Closing Bell - Closing Bell: The Impact of a Second Trump Administration 11/07/24

Episode Date: November 7, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

Well, that was Fed Chair Powell following the decision to cut interest rates by 25 basis points. The chair saying the economy continues to expand at a solid pace, that labor market conditions have eased. He was noncommittal on another rate cut in December. I want to show you what the major averages are doing, pretty much hanging on to those gains. It does follow that massive day. Yesterday, Nasdaq's been the outlier all day, up one and a half percent. But the S&P and the Dow are also winners. Welcome to Closing Bell. I'm Scott Wapner, live here, Post 9, New York Stock Exchange. Let's bring in now Double Line Capital CEO and CIO Jeffrey Gundlach. Jeffrey,

welcome back for our traditional visit. Hey, Judge. Good to be here again. It's good to have you. So what is your reaction to what the Fed chair had to say today? He used a couple of our words, the one we talked about last time, recalibration and then remarkable, he said, when describing the resiliency of this economy. Yeah, recalibration showed up again, and that's a repeat of the last meeting's sort of word of the meeting. And I think Powell feels very much that he's in a good place now because since the July 31st meeting, we have the two-year treasury rate is up by almost 60 basis points and the Fed funds rate is now down by 75 basis points. So he's gotten much more in sync with the bond market by a movement of Fed funds relative to two years of 135 basis points of convergence in just basically two meetings. So I really think that we probably have one more rate cut coming in December because that would true up the Fed

funds rate with exactly where the two-year Treasury rate is right now. So it is interesting that we've had such a strong performance of the stock market since the last Fed meeting, while we've had interest rates rising. So you've had a tremendous outperformance of stocks versus at least Treasury bonds since the last Fed meeting. And I attribute that basically to the election result. So we had an incredibly consequential election result, very different than a lot of people probably were forecasting as a base case a few months back. And we've had one of the least consequential Fed meetings today with basically a repetition of this idea that the goals are normalizing, the labor market's normalizing. You know, the quits rate and the job openings rates are kind of where they were pre-pandemic.

And so I think the Fed is feeling very much that they are plodding along towards their goals. And he said so in fairly direct language today. So, yeah, the thing that's sort of surprising me a little bit is that people are so willing to dismiss the softening jobs market. I mean, the 12,000 jobs, I know people want to attribute that to one-off hurricanes and strikes and stuff like that. But I keep looking at the household survey. And the household survey over the last 11 months has been a loss of jobs, of over 300,000 jobs cumulatively over the last 11 months. And so that typically is a little bit more real time at economic turning points. It's still not terrible, the household survey. It's very volatile. So we have to watch out for that.

But it is not showing tremendous signs of strength. And the real problem that the bond market seems to be having from my perspective, and it's being talked about much more in the open, it came up several times at the press conference today, is that the supply of Treasury bonds is getting to be rather astonishing. We have a $2 trillion deficit. It's about 6% of GDP over the last 12 months. And we still have a growing economy. And the interest expense on the debt, which I always talk about, three years ago was $300 billion per year. It's now $1.3 trillion per year. And we have a great volume of bonds that are rolling off with very low interest rates from five years ago, or even three years years ago that are being refinanced

at substantially higher rate levels. And this is going to continue to be a supply problem for the bond market. And for this reason, we are not positive on long-term treasury bonds in spite of the fact that the economy is sort of gradually slowing down. It's just the supply of bonds is very troubling.

And so we recommend investors stay at the intermediate part of the treasury bond market and not out in the 20 and 30 year bond sector. In fact, when we were at the low end rates basically several weeks ago, we made another duration cut or maturity cut in many of our bond funds because we do not want to be exposed to this fiscal financing problem, which I think could very well lead to rising interest rates in spite of the fact that we might have a slowing economy. So interest rates are rising. The curve is not inverted anymore, twos to tens. It's not very positively sloped. It's a very flat yield curve.

