Power Lunch - Losing Steam?, Biden On The Record 11/16/23

Episode Date: November 16, 2023

Markets are pulling back today, as the November rally takes a breather. Walmart is dragging on the Dow after some disappointing results. But November has still been a great month for stocks overall, especially the Nasdaq, which is up 9%. We’ll discuss.Plus, we’re awaiting remarks from President Biden at the APEC CEO Summit in San Francisco, following his meeting with China’s President Xi. We’ll take you there live when it happens. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody, alongside Kelly Evan's. I'm Tyler Matheson. Glad you could join us on this Thursday. Market's pulling back today. The November rally taking a little bit of a breather. Walmart dragging on the Dow after its results. We'll have more on that coming up. But November has still been a very, very good month for the markets, especially the NASDAQ. Kelly, up 9%. Incredible run. And we are awaiting President Biden, who will be speaking any moment now at the Apex Summit out in San Francisco. It comes, of course, after his meeting with China. China's president Xi. Let's bring in our Aymond javers now for more on what to expect, Damon. Well, one thing we're wondering what to expect is exactly when these remarks will kick off. We don't have any guidance on timing just now, but you can see that the lectern is set up with an impressive backdrop there here in San Francisco, awfully colorful. And we're going to wait and see what the president has to say. Of course, this is his opportunity to wrap up this summit with Xi Jinping and take a bit of a victory lap, as we're saying, because this is an administration

that views this week as very much a success in terms of lowering tensions with China, getting that military-to-military dialogue reestablished, and what they view as a big win on fentanyl also. A senior administration official briefing reporters yesterday said that the agreement on fentanyl is important and the Chinese have already begun to crack down on certain companies. The United States provided the Chinese government with the names of individual companies that are making precursor chemicals to fentanyl. the Chinese government took action on those within the past week. So the administration feeling

bullish on that. And then, of course, there's the market implications here because these geopolitical tensions do seem to be receding a couple of ticks in the wake of some positive rhetoric by both Joe Biden and Xi Jinping here in San Francisco this week. So all of that, I think, is on the president's plate as he gets ready to talk to the press here in San Francisco. When exactly he'll do that? We don't know. We're going to wait and see with everybody else. How did the business dinner go last night, Amen? It was fascinating, Tyler. I mean, I was in the room as Xi Jinping was honored by America's best and brightest CEOs.

I mean, some of the biggest names in finance. You know, Larry Fink was there. Tim Cook was there from Apple. Albert Bula from Pfizer. I mean, just an incredible list of CEOs and executives there at this dinner honoring Xi Jinping last night. And she spoke for about half an hour, I would say, to the room. and made some very friendly remarks, didn't really speak specifically to the business community, more broadly to America and his, as he called it, his friends in the United States, saying

that he wants more travel back and forth. He wants good relations back and forth with the two countries and saying that he feels that the United States and China have an obligation to jointly lead the world because of their size as major countries and their dominance. It was a speech, Tyler, that I thought, revealed that Xi Jinping sees himself and sees the nation of China as on a par with the United States now in terms of geopolitics and sort of taking China's rightful place as one of two dominant superpowers in the world. How would you characterize the reception he received? Was it effusive? Was it muted? What was it?

No. The CEOs gave Xi Jinping a standing ovation in the room last night. was striking, to be sitting in a ballroom with some of the most prominent and powerful capitalists in the world as they gave a standing ovation to the leader of the Chinese Communist Party. It's just not something that you see all that often. And to a person that the President of the United States has described yesterday as a dictator. Right. Yeah, absolutely. And every one of these companies has enormous exposure to the Chinese market, enormous dependence in many cases on manufacturing access to raw materials in China,

deep business relations, deep histories in China, and they're just not in a position to snub Xi Jinping when he comes to town. Yeah. Right. And they didn't. The interesting one was Elon Musk, who showed up for the VIP reception before the dinner. And I don't know if he had a handshake with Xi Jinping at that event or not, but I do know he was in the room where Xi Jinping was scheduled to be.

But then he didn't come to the actual dinner, didn't sit at the head table. He left the building before the dinner. even began. So the rest of the CEOs, though, including the most prominent ones sitting at the head table, sat through Xi Jinping's remarks and gave him a standing ovation at the end, Tyler. All right, Amon Javrish, thank you very much. We'll be waiting to hear more from you. As we await President Biden's remarks from the APEC summit, let's get to our panel. Bill Lee as chief economist at the Milken Institute. Join us in the last hour. Michelle Caruso-Cabrera, a CNBC contributor, joins us from the APEC summit in San Francisco. Welcome to both of you.

Michelle, let me begin with you. How much, if at all, have U.S.-China relations just thawed? Oh, I think this was definitely an improvement that we've seen in the last 24 hours. And by the way, I'm outside the hall where President Biden is going to speak in just a few minutes. The sweep happened by the Secret Service, and they're still letting people in. So presumably he's going to start soon. But people are very eager to hear what he had to say. I think Eamon's right.

Definitely a victory lap when it comes to what is core. to U.S. national interests, which is de-escalating the situation and avoiding a potential war or conflict with China. And we took a step toward that instead of a step away from that based on what we saw yesterday, the relationship between the two leaders. I would say the business relationship, while they gave him a standing ovation last night and there's an improvement when it comes to international flights, he still didn't say a lot of things that probably would have been helpful. Like, we're going to stop arresting people. We're not going to pit... members of the Chinese Communist Party in your management structure anymore. We're not going to

make it illegal for you to send basic financial information from your subsidiary out of the country. Those things didn't happen. And so I'm not convinced that this big decline that we've seen in foreign investment in China in the last quarter isn't going to continue because I'm not sure there was enough said for the business community. Bill, let me ask a similar question, get you to react to what Michelle just said. The business leaders did give him a standing ovation. if only to be polite. But Michelle points to a couple of key areas where things were left unsaid. Michelle is absolutely spot on.

The easy for Biden were already done and pre-packaged by the staff work ahead of the meeting. So we already knew those were already done deal. The key for President Xi Jinping was to go on a charm offensive and convince investors that China continues to be investable. and I don't think he did that last night. I mean, yes, you had a huge round of standing applause from everybody there because everybody was applauding their book. They were already there. They need to have good relations with the administration.

And so guess what? They were very friendly to Chief Dupin. What we don't know is whether these guys are going to invest new money into China, whether other companies and other investors will think of China as a place to go for sourcing their materials or for putting factories in or rather to go to the rest of Asia. Right now, the most investors that I talk to are saying, I need to look elsewhere because it's almost impossible to do business as usual, due diligence, get information, get the kind of stuff we need to make assessments about economic opportunities in China.

That said, Bill, most companies also have FOMO. And if it looks like relations with China are thawing and people are going to be investing there again, you know, Starbucks continues to invest at open 9,000 stores. I mean, this feels like a moment that will give them cover for the duration of the time. this administration, barring a significant change, to now go jump back into China and hope that maybe as growth turns, they can capture some alpha, so to speak, at the time when the U.S. may also be slowing. I sense as though that's the mood right now. Well, it's a commentary I think I've heard is that Xi Jinping is not a reliable boyfriend. He has changed his mind before about the role of private companies in China and the Chinese economy.

and now that he's saying that, well, I really wasn't changing my mind. I really welcomed foreign companies. That kind of head fake is something where fear of missing out has to be cautioned by risk management. And right now the risk of Xi Jinping changing his mind again is very high. Michelle, let me turn back to one of the areas. It was sort of the de-conflicting of the relationship. And a lot of that hinged on military-to-military communications being re-established. Walk us through what exactly that means.

It's not just a red phone on the president's desk and on she's desk. No, that's absolutely right. President Biden made a point that there was going to be direct communication between him and Xi Jinping, especially when it comes to military situations. But when you have two potential adversaries working in the same theater, there are potentials for accidents, as the president said last night during his. his remarks. And there are supposed to be protocols in place so that when accidents happen, they don't get misunderstood and then escalate to full-on war. And the way you do that is you have

military to military protocols, which during the era of the Soviet Union were very, very thick and established. There were huge manuals about what you would do if something were to happen. So that way, a commander in the field would talk to another commander in the field and it would go up the chain so by the time the two presidents talked to each other, they know. or the two leaders talk to each other, they know what they are talking about and what their answer is going to be. So what we have to wait and see is, okay, they've agreed to resume military communications a month from now, six months from now, we have to ask, okay, are the protocols really in place so that when something inevitably happens, perhaps in the South China sees, that there is a way to de-escalate what could be a mistake, if indeed it is a mistake.

Yeah, it's really a question of how institutionalized do those. communication lines become, I suppose. Bill, your reaction on that and anything else that comes to mind in light of these bilateral. The geopolitical risks that China has introduced into the South China Sea is really enormous. Their activity there is all pushing toward the direction that they are going to be big players in the geopolitical world. Now, President Xi has said, yes, We want to avoid accidents, but do we have established a communications link between the head of defense and head of the military in China? No, right? Yes, operational, the communication is important, but we need to get it up to the policy level.

The other thing I think we have to remember is the key for a lot of our audience and a lot of people around the world is what's the role of China's economy in the world? It's the second large economy, but the dual circulation strategy they put in place focus on a lot of domestic activities and the rest of the world was essentially shut it aside. He's now turned around and said, well, you're misinterpreted what I said. That kind of flip-flopping is something that I think the Shi administration is going to have to do a lot more footwork to convince everyone that they are serious about inviting foreigners in and allowing them full access information to do due diligence. Let me ask, squeeze in one more quick question, Michelle. How much do we know about how much the China-Russia relationship was discussed, if at all?

That question came up during the press conference yesterday, but we didn't get a lot of detail. But, you know, it's interesting. Ian Bremmer was speaking earlier this morning, and he made the point that there's a lot of discussion about this access, what's being called this access of evil between Iran, China, and Russia. And he divides the world a little differently. He thinks Iran and Russia very much want chaos, but it's very much in the interest. of the U.S. and China in particular, they do not want chaos. They want stability. So, and we have

seen, we have seen, let's talk about this event went very well yesterday between President Biden and Xi Jinping. If you go back more than a year ago to when Putin met with Xi in one of the stands, that went very poorly. Putin had to basically apologize to Xi about what he had done in Ukraine, right? So there is behind closed doors. People have said that Xi Jinping is very unhappy, unhappy with Putin and what he did with Ukraine. But, you know, it's his guy and he's got to stand by him. But that's not necessarily a good relationship. It may be a relationship of convenience. Very interesting. Michelle, thank you. Great to see you. Michelle Caruso-Cabrera. Bill Lee, same to you. We really appreciate you. And as soon as President Biden begins, we'll bring that to you.

We're still awaiting. It should be any moment now. In the meantime, hello to hybrids and goodbye to EVs. More and more consumers seem to be embracing the hybrid option over fully electric cars, and the struggling EV infrastructure may have something to do with it. We'll discuss that next. Plus, Lux in flux shares of Burberry down more than 10% now after the British luxury fashion retailer warned that a global slowdown in spending will hurt its guidance. We'll talk more about that and retail earnings in general when PowerLUD returns. Welcome back to Power Lunch. The auto industry clearing one major hurdle with the resolution of the labor strikes narrowly, by the way today, that UAW contract was approved only by about 54% of members.

You can see shares of the big three are down 2%. And another potentially bigger problem looms now, questionable demand for electric vehicles. Hybrids continue to outsell pure EVs in the U.S. And yesterday, Toyota announced its best-selling Camry will now be hybrid only, as Toyota has stuck with a hybrid approach. But Hyundai is charging ahead with its EV ambitions, unveiling a new model. And we learned a short time ago, the company will be the debut seller of cars on Amazon. Joining us now is Jose Munoz, Hyundai Motors North America CEO, with our very own Philo. Welcome to both of you.

Phil, kick things off for us. Thank you, Kelly. Jose, Kelly, set it up there. The news that just came out within the last couple of hours, your partnership with Amazon. Explain how this will work if I am a potential Amazon customer, and I'm a potential Amazon customer, and I'm looking to buy a particular vehicle. How will this work with Amazon? Well, thank you, Kelly.

Thank you, Phil, for having me. Well, I'm very proud that we announced earlier this morning here in the L.A. show this strategic partnership with Amazon, which is comprised of three pillars. The first pillar, which to me is the most important, is about the possibility for the consumers to buy our Hyundai products online. Not many people know that we have started this partnership back in 2000. by having a showroom experience.

And then we are very pleased with the evolution. So we decided to be able to go through the end-to-end experience. So basically the consumer can get into the Amazon environment. They can choose the vehicle they would like to shop. They can choose the configuration, you know, the color. And actually the dealer they would like to buy from, And they can check also, obviously, the price, the incentive, and everything else. They can also finance the vehicle online, and even when the program is fully developed,

they'll be able to trade in their current vehicle or even by a CPO. So we announced this program today. We're going to start a pilot phase in the first quarter of 2024, and we will deploy it through the entire portfolio, starting in the second half of 2024. This is just one pillar. The second pillar is about the integration of Alexa in our vehicles starting 2025. This is also a fantastic news for our consumers that they already know how Alexa works and will be able to connect from their car, wireless voice recognition system with their smartphone

or with their homes to operate their home from the car. We have jet a third one, which is the... U.S. Jose, I hate to interrupt you, but we're getting the two-minute warning for President Biden. So I want to get this one question in here regarding EV demand. You unveiled the new Ionic 5N, a sporty version of your all-electric ionic 5. Are you seeing demand for EVs slowing, not growing as quickly as it was before? What do you see in the market right now?

Well, in our case, we continue to increase our sales of EVs dramatically. We're having double sales of EV every month a year over year. It is true that we don't see the industry growing as fast as we originally thought it would be. We remain number two in the market, as you can see in this table, despite the fact that we don't qualify for IRA. So we are positive, but it's true the demand is not as high as expected. We are also seeing a fantastic growth of our hybrids, and that's why, for example, we just announced the new Santa Fe fifth generation,

which has also a hybrid power train. So on the all electrified vehicles, we see 50% growth. On the EV, we see 100% growth. So we're still doing well. Jose, quickly, you just announced that 25% pay raise for your employees. And Jose, apologies to interrupt. President Biden is beginning his remarks at the APEC summit in San Francisco. Let's listen in.

Welcome to San Francisco. Sparconi Center is about as big as my state. This is a city of San Francisco. with innovation and breaking barriers, where collaboration and coming together have always been key to unlocking or potential. It's a city that has been shaped by centuries of deep ties to the Asian Pacific region by contributions of people of Asian and Pacific Island heritage. So San Francisco is a natural place to gather and innovate and collaborate for the 2030

AFIC summit, the CEO summit, and all the events were taking place this week. And I want to talk to, I want to thank everyone who's made this week possible, especially those serving in APIC's executive secretary, APIC business advisory council, the National Center for APIC and so many others. Today, 21 APIC economies make up more than 60 percent, within 60 percent of the global GDP. for almost half the global trade. The Asian Pacific is projected to be the largest contributor to global growth over the next 30 years.

So, the vision we pursue for the economic future of our region will rebound far beyond the Asian Pacific. The choices we make are going to matter as not hyperbole you suggest for the entire world. It's up to us to harness the dynamism of our country. our economies and tap the entrepreneurial spirit of our people and unleash the potential, the unlimited potential of our partnerships in order to realize the future that will benefit people not only in the Asian Pacific region, but the whole world. I mean that sincerely. People everywhere.

Future where prosperity is shared and is inclusive, where workers are empowered and the rights are respected. Our economies are sustainable. resilient and the bridges that connect our people open a golden gate of opportunity to create lives of hope. Just lives of hope, most people are just hope. You know, it's been my approach here in the United States from the moment my administration took office. We're building an economy from the middle out and the bottom up. Trickled down economy worked okay sometimes, but not a whole lot trickle down on my dad's kitchen table. But when the middle class does well, the poor have a chance

and the wealthy still do very well. Because what happens, the poor have a ladder up, the middle class and the wealthy still do well. Folks, we're already seeing the results. The last quarter, the American economy grew 4.9 percent, the highest growth rate in two years. More people in the United States, because of many of you sitting there, CEOs, let's give credit words, do. More people in the United States are in the workforce today than any time in American history. Our unemployment has been under 4% for 21 straight months. Inflation has come down by 65% and more to do. We now have the lowest inflation rate of any advanced income.

economy in the world. Meanwhile, meeting household wealth has grown by 37% in real terms since before the pandemic. I acknowledge there's a disconnect between the numbers and how people feel about their place in the world right now. We can deal with the second part as well. We still have work to do. But our model for growing is delivering real results for all Americans, significant black unemployment, Latino unemployment, et cetera.

The strength of our economy is driving growth and spurring investment throughout our region. Again, because of money of you sitting in front of me, made those judgments. And it's drawing investments to the United States, especially from Asian Pacific economies. Since the start of my administration, companies from across the Asian Pacific

have invested over $200 billion in the United States. These are historic investments, creating literally tens of thousands of good paying jobs, where 14 million created just since we came to office, all across America and industries that are going to shape the future of this globe, semiconductors, electric vehicles, batteries, critical materials, hydrogen hubs, and other critical emerging technologies. I've long said, it's never been a good bet to bet against the American people. Never. No, I mean it.

Think about it. It's never been a good bet. And we're proving it once more. So my message to all of you here today is leaders of a government and industry can count on the United States. We're delivering on our promises and we're doubling down on our progress. progress. And we'll soon be your strong and steady partner as we continue working together to realize the Asian Pacific region that is free and open, prosperous and secure, resilient and connected. By the way, twice since I've been president, I've had the leaders of the Asian

Pacific Islands come and meet with the United States. They're all part of it. I thought when I left the G20 and Vietnam desperately wanted to see me and raised a relationship. It brought me back when I stood in front of that monument to John McCain. All my days growing up, I never thought that would ever occur. Today, I'd like to talk a little about the work we've done in the region to get there and how we're going to go about seeing this road forward. I've said for a long time, United States is the Pacific power.

I had that brief discussion yesterday was President Xi. He asked why we so, he had asked me before, I reminded him why we were so engaged in the Pacific. It's because we're a Pacific nation. Because of us, there's been peace and security in the region allowing you to grow. He didn't disagree.

By the way, it was a very good, straightforward meeting. We aren't going anywhere. For decades, America's enduring commitment to the region has been a springboard that's enabled growth, transformative growth, ensure the open flow of commerce and left millions of people out of poverty. Today, that relationship goes both ways.

United States remains vital to the future of the region, and the region is more vital than ever to the United States of America. It's when my administration's outlook from day one, and we have clearly laid out our approach with our Indo-Pacific strategy. We're delivering across the board, including when it comes to our shared economic agenda. The United States has deep ties with our fellow APEC economies. More than 60 percent of U.S. exports go to fellow APEC economies.

robust two-way investment between the United States and epic countries supports good jobs, new opportunities all across the region, and American businesses significantly represented here in this auditorium are the largest source of foreign direct investment in the epic economies. In fact, we take just the U.S. companies represented here at this summit and look at their new investments, APIC economies in the calendar year. It totaled more than $50 billion so far. Investments announced today from companies like Amazon, United, Delta, Microsoft, to make sure our region is more inclusive and interconnected.

Investments announced today from companies like Boeing, Apple, Plexport, Pepsi coal, a Pepsi company, I should say, to make our economies greener and more sustainable. Investments today from companies like IBM, Organon, Visa, look, they make up, they make our region more resilient. They make you all make it more secure. Here in this world, this world-renowned hub of innovation, leading tech companies like Anthropic. And I'm gonna mispronounce. I'm not gonna try. It's better not to try and not mispronounce

than try and mispronounce. The point is, small and medium-sized business and startups are getting into action as well. All the announcements translate into real outcomes that matter to people's lives that matter to people's lives. They're proof that a strong, dynamic American economy is an engine of growth, economic growth innovation

throughout the entire region. And they're testament to the fact that American investment and American ingenuity are in high demand all across the region. Because when you do business with the United States and our companies, you know what you're getting. High standards, fair practices, protections for workers, world-class ideas, an innovation, and a commitment to deal with the environment. Finally, it's a quality guarantee.

Look, this is how we've been able to mobilize billions in investment, including major new announcements this morning through our partnership for global infrastructure and investment. We also work closely to deepen our bilateral economic cooperation with partners throughout the region. especially on the issues that will most impact our future economic success. For example, in September, when I traveled to Vietnam, as I mentioned earlier, to mark a historic new phase in our partnership of our countries, we committed to work together to strengthen the semiconductor supply chain. With India, Japan, Republic of Korea, and Singapore,

we've launched new initiatives to shape the technology and standards that will transform the future. We've deepened economic partnership with the Philippines, Indonesia, Australia, and others. We've renewed and elevated our engagement with critical regional bodies, including the ASEAN and Pacific Islands Forum. And when we offered to host APEC two years ago, we committed to modernizing this institution to make it easier for us to work together as we take on the challenges of a new era, and there are many challenges. We're going to see more changes in the next 10 years than we've seen in the last 50 years. That brings me back to the summit and where we go from here. The world is fundamentally different than it was 30 years ago at the first annual APIC leaders meeting

at Blake Island and Washington State. The questions we must answer today not about how much we trade, without how we build resilience, lift up working people, reduce carbon emissions, and set up our economy to succeed over the long run. How to deliver growth from the bottom up and the middle of out so no one gets left behind. The idea behind this New Indo-Pacific economic framework of partnership among 14 diverse and dynamic nations

all committed to tackling urgent issues like pandemic response, vulnerable supply chains, climate change, natural disasters, which we've learned can gravely impact our economy. We announced the framework in May of 2022. And later today, we're launching an important new tool to promote sustainable economic growth and create a race to the top, not the bottom. There are tangible commitments negotiated in record time that are going to deliver meaningful outcomes, meaningful outcomes to make supply chains more resilient, facilitate clean energy transition, and fight corruption. corruption. For example, a new supply chain agreement will allow us to better monitor for supply

chain challenges before they become a kind of full-scale disruptions we saw during the COVID-19 pandemic. And I'm sure we're better prepared to shift and adapt when disruptions do occur, and they will. I know you all know better than I, our work is not yet done. This framework will be a platform for ongoing economic cooperation. We will continue working to better facilitate high-standard trade and advances workers' rights with strong enforcement of labor standards. At every step, at every step, we have held our commitment to unions. Each of the framework pillars include strong pro-labor outcomes

that will benefit workers of all economies. It's critical to building the strong, a stronger, more resilient economy for families across the Indo-Pacific. This week, my administration has launched our new global labor strategy to ensure that workers' rights are the centerpiece for economic strategy internationally, as well as domestically. That's a primary concern to me. Last week in Illinois, I congratulated the UAW on the record contract with the big three U.S. auto companies. The contracts can lead to thousands of new jobs, billions of dollars in plan investment to

keep American auto industry strong and competitive, and urge any company investing in America. They enter into partnerships with the most highly skilled, dedicated, and engaged workers anywhere in the world, American labor. And folks, I ask the Treasury Department to do a study. When labor does that do to people, all other non-labor folks around the country? benefits. And by the way, the reason many of you use labor is because they're the best workers in the world. Union. It's not like you show up one day and say, I want to be electrician. You show up one day and say you've got five years to practice, and then you get a card.

I'm also intent on responsibly managing the competition between the United States and the people's Republic of China. That's what we talked a little bit about yesterday, President Xi and I. That's what the world expects of us. And I promise you that's what we're doing. I met with Xi yesterday leader to leader to make sure there's no miscommunication between us. As always, I've met with him more than any other world leader

because when I was vice president, it was concluded that I should get to know him. It was inappropriate for the President of the United States to be meeting with the vice president. We've had prior to this 68 hours of private meetings as he and I each with a simultaneous interpreter. Our discussion has always been candid and constructive. I again emphasize the President Xi that the United States does not seek conflict.

And yesterday we announced resumption of military-to-military communication channels to reduce the risk of accidental miscalculation. And it exists. This is not, as my generation would say back in the day, this is not all kumbaya, but it's straightforward. It's straightforward. We have a real difference with Beijing when it comes to maintaining fair and level economic playing field

and protecting your intellectual property. We're going to continue to address them with smart policies and strong diplomacy. We've also taken targeted action to protect our vital national security interest. Let me be clear. We are de-risking and diversifying our economic relationship with the PRC, not decoupling, not decoupling. We'll be firm standing up for our values and our interests, and I was very straightforward, as he was with me yesterday. At the same time, on critical global issues such as climate, AI, counter-narcotics, where it makes sense to work together, we've committed to work together. We're going to continue our commitment to diplomacy to avoid surprises and prevent

misunderstandings. A stable relationship between the world's two largest economies is not merely good for the two economies but for the world, a stable relationship. It's good for everyone. Let me close to this. The leader's statement from that first Blake Island Summit 30 years ago captured a shared commitment to, quote, deepening the spirit of community, end of quote, among our economies. For all this change over the past three decades, we have to continue to summon the spirit of community

to meet the challenges today and to seize the enormous possibilities that exist. My staff is tired of hear me say this for the last, I don't know how many years. The world is at an inflate. election point, where the decisions we make today, this is not hyperbole, are going to shape the direction of the world for decades to come, for decades to come. Just think of AI. That's particularly true in the Asian Pacific, where so much of the future of our world will be written.

And I would argue each of us has a part to play in writing that future together. So today, I challenge all of us to measure our successes not based on the bottom line of our balance sheets, but the lives we lived up through investments, the potential we unleash with our innovation, and the ability to can talk with one another. Let's build a global economy where everyone has a chance to succeed in workers have a fair shot, a fair share of the value they create. The United States is stepping up because of many of you in this world, room. We're not talking to talk. We're backing it up with commitments. We're going to see us follow

through. So I want to thank you again for joining us in San Francisco. Thank you for your commitment APIC and the future of the Pacific, Asian Pacific region. And thank you for everything you've already done to make this summit a success. We can do more. God bless you all. Thank you. Francisco. We turn to Amon Javris to wrap the key headlines from his remarks. And does this pretty much conclude the event, Amin? Yeah, it does, Kelly. And what you just heard was a sales pitch. Joe Biden pitching two separate audiences here. One is the leaders of the Asian Pacific nations themselves. You heard him mention Vietnam several times, but also he's talking about Indonesia, Australia, South Korea, Japan. He wants to create sort of an American-led Western-style economy group around China

that can be used as a buffer economically and politically against China. He was pitching that group. And the heart of his pitch was when he said, when you deal with the United States, you know what you're getting, fair practices. It's a quality guarantee. He's saying, deal with us, not with the Chinese. You get pro-environmental conduct. You get less corruption. You get fair rule of law, all those things in the U.S. orbit, and by extension, not in the Chinese orbit. The other thing he was doing there, I think, was reaching out directly to the audience of CEOs who were in the room, both American and Asian corporate leaders in the room and in San Francisco today. And he talked directly to them and twice gave them specific credit. Remember, this is a

president who was out on the union picket lines here in the United States. He talks very much about unions in this speech. But he also gave praise to the CEOs. He said a lot of the successes in the region are because of a lot of you sitting here, the CEOs, let's give credit where it's due. So Biden there rhetorically at least buttering up some of the corporate leaders and saying that you get credit for some of the amazing transformations we're seeing in the economy in Asia right now. And that is very much reaching out to another constituency that he needs and that he sometimes antagonizes with all of that pro-union talk and marching. on picket lines. So a fascinating sales pitch from the president of the United States, Kelly.

