Power Lunch - Dow drops, but on track for a winning holiday week 12/27/24

Episode Date: December 27, 2024

Stocks declined on Friday, led by technology names, but major indexes are still on track to post a positive holiday week. We’ll cover all of the angles for you. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Oh, this is me. Welcome to Power Lodge. I'm Kelly Evans. He's Steve Leasman, and you're back. Thank you for coming back today. Good to be here. Join us to close the week out. Stocks are lower, but they are off the worst levels of the day. The NASDAQ down about 1.6%. Of course, we're all wondering what happens to the Santa Claus rally. We've got to be up 1% for the last five days of this year, first couple of next year for that to happen.

Apple hitting a roadblock today on the weight of $4 trillion. The big tech components of the Dow are dragging on the index, and the leaders of the NASDAQ 100 are some names we don't often talk. They barely might even know they're in the NASDAQ 100. Starbucks, Pepsi, Kraft Heinz, Mondleys, you're getting that staples, kind of vibe. All this comes as the 10-year yield right now around 4.6% just off its highest level since May follows a surprise increase in wholesale inventories, which means people are buying more stuff. Yeah, I don't think that's really a market mover. I mean, you know, call me crazy. I think it's a

Friday, it's a thin trading session. We get a couple of data points. That one's not exactly top tier. And the week was not bad, right? We're looking at the week. Look at that. They're right there. That's the week for yields, which is kind of like along the line. But markets, I think, this week, they were. No, because we had the biggest Christmas Eve rally for the S&P since, I think, 1973 or something like that. So that gives us a nice kind of little margin of safety. When I looked at what was down today, all those things were way up, had been way up.

So it's not like that big a deal. Right. The biggest decliner is Tesla, things like that that had a strong, when Palantir, whose CEO was just named the CEO of the year, whose company shares, I mean, how many times over have they increased this year when that's one of your biggest decliners for virtually no reason. I think it just tells you this is a mark in a rotation. A lot of people I've been talking to say could be pensions, rebalancing, a lot of effects like that when you get into this calendar. I have another theory, by the way. About Palantir? No, about the Santa Claus

rally. Which is? I think it's going to be hard to have one without art. Without art cash. If art didn't sing, that's true. I'm not sure. Maybe it's just going to be delayed because of that, but that's true. Without art, it's going to be hard to have a Santa Claus. Right? And he didn't sing this year. It's true. Anyway, just. Yeah, well, and out of respect, then. then we don't even need it. Well, we do need it, but people are banking on it. I don't want to disappoint people, but I'm just saying that's a possible reason. It's a great point.

Let's begin with an issue that may be driving a wedge between Trump supporters this week, really the past 24 hours. Immigration, especially high-skilled immigration. Elon Musk and Vivek Ramaswamy. They're the co-heads of Doge, as it's called. They say Silicon Valley needs high-skilled immigrants. While the factions of the president-elects base are not so keen on whether we need more of that. Megan Casella is looking at the issue for us.

Megan, bring us up to speed. Kelly, that's exactly right. So this debate is over H-1B visas, which go to those highly skilled workers, as you said, in fields like math and engineering. And this all started with criticism from far-right activist, Laura Lumer. She called out Trump appointees

for advocating for raising the cap on H-1B visas. She was saying that stance was in opposition to Trump's America First agenda. The big tech wing of the party then pushed back on that. Elon Musk saying it comes down to competitiveness and that if you force the world's best talent to play for the other side, that America will lose. Other conservatives then chimed in against the tech crowd and Kulter saying that tech wants H-1B workers because they can't leave a company without losing that visa,

comparing them in that way to indentured servants. The one person not chiming in so far this week is Trump himself. Trump froze H-1B visa applications. When COVID hit in his first term, he tightened the application process a little bit as well. But this summer, he said that anyone who graduates from college in the U.S. should automatically get a green card suggesting he might back visa expansion. And we're not talking about a huge amount of immigration here. Only 85,000 H-1B visas issued each year. Amazon applied for more of them in 2024 than any other company. You can see here other big names among the top 20 or so users as well. Musk's Tesla, you can see they're applied for 742 of these this year. So tech CEOs clearly have a vested interest in this,

That's ignited this fight over a poor tenant of Trump's agenda and highlighting for the first time, really, some fissures or some cracks within the party on this. This is really quite amazing. Megan, I don't want to belittle the criticism here, but are these people aware of the demographics and the math around the demographics that show that we have, God, I can't remember the number of people 65 and older who are retiring every year or something like $4 million a year? Is that the number? I'm just wondering, and what is it that they think is going to solve the problem that we have in population in this country? You're exactly right, Steve. You and I both know, Jay Powell talks a lot about the importance of immigration to the economy, for example, because of all those retirees, the aging demographics in this country that we need people coming in because it would contribute to inflation if there was more of a push or more of a fight, more of a labor shortage. We saw a little preview of that over the past year or so.

So what they're talking about here is that American values, American workers should be able to take these jobs. What the evidence, though, shows is that more often these high-skilled workers, when they're coming in, are actually creating jobs. They're starting companies like Nvidia, like Tesla, for example, that are then creating jobs and hiring lots and lots of people. And so what the Ian Coulter and Laura Lumer crowd is worried about is taking jobs away from Americans. What the Elon Musk and the big tech crowd is saying is that we need these people here to create these. jobs to remain competitive so that we can then be even more productive. Just very quickly for Megan, it's fascinating. I forget, I believe it was Anne Coulter, who essentially gave the union line on why they're

against H-1B. This is also part of a bigger story, Megan, isn't it, that the Republican Party has been courting and winning union workers. And there they are with essentially a pro-union line when it comes to H-1B's immigration. Right. It's fascinating here how the politics can get so. scrambled at which wings of which party are starting to unite on this. This idea that we want American jobs is a very much a union line. It's something you can hear Joe Biden say sometimes.

That doesn't mean, though, I think is the argument that a lot of Democrats. And at this point, Elon Musk and Vivek Ramoswami, for example, are saying is that that doesn't have to come at the expense of these highly skilled workers. Musk went on Twitter or went on X, I should say, yesterday to try to double down and to say, to be clear, I'm just talking about the top 0.1% of workers because these highly skilled workers make up such a small amount of overall immigration. What we do have to watch is where Trump falls on this. Does he feel like he has to choose either Musk or his MAGA base of loyalists that many of them have been loyal to him for eight years now because of his immigration stances and his more hard-line stance?

Does he feel like he has to choose one or the other? Does he find a way down the middle and what happens to the economy amidst all of it? Megan, thanks very much. I'm going to stick with it, though. Let's bring in another Steve to this conversation. Yeah, just how important our skilled immigrants to H-1BVVs, to the U.S. economy. Let's ask Steve Oedland, president and CEO of the conference board and a CNBC contributor. Steve, thanks for joining us. I did a story about this, I don't know, maybe a year

ago, and I calculated the following, that if there was an Austrian clerk who, let's say he was educated in the United States, and he had a nascent theory about this thing called relativity, he would have a one in six chance of getting a visa to come to the country. So where are we now in terms of getting the best and the brightest into this country? Well, I think you have to go back to where you started this segment, which is let's look at the fundamentals. U.S. deaths, so the number of people dying in this country will soon outnumber the number of bursts. I think we're at that juncture right now. So the only way that you're going to grow population is through immigration.

You need population growth in order to grow consumption. in order to grow the base. Okay, then you go to workers. The number is 10,000 boomers, baby boomers retiring every single day. You're right, the number is 4 million per year. So then you layer on that skill shortages. We've got severe skill shortages in most of the STEM areas, trades, and so forth. You add all that up, and we need about 6 million people immigrating into this country every year

for the next 10 years or so. then you look at H-1B visas, which are the, you know, the source of skilled labor, and we're limiting that to 85,000 people. So a tiny fraction of the number that we need. So we need, in order to make the labor force as our top goal, we need to expand immigration. But Steve, I'll take the other side of some of this stuff here. One of the criticisms that was levied in the back and forth on the tweets was that, um, Musk is advertising for jobs that pay $70,000 a year. That's not the top 0.1%.

Those are jobs that you would think at 70,000 are not that highly skilled and could be filled by Americans. They can't be filled by Americans because they're not being filled by Americans. We've got these skill shortages. They can't fill these jobs. This isn't an either or. We need jobs at every single level. So yes, we do need some unskilled immigration,

but we need skilled immigration. I mean, it's all over the place, Steve, as you know, by looking at the numbers. So the system's broken. You know, they tried to fix this in Bush 43. They didn't get it done. You know, you had 9-11 intercede, you know, all of that. But multiple times over the years they've come at this. I think that they're conflating.

I think the political issues you talked about are conflating the unchecked southern border issues with the need for controlled immigration. We need immigration. It's really, really important. you have 20% of the students at most of our elite universities who come from international. And so we're educating the rest of the world, but we're not letting them stay here and deploy those degrees in our country when we need those skills. So it's clear we've got to get beyond the politics and we've got to get this fixed. Well, it's all politics. I was going to ask,

Steve, what are the proposals that are actually on the table as far as you know? And what might really happen on this? Well, first of all, you've got to get rid of this, you know, this stuff with the southern border, all that, because it's just confusing the whole thing. But CEOs are aligned on trying to staple a visa to every diploma of someone who is not a citizen. Stay here. Allowing people to self-nominate rather than having to go through the countries, allowing people to come in and bring investment capital in, you know, if they have it and so forth.

allowing not to have limits by country or by nationality or by gender or any other measure. Look at it in terms of who's coming here, what skill sets. Check it. I mean, do the background check. Make sure that we're not importing criminals, but get the skills that we need. Steve, we have to, I want to make one more point on this issue, which is that the two issues are very related. The aging of the population and the need for workers, where they dramatically intersect, in medical care workers.

And we have this aging population, which creates this tremendous need for medical care workers. So this immigration thing... I mean, they have to go... A lot of their nurses are trained in Africa. Right. And then come into the UK in order to work.

And it creates a dynamic where in Africa, they say, we need the nurses too. I mean, there is a global war going on here because this shortage is happening everywhere. So this immigration thing, it's nice for Tesla. It's nice for Amazon. It's life or death for the hospitals.

Wait, but it's a different issue. And whether or not the hospitals can even be open. Because they don't have the workers. Yes. So many of them? You know what I mean? But the argument over what should happen with the tech workers and what should happen

with the health care workers and see what would happen with the southern border? I mean, there's a lot of different things going on. Let's come back to that. Steve, stick around. I want to get your reaction to another important topic, which is very related. It's productivity because if we can be more productive, we don't need quite as many workers, though. It won't solve the whole problem.

We are experiencing a productivity boom. And it's a good thing, but it also presents Fed Chair J. Powell on the Fed with a great challenge for. 2025 and how to steer monetary policy. Productivity's average 2.6% over the past six quarters. But look at this, Kelly, a turnaround from negative numbers. Love it. After the pandemic, it averaged 1.5% from the great financial crisis to the pandemic. This is likely before any AI impact yet. Even a full or a half point extra productivity

growth, that is a big deal for how we live in the U.S. economy. But the Fed has to figure out, is it a short-term blip or a lasting episode? Will AI and Trump tax cuts and deregulation? Can they push up productivity? or could tariffs and deportations derail it? And of course, how does monetary policy react? Higher productivity means Powell can let the economy run somewhat hotter, like green spend in the 1990s, but it also could mean a higher terminal funds rate because demand for capital is higher when investments have high rates of return and productivity.

So, Steve, let me turn to you. How do you balance? I just want to show you the sources of productivity that are theorized right now. A lot of people change jobs in the pandemic, so we got the better people. people into the better jobs they're more suited for. And then, of course, we train some of the lot of people we hired. Work from home could be a source of productivity. Companies learn how to do more with less during the pandemic.

And some of this could be uncounted hours. That's very perilous for the Fed right there. If you have undocumented immigrants or work from home hours not being counted, then some of it is a statistical illusion. But, Steve, let me ask your opinion on this. First of all, how much do you believe in the productivity numbers these days? and how much could it help, say, offset some of the immigrant issues we have? Yeah, they're really squishy numbers.

You know, they went up, they went down, they've come back a little bit as you showed. And so it's all over the place. And so then you wonder, well, what's the long-term trend? If you look back to the 90s when we had productivity growth because of the whole PC revolution that added 100 basis points to our GDP every year during that period of time, It's been stagnant since then. So we needed to get back to some sort of breakthrough. Now, AI does that to some extent.

It's going to come. We all know it. But, you know, AI is just ones and zero. So it's another tech revolution that will allow people to get more productive. The problem right now, Steve, is that I think that this latest uptick is driven by people, by labor shortages, meaning that the people in place need to work longer. And so our studies show that stress and burnout are at record levels. And so the question is whether this is a sustainable level of productivity or whether it's a blift because of dire need in companies and it's just going to fall apart on us.

Nevertheless, it gets back to our original subject, which is we need more skilled workers, we need more consumers in this country in order to grow. You have to have your population growing on the country and the GDP isn't growing. all of that comes back to the same issues we were talking about. So now I'm going to make a lot of people angry, which is the following, which is that if you're going to have a large influx of immigrants into the country who are unskilled, the best thing you can do for your economy is to train them. Isn't that right, Steve? Well, the best thing to do is to make sure that they're documented.

Well, right, but I'm just saying if they come in and they're less productive, if you make them more productive, you raise aggregate productivity. That's just the math. but if they're still illegal and you can't hire them it doesn't solve anything so you have to start with there needs to be a process to fix to make them legal we can't hire in businesses we cannot hire undocumented workers legally now you know people do they happens in the construction trade it happens in

agriculture happens you know in restaurants and so because there's a dire need and people are kinda looking the other way but it's illegal i mean e-ferrified is checked and we have ice coming in and checking you know so you need to find a way to make these people legal, make them pay, you know, have them pay taxes and so forth. And then, as they say in the South, train them up and, you know, make sure that they're adding value on that skill set. I'm just glad that productivity is on the rebound.