And we're anticipating that the Fed will cut rates again in December. So not a lot to take away from today's meeting. It was pretty much a repeat of the comments that were made by Jay Powell at the last meeting. But I do think that he is much more in line with the bond market. And he is correct in exuding the idea that he's in a normalized sort of a place and that he's making progress towards the mandate. The inflation numbers are lower, of course. The PCE core is at 2.7. There are some inflation numbers in the low twos. We believe that if we keep the price of oil around the low 70s, which has been a lot of resistance down at around 70,

we think we're going to see potentially a headline CPI that's below 2% in about four or five months based upon the structure that's there. So Jay Powell will be able to pretty much declare a victory. I also commend Jay Powell for bringing up the lags on the rent rolls. Part of the inflation rate that remains elevated is kind of rent rolls. The new rents have almost no inflation, but the old ones, they come down with a lag. And so that part of the inflation picture is probably still going to provide something of a ceiling on where the inflation rate is going to be for 2025. I don't think

under the base case we'll see a three-handle CPI inflation rate during the next 12 months. Jeffrey, bear with me for a moment, if you would. Steve Leisman's come out of the room where he did ask a question to Fed Chair Powell. Steve, going in, you called the statement splashless. That's the word you used. Were there any waves, if you will, in the comments that he just made? No, I think what there was was a guy that was on the beach trying to avoid getting wet from any of the waves that might be lapping on the shore, Scott, as I would describe it. And those waves include a new election, potentially huge new fiscal policies coming down the road. You and Jeff were just talking about the spike in interest rates that are out there and what's happening with the deficit.

I think he didn't want to get involved in much of that today. He seemed to say, hey, all of that's down the road. But I'll just play for you the one thing that says, hey, where are we going with this? And he says, we're still going to neutral. Here's what he said. We're going to wait and see how things come in in December. I mean, I it's just I would put it this way. We're on a path to a more neutral stance, and that's very much what we're on. That has not changed at all since September. And we're just going to have to see where the data lead is. So, Scott, that's where we're going. It sounded to me like maybe there's another cut, as Jeff suggested, coming in December. I do think it's interesting what's happened, which is now the market seems a little bit more aligned with where the Fed is and where, by the way, our Fed survey is, as opposed to the Fed getting more

aligned with the market. The market went way haywire in terms of expecting lots of rate cuts. It came back up and now it's, I don't know, actually a little bit more restricted than the SEP. But I think what we need to do, Scott, here, and I'm fascinated by Jeff's comment, you've got to be on your toes. Things could change, and they may take time, and that's going to have an effect on the Fed, but we just don't know how or when.

Yeah. I mean, the chair, I mean, Jeffrey did mention the movement in the two-year. They're becoming more in line, is the point you make with with the Fed. I want to ask you to react to one thing that we did hear a short time ago by by Chair Powell. It's when he was asked by a reporter, the political backdrop, certainly some concern of, you know, what the Trump presidency would would mean for the rest of the chair's term, which goes until mid 26. He's got 18 months or so.

Let's listen to how how Powell answered this and we can react quickly on the other side. Some of the president's elects advisers have suggested that you should resign. If he asked you to leave, would you go? No. Can you follow up on it? Do you think that legally you're not required to leave? No. Emphatic, defiant. What do you make of the way he answered that? I think that he feels that the law does not give the president the authority to dismiss the Fed chair. Most of the legal scholars I've talked to about this issue suggest that he does not have that authority without cause or whatever cause means it would be like serious malfeasance in the job. And he's pretty adamant about that. He serves at the pleasure of Congress, nominated by the president.

And if the Congress wants to change the Federal Reserve Act to give the president the authority to dismiss the Fed chair. Look, the the the tale of the tape, Scott, we did something. You know, remember, he said the Fed has no guts, no vision back in 2019 when he wanted the Fed to cut. And then he said he might demote the Fed chair. And that's when in 2019, he also said that he, Powell said he would not go. And then this year, the president-elect said he might, he might get rid of him. Then he said he's going to keep him. For my taste, Scott, the more important issue is that this has got to be a lot more fun to cover the Federal Reserve right now in terms of, you know, so. But I do think the thing to do with all this stuff is probably to ignore it. I don't know that it's

going to have any big effect on policy. Fed chair is just going to do his thing, act according to the law, and the president's going to make a lot of comments about policy. And it's just going to be more interesting than it has been under President Biden. I did think it was an interesting exchange there. Steve, thank you. Senior economic reporter Steve Leesman back with Jeffrey Gundlach. I mean, Jeffrey, we talked about the backup in yields. You certainly did. I mean, what role do you think that might play, if any, in where policy does go from here? Powell said, quote, we're watching that. We'll see where they'll settle. Right now, it's not a major factor in how we're thinking about things. Do you think it needs to be a bigger factor? Well, I think that one thing with the Trump election and the Senate going to the Republicans

and perhaps the House, if the House goes to the Republicans, there's going to be a lot of debt. There's going to be higher interest rates at the long end. And it'll be interesting to see how the Fed reacts to that, because Trump says he's going to cut taxes. At least he said so in the campaign. And he's very pro-cyclical stimulus. Basically, it's in his DNA. So it looks to me that there will

be some pressure on interest rates, particularly at the long end. So I think that this election result is very, very consequential. And I think most people were surprised at how widespread the strength was for the Republicans. And maybe it was just a denunciation of all the lawfare. I think that was a really big, big issue in the election. People, all these crazy lawsuits being filed almost on the same day back a year ago.

And people just don't like that. People don't want this kind of strange manipulation. And I think that Trump's authenticity is something that attracts people. Unfortunately, he's very outspoken about the types of policies that are very stimulative that he wants to put in. And he's always been a debt guy. So I'm really worried about that. I'm glad that Elon is somewhat associated with this administration. I mean, they're talking about looking for some spending cuts. That'll be really interesting. I mean, Elon, if you're listening, give me a call. I can help you try to find a trillion or two out of spending cuts because we certainly need that. But I think that we have

a risk here of there being a backlash from the bond market. And the stock market has done so well since over the past couple of months. And the bond market has not done very well at all. And it's starting to be kind of an interesting valuation issue. I think Goldman Sachs was put out a paper talking about forward returns and how bonds are very, very competitive given the yield to where they are today, where you can get 7% yields out of not terribly risky, say, double B type of a corporate portfolio. And I think it's quite likely that bonds will be much more competitive going forward than they were. But in particular, what's interesting is that the spreads on corporate bonds are very, very small in terms of the incremental yield versus treasuries relative to history. They're almost where they were really at the lowest for like junk bonds.

It's only about 270 basis points higher than treasuries. Investment rate corporates are inside of 80 basis points over treasuries. But I don't think that that means you should be avoiding corporate bonds. I never liked the really low rated stuff, the triple C's and all that. But in single B, double B, weak triple B's, I really think that there's a reason why spreads are so tight. And it's because I think the corporate bond market is less risky on a relative basis than the treasury market. It almost reminds me of where it was back at the beginning of my career when the Reagan came in and people were worried about the deficit and you had the higher quality bonds like IBM, for example, I remember at the time, actually yielded less than treasuries because people thought IBM was safer as a borrower than

the treasury market. And I think that's one of the things that's propelling this corporate bond performance that's been very, very strong. The reward isn't very high, but the risk isn't very high. These corporate treasurers are smart. And when rates were so low, I mean, three years ago, the high-yield bond market, believe it or not, yielded 3.5%. And so these treasurers locked in these very low rates, and there isn't a maturity wall coming for the next few years. And so it'll be interesting to see how the spread markets change. And we've already seen pretty much spreads tightening across the board on non-treasuries. It's the treasury market that's been the underperformer in recent months. And I have

a feeling that could continue. So you told me prior, I think you alluded to it here, when talking about the tax cuts, you told me you were not in favor of re-upping the Trump tax cuts. So he obviously thinks he has a mandate. He may he may in fact have a wide enough margin in the House by the time this is all said and done to to do that. You stand by that view that they shouldn't do that. And I also want to know what you think about that Larry Fink op ed in the journal the other day regarding the deficit, which you are obviously concerned about, that essentially you can grow your way out of this deficit problem. You just have to have a higher nominal GDP growth, in fact, to do it. Yeah, I actually I agree with that point, except there's a caveat, and that is we have to stop this deficit spending. If Jay Powell said this in the press conference to his credit.

He said, we can't keep spending $2 trillion more than we're taking in. The math just doesn't work. Ben Franklin said one of the great natural wonders of the world is compound interest. But when you're compounding your debts, you you you're running into a real, you know, a parabolic compound interest curve that's working against you. So we really need to have less of a deficit. And I don't think that's going to happen in in the quarters ahead based upon the strength of Trump in this pretty resounding victory. You know, I think Harris actually underperformed Biden in just about every county in America. It's kind of hard to believe it could be that widespread. But the lack of authenticity from Harris was really kind of fatal. And of course, she had an albatross around her neck with an approval rating of her boss

that was just mired at 40 or lower for the last few years. So she really had an uphill battle that she was forced to climb. But I think that we're not going to get better news on the deficit in the first couple of quarters, maybe first year of the Trump presidency. I really do not want tax cuts, frankly, for anywhere in the economy, because I don't think that we can continue on this path. And if we re-up the tax cuts, that just means that we're extending the timeline on this deficit problem. I'm actually

writing, it'll be out in the public in about a week or two. I'm writing my own white paper about the debt crisis is starting to come much more in focus. And I've run through some basic arithmetic on that. And it's really rather sobering. So I do not like long term Treasury bonds. The last thing I did relative long term Treasury bonds was to sell them. You had been calling for a recession at some point um do you still think one's possible likely or do you think that the election of donald trump changes the calculus because he's going to theoretically have a a more pro-growth agenda if you will um you certainly would have you have a lot of pent-up demand as it relates to m&A and other things. How do you view that now? Yeah, I think I think that's right. I think Trump, it's clear by the action of the stock market, not just not just yesterday and today, but really over the past couple of months as the as the as the support for Trump was on the rise kind of steadily for the six to eight weeks prior to the election.

We see tremendous outperformance of stocks versus bonds. It's getting rather stretched, but I do think that it's right to see the Trump victory as reducing the odds for near-term recession fairly substantially. And so I don't really like the way it's going to be accomplished, because I think that's going to lead to this problem on long-term bonds. But we'll see what happens. Certainly the odds of recession drop when you have this type of an agenda being promoted in plain English for the past three months by Mr. Trump. Does it change the trajectory of the dollar, which is obviously one of those trades that had been a so-called Trump trade.

We saw the dollar index rising, and it seems to be on a higher trajectory from here. Is that what you see? The dollar seems to be extremely correlated to interest rates. If you take a look at the chart of the DXY index and overlay it on the chart of, say, the 10-year Treasury, it's the same chart. So what happens is our interest rates, you know, have been going up, and that's supportive of the dollar. If I'm right, and there's still some potential for long-term rates to be suffering under deficit fears,

then the dollar would probably still go higher. And so for the time being, we've been neutral on the dollar for much of this year, and it's been trading in a range between about 108 on the DXY index and 100. And lo and behold, right at the dead center of that range, very nearly the dead center. And that's the same on the 10-year Treasury yield. You know, it got down to 360. It's been up at around 5% or so and right in the middle of that. So the dollar is extremely influenced by movements in U.S. Treasury rates. And so I believe that is going to continue to be the case because it's been an extremely strong correlation over the past several quarters.

And there's no reason to believe that's going to change. It seems as though you think that Chair Powell at this point in the cycle from, you know, when we started doing these interviews a couple of years ago, it feels like at this point, should he, can he at this point declare victory? He obviously said today explicitly that he wasn't. And some like Stan Druckenmiller this week suggested that they might try and do that a little too early. But does he have a right at this point to declare victory, given the trajectory of inflation, where the economy is, again, using the word remarkable to describe it? Should he?

I think it's a little early on that. But I think he'll be able to do that come, say, March or April of next year, unless we get some sort of a shock to commodity prices, particularly the price of oil, because we're going to get, on the headline CPI, we're quite confident, given the current structure of the commodity complex and where rents are going and the like, we think that the CPI is going to have a one handle on the 12-month headline number come March or April of next year. And if that happens, well then I think you can start talking about declaring

victory at that point in time. I think it's too early now, he's too prudent, he's too careful of a Fed chairman to make that assumption. You know, he says we don't predict, we don't assume. He said those words in the press conference, I applaud him for that. But the trajectory he's on, he's getting to he's getting closer. You know, we started these conversations. The Fed was so far behind the curve. They were so loose compared to the the obvious trajectory of inflation. And then he was too tight. And now he has gotten himself begrudgingly, perhaps. But he's got himself almost in line with, I've

said this almost every conversation, Scott, the Fed follows the two-year. And I know people push back against me, but I can prove it mathematically, and it absolutely follows the two-year, and he's almost exactly in line with it. So Powell is in the right spot where he is. He says the labor market's normalized. I agree with that. The inflation rate has been coming down. I think he deserves credit for what he's done once he finally started cutting, and now he's cut 75 with the two-year going up.

He's right to be in a relaxed frame of mind, and his mood and demeanor in the press conference were very good. I thought his answer to, are you going to be demoted, be in a relaxed frame of mind and his mood and demeanor in the press conference were very good. I thought his answer to, are you going to be demoted or would you step down if Trump asked you to, I thought that was a great answer. Just no hand waving, just no. He's not stepping down. So I think that's good. Yeah, I think that's why we played it. It had a bit of, I don't know, drama necessarily to it. But the the way that the chair answered that, I mean, how do you view that? I don't know

if it's a wild card or not. You know that Powell obviously thinks he has some room ahead to continue to cut rates. Right. He made that clear. He thinks they're too restrictive. To the degree of which they are, that's still unknown. But he also is potentially going to be dealing with reflationary policies from a new president at a time where the economic backdrop, Jeffrey, is pretty good. It just creates tension, I think, in the relationship, if you will, moving forward. Yeah, I think that's right. I mean, I think there is a risk of a reflationary policy. We don't know what the tariffs are going to look like. They could be, you know, surgically applied, which would be great because that's kind of where it was the last time. Or they could be, you know, just very heavy handed. That would obviously be potentially inflationary, depending on what method is used on these

tariffs. And of course, tax cuts that he's talking about are horrible for the deficit. So we've seen that, and I'll just repeat it one more time, as Trump became more likely to win, we've seen rates go up and we've seen, in spite of those rising rates, we've seen stocks going up. So it's been a very obvious sort of a Trump trade. I don't know why one should expect that to change in the near term. I mean, we have to see what happens come January, third week of January. But I'll be monitoring the rhetoric that comes out of Trump very carefully. And he will be probably trying to browbeat Powell into being less restrictive if possible.

So it's going to be an interesting time period here. We've had quite the week. I think Powell looked a little tired. I think a lot of people had a late night on Tuesday. And so this meeting is really very inconsequential. I think what we see December and then the first meeting of 2025 is really going to be very important in terms of the, you know, I guess the drama between President Trump and Chair Powell. We've seen this movie before. We'll see if the sequel is nearly as dramatic. It'll be fun to watch. Let me ask you this. Of the Trump trades, if you will, the one that we saw to the downside was China. You've

told me for many months that you liked India. Do you like it more today because you anticipate higher tariffs on China? How do you view that whole paradigm? Well, I still, I like India a lot for the long term. I mean, it's obvious that they're on the ascent, not just demographically, which is extremely strong demographics, but they're clearly a beneficiary of, you know, production shifting away from China, as is Mexico probably. So I think that that's not something that I even think about as a three-month or one-month. I'm talking about a multiple-year horizon. I just think India is a great place to be for the long term. The dollar is very stable. Oil has been very stable. It's really remarkable how we've seen such volatility in gold and silver being up so much.

Now, Bitcoin is on a moonshot. I was going to ask you that. This is all I think. Did you go buy some Bitcoin on Tuesday night? No, no, I have no interest in cryptocurrencies, but I do think that it's interesting that gold has been rising and silver has been rising relentlessly pretty much all year. And I think that's an anti-deficit, anti-Central Bank type of a mood that's going on. Central banks are buying gold like crazy. Retail buying, even Costco is selling gold and they can't keep it in stock. I think people are viewing Bitcoin and gold as not speculations as much as they were five years ago,

but more as permanent portfolio allocations. And I do have gold in my portfolio. So I continue to hold gold. Bitcoin is for I'm a coward. I can't I can't stomach that type of volatility. So that's why I do bonds primarily. You know, it's let the momentum guys have their fun. But I'm a value guy primarily. And so I don't I don't have a mechanism for valuing fair value on Bitcoin. So I stay away. All right. We will, we'll leave it there. I think we covered so much.

I so much appreciate your time as always, Jeffrey. Thank you. All right. We'll see you in December. I guess the next one's what? December now? December.

Yeah. We'll see in about a month. We'll see what happens. All right. All right. Good luck, everybody. Good luck out there.

Yeah. You as well. That's Jeffrey Gundlach joining us from Double Line once again. Up next, much more on today's market reaction to the Fed decision. And Chair Powell's news conference, Instant Expert Analysis, is coming up. Plus, Airbnb reporting top of the hour. We have all the key themes and metrics to watch for when that report crosses the tape in OT. We're back after this. We're now in the closing bell market zone.

CNBC senior markets commentator Mike Santoli and Virtus' Joe Terranova here to break down these crucial moments of the trading day, this Fed Day. Plus, Giorgio Bosa has the setup ahead of Airbnb earnings in overtime. Joe, I'll turn to you first. Your reaction to some of the things that Jeffrey Gundlach said in reaction to what the Fed chair said. I think Jeffrey's spot on in identifying that the potential for the long end to back up is a significant possibility. I think Jeffrey's right to identify we're seeing a rally in some of the precious metals. But I also think that Jeffrey's tone is one that I share, where I think you have to be optimistic about where we are in the investment

environment. And I think we're making a tremendous mistake here. We listen to Chairman Powell's press conference. We listen to it. And I think a lot of skeptics about where we are in the marketplace. We're attempting to hear something that would disrupt this rally. You're not going to hear that. You're not going to hear that from Chairman Powell. And let's remember that the scoreboard, the scoreboard for President Trump is the stock market. When President Trump was elected in November of 2016, the first thing that happened in December while his transition team was working was the Fed raised rates 25 basis points. And in 2017, they raised them 75 basis points on three meetings. And then in 2018, they raised them 100 basis points on four meetings.

We're in a completely different situation right now, Scott. The Fed is actually cutting rates. We're looking for contention between the Fed chair and the president that I don't think is real based on where we are today. Yeah, it's like candy for somebody who has made a career on hoping for low interest rates. I mean, it's just what you do and how you do it. That's what you want. What would you make of what Jeff said?

Sure, I mean, maybe it's the slow pace and the wait and see posture that might at some point create a little more static. But right now, I think the market wasn't really expecting much beyond confirmation that the plan is in place.

They think that rates are too high for where inflation is. They've thought that for a while. They're normalizing it. They're hoping the Treasury yield curve normalizes. Powell could not be pulled into making grand declarations about the message of long-term yields going up because, honestly, I don't know why there's this much fixation on a 4.2 or 4.3 percent 10 year treasury go. We were here July 31st or above there in April. Yep it went up quickly but that's because we entered and then immediately reversed out of a growth scare. It's not about some kind of critical tipping point level. So I think all that is is to the good. And in terms of the stock market I mean look the overheated stuff

yesterday is backing off. Bank stocks giving up 2 percent after a massive move. Transport's down. Otherwise, it's definitely people want to remain involved. And you have a final hour lift here, basically driven by procrastinators who don't have enough exposure. There is a question as to what role the backup in yields may play in the trajectory of Fed policy. At a time where you have, as the chair himself called the resilience of the economy, remarkable. You do have the possibility of the backup in yields going even further. They're not exactly sure where neutral is. They know they're too

restrictive. So there's still a lot of wild cards. There's plenty of play in all of these questions. And I do think that's why it's probably into next year that it becomes a little more touch and go because another quarter point from here they're still not going to be at neutral they're still not going to be near neutral what they believe is neutral if yields start to really blow out because inflation data or inflation expectations are really gathering steam that's going to be an issue for the economy, for equity multiples, for what the Fed thinks it needs to do. But until and unless that happens, I don't think that that's the thing specifically to worry most about. I focus on positioning. And let's remember, we're still not certain that it was fundamental forces that we got that backup in yields from the

last Fed meeting until the current Fed meeting. I think a lot of it was technical nature. I think you had. A market. Yeah as it relates to the treasury market where speculators had gotten very long. Because they thought the economy was cooling. They thought they were gonna get fifty basis point consecutive

cuts beyond September. And I think now you've got. A treasury market with speculators are actually very short the market so. I like the chairman Powell gave the example. So I like that Chairman Powell gave the example of the last time that a 10-year went up to 5%. And he kind of dismissed it and basically said, oh, yeah, it went back up to 5%. And it came right back off.

That's why he said, quote, right now, it's not a major factor in how we're thinking about things. We're watching it. Let's see where they settle. It was not exactly fully dismissive of it but certainly didn't sound concerned let me ask you this um as an investor yesterday was such an enormous move in so many things within the market does that color your opinion on where and how you would put money to work from here forward because so much happened yesterday in so many different parts of the market. It's like, well, well, I liked Bitcoin before, but wait a minute. That was like above seventy five thousand. You know, I kind of like growth stocks like Tesla, but that was up like 20 percent this week.

How do you play it now? So I think where momentum was working that intens intensified and momentum by itself is a very powerful force. I think you stay with that. But I also think we were reminded of the opportunity regarding just investing in the U.S. itself, because you looked at yesterday's tape and what did you see? You saw large strength here in the U.S., but not so much beyond the U.S. That doesn't mean that you want to have some exposure outside the U.S., but not so much beyond the U.S. That doesn't mean that you want to have some exposure outside the U.S., but I'm not necessarily sure that you need to. I also think a lot of what we saw yesterday was the expectation that finally the Russell 2000 comes out of its

earnings recession, that you could see profit margin expansion and earnings growth. It was up 6% yesterday, and today it's pulling back slightly. I still think you stay mid-cap and large-cap. You play the broadening out in mid-cap and large-cap, and let the Russell really prove itself that it's going to come out of that earnings recession. All right, we'll come back to you guys in a second. Adir Jabosa now on what to expect with Airbnb and OT. Dee? Hey, Scott, it's all about bookings and demand expectations.

