Closing Bell - Closing Bell: What’s Next for Stocks? 6/22/23

Episode Date: June 22, 2023

Dubravko Lakos of JP Morgan had a fresh note that had all of Wall Street talking today. He gives his take on where stocks could be headed from here. Plus, Alger’s Ankur Crawford breaks down the big tech stocks… and under-the-radar names she’s betting on right now. And, Former Dallas Fed President Richard Fisher gives his forecast for the Fed and when he thinks the next rate cut could happen. 

Welcome to Closing Bell. I'm Scott Wapner. This make or break hour begins with the risk reward for stocks and whether it's gotten better or worse as the second half of the year approaches. J.P. Morgan's Dubrovko Lakers will be here in just a minute with his answer because his new note had Wall Street talking today. In the meantime, here's your scorecard with 60 minutes to go in regulation. Boeing and IBM are a drag today on the Dow, which was lower for much of the day. But as we start this final hour, the Dow is green, albeit barely. More broadly, stocks trying to avoid a fourth day of losses in a row. There's the S&P positive now as well. Energy, financials, utilities have been lagging. In fact, it is the worst week still for the S&P since March. NASDAQ higher. It's hoping to keep its eight-week winning streak alive, and it's doing pretty good at that right now. There's the NASDAQ, 13,613, just shy of 1%.

It does lead us to our talk of the tape. The challenge ahead for investors, given the rally we've already had and what we think still lies ahead. Let's bring in Joe Terranova of Virtus Investment Partners. Dubrovko is going to join us in just a moment. It's good to have you here. So you sat down and you said, oh, energy's lower. Oh, financials are lower. I mean, the market's fought back, though, as we begin this final hour. So how do you see things here? OK, so but the market is fighting back. Why? Because there's a mega cap put underneath the market. It's the mega caps once again. So initially it was Microsoft.

It was Nvidia. It was Apple. It was Meta. Well, guess what? Now Amazon's joining the party. Amazon's at its highest level since September of 2022. Because they just announced an AI play today that they're going all in on. That stock you just saw, 3.5%. Which is a catalyst in the early innings in 2023.

So if the Bulls are going to be defeated, and they're in control right now, if the Bulls are going to be defeated, you have to tell me, how is it exactly you're going to break the fever that currently exists in mega cap equities? Because every day it's saving the tape. Look at S&P equal weighted today. S&P equal weighted is underperforming the S&P by 50 basis points. That's something that just continues to act in continuing. So the script is in place. I've said I think Q3 could be a flat to negative quarter. But on the other side of that, you have the mega cap put that's in place

and that's going to lead markets to resume the overall positive trend of 23. But see, the only way the bulls can stay in control, some would suggest, is for the once lagging sectors to continue to do well. I disagree with that. How otherwise can the bulls stay in control? So everything else can lag and tech is going to just carry the day until it doesn't? Because you continue to see multiple expansion in mega cap equities. And that's a possibility. How long can that last?

I understand. Listen, logically, you would say to yourself, not much longer. But how high is high and how low is low? That's a question that you never want to ask yourself when you're trading or investing. So Fed is still hawkish, whether it's the chair himself, Bowman or Waller overnight was obviously hawkish. Econ's a little dicey, right? We think it's going to weaken more. Valuations are kind of rich, right?

So are the bulls really able to stay in control in the face of all of that? Now they have been, they have been, but for how long? They're in control because of the predominance of mega cap equities. That's why they're in control. You're mentioning the Federal Reserve. It's not just the Federal Reserve. It's the Bank of England with a surprise hike. You talk about an economy. A surprise of 50. Again, the premise that the economy, we're going to have a soft landing and the economy is actually resilient and the economy is accelerating. How could anyone say that if you look at a two versus a 10 year and the deep inversion, not only here in the United States, look overseas, look at Germany.

Germany's two versus 10 deepest inversion since 1992. That's not a sign of growth in the economy. But you say none of it matters as long as mega cap tech has a bid. Because it's the only place you could find growth. It's the only place that you could find within earnings the consistency of double digit earnings and revenue growth. Yeah, but what happens if in this? So we're right on the edge of the second half of the year. OK, now we've been a lot stronger for a lot longer than I think a lot of people thought we'd be by this point. You'd agree with that, whether it's the consumer, the economy at large and for that matter, the market. Correct.

The thought, though, is that once you turn the page into the second half, the rubber starts to hit the road of all the Fed has done. That jobless claims today, you know, remain elevated, that the employment picture is going to get worse, that the consumer is finally going to get tapped out at some point and spending, you know, as much as they could possibly bear to keep up with inflation, want to have summer travel that's kept airfares up. But at some point that's going to run out. OK. No? No. I see the economy continuing to weaken. The price you pay to combat inflation is an economic contraction. I see through the second half of the year that we will have the Federal Reserve making the mistake of raising once, probably twice.

And then if they raise twice, they're going to probably at some point in the near future have to take back those hikes. That does not mean that you wash away with an eraser the positive catalyst that is generative AI. So but in the last couple of days, you sounded more more cautious, I think it's fair to say, on the market. Now you don't sound so much. No, I'm cautious in terms of valuation, in terms of trading out of what I perceive to be a higher valuation equity name into a lower value equity name. Broadcom, AMD, that's an example. I did that in early June. Traded out of AMD, much higher valuation into Broadcom, both going to benefit from AI. So I want to use this quarter as a placeholder. I want to be invested, but I just want to be respectful of valuation.

I think valuation in this upcoming quarter, I think it's going to matter. Do you think the market cares what the Fed does from here forward? Because I mean, they could keep talking all they want to. I think the market will be upset by two hikes. I do think the market will be upset by two hikes. Why isn't it upset now if it thinks that, you know, that's the way they're talking? Well, it's upset in the places that are economically sensitive. I think you would agree with that. Financials, precious metals, energy, all underperforming. The commodity story is very soft right now.

So the economically sensitive areas of the market, excluding industrials. Well, maybe excluding industrials that that's not a critical part of the cyclical economy. It is a critical part of the cyclical economy, but that's where you're seeing a large amount of stimulus benefiting a sector. So the stimulus that's been introduced over the last several years, there's having a significant positive impact on the industrial sector. Month to date. OK. Yes. Speaking of these economically sensitive areas, materials are up seven and a half percent. Right. Industrials up eight percent. Financials up 4 percent. So if there's so much worry about the economy, why is that happening?

You left out real estate. You left out energy. And those are important, economically sensitive sectors. Energy's up two and a third percent. OK. And what do we have? I know it's been a huge. Right. But relative to everything else, listen, you're you're you're you're isolating a small body of time. I get it. I understand that. I think a lot of that has been a result of the resolution of the debt ceiling debate. That's part of it. I think it also has to do with the Federal Reserve skipping at the most recent meeting. But I think when you take the 30,000 foot view of where we are in the economy, I just look at FedEx the other day. I just don't think you could present a strong argument that the economy is actually accelerating. Yes, labor is strong. Well, why is labor strong? I don't think people are trying to argue that the economy is accelerating. I've heard that argument. The one bullish argument has been it's just not decelerating as rapidly as one expected. Therefore, maybe you can actually engineer something other than a recession.

OK, but that view is clouded by the labor market. And the view is clouded by the labor market because employers are not going to let go of employees. Let's bring in Dubrovko Lekos, now J.P. Morgan's chief equity macro strategist, joining us once again. It's good to see you. Welcome back. Thank you. Thank you. Good to see you, too. So I mentioned your note today certainly had us talking, and you say that it's unattractive, the risk-reward for equities right now. Why so? Why so? Well, I think you have the policy side of the equation,

which remains restrictive. I think, you know, monetary restrictiveness is going to continue to impact us with different forms of lags. And I think these lags will get only, you know, louder in the second half. I think the fiscal side, which has been a massive tailwind, is diminishing. I'm not saying it's a headwind, but I think it's a diminishing tailwind. And I think growth, big picture, maybe with the exception of like you know certain pockets like tech which are very important and ai i think continues to decelerate and i think the market is now at a point where it's kind of pricing in a fairly rosy picture and so i i just think that the backdrop is is is quite challenged as we go into the second half. I want to read you a blurb or two from your couple of notes you put out today. Quote, some argue the next leg

up for the market will be supported by laggards. We see this as a tall order. Expect a more challenging macro backdrop for stocks. Consumers are starting to show signs of weakness. Excess savings will likely be exhausted by October. So a lot of this, quote unquote, stimulus that has led to this rally in the first place, you see dissipating in reasonably short order. I would say over the next few months, I look, first of all, I think it's extremely hard to time things in the short term. But I think if you sort of take a three to six month view, yeah, that's the case. And I heard a little bit of your discussion that you were just having now. I think, yes, most of the upside has been driven, very cyclical, and the cycle continues to age.