Interesting also that a phrase that stuck out to me was that we seek to diversify and de-risk our relationship with China, not decouple. Yeah. This is all about showing that stability is good for business globally, right? I mean, that's what the business audience wants to hear, and that's what the political leaders in Asia want to hear from the United States and China. We heard a similar theme from Xi Jinping yesterday saying that the two nations have an obligate. to work together, to lead the world together, to have stability in their relationship. We heard Joe Biden saying that today, too. Both leaders signaling to the world that they don't seek confrontation. Now, we saw some of that kind of rhetoric last year in Bali between these two

leaders, and then we saw a year marked by spy balloons and other things. So we'll see if the rhetoric holds up to the reality here. But at least on the rhetorical level, they are signaling that they want to de-risk the entire world. All right. Amen Javis. Thank you very much. Safe travels as you come home from the APEC summit. More power lunch after this. Welcome back to Power Lunch, everybody. The November rally taking a bit of a breather, as stocks trade a little bit lower today.

But despite today's declines, the Dow is up more than 5% this month, as you see there. The S&P up more than 7. NASDAQ, up almost 10 in November. Our next guest has been saying better days are ahead for the markets. But not necessarily for the economy. Let's bring in Kevin Mon, president and chief investment officer at Henyon and Walsh,

asset management. Kevin, you say that you think that the Fed's work for this rate hiking cycle is done. When rate hiking cycles finish, what historically have been the best places to put your money? It's a great question, Tyler. And our research shows that there are certain sectors of the stock market that have historically performed best. At the end of rate hike cycles, which we haven't had for a long, long time. Which we haven't had for a long time right before the Fed starts cutting rate. And that generally accompanies economic slowdowns. Those sectors include health care, consumer staples, and industrials. We also like certain areas of the fixed income market like municipal bonds and preferred securities, which historically have also done well at the end of rate hike cycles.

Industrials is a big, big, big category. So drill, narrow it down. You're talking about defense industries? You're talking about heavy equipment manufacturers? The aerospace and defense sector. We all know about all the geopolitical conflicts. that exist across the world right now, and unfortunately are likely to escalate. It's forecast that that military spending will increase by nearly 50% over the next decade. I think that's an underestimate.

And who are the companies likely to benefit? It's those defense contractors. One name we like is Lockheed Martin. It's got a dividend of about 2.7% only trading at 16 time earnings, and they're likely to be one of the largest benefactors of that military spending over the next decade. Healthcare, consumer staples.

I mean, Walmart obviously was a lot of, a bit of a landmine this morning. Is consumer staples still attractive here? I mean, is that an okay place to hide out? Sure. And let's talk about Walmart for a second. They did beat on earnings estimates. They beat on revenues estimates.

They increased their forward-looking earnings estimates below expectations. But they did cite some concerns that I believe with, and that's the strength of the U.S. consumer. They do think the U.S. consumer will be more frugal this holiday season. I agree. They did express concerns about the risk of deflation. I agree. However, those concerns are actually tailwinds for Walmart, right?

Walmart is well positioned to withstand an economic slowdown and ultimately flourish when the economy stabilizes later. So each time the stock pulls back like this, I think it's actually an attractive entry point. Other consumer staple stocks are likely to follow suit because they're bellwethers and they hold up during periods of economic slowdowns relatively well. If you think we have sort of maybe crested in interest rates, that would suggest it now would be the time where you might, might extend duration. Absolutely. Agree? Absolutely. Certainly in municipal bonds right now. If you can extend duration, lock in some higher coupons and buy them at their current discounts,

because we know as interest rates come down, what happens to bond prices, they go up. So on a total return basis, if you can lock in that higher coupon and take advantage of rising prices, you're going to be pretty happy. Not only you get the nice yield, you get the higher yield, but you get capital appreciation, too, if you don't want to hold to maturity. Bingo, especially for those high. high net worth investors that are focused and concerned about tax-free income. Municipal bonds are a great opportunity.

That chart showed it, too. I mean, really under pressure all year long, and then all of a sudden starting to get a bid, there it is, really in the past month or so, that's the PIMCO Muti ETF. Also, you like preferred securities. I really do. And this, you think, has kind of historical tailwind behind it, also the current environment.

Do you have to get tactical there? I don't know if can you do preferred securities through an ETF? You can do preferred securities through an ETF or our own Preferreds Plus Trust. that's smart trust, but Preferds are trading at a significant discount right now, around 30%. That's a big correction. We also know that historically, Preferds are one of the best performing fixed income asset classes coming out of the end of rate hike cycles. According to Cohen Steers, the average return of over 14% in the one year following the end of a rate height cycle.

I believe that end of rate height cycle started in July. So now's the time to start positioning back into Prefords, take advantage of their high dividend yields, and also their attractive. You mentioned health care. Healthcare like industrials is an incredibly broad space. Are we talking about drug companies? Are we talking about health care medical device makers? Are we talking about insurers?