Last quarter, you might remember, the company warned of slowing U.S. demand. The Paris Olympics likely provided a boost for its latest quarter, but most importantly, how is the upcoming holiday season looking? When I chatted with CEO Brian Chesky a few weeks ago, he said he was very confident over the long term that demand is going to remain strong. He's encouraged by the trends that he was seeing. So I'm curious to learn how he plans to capitalize on those trends, as well as how he will continue to build now that the company is in growth mode. Another area to watch is marketing spend as Airbnb increasingly shells

out to compete with the other OTA home sharing units and how that could impact margins. Scott. Dee, thank you. We'll see what happens. George Rabosa, Mike, I'll turn back to you. I'm curious as to what you think about, you know, the Fed chair is pretty confident that inflation is going back towards sustainable, I think, is the word that he used. Gundlach thinks it may go lower than target. He's been pretty consistent on that quote. If we keep the price of oil around low 70s, we're going to see headline inflation below 2 percent in four to five months. Right. I mean, I do think that's kind of where the math gets you, maybe at least on CPI. And sure, I mean, I think it was interesting in the press conference when Powell was asked about the removal of that phrase in the statement

where they had previously said they're confident that inflation is heading toward target. And he basically said, no, that wasn't really a coded signal to suggest that we're losing confidence or that the trajectory has changed. I think the market took some heart in that. Interestingly, too, he was also asked if they would like to see inflation go well below target for a while. Spend some time there because they had this idea a while back when inflation was too low that you had to let it sit higher than 2% for a while to even out the long term. He basically just throw cold water on that. He's like, nope, we're not playing that game. 2% is the target. So we're not going to fight for super low inflation. So I think right now, those are all questions for once we get closer to target and closer to neutral in terms of the rate.

I also thought Jeffrey Gundlach highlighted something that was important related to the difference between how the Treasury market might be trading, but how the corporate bond market is trading. The corporate bond market is trading incredibly well. Yeah, spreads are tight. Right, spreads are tight. Any new issuance, there's very strong demand for that new issuance. And we're going to see a lot of new issuance coming out on the other side. I also think we're going to go through this period here as we move into the new year where the animal spirits return, where you see M&A return. And the other thing is, you know, you have people that are saying, OK, well, potentially we're going

to have a lower corporate tax rate, possibly, right? But we're not going to feel the effect of it. Yes, you are, because CFOs are going to see that. They're going to know it's coming, and that's going to increase cap tax. In terms of high yield, the high yield trade, the animal spirits idea introduces the idea of more risk-taking, he was pretty clear that he wouldn't go too far out in the high-yield curve here of thinking about where you want to take that risk. If it's CCC right now, something went wrong, right? In other words, it's not like you're going to go out and issue a lot of paper at CCC as a fresh deal.

So I think what he's basically saying is don't look at the broken merchandise. You've got a decent risk-reward and good yield. Yeah, there's too much good out there. You don't have to reach. That being said, this idea that animal spirits have been dormant is a joke. OK? The market's been ripping for a long time. Credit spreads have been tight for a long time.

Flows have been pretty healthy. Only in M&A it's not a joke. No, no, of course. You're right. Corporate activity. And animal spirits aren't there. That's where we're focusing. Not in the monetary market, please. And that's where we're focusing on, not in the equity market, please.

And that's probably good for small caps because a lot of those companies, the way they leave the index is they get bought. And it's probably good, and it's absolutely good for the investment banks. But by the way, Goldman Sachs stock has been going almost vertical, and yesterday it went literally vertical. So this is not underexplored territory here. We're here, guys. It's not the beginning of a cycle. It's not the beginning of a cycle. It might be the acceleration of a cycle. Well, it could be the beginning of a of another of another cycle, which is all but IPOs and all the rest of it. Absolutely. Know that about it. I think and I'm glad you keep us honest on that.

But that's that's what we're targeting here. Finances, by the way, the worst performing sector today after ripping yesterday. Mike, thank you. Joe T, thanks to you as well. That does it for us. We do have some earnings coming up. We'll go green across the board. Not that far from six thousand on the S&P either. See if we get there tomorrow.