Are you buying those numbers? I'm not sure. I mean, I've studied productivity long enough to know to be very wary. Exactly. So I'm glad you're highlighting it because then I have more confidence that maybe this is real. But here's the problem. It takes a long, long time to know if these things are real, but you have to act with monetary policy and so forth in the moment.

So I give Greenspan a lot of credit in the 90s. I'm not sure I would have had the confidence. Like he did say, yes, this is definitely happening, and policy is going to be such and such as a result. And now Powell and the Fed, I mean, they have to try to do the same thing, figure it out. It may be a watershed moment for the Powell tenure when he makes a call on what to do about this productivity. But wouldn't you say productivity is inherently disinflationary?

In the longer run, yes. In the long, well, think about it. Think about the headlines we read every day. A billion into AI. Right, right. And then plus the government borrowing all this money. That's a different story. The two combine, I think, where you have this upward drift to rates.

I don't think it's all the productivity numbers. But if you have more productive investments to invest in, you have a higher demand for capital, so it should essentially raise the neutral rate. Back in the 90s, you know, the 10-year yield went from like, I'm going to have numbers of 4.5 to 7 percent or something. something. It's interesting about that it wasn't a headwin for stocks. It rose in tandem. It was a reflection of what you're talking about. So what's interesting is the great call the Greenspan made in 96 was to keep rates the same when other people were arguing to raise them

because he said, no, I've got productivity out there. It's going to take care of the inflation problem. The footnote to that is he held them constant at five and a half percent. So it was a percentage point higher. Exactly than where we are now. We have to go, unfortunately. Steve, thank you for joining us today. President and CEO of the Conference Board. Great conversation, Steve. And stocks are selling off at this hour. Big tech, small caps are getting the worst of it. After the break, we'll get a check on bond yields as well following that report, signaling a surprise uptick in consumer demand.

More on Power Lunch right after this. Welcome back to Power Lunch. A down day for the markets, although it's less ugly than it was this morning. The NASDAQ's down about 1.6 percent, S&P 1.1%, 300 points lower on the Dow. And all the stuff that was winning this year, that's underperforming and vice versa. So that kind of gives you the mood and flavor of things. What about over in the bond market? Well, yields were lower and now they're a little higher.

Maybe it was this morning's economic data. Rick Santelli is here to enlighten us. Hi, Rick. Well, I'll tell you what, Kelly. I doubt if this morning's data made a huge difference, but it was light trading and the trade deficit was bigger than expected. Jose Limitories reversed from positive to negative. And all of that isn't necessarily good.

But the biggest issue of all is what's, going on with the yield curve. Now if you look at a two-year year to date, we settled last year in a two-year at four and a quarter, which means it's up six basis points, nearly unchanged. If you look at a 10-year, it was at 388 the end of last year. It's now 461. It's up 73 basis points. And of course, 73 minus six. That means the spread, Tuesday, tens, is 66 basis points steeper, and that makes sense, because as you look at the chart, we're at minus 37 at the end of last year, we're basically hovering 2930 right now. That is a huge move, and it underscores the dynamic.

Most traders were paying attention to all year. They thought debt and issuance would push up rates, but they didn't want to pick a certain part of the curve, so they did the spread. And the spread really was quite profitable in the steepness. That's a lot of basis points. But there's more going on here. Everybody else in the world is not doing as well as us. Maybe we have still a lot of money slashing in the economy.

But the two biggest export economies we think of being in the U.S. are China and Japan. Now look at the dollar versus the one. That's dollar terms. Dollars basically at a 13-month high, very near, which means the currency for China is at a 13-month low. Look at the dollar yen. The yen right now is down or the dollar is up, 12% on the year, But maybe more importantly, this chart goes back 20 years.

And what's interesting here is how much lower, how much lower the dollar was pre-COVID. This is a huge economy. And considering that Germany slowed down so much, the yen being this week, is going to be the benefit to the Japanese economy. However, if we throw tariffs into the mix, it might make the dollar even stronger. Foreign exchange is going to be a big area to pay attention to in 2025. Telly in the gang, back to you. All right, Rick, thank you. Rick Santelli.

Sicking with the bond market, our next guest says the yield curve breaking through a key resistance level could be good news for growth names next year. We're going to explore that market and the market navigator next. Welcome back. We just heard from Rick a little bit about bond yields. Let's dig in on treasuries and the yield curve. Short-term rates have been somewhat stable, but long-term rates rising. What does it mean? And is the market misreading the signs?

My next guest says, yeah, that might be the case. Joining us as Todd Gordon, the founder of Inside Edge Capital. Todd, your trading rates today, do tell. Oh, hey, Kelly, happy Friday. No, I was love positioning the portfolios based on what the macro flow intermarket relationships are telling us. And, you know, I think the markets perhaps are reading into it incorrectly when you look at the 10-year yield moving up, right?

We're breaking up through 4-6 right now. We have some resistance from April about 4-7. And as Rick said before, what's happening is those long-term rates, 10-year, 30-year yield are moving up. But the short end is anchored as the Fed has maybe a 50-50 chance of cutting once more in May. And a lot of people, I think, on its face are reading it as inflationary, slowdown, protectionist tariffs, reason to sell stocks. But it's getting the yield curve out of inversion, normalizing it on the way up. And I think it's actually leading into some nice rotation into the growth trade. I see. So you're not trading rates. You're looking at some of these yield curve moves and thinking you want to trade growth stocks?

Absolutely. And I sent a chart along here. If you actually look at, let's overlay, this is kind of weird, Kelly, the 10-year yield, this is the nominal 10-year yield over the value growth ratio. I'm using Vanguard's VUG, VTV ratio. And actually, if you look at yields dropping, this is like over the last 20 years, you're going to see a very good correlation of value. value growth selling off along with yields. The 10-year yield has started to come back, moving up, as we've rotated post-COVID into growth stocks. So growth right now continues to outperform. How much higher can that 10-year yield go feeding that growth value relationship? We shall see. I have a hard time seeing the 10-year yield too much above 5%. I'd like to see the 10-year-year and 30-year kind of chill out a little bit. And if we can exist with 30, 40 basis points of 10%, to curve sort of normalization, I think the growth trade is going to continue to be able to move in. And what Rick said, really important. If you want to get into the minutia of FX, the dollar

is moving up. Yeah, but it's being led by dollar yen along with the rest of the carry trade, non-dollar carry trade. Global risk guys are putting the carry trade back on. So I'm bullish next year. And a lot of times, you know, people say they use the carry trade to buy or to chase those growth stock, so maybe a sign that people are piling into that trade and creating more momentum. Would you, Todd, it's funny, because usually when people talk about the yield curve normalizing, they say, and so I like the banks, and it almost makes the case first, and so I like, you know, more traditional areas of value. Are you going to kind of change your strategy if the curve changes, or would you stick

with growth stocks next year, almost regardless? No, I think, I really think the 47, 48, 49 is fine, and as long as the two, year yield with Tracks Fed Fund stays at about 4.3, as they said, we'll have 40, 50, maybe 50, 60 basis points. But if we start to get too steep, what's going to happen, either short-term rates drop too much or long-term rates go up too much? That could be a problem. Kelly, I think the best case to remain bullish on growth in 2025 is hopefully the fixed income market just go sideways. And we don't really have to talk about it anymore because I feel like post-pandemic, we've all become yield curve and macro experts who invest in the stock market. So I think best case,

maybe it goes sideways and we can focus on good fundamentals and stocks that are leading the AI revolution. All right. Todd, thanks. Appreciate that perspective. That kind of unique take on it. Good to see you today. Todd Gordon. Steve? All right, after the break, another stock getting a huge boost this year by buying Bitcoin. There's not a decimal place wrong in that. That's 2,348%. We're going to reveal the name in today's power check and how much Kelly Evans actually owns after this break. Welcome back. Time for a quick power. check shares of Ametis and United Health entering into a new waiver agreement, extending the

deadline for closing to a $3.3 billion merger. The new deadline is 10 days after a final court decision is issued in the lawsuit or December 31st, 2025, whichever is earlier. And Medici's higher on the news. We should check on UNH, but obviously that's been the stock that's done terribly over the past month or so. And there's going to be a ton of regulatory scrutiny on them if they look to do any other kinds of combinations or so forth. into 2025, obviously. Meanwhile, Netflix is saying in a statement that nearly 65 million combined viewers watched the streaming giants NFL coverage, set some records, 65 million. Good news for Netflix. The stock, though, is down about 2% today, selling all the winners today, Steve.