All of them? What? I'm focused on the smaller-cap biotech names. We like a name called Immunocore right now. Immunocore is about a $2.4 billion small-cap biotech. They're focusing on developing T-Septor-reseptor-based immunotherapies to treat cancers, to treat autoimmune disorders and other infectious diseases. We think the M&A activity is going to pick up in the biotech space,

especially as interest rates come down. But don't they usually trade as more of like a NASDAQ momentum proxy? So you think this is idiosyncratic to MNA? Or do you think, I mean, that argument otherwise you think would apply to more of the MoMO areas of the market? I really think there is going to be a pickup in M&A activity, specifically in the biotech space right now. Large-cap pharmaceutical companies have excess cash sitting on their balance sheet,

continue to have margin pressures priced by, price controls coming out of Washington, and a lot of their large revenue-producing drugs are now coming off a patent and being subject to generic pricing. Were they going to return to replace that lost revenue, they're going to have to be acquisitive, and they're going to look to these smaller-cap biotech names that are trading much lower. Now biotech is going to take down for the last three years. Now they can pick them up at much lower prices and finance it at much lower rates over the next two to three years. All right, Ken, we have to leave it there or last.

Thank you. Happy Thanksgiving. Happy Thanksgiving to both of you. Thank you for joining us. Coming up, as we mentioned, Walmart's guidance disappointing the street. Another bad sign for the consumer space, it seems. Shares are down 8% will dig into their earnings when Power Lunch comes back. Welcome back to Power Lunch.

Shares of Walmart are down more than 8% today after its guidance didn't meet what the street was looking for. The company's CFO saying sales in November have so far made the company, quote, think cautiously about the consumer. For more, let's bring in Greg Mellick. He's a retail analyst with Evercore ISI. This one kind of a shocker, Greg. Why did it land so poorly? I think it was all where the expectations have gotten. So Walmart has been doing very well, not just this year, but over the last, I'd say, five or six quarters, a lot of traffic momentum.

They have been growing EBIT dollars, double digit, the last few quarters. And frankly, they had a good comp of almost five, but it didn't flow through to margins. And I think that's where the market today is taking some back from them. Is it almost the flip side of the Target story, where Target had bad same store, but their profit margins or certainly their bottom line earnings looked a little bit better. Walmart, it seems to be the opposite. I think, well, that is, that's absolutely true. I mean, Target's talked about being laser focused on margins this year and making sure that

their profit model is still working. Walmart didn't have that problem. What they were doing was leaning into all the customers and traffic that they've been winning the last three years. And, you know, frankly, this quarter, because they had a high level of remodels and sales got weak and sort of the back half of October. They did say it got better in early November, but that volatility is where they put some caution. And the other thing is that deflation is starting to come into the numbers in some parts of the store.

And that also means that comps, while still growing, will probably be decelerating. We think to around 3% in the fourth quarter. How tender do you think consumers are right now? You know, our view is that the consumers have a strong balance sheet from all the checks that we were flying out. during COVID. The excess savings is probably down to six or seven hundred billion. And, you know, it's not a disaster, but people are making more and more choices. So we think holiday sales will grow two and a half percent this year in the fourth quarter. Retail sales year to date are growing a little bit over three percent. And we just cut our forecast for next year for

retail sales to only grow two percent. So, you know, this is part of a deceleration to norm, is what I would say in retail. Do you have a sleeper pick in retail? Well, you know, the sleeper today might just be Walmart. If you look at our top five names, it's Walmart and Costco. Kroger is kind of a sleeper in that I think people are very concerned about how deflation could also hurt them. But if they're able to get the Albertson's deal done, we think there's some margin upside into the back of the back half of next year and then 25. And I would say Sherwin Williams is one we use for the interest rate sensitive where we think there's some nice margin expansion. If volume ever comes back, that could be a nice one there. And O'Reilly, so O'Reilly Automotive, another, I don't know if it's a

sleeper, but we still think it's a core winter in that space. Are we in retail deflation? We're in a massive period of retail disinflation, and we are certainly seeing in categories outright deflation. So a lot of general merchandise, electronics, et cetera. And what we're learning now is which categories are going to pivot from just disinflation to deflation. And that's why watching this holiday and these trends, I think, are so important. And that's why I think what Walmart had to say today is not just hurting their stock. It's sort of taking down a retail in general. So final, you say 2% gains over the holiday season in sales. Who's the main beneficiary there? Is it Walmart? We'd say any retailer that has got inventory right. Right. It's been growing traffic isn't a better

place to win. Got to leave it there. Great. Thanks very much. And thank you for watching, lunch closing bell starts right now