It's not going to get younger. And so I think best case scenario you get is you get a leadership and concentration environment that becomes even more extreme. And so I know we're sort of at the most narrow or most concentrated period since 1970, but you look in 1960s, you look in 1950s, things got even more concentrated. And I think that's the pain trade for many. And I think this is largely a function of, I mean, yeah, AI is definitely helping, but I think it's largely a function of the fact that liquidity is getting sucked out of the system and money continues to funnel into the biggest and strongest balance sheets that can sort of withstand that. And that hurting continues to happen. And as you go, as you get closer to recession, I think risk is that that hurting becomes even greater, not lower. And so that's why I don't buy the argument that you're going

to see a broadening in leadership. But what about the, I mean, you mentioned the cycle being, you know, either late or near the end. And you also obviously mentioned AI. What if the economic cycle just, I don't know, drank from the AI fountain of youth? And it is going to be so much more powerful than we even had any idea of. Look, it's a view out there. I don't share that view. You know, my background is also quant and machine learning AI is nothing new. It's a trend that's been in place for the last 10 years. Quants have been adopting it since many years ago. I think it's just basically broad awareness that's kind of increasing and picking up and you're seeing a bit of a arms race between a lot of the large

corporates. And so, yes, they're investing in infrastructure, chips, GPUs and whatnot. But I don't think that's sort of the big narrative around this is going to revolutionize productivity and so forth, this is going to take time. And we're not talking about next year or two. It's going to take more than just, I think, a few years to get there. And in the meantime, I think the market is priced in a lot. So, again, I'm not saying, I think it's a very healthy trend. I think it's a trend that has a lot of potential. I don't think it's that new. And I don't think it's going to revolutionize things that much in the short term. And so, yeah, those stocks can continue to do well, but I'm not sure that's enough to basically

keep everything afloat. I'm kind of surprised to hear you say that, especially regarding generative AI and just what we're already seeing and what I guess you could say still nascent stages of it from a consumer standpoint and how it's already kind of revolutionizing search and the way that companies are investing heavily in it. Yeah, so I do think that certain pockets will definitely benefit from this. But again, the big picture economy, I don't think is going to stand to benefit in any significant shape or form in the near term. That's what I mean. So I do think that certain pockets, yeah, they benefit.

The semis, some of these like, you know, mega cap tech names, some of the consumer plays, sure. But I think big picture doesn't change that much in the short term. I think it's really more of a medium term story, sort of two, three years out. Even as those groups are pretty large groups in the market, right? That's the other point. We're not talking about, you know, sectors that are three or four percent waiting out of the S&P. We're talking about 25 to 30 percent of the S&P 500. Right. But those same companies happen to be the companies with the with the strongest balance sheets in an environment where liquidity is getting sucked out. I think that deserves a premium. And then, too, those are also the companies that have been quite aggressive in terms of cutting costs and protecting earnings.

And so I don't think it's just AI that's benefiting them. I think it's multiple factors. What about the idea that you put forth of the consumer starting, as you say, to show signs of weakness? Where do you see that? So I think you're seeing it in more and more data points. I think, for instance, if you just listen to what a lot of the consumer companies have been talking about recently, whether it's the Walmarts, the Targets, the Costcos of the world, they're talking about a continued rotation from discretionary towards necessities, towards private labels. You're seeing more and more signs where the consumer is shifting towards leverage and credit as a lot of the COVID stimulus continues to basically phase off. You have the student debt loan relief that's coming to an end later this summer. And I think beginning of September is when people, you know, a lot of these folks are going to have to start paying debt again.