Okay, here's the answer. KULR technology lower today after climbing 40% Thursday. The space technology company announcing it bought 217.18 Bitcoin worth about $21 million. It's now about $21 million. It's now about a billion dollar company. To be clear, I do not own nor would buy shares of KULR or any company trying to. I mean, we can't buy them. But, you know, in trying to engage in this kind of silly strategy. If they are, if corporate America for mega cap, you want to put a couple of Bitcoin on your balance sheet, fine. Maybe that go that we go that route, not kind of these moonshots, if I can borrow. So you think all this ends badly? You know, it's just, we saw this before years ago. Remember all like the, the lemonade companies and this and that that they were

chasing crypto? I mean, it's. not, I want to invest in real companies, and whether they want to put some of their cash in Bitcoin, fine, do whatever you want. Real companies. I don't know enough about KULR, but I know when the market cap does what it does because they're buying Bitcoin, I'm not interested. You want to buy Bitcoin, just buy Bitcoin. You know what I'm saying? Right. Anyway, quantum computing stocks have also been on a role. Starting back in early December, when Alphabet announced that new quantum chip, they're pulling back a bit today, but not going to make much of a dent. Raghetti computing is still up 1,600 percent this year. Quantum computing

up 1,900 percent, D-Wave, up nearly 1,000 percent. The chips they're coming up. This is so early innings, so early stage. Be very, very careful in this space. I was going to make a quantum joke that their stock price can be in two places at once. I was going to say, I don't even know any quantum jokes, but I guess I kind of get that. That's maybe a quantum joke. Finally, a new screener of CNBC Pro laying out some names that could struggle to find gains next year. Now, not all these names are performing poorly. The key is that Wall Street analysts don't see much upside.

The list includes Apple, American Express, Boeing, Caterpillar, and Goldman Sachs. That is your power check. ABCG. Let's get over to Kate Rooney now for a CNBC news update. Hi, Kate. Hi there, Kelly. The United States saw an 18% increase in homelessness this year. That's according to new data from the Department of Housing and Urban Development.

Officials say more than 770,000 people were counted as homeless. The agency reports that the rise was driven mostly by a lack of affordable housing, devastating natural disasters and a surge of migrants in several parts of the country. Meanwhile, customs agents seized more than 22,000 counterfeit Pennsylvania vehicle inspection stickers. The agency reported the stickers were shipped from Israel and were heading to an address in Philadelphia. Officials did not say who sent those tickets or who was to receive them. So far, no arrests have been made. And finally, the Park City Ski Patrol are officially on strike after months of negotiations with Park City's mountain parent company. That's Vail Resorts. The union says

about 200 patrollers are hitting the picket lines. Talks broke down between the union and Vail Resorts over wages and benefits. It's unclear how long that strike will last. Busy holiday ski season, Kelly, so one to watch. Hopping up in a place we don't usually expect. Yeah. Kate, thank you. On a down day for the markets, our trader has some top picks to start the new year on the right foot. Get out the shopping list, right? Isn't that what you want? On a down day. We'll see when Power Lunch returns. Welcome back to Power Lunch. Tough session here. On a Friday, the major averages off session lows, but down across the board, especially big tech and small caps. Those are the biggest decliners. Despite that, the Dow S&P NASDAQ, trying for a

weekly gain. We had a big Christmas Eve rally, hoping the year in Santa Claus rally also remains marginally intact. Our next guest is optimistic for the new year. You've got to be kind of your stock investor. Jeremy Bryant is portfolio manager at Gradient Investments. And And now, okay, let's just see, this market out. I don't know if this was three-stock lunch, Jeremy, so I got to get my segment straight. What would your three-stock lunch be comprised of? What's on the shopping list on a day like this? Yeah, so we're really looking at things that, you know, there's a lot of stuff in the markets with valuations rising here that have gone from 20 times earnings to 30, 40, 50 times earnings, right?

That's the stuff we're trying to avoid here a little bit for a three-stock lunch. We're trying to find the stuff that can still grow, but that valuations really haven't stretched. that. I'd start with Alphabet as the first one in that contender list is it's going to expect it to grow it again in the double digits for the next couple of years. And despite almost a 40% return this year, it's still only trading it about 23 times earnings. So it's right in line with the market because of all the regulatory stuff and the other overhangs that are potentials on the stock. We see it as more of an opportunity to continue to buy a stock that's relatively cheap. It's amazing that you can have a company come out with a quantum, you know, the quantum companies

are up 1,000 percent in Alphabet's trading at 23 times earnings. And they have Waymo and they have Gemini. I mean, it's so interesting how it's not a 30 or a 40 multiple kind of company. Exactly right. And the other one that I would say is YouTube, right? If you're just looking at saying media growth, where is media growth going? Well, if you're talking about podcasts, you're talking about those things, everybody's going towards YouTube. So those are the kinds of things just in and of itself. You could make an argument with Alphabet that even if it it gets broken up, the sum of the pieces might be more valuable than it's currently at right now. So I think that's what's really interesting about this company.

22 times. Real quickly, Jeremy, about today, and then we'll move on to some of the other things we want to talk about. But, you know, do you make much of the fact that we're having kind of a reversal day where all the stuff that won this year is down? I mean, is that just your end rebalancing? Is there something more to it? I think it's like four people are trading today. I really don't think that there's a lot. And they all have that. Especially, like you said, the pre-Christmas rally was one of the things. We're just kind of offsetting those things. I just don't think that there's a lot of activity

and a lot of things you can take from these movements. You know, these year-end movements can get a little funky. So we don't tend to put a lot of stock in it. But if a stock gets overdone based upon these year-end movements, we'll take advantage of that for sure. Jeremy, I have a question here. When I just want to read this one, when Kelly led into this segment, she talked about

across the board, big tech, small-cap stocks. I have some fixed income in my portfolio. And yet when I look on the stock side of my portfolio, I feel like they're affected by interest rates too. I feel like I have interest rate exposure in the stock market and in the bond market. I don't want that much exposure. Is there any way people are getting around this now?

Especially like if you're in the small caps, yields go up. Your small caps go down. There's like too much interest rate exposure. Yeah, I think the central theme of that one would be, You've seen what's worked when interest rates are rising, right? People flock back into tech because they don't care. Right. They can do whatever. They don't need to go out and raise debt. They don't need high cap backs. They can do whatever they want to do because they have massive cash flow generation. So I think that's where people circle back into when interest rates get a little frothy, if you will. So that side, I think that's what we've seen working. And that's what people's playbook has been. at these levels, I think it's worth taking a look at some of the stuff that's been more damaged by that interest rate trend,

rather than flocking more into the ones that have benefited from it. What's an example of that, Jeremy? You know, companies like waste companies, right, is your industrial companies. Company like McDonald's is another one that just kind of hasn't done much. Now, I don't think that's affected much by interest rates. But if you look at like a waste management or waste connections, these kind of companies have come down. I don't know, we're in December. Now, there might be some economic activity slowing in there,

but I think part of that is dividend, recurring, interest rate kind of stuff can affect them a little bit more. But in my opinion, that's becoming more opportunistic as a result of those, you know, falling a little bit. What else? You know, the other one that is a little controversial right now, but we still like it a lot is United Health Care. We think United Health Care is an opportunity at this point right now. At the end of the day, it's going to be very difficult to displace these companies. There could be some adjustments that come as a result of a new administration coming in, but I doubt that single payer health care is on that docket.

So from our side, we think the public insurance or the private insurance companies are still going to be very valuable. They're still going to grow 8 to 10 percent per year. And you now have, based upon this recent reduction in United Health Care, a really good opportunity to enter a really good company at a cheaper price. Jeremy, what might happen on the policy front that would actually kind of make you say, okay, wait a minute, this gets really to the heart of this business model. And I ask as someone who's kind of hoping they can come up with something to get to the heart of this. I mean, it's the billing, it's the whole incentive structure in health care, high levels of regulation,

so on and so forth. I mean, is there anything in the works on that front, you think? Not, you know, here's the thing is that there hasn't been a magic fix for health insurance in 25 years, right? from a perspective of just getting, you know, cheaper care to the consumer that, you know, avoids middlemen and all that stuff. We've been talking about that for a very long period of time. I would love to see some fixes, too. You know, the health care system, when we're spending the most and not getting the most optimal care, that seems to be a problematic system. By the way, if they do make them divest the PBMs, would you be more bearish on the stock or not care so much?

Slightly more bearish, but, you know, they just basically tabled that for this, you know, to get the budget line across. So from that side, I mean, there doesn't seemably a lot of what I would call forthrightness and aggressiveness about taking care of those types of things, especially since the new administration coming and probably has other incentives and things that they're gonna concentrate on at the outset.

So this is a tough problem to tackle. I don't, you know, our elected leaders can try to figure out that problem, but until then, I think the insurers play an essential role within that space. And I think that right now, especially, you can buy them at a bargain opportunity. Jeremy, Brian, thanks for joining us. Appreciate your time.

Thank you. In conversation, coming up, we're going to drill down on some top picks for 2025 in a special three stock ones, including an under-the-radar cloud player. I like that under-the-radar cloud player, which is up 18% in the past six months. We're going to reveal the name when Power Lunch returns. All will be clear. Welcome back to Power Lunch. Time for today's three.

Restock lunch. We want to help you start this new year with some gains. So we asked our trader for his top picks in the new year here with our trades as Quint Tatro. He's founder and president of Jewel Financial. Your first pick for 2025 is lower today, but on pace to close out its best months is May 2020. And it's fifth positive year in six. Quint, go ahead. Yeah, Steve, thanks for having me. First of all, we don't need to rehash what Jeremy just did a really nice job discussing. I mean, Alphabet is trading 22, 23. three times earnings. It's relatively cheap for this name. Forty-four billion in cash, very little debt, all the ancillary components, even with a breakup risk. It's just a phenomenal mega-cap name that really hasn't received. Some of the enthusiasm that other names have, it's definitely our number one mega-cap tech stock going into 2025. Let me just push on that quint for a second because I was kind of like, you know, singing its praises five minutes ago. What if they have to sell Chrome, or something where shareholders couldn't capture a spin-out value or something like that.

Yeah, I would find it hard to imagine us as shareholders not being able to capture any value. I mean, if it's sold, it's sold, but we would benefit from that. But again, it's not like we're going to stop using Chrome. I think a lot of people misinterpret some of these headwinds and these risks. I mean, again, even if there's a breakup of alphabet and we have a sum of the parts, our work suggests that ultimately after the shade, which would certainly ensue, and I think provide an incredible buying opportunity, some of the parts are extremely more valuable than as a whole right now.

So I'm not scared of that at all. And if we saw, you know, like, knee-jerk reaction on that news, which would probably be more than knee-jerk, it'd probably last a while. We'd accumulate the shares and be glad to own, you know, these names in parts. And, again, if they sell Chrome, I mean, we'll benefit from that as shareholders. Sounds like if regulators really want to punish the company, they should just let it stay as is traded 22 times and, you know, I don't want to call it a value trap. Oh, you're right.

I mean, you're right. That's what's keeping a lot of people away from really bidding up the name here and keeping a kind of a cap on it is just that. So in a way, you're right. All right. Let's move on to Snowflake, which that was the mystery chart cloud name we were referencing, which is down for the year. Although it's had a nice finish here up 18% the past six months.

Why is this one on your list? Yeah, because it's pulled back after that incredible. incredible earnings announcement. I mean, for people that are not familiar with this stock, they should dig into it. They help large companies. A lot of the Fortune 500 manage and handle their big data on cloud servers. And their partnership with Anthropic, large language model company is going to help them really dive into the AI. They're blowing numbers out. On the surface, the stock does not look cheap. But this is a growth name that's going to put up, we think, massive numbers into 2025. And it's going to, in hindsight, look really,

really inexpensive. The pullback here is a gift, in our opinion, on Snowflake. All right. Final pick is Occidental Petroleum riding a four-day winning streak, but down 19% in 2024, second negative year in a row. Been dead money in the oil space, Clint. What are you thinking here? Listen, I'm going to follow the Oracle on this one. I mean, I'm going to assume he has a plan, and why not just hitch my wagon to his? I mean, it's 5%, almost 5% now, Berkshire. I like oil and gas as a contrarian play going into 2025, despite what we think could be lower oil prices. We do think that deregulation gives the profitability possibilities upside here for the names. Also, we do think there's just going to be kind of a tailwind with the new administration. So I'm going to go with Oracle,

Warren, and Buy Occidental right alongside of him, even at a better price than he has for Berkshire. You don't think he's just going to dump it like IBM? I don't. I don't see the same. I saw a lot of challenges. I did not follow him into IBM due to shareholder repurchasing there that I think inflated the EPS. I stayed away from that one. I was glad to. I'm now an owner of it. Fast forward today. But I don't think I could actually, I mean, this is total speculation. But in my kind of notes, I've said, hey, I could see him buying this whole company. All right. Now, with a vision of a reed in his mouth, tumbleweed going across the planet, we'll say goodbye to Quinn with a vision of him hitching his wagon to the Oracle. Thank you, Quinn.

Be right back. Welcome back. We've really cut our losses here. The Dow was down 564 points at session lows. And Steve, we're now only down 267. Yeah, pretty nice to come back there. At least a better way to end the week than we had. Just a reminder for people, not much happening next week. You have the ISM manufacturing on Friday, but not the jobs report. The job report is January 10th. So ISM manufacturing usually comes out on the first, but it'll be the second. It'll be the third, actually. Good. Yeah, that'll be the third. Not much data, probably not much fetched. next week. So you can just enjoy the ride, I guess it's the best way. No, we don't like this. We want all the data up and down. But things are calm when the Fed's not talking when the data's

not coming out. Probably true. Have a nice weekend. Have a great holiday. Thank you. It's been a pleasure having you. I think you turned the market around. I would not take credit for that. You got to get rid of those bonds and just start chasing the Lestdkeye. With those companies that buy Bitcoin. Thanks. Thanks. Great advice, Kelly. Thanks for watching Power Lunch, everybody. Closing bell starts right now.