last 30 days to say yes yep so you you that CrowdStrike has sort of rebounded fully and enough from the issues that it had? I do, yeah. Look, they're an incredibly strategic vendor to their customers. And, you know, there's two sides to the coin of cybersecurity. It's an incredibly serious business. So when something goes badly, it, you know, is a very strategic, large issue for the customer base.

But at the same time, you know, in our view, they have the best technology in the industry. Let me lastly ask you, because we really didn't get to it. Whatever kind of regulatory risk that you may see, you know, no matter the outcome. You know, former President Trump hasn't exactly spoken glowingly about many within the tech industry, you know, during his term. Now, you know, he obviously has Musk in his corner, so maybe things are different. And a number of regulatory actions have come down against a number of different mega cap names. How are you thinking about it no matter who wins? Well, I do think the most meaningful difference between the two sides will be the FTC and the part the potential departure of Lena Kahn would be a massive

positive for big cap tech and their ability to make M&A transactions. And that flows down to private equity and the venture capitalists that are backing companies that have not been able to be acquired by the largest tech companies, largely because they're waiting to see what happens with the current leadership at the FTC. So I think that is the biggest difference between who wins in this election. And so if Trump were to win and Lena Kahn were to depart, we would see that as a really good change for the tech industry. All right. We'll talk to you soon. It's good seeing you. As always, Glenn Kacher joining us once again. Thanks for having me on. You bet. Thanks for being here. Up next, we have the star technician Ryan Dietrich.

He's back with us. Why he is still betting on the bulls despite the potential volatility ahead. And make his case next. Stocks are rallying across the board on this election day. And while my next guest expects some near-term volatility around the election, he says the bull market's alive and well heading into year end. Joining me now, Ryan Dietrich of the Carson Group. So the backdrop is favorable no matter what happens tonight? Yeah, Scott, happy election day. And thanks for having me back. We think so. And you had a great 20-minute discussion before I came on. And what do we know? Well, we had the VIX has obviously kind of soared from

almost 15 over 22 recently. Just yesterday, we saw massive, massive puts being traded. So there's hedging. We know there's a big event coming up. All that negativity, Scott, once we kind of get through the uncertainty election, we get into the weeds of it here. We do think that that potentially can be the springboard to a potential another strong November. I mean, let's not forget November is higher. Eleven the last 12 years. It's just seasonality. I get it. But just look at today's services number. This economy is still strong. This is still a bull market, Scott. You think we're just on the cusp of a plunge in volatility? We do. We think so. That's a great way to put it there. I mean, listen, we have not.

So the VIX was up around 22 just recently. The last 31 trading days, we've only had one day the S&P moved more than 1% up or down. That was Halloween, the big down day. So you've got all these bets on potential volatility, but we're not having any volatility. I love when Verone joined you yesterday. Chris Verone pointed this out yesterday. I agree. Look at what credit markers are doing. Look at credit spreads. There's no real fear. There's no monster under the bed when you look at the credit markets. Again, there's a lot of worry, yes, but maybe it's undue. And once you get to the other side, you probably are going to, again, get an upward swing. I don't think it, I hate to say it doesn't matter what happens, but once you just get through the uncertainty of this election, we think, you know, the stage is set again for a

year-end rally. But I mean, I asked the group during the conversation that you were listening to earlier whether the biggest wild card this week was actually Fed risk, not election risk. For the very reasons that you just suggested, backdrop's good. So many foresee the market going higher no matter who wins. The Fed, I don't know. I mean, our expectations have been dialed back. What if they get dialed back further? You're right.

That's a great point. Now, first off, I'll be clear. We do think there's 25 basis points coming. We think there's probably another one in December. I've come on with you all year saying inflation is last year's problem. That's why we don't think we need rates up at 5% because inflation has come back. But that could be kind of the uncertainty this week that nobody saw coming, right? And the Fed's on a Thursday.

I mean, half the people, even on your network, are saying Wednesday. Like, it's Thursday this week. They're really trying to throw everybody off when it comes to the Fed. But I'll just put it like this, right? We're up over 17.5% for the year going into this month, into the month of November. All right, all you need to know, listeners, you know this. 14 times this happened. November was higher, 12 out of 14. December higher, 11 out of 14. Those two months combined, we're up every single time. 14 out of 14 times, we're up a lot going into these final two months. That's just

one stat I'm aware, but I think it's one we would not want to avoid here once we get the Fed out of the way as well. The other stat that sort of hangs people up is valuation. How are you thinking about the price you're willing to pay for stocks right here? Yeah, great point there. Valuations are a little pricey, especially large cap. I know it came over you last month. We talked about technology. We are more neutral tech because that's where some of the pricier parts are. When we look out on the spectrum, I mean, I know it's a dirty word sometimes, small caps, right? Small caps are historically cheaper over large caps. Look what happened last week, right? Stock market was down is what they told us. Yet small caps were up last week. Small caps

outperformed yesterday, outperforming again. We think, again, with a strong economy, small caps, mid caps look good. Also cyclicals, those industrials, financials are still areas that are growing that aren't wildly over overpriced, I guess. At the same time, we've all seen the numbers, valuations. They matter in the very long term. But again, that's why your term, six to 12 months, we're not overly concerned. We have record earnings coming in here, Scott. You're neutral tech. Why? Oh, similar to what I just talked about there.

It's had a heck of a run. Yes. The valuations are some of the highest out there. And again, we say neutral, but we think it means you're bearish. I'll be very clear. The money we run at Carson Group, we have a lot of tech exposure. It's just we're not going overboard with the tech exposure because, again, we think of some of the pricier parts of the market. We do actually like communication services, which is clearly kind of cousin to technology. I mean, you're not overweight. It's like 30% of the S&P. Right. You're just saying you're not overweight the tech sector. That's exactly what I'm saying. We are overweight the small, mid-caps, industrials, financials when we look at this kind of the average 60-40 portfolio

that we run. But we're not overweight large tech names at all here because, again, they're the pricey part of this market. And you don't think there's risk to any part of the trade that you like by virtue of a backup in rates? Yeah, well, listen, there's always risk. There's always things we get paid to worry is what we like to say. No, but like legit risk. I mean, I mean, I know there's always risk. We walk outside and get run over by a bus. I mean, you know what I mean? Like legit risk. Like the tenure 10-year starts to back up further, the first thing to crumble under that weight is small cap stocks. Small caps, mid caps. You're exactly right. Maybe some of those cyclicals. I mean,

those could be some areas. And again, I guess, you know, all we know is the most recent data we've had. We haven't really started to see inflation coming back. We'll get some clues on the Fed, obviously, this coming Thursday when they do something. But the reality, again, is we're not seeing any major warnings. Look at the ECI, Employment Cost Index, just came out recently. Lowest number we've seen in a long time. There are different parts of costs that are still quite low that aren't showing any major worries, at least to us, why we would expect to see yields soar higher. But clearly, if you think about what's some of the big risks, geopolitical risks, you have Black Swan risk, but also drastically higher yields. Don't expect it, but that is one that really could upset the apple cart for sure.

Okay. I appreciate the deeper explanation there, Ryan. Thanks. We'll talk to you soon, Ryan Dietrich. Once again, I'll close the bill up next. We track the biggest movers into the close. Back to Kate Rooney for that. Kate. Hey there, Scott. So accounting issues causing trouble for one food producer. Bringing the details after the bell. Let's get back to Kate Rooney now for the key stocks that you need to watch. Kate. Hey, Scott. So shares of Archer Daniels Midland falling today after missing estimates for the quarter and issuing some underwhelming guidance. So short of the street's expectations. Plus,

the food processor continues to struggle with accounting issues. The company plans to refile its results for 2023 and then canceled its current quarter earnings call as well. And then shares of Astera Labs on pace for its best day, going back to the IPO. It blew by expectations for the current quarter and then issued upbeat guidance for Q4. The chipmaker seeing surging demand for its AI platforms, helping drive some of those results higher today. Scott, back to you. All right, Kate, appreciate that. Thank you, Kate Rooney. Still ahead, Supermicro reporting top of the hour in OT. We break down the key things to watch for when those numbers hit the tape. We're back on the bell after this break.

We are now in the closing bell market zone. CNBC senior markets commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, two earnings releases out in overtime that are on our radar. Super Mike Gross, Sima Modi has that. Pippa Stevens on Devon Energy. Mike, I begin with you. You know, we decided we were going to be higher today. But when really in a holding pattern, though, I haven't done all that much in the last few hours.

No, that's true. I mean, not in the last few hours. And really, every day seems to be mostly the market just sort of taking us back to something like a 50-50 type election odds outcome. And then if a certain part of the market kind of oversteps and goes wide, that market gets brought back. You saw that in Treasuries today. You saw it in DJT. Bigger picture, though, the market's been kind of consolidating and digesting and really close to all time highs for a few weeks now. The median S&P stocks, you know, eight or so percent off its high. Yet we've managed to keep in the in the uptrend economic numbers. ISM services come in solid. So everything else seems to be working fine with the exception of those long term treasury yields that have been testing the range highs earlier and then just came off the boil in the last hour or two.

How do you feel about Fed risk? I don't see it as really that acute at the moment, mostly because the market's still saying 97% chance we know what's going to happen on Thursday in terms of a quarter point cut. And then the path from there, I think we can live with a lot of those scenarios that are going to be laid out, probably some degree of data dependence for the next move or two. But that's probably coming from a position of strength, just because if there's any slowdown in that Fed easing process, it's probably going to be because the economy is hanging.

Gotcha. All right. Back to you in a second. Seema, tell us about Supermicro. Well, Scott, as you know, a lot is riding on this earnings report. Shares of Supermicro have gone from being a favored AI trade to now down about 70% from its recent high hit back in March. Hit by accounting allegations, which first came to light by short seller Hindenburg, followed by a report of a DOJ probe. What really got the street concerned was accounting firm E&Y dropping Supermicro as a client on October 30th, citing transparency issues. Now, in Supermicro reports tonight, investors will want to know if it has been able to secure a new auditor, and if not, how it plans to handle a potential delisting from the NASDAQ. Competitors Dell and HP Enterprise have emerged as beneficiaries, but industry experts point to Supermicro's design expertise.

That's why it counts NVIDIA and Elon Musk's XAI as customers, Scott. All right, Seema, thank you for that. Seema Modi, now to Devon Energy and Pippa Stevens. What should we watch out for? Well, Scott, Devon has actually lagged both the XLE and the XOP this year as it gets set for Q3 results, and production levels have come down from Q2's peak. Now, during the quarter, the company closed its acquisition of Grayson Mill Energy's Williston Basin assets. And so commentary around how that plays into 2025's setup will be top of mind, including production targets, shareholder returns, whether additional M&A is necessary to enhance inventory, capital efficiency trends, and Permian infrastructure constraints are also key themes to watch, especially on the call. Now, the company has a fairly low break-even price of around $40

per barrel on WTI. And so even if oil stays range-bound, Devin should still generate plenty of cash, with the company targeting roughly 70% of excess free cash flow to buybacks and dividends. Stock is modestly higher here ahead of the print. Scott? All right, Pippa, thank you. We'll see what happens. Pippa Stevens. Mike, I turn back to you. You look at the sector split pretty even. I mean, industrials and discretionary are certainly the standouts. But as we had already suggested, technology is having a nice day as well. For sure. And, you know, it's about a three to one up versus down breakdown in terms of advances to decliners in terms of volume today. So it is pretty much across the board.

I don't think it's really trying to tell any real sharp story about what specifically is going to happen in the next few months. One thing that's interesting to me is that the volatility is down by one and a quarter points. It obviously got kind of overinflated. People got hedged up going into this event. Maybe there's a sense out there that we won't necessarily have to wait very long for a decisive election result. And that's what the market has maybe been most wary of, I guess, and trying to hedge against is this idea of suspended animation. So who knows? I'm trying not to overinterpret every little kind of gyration within the market in terms of these themes based on what's going to happen. But that's something that's notable today.

It seems like we have the potential for investors to migrate back toward risk and using, you know, kind of seizing on the fundamentals as opposed to trying to trade these scenarios. That would also theoretically take some of the air out of the VIX, too, which has been, you know, more elevated than some say is justified or necessary with the S&P not that far away from highs. Yeah, I mean, it's all based on, you know, over the next few days, this idea that you might want to be protected against some kind of big volatile move. And yeah, that's starting to bleed away at this point. You know, again, you don't want to necessarily say that the market somehow knows what's going to happen. It's really been kind of in many different minds depending on the day. And I think right now we can lean back on the idea that the economy is in decent shape.

Earnings have been coming through well enough to justify where the market has gotten to. You know, markets no longer really overbought. If anything, breadth has been sort of poor in the last few weeks. That means most stocks have reset lower. And they're ready to kind of react to the macro as it comes through. And, yep, we're going to be pivoting right to figuring out what it has to say and whether that's a friendly message. But I think that's a more kind of familiar place to be in as we go into the rest of the week. We'll go out near the highs.

Mike, thank you. That's Mike Santoli. I'll, of course, see you this evening as part of our election coverage. But we're going to go out near the highs here. S&P's up better than 1.2% with the bell ringing. We're now about 425, but we're green across the board on this election day. I'll see you in a few hours. In the meantime, let's go into overtime now with Morgan.