We estimate that's a $9 to $10 billion headwind per month. And so I think it's a number of different areas that continue to sort of show signs where not the entire consumer, but the lower income, sort of the bottom two quintiles or the show signs where not the entire consumer, but the lower income, sort of the bottom two quintiles or the bottom 50% of the consumer by income, that's the area that's coming under increasing pressure. And I think the question is, does that at some point start to sort of spill over into the broader economy, into pricing power and earnings? So then given your view, what does the ideal allocation look like for one's investments? So from the beginning of the year, we have been very vocal about the fact that portfolio managers and investors should be tilted towards high quality, profitable, strong balance sheets and large size.

We've been very negative on small caps, for instance, on the flip side of it. And I would argue more of the same. If you ask me about sectors and more specific sort of themes, I would say boring stuff like utilities, defensive health care. And then I do think that mega cap stocks, given their balance sheet, I wouldn't be selling those areas. I do think that those areas will likely not underperform as the cycle ages. So again, the high quality areas is where I would continue to lean into and anything that is more sensitive to interest rates, that's the area that I would continue to stay away from.

So the quality factor. I know, but you just obviously made the case for mega cap as you said. So, I mean, if you don't think that those stocks are going to necessarily pull back. I would perform on a relative. I'll perform on a relative basis. Why would the market at large, right? If you're making the argument, stay big, stay with quality and stay with good balance sheets. I've just checked three boxes of all the reasons why those stocks have done well. Sure. And I think more of the same. It's just that right now you've seen these areas outperform significantly year to date. I'm not saying they continue to go up in absolute terms. I'm saying on a relative basis, I think they continue to outperform. And I think the rest

of the market, so everything outside of the top 50 continues to melt. The private sector, I think, continues to be under increasing pressure. The economy. And I do think that at some point that's going to come back and bite everything. It's just that in the meantime, I think you continue to see a rotation towards quality. And the last few weeks, there's been a bit of an awakening. We're getting a lot of questions from investors. Is it time to go back into cyclicals? Is it time to go back into high beta? Is it time to go back into small caps? I don't. I don't think it is.

I think it's just a short squeeze. Interesting. Yeah. Let's expand the conversation, Dubrovko. Ayako Yoshioka of Wealth Enhancement Group joins us now. Joe Terranova, of course, is still with us as well. Ayako, I go to you first. So you've heard what Dubrovko lays out today. His note had certainly a lot of people assessing where we are right now and where we may go over the next few months. What's your view? I agree. You know, I think this is very similar to what we saw back in 2016, in which we had that softness in earnings or the earnings recession. And it was the mega cap tech stocks or the things that really propelled

stocks in 2016. And this is not that different. You know, we have a slowdown or an economy that is slowing. And so when growth is scarce, everybody, you know, looks towards finding companies that can grow through that. So I agree with what Dubrovko said. So, Joe, in other words, don't pay attention to the S&P 50. Pay attention to the S&P 450 is essentially what Dubrovko is saying. Those stocks are not going to do well in the environment that he sees. And thus the market is going to be capped. So, I mean, and let me first say, Dubrovko and I didn't speak before he came on air because he's basically,

I agree with everything that he's saying, okay? I think the important thing though, I heard Dubrovko say that his question, the questions that he's getting are, is it time to go back into cyclicals? Wait a second. Everyone's already in cyclicals. So I think it's a positioning question. And this is a question you've asked multiple times on the

show in the last several weeks. Where are we from a perspective of positioning? Energy. Overall, the consensus is still overweight towards energy. So it's not a matter of going back into energy. It's a matter of now pivoting away from energy and going back more towards mega caps because positioning at the beginning of the year wasn't there. Positioning at the beginning of the year didn't want growth. Positioning at the beginning of the year wanted the economically sensitive part of Dubrovko's point is forget the people who are already in those sectors. You've had a considerable amount of cash on the sidelines. You've had a considerable amount of cash in money markets. You've had a

considerable amount of money in fixed income treasuries. So if you do think that the market has started a new bull market and that the lagging sectors, the ones we've just named, are going to catch up, I think that's what he's referring to. Should I go into these areas? And his answer is no. No, and I agree with him. They're not. You have a—

Well, they are this month. But, Scott, you've had a rotation that began in January, a rotation that's very clear. It's not cyclical in its nature. It's secular in its nature. And it's going to build momentum over the coming months. I gave before four stocks, four stocks in which positioning in the fourth quarter went to underweight. Apple, Microsoft, Meta, Nvidia. OK, now lump in Amazon. You're going to be adding not you're not going to be

reducing positions towards mega caps. There's a clear rotation that's in place. The rotation is not going to buy the laggards. The rotation is going to buy the S&P 50. Dubrovko? Yes, I broadly agree with that. And I do think the one thing that's quite interesting is that the 10 largest stocks have decoupled quite significantly from sort of the next 10 and the next 10 stocks, which historically is not typically the case. So where I would be looking right now is not necessarily the top 10, but sort of stocks number 11 through 50, which are also good balance sheets, good quality companies, pretty robust, should be able to tolerate a higher interest rate environment, but are trading, I think, generally at much less stretched

valuations. So 11 through 50, to be more precise, is like an area where I would be doing fundamental work and trying to identify names that look attractive. So, I mean, do you think the market is currently vulnerable? Do the bulls not really have the control that they think they do? I think that the bulls are pricing in a very rosy outcome. And as part of that outcome, many bulls for the last several months continue to argue how rates are going to come down, how the Fed is done, Fed is going to roll over. But if anything, the opposite is happening. And so that's what I'm just saying. It's almost like the consensus has moved to soft landing. There's a lot of capitulation happening in the market. There's recession fatigue.

People are giving up on the recession. And I think at the same time, complacency is building up. And so that's where you get the vulnerability. You can answer, and I'll make this the last word, too. Sure, no, I completely agree in that the economy is slowing. I think investors are tired of hearing about a recession. We've been talking about it for almost two years now. And this slowing, you know, it will impact the field. It's, you know, it's kind of like Tiger Woods versus the rest of the field. Everybody's betting on Tiger this time. But, you know, we think that there's a chance that the field can win as we go into the next 12 months as things slow down in the economy.

Guys, we'll leave it there. Aya, thank you. Dubrovko, thank you. We'll talk to you again soon. Joe, turn it over to you as well. Thanks for being here. Let's get to our Twitter question of the day. We want to know, is the risk reward for stocks getting better or worse? I want to know what you think. Please vote at CNBC closing bell on Twitter. The results are coming up a little later on in the hour. We're just getting started, though. Up next, top picks for your portfolio. Al Jazonka Crawford is back with some big opportunities she is finding in some big tech stocks and some under the radar names, too. So join us right here at Post 9 after the break.

We're live from the New York Stock Exchange and you're watching Closing Bell on CNBC. Welcome back to the mega cap driven rally setting up for a bit of a breather. Nasdaq is on track still to snap its eight week winning streak. But despite investor concerns over narrow leadership, our next guest is still finding broad based opportunity both in and outside of tech. Let's bring back on Crawford executive vice president and portfolio manager at Alger. Welcome back. Thanks. Let me just get your first view here because the bears don't want to go away, okay? And they don't think they have to because they think that the Bulls have this false hope that all is good

and that the rest of the year is going to be just fine. So what's your view on that? I think let's put it in perspective of where we started the year. We started the year with the Bears expecting the S&P to earn $180 to $190. That number is now looking like $220. And the number is rising. As we go through Q2 earnings, it is highly likely that we actually get revisions upwards to that number, not downwards.

As we look forward to 2024, we see a growth year instead of a down year. So, you know, I think we have to at least consider that we're coming through this without too, too much damage. In the last six months, we've seen a banking crisis. It hasn't really affected the market. The consumer has been slowing, hasn't really affected the market. Numbers are going up. You know, you've seen a brand new theme with this Gen AI that can really drive the next few years of earnings. You sound bullish. You sound like you're a bull. I suppose I am. And in part, if you look at the valuations in the market. Are they justified? Well, OK, let's take let's take Meta, for example. Meta only trades at a 15 or 17 multiple on street earnings on next year. Is that aggressive? I don't

necessarily think it is. What if I take your Meta and I show you an apple and I say, OK, that's 30 times. Is that justified? Yeah. So Apple is a different, a little bit of a different beast. I think a former guest that you had on was talking about how there is a given the liquidity crunch that we're seeing in the market. There's this rush to these mega caps that actually generate liquidity. They don't need to take on the debt. I think there's a little bit of that going on. But if you look at the profile for Apple, Apple's numbers haven't actually come down that much. Microsoft's at thirty three and a half times. Is that justified? And Microsoft's numbers for 2024 may actually end up going up just like we saw for NVIDIA,

in part because they're seeing so much insatiable demand for for Gen AI and AI that, you know, I think we have to at least entertain the possibility that numbers can still go up. See, that's what the bears seem unwilling to come to grips with, is that maybe their expectations of earnings falling off a cliff are going to be wrong. And they still think that all of this is going to come home to roost in the second half of the year, that earnings expectations are going to disappoint. They just haven't yet. You know, everything you said is right. And I would remind you that in the beginning of this year, the bears are saying the same thing for the first half of this year. So if it comes to roost, maybe it's in 2024 and we still have another nine months of earnings revisions upwards.

What about areas outside of tech? So tech dominates everything and it's a large part of what you do as portfolio manager, obviously, but what other areas are there opportunities in, as we teased and said you thought there were? Yeah, so I think as we inch closer to 2024, this becomes very much a stock picker's market. And in part because you have to suss out who are the beneficiaries of certain trends and what trends don't you want to be part of? So, for example, in an industrial world, as we go into 2024, we have the tailwinds of the Inflation Reduction Act or all the reshoring, the CHIPS Act starting to come to fruition, the JOBS Act that was

enabled in 2021, the funds start to flow in 2024. You know, you have data center growth, all this Gen AI is going to, the demand for data centers and building of data centers, the power related to the data centers. So you want to actually be part of some of that cyclical bent in the market. Martin Marietta Materials, does that fall under one of your picks? It does, and it kind of feeds into these same trends. It is absolutely not a Jenny Eye story, but it is a story of basically they're a stone quarry. They sell cement and stone and rocks. And it's not really that sexy, but it enables the building of America, the reshoring, the building of data

centers. We will leave it there. Ankur, thank you. Thank you. That's Ankur Crawford joining us once again at Post 9. Up next, forecasting the Fed. Former Dallas Fed President Richard Fisher, he breaks down what he thinks Mr. Powell's next move might be, and he flags when he thinks the first rate cut could come. Just after this break. Closing bell back after this. We're about 25 minutes from the close. Let's get some top stocks to watch as we head closer there.

Christina Partsenevelos is here with that. Christina. Let's talk about Amazon because it's firmly in positive territory after J.P. Morgan reiterated its overweight rating on this stock. That's why it's up 4%, citing further growth in Amazon Prime. Loop also reiterated its buy rating on the stock. And that commentary comes as Amazon announces a $100 million investment in its new AI-focused innovation center for AWS. And so that's why you're seeing shares at $129.81. Let's talk about Overstock because maybe Bed Bath & Beyond is not dead.

Overstock is higher after winning the auction for Bed Bath & Beyond's branding and intellectual property. The $21.5 million deal includes Bed Bath's mobile platform, but none of its physical locations. Overstock is on pace for its best day since March 2022. The stock is up a whopping 18 percent. Scott. All right, Christina, thank you. When we come back, former Dallas Fed President Richard Fisher joins us with his own outlook for the Fed and his big rate forecast. Closing bell is back after this. Markets again wrestling with the potential for more rate hikes ahead of Fed chair ahead as Fed chair Powell's second day of Capitol Hill testimony. Further dashing hopes of a longer pause or even a cut. Former Dallas Fed President Richard Fisher joins me now to share his outlook. Richard, welcome back. It's nice to see you. Thank you, Scotty.

How many hikes are we going to get between now and the end of the year what do you got on your scorecard here well i think if you listen to michelle bowman just now and you listen carefully to chairman powell and you saw what the bank of england did with 50 base points the canadians the australians there is still a possibility for one or two more. And at a minimum, Scott, they're not going to be cutting rates, in my view, as far as the eye can see into 2024. My guess is they'll just have to hold it where it is. The reason for that is Powell was very firm. The committee was very firm after the last meeting and in the press conference.

Two percent is sacrosanct. They're not going to give up on trying to achieve that target. They're not comfortable yet that we've gotten far enough in the right direction. So I wouldn't be surprised if they just paused. But they just paused. I hear everything you're saying with that. Why didn't they just hike? Well, I think he was honest about that. They were honest about it. What they want to do is get a feeling for how this current constraint in the credit side that's driven by the banks might affect the system.

But already, I think you can tell, and you just had some very good people on, who are quite bullish about the economy. And I don't see any problem with it. I would have, could have argued both sides at the last meeting, but I have no problem with her having paused. But I do expect them to do a little bit more. Would you have voted to pause? I could have argued both sides, Scott.

I know, but we don't do both sides. Come on, Richard. What would you have done? Remember, I was viewed as one of the hawks, right? And part of that is because Tubbs remembers the pigeon family. I don't want to be anybody's pigeon. But I was viewed as a hawk. Yes, I would have voted to take a look, pause, see what happens.

And also, I would have left the door open for at least two more votes. Now, you cite the economy, and I think it's probably, I don't know, I don't want to put words in your mouth. Is the economy stronger today than you expected it would be after 500 basis points of hikes? I am not surprised that it is as strong as it is. And the reason is because the employment data is still incredibly strong. And as long as you have people with jobs, they consume and the consumption drives our economy. Manufacturing is already in a recession. It's only 17 percent of our economy. I say this over and over and over again. It's driven by consumption, by the service sector. As long as we have people that are fully employed as they are, as long as we have more people looking for people to work than people

willing to go to work or able to go to work, then we're going to have decent consumption. It will have positive economic growth. And I'm not surprised by how the economy has reacted. Well, let me ask you this. How would you counter the comment that you hear some making that the Fed is just looking at all of this wrong? They're looking behind them rather than what's really in front of them, that maybe the labor market is just different post pandemic and their traditional methodology and all the things that they've been groomed to look at for the last two to three decades of their careers just don't work anymore. The economy is different.

The labor market is different. The pandemic screwed everything up. So let's get with the program. Inflation is coming down a lot faster than they want to admit. How would you counter that? I would say that the people that make that criticism don't understand how the Federal Reserve works. They don't give enough credit for the capacity for the Fed staff and for the Open Market

Committee members and participants to interpret what's going on in the economy. And I think it's a argument that falls on deaf ears. But Richard, the Fed's own staff says there's going to be a recession. It's like there's a disconnect even inside the building. Well, it's up to the FOMC participants and members to interpret what the staff gives them and then to proceed with monetary policy. So you have to remember, you're saying you're saying there will be a recession.

I think you're referring to the slowdown that's forecasted, or at least thought of, at each meeting when they project themselves. As the chairman has said, and he's absolutely right, he's a former DOT, I can tell you he's a retired DOT, it's not a forecasting exercise. What it is, is how you feel at the retired dot. It's not a forecasting exercise. What it is, is how you feel at the moment. And that's not an official forecast. So I haven't heard the Federal Reserve System, as expressed by the Open Market Committee, forecasting a recession. In fact, if anything, if you listen to them between the lines, they're talking about either a very soft landing or not having to bring in negative economic growth.

I'm going to ask you lastly, I have to make it quick because you just made yourself into a dot again, which I want to know, what dot would you have been? Would you have been in the three or more hike camp or the two, at least two more? I would have been probably in the two camp, but maybe only one. We'll see. All right. We'll talk to you again soon, Richard. I appreciate it as always. I appreciate you taking the old dot on board this great show. All right. Richard Fisher, former Dallas Fed president, joining us. We'll see you again soon. All right. You take care. Last chance to weigh in on our Twitter question. We asked, is the risk reward for stocks getting better or worse?

Had to add CBC closing bell on Twitter. The results after this break. The risk reward for stocks, you said it is worse by near 60 percent. The market zone is next. We are now in the closing bell market zone CNBC senior markets commentator Mike Santoli here to break down the crucial moments of the trading day. Plus UBS global wealth

management's Julie Fox on the pockets of opportunity. She is finding in the market Phil LeBeau on the sell off today in Boeing shares. Michael you know down for a bit but certainly not out. in the market. Phil LeBeau on the sell-off today in Boeing shares. Michael, you know, down for a bit, but certainly not out. Yeah, the market behavior itself this week has given you really no reason to be concerned.

We've had every reason to have a pretty sharp pullback, have some turbulence seasonally, technically, arguably with yields going up. But it's rotating instead of really pulling back at the index level, smothering volatility. You have the VIX under 13 right here. That being said, it feels like a much more even trade but it's rotating instead of really pulling back at the index level, smothering volatility. You have the VIX under 13 right here. That being said, it feels like a much more even trade, as I've been saying.

It's no longer that this is a massively hated or disbelieved market. I think it's a little more of a 50-50 shot in terms of the immediate term from here. So you have to be on the lookout for some of those things to take hold that might have made you anticipate a little bit of a pullback. Julie Fox, risk reward for stocks. The question we asked 55 minutes ago, I ask to you now, is it better or worse? Well, I still think that the risk reward dynamic in the stock market is not attractive. We see better opportunities in high quality bonds rather than stocks. And we've been talking about this all year, about how the market breadth is very narrow and it's just been tech leading the way. Only recently have you started to see that rally widening a bit. And so for investors who really

want to put their money to work in stocks, we'd focus on the areas of the markets that have not participated in this year's rally, areas like consumer staplesples industrials. And we also think that income generation is a really important component of a portfolio so. We also like dividend playing stocks with. You know sectors as well right now check is your least

favorite sector. Yes tech is our least favorite sector we still remain cautious on technology. Least preferred sector we see better opportunities in in industrials and consumer staples. But we also acknowledge that the long term use case for AI is very exciting. But you can't ignore the valuations and the valuations in the AI space. They've run up dramatically. So we wouldn't be chasing these companies. And you want to be really selective. I think for investors who are seeking exposure to the tech sector, you want to look at it areas like like software. And just because there's promising technology out there like I, it doesn't mean that investors should overpay. A to invest in the area. And so I think you have to really think about the markets, the right investment opportunities, that right risk reward lens right now. All right. I appreciate you being with us, Julie. Thank you.

Phil, to you, Boeing was a big drag on the Dow for much of the day today. And it has to do with the supplier, doesn't it? Spirit Aerosystems, Scott, that's what we're talking about. It supplies the fuselage for the 737 MAX. It halted production today. The union there, the machinist, 79% rejected a current contract offer. Strike is expected to potentially start on Saturday. The concern here is 737 MAX production. Remember, they're at 31 a month right now, expected to soon go up to 38 per month, eventually by 2025, go up to 50 per month. If they have an extended strike at Spirit, that calls into question whether

or not these production plans, at least the near-term ones, might have to be pushed out a little bit. For the time being, Boeing does have enough inventory of MAXs that they're not going to have to curtail their production plans. But this is one people are going to be watching carefully because you have an extended strike at Spirit, then you have an extended problem for Boeing. Scott, back to you. All right, Phil, thank you. We'll keep our eyes there down 3% as we turn to Mike Santoli. The two-minute warning is about to happen as we speak.

So what do we look for now as we come to the end of the week? Well, you look at the weakness in the bank stocks. I think you want to pay attention to whether, in fact, all you got was a reflex bounce in some of the neglected areas of the market to start off this month. That's one thing to, I think, be mindful of. I mentioned the yield story. I think in general, we're trying to digest exactly where we are. We haven't gotten a reprieve either from the idea that the Fed's going to remain vigilant or that the economy is set up to decelerate further. What we have had is a window where we didn't have to worry as much about that.

So I think we're still in a decently comfortable zone. The overall trend in the market is higher. That's what's changed, I think, which has built up a cushion, which means you can have a pullback, another 4% or 5%. It's still no big deal. And if growth is, is again going to be considered more scarce in terms of the overall economy, maybe that will just keep a bid in some of the more secular growers. And so it's hard to know what that means for the overall index path at

this point. I'm also watching to make sure sentiment doesn't get overexcited. I think you're on the verge of it, but not really on a wholesale basis. Some of the action in terms of options flow in the Teslas and the NVIDIAs, you know, that went right back to the crazy zone. But it hasn't broadened out to where it's where people are feeling thoroughly overconfident. Biggest change, I guess, in between now and let's say, you know, six, eight months ago, is this is one of the first times we've been able to definitively say, as you just did, that the trend is higher. That's what you said. The trend is higher. You've got a trend change in the market.

Yeah, so that's certainly at the index level. That's asserted itself. It gives you a little bit of comfort to say essentially that it's just not as fragile a setup, even if we've front-loaded a fair bit of the rewards and the relief of a Fed clause. All right, so the S&P 500 is going to knock a game today. Dow's going to fight it out until the last tick settles out. But nonetheless, it's like green

for the S&P and the NAS. We'll see you tomorrow.