Power Lunch - Post-election rally takes breather 11/12/24

Episode Date: November 12, 2024

Stocks are retreating today, as the major averages take a breather from their post-election run. Key components of the so-called “Trump trade” were among the most notable losers. Small-cap stocks, which are viewed as a potential beneficiary of Trump’s return to the White House, were broadly under pressure, with the Russell 2000 dipping about 2%. We’ll tell you all you need to know about that and more. 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 Evans. I'm Tyler Matheson. Good to have you with us today. Stocks giving back some of their recent gains today, but the focus does remain squarely on the Fed. As a new report suggests, Jay Powell is prepared to fight if President-elect Trump tries to remove him as chair. We'll talk to the former Dallas Fed President Robert Kaplan in just a moment. Obviously, the question of Fed independence looms very large as this new administration takes up. And especially given how Powell responded to the question in his late last. Do you care to elaborate? No. Not permitted under the law.

Meanwhile, Trump is continuing to name people to his administration. The last name floated, not yet confirmed, is Marco Rubio for Secretary of State. Seen some rumors about Huckabee as well. Look at what that could mean for relations with China, of course. He has a long history on the Foreign Relations Committee. I believe he's also on the Senate Intelligence Committee. So it's not as though he does not have the bona fidees to step into that role. But being a senator where you are free to comment is very very,

different than being the policymaker where you have lots more at stake, I guess I would say. And Netflix says its ads supported tier now has 70 million active users globally. This comes as the company is making a big push into sports. It has the Mike Tyson-Jake Paul fight on Friday and NFL games on Christmas Day. I don't think of NFL on, I think of the NBA on Christmas Day. I think of the NFL over the Thanksgiving weekend more. But at any rate, they're doing big in sports. And what do they say?

They've sold all the ad inventory. That's what I heard. I think it looks like people are really excited to have people now turn to Netflix as a sports platform on top of already turning to them for everything else. Forgive me. Is Jake Paul a podcaster? What is Jake Paul? I don't. You know, you and me together wanders.

Is it what? What? A YouTuber. Okay, good. Thank you, Paul. Well, I wish him luck with Mike Tyson. I don't think I'd be doing that. All right.

First, we're going to turn to the Fed. Piper Sandler out with a new note. discussing the possibility that President-elect Trump could name a so-called shadow-fed chairman soon after he takes office next year. Don't know exactly what that would mean, but we'll explore it. Trump repeatedly threatened to fire Powell in his first term, and in return, Powell has indicated that he's not going down without a fight if it comes up this time. For more on what all this means for the Fed going forward, we turn to Robert Kaplan.

He's the former Dallas Fed president and the vice chairman at Goldman Sachs. Mr. Kaplan, welcome. Good to have you with us. Good to see him. Do you believe that the president has the power to fire the chair? It doesn't appear he does, but more importantly, I think having an independent central bank is very critical to the United States and to any country. And I would like to believe that the Fed will continue to remain politically independent, and that would mean allowing Jay Powell to finish out his term. The president has apparently in other words,

venues said things like, I feel as though I need or deserve a, quote, say in monetary policy. Do you believe that is the case? And what would having a say mean in practice? So any president or elected official or citizen for that matter has the right to have a say about Fed policy. The issue for the Fed is you want to be able to make decisions without regard to political influence or political considerations. And so the feds very used to people on the outside commenting, the president, even at times commenting, we saw that from 16 to 20, and they'll be able to manage that. I think the thing that the administration normally will have more of a say in is supervision. Usually that does change with administrations, and I think you'll see the

approach to supervision likely change here also. So I'll get one more question and then Kelly will jump in. I'm curious whether you think, I mean, the Fed has sort of signaled that it is on a prolonged rate-cutting mission. Do you think there's the possibility that the Fed might pause and take more of a wait-and-see attitude with a new administration coming in, with economic policies bound to change, with the incoming president saying he wants to re-up the 2017 tax cuts. Do you think that the Fed might sort of pause right now? Do you think it would be wise if they did?

Yeah. So I said for the couple of months leading up to the election that there are going to be two phases to the rate cutting process. Phase one is with inflation sticky around two and a half percent. I think the Fed has room to get the Fed funds rate down to four and a quarter, four and a half. that would mean one more rate cut in December. I've felt for some time that unless you see demonstrable progress from two and a half to two, that the next set of cuts would be more uncertain. And I think the markets are starting to realize that even before the election. In light of the

election now, you're going to have a whole new raft of policy. So yeah, I think if I were sitting in my former seat, I would be non-committal even on December until I got to the December meeting. I want to see the November jobs report. I want to see inflation data. And I do think it might well be appropriate to take some time to see how these puzzle pieces of the new economic structure emerge before you make more decisions. And I think the Fed in this kind of situation is wise to be more of a risk manager, not a prognosticator. And I think if there are things that are unclear, I think it's okay to slow down and give some time to let them clarify. The timing could potentially be awkward then that they go on pause right as President Trump is

coming into office and that could be uncomfortable for them. At the same time, maybe I'm an outlier on this, I'm not convinced he's always for lower rates. And maybe he will be, but knowing that inflation is what, you know, got his predecessor thrown out of office to some extent, knowing that consumer prices may risk going higher because of tariffs anyway, maybe he wouldn't mind a little cover from the Fed to keep things on the margin tighter and keep inflation from really breaking out again. Yeah, I think they will be sensitive to that. But I have felt for the last couple of years we would have benefited more from a whole of government approach to fighting inflation, meaning, in my opinion, it should not be just the Fed whose job it is to deal with inflation.

So I think in this new administration, I think you're more likely to see a whole-of-government approach. What do I mean by that? I think you're likely to see some of these directed government programs, inflation reduction act being the most significant. You might see those repurposed or stood down. I think you're likely to see a very substantial regulatory review. economy-wide, which is intended to create more productivity growth. I do think you're going to, on the other hand, probably see less workforce growth, and you're certainly not going to get the

workforce surge that we got this year. And then we've got a number of other policies. You're going to see more, I think, more oil and gas production, more effort to get prices down at the pump. And there'll be a whole question of what the fiscal mix is going to be as well as tariffs. But this is a, There's a lot of moving pieces, and I think all of them may have some bearing on the organic growth of the economy. And I think we're likely to shift from a more – we currently have a more government, I would argue, directed economy with government spending to, I think the objective may be a more organically driven growth economy.

And I think we're going to need to see more clarity on the policies to understand their impact on inflation. And I think the Fed will be a key player in this, but they won't be the only player going forward. All right. Robert Kaplan, thank you so much. Always good to hear from you. We appreciate it. Good to talk with you.

Thank you. And interesting, as markets price out the odds of more rate cuts, a very different landscape than what we thought we'd be heading into. Still to come, Donald Trump, along with billionaire Elon Musk, is set to meet with Argentina's Javier Millet. As the president-elect may be narrowing down a secretary of state pick will have more details when Power Lunch returns. Welcome back to Power Lunch. President-elect Donald Trump has already started filling key positions in his second administration. So far, he's chosen a chief of staff, a Bordersar, a U.N. ambassador, an EPA administrator. And today, reports suggest his next pick will be Florida Senator Marco Rubio as Secretary of State,

a known foreign policy hawk who has taken hardline positions on China, Iran and Venezuela. For more, let's bring in Dwardrick McNeil, Longview Global's senior policy analyst. And here on set with us, Michelle Crusoe Cabrera, both our CNBC contributors. It's great to have you here. Michelle, what policy-wise do you think Rubio, as Secretary of State, indicates? I hate to bring everything back to oil, but I know he's been hawkish on the Israel issue as well. So, China Hawk, number one, what makes him interesting, I think, as a China Hawk, is also his very deep knowledge of Latin America and his concerns about China's involvement in Latin America. lending to Latin America, buying their supply chains out of Latin America, is a extreme hawk on Venezuela and on Cuba as well. So bringing all those together.

And I think also the fact that, you know, that Florida is now a red state. So the replacement there is, you know, you don't have to worry about losing somebody in the Senate. It's a guarantee. Yeah. Whether DeSantis would say, hey, I'm going to step down as governor and be a senator. Who knows? That's interesting. I hadn't even thought of that.

Nor had I. I'm a dream. It could happen. Rick, what do you think of what Michelle just said there about Mr. Rubio, Senator Rubio, I should say. And would he, let's talk specifically about China. How much tougher will an adversarial will the Trump administration be with respect to China than the Biden administration has been? Hi, Tyler. Great to see you. Yes, I absolutely agree with the way Michelle laid this out. Let me just say, I think for the China community writ large here in Washington, that's Democrats

and Republicans. Rubio is a very well-known quantity. You won't get many objections from the China watching crowd over him as Secretary of State, if that is the pick. He served the Senate Foreign Relations Committee, Intelligence Committee, the Appropriations Committee in the Senate, which means, Tyler, he knows how foreign policy is shaped, set, funded, and exigent. And that will bode well for U.S.-China policy. In terms of continuity, there are some continuities that I would see with the Biden administration. That's largely around the approach to allies and using allies to compete with China. The problem is the divergence.

And the divergence to your point is this is shaping up to be a very hawkish U.S.-China policy under Trump administration. And allies are going to have a very difficult time taking the gloves off completely and moving away from a managed competition framework, which we saw under Biden. So there could be some issues there with allies and businesses who don't want to see this sort of unbridled competition that I think we may see under the early days of the Trump administration. Michelle, the other thing I think about is when John Bolton, I think Trump had said something like, you know, I loved bringing him into the room because everyone else got scared

and knew like this guy might do something crazy. And so how much of this is a bargaining chip to kind of intimidate people into thinking, oh, he might really go as far as he says he's going to go on this. And then Trump in the back of his mind, maybe go, and maybe I will if you don't follow through. I know we're talking about China, but I wonder if Russia is the area where we actually could see the most activity in the next couple of months. They're obviously kind of heating up right now, what's happening in Russia and Ukraine. Russia has been releasing a lot of aggressive statements about Trump and kind of doing aggressive things already, which make you wonder if they see, if they are worried about how this relationship might kick off.

Every single pick thus far speaks to his confidence, Trump's confidence, about how he performed in the election and where he wants to go and how tough he wants to be when it comes to foreign policy and on countries that he thinks taking advantage of the United States and also absolutely sending a message to Russia. The one thing I would say... What's the message to Russia? Oh, I think the message is that they want to settle the war in Ukraine. For sure, absolutely. I think that's probably already started. But most people assume that's bullish for Russia. And yet we're hearing reports that they might give more access to Ukraine, to those long-range weapons to fire into Russia. Maybe no one's saying they're going to take land back or whatnot.

But why does Russia seem to be a little bit on the back foot about this? I think because when Trump was last time in power, even as he sounded friendly himself to Putin, everyone around him was anti-Russia. It was one of the strongest anti-Russia cabinets that we had seen in a long time. And Bill Browder came on this network and said, it's so strange, Trump talks this way, and everybody underneath him talks that way, right? I mean, here's the thing to remember about Trump. And I think about this in particular with China. And this is going to sound weird when I say this.

He's weirdly less ideological in some ways. In other words, he doesn't want the country to be taken advantage of that's his viewpoint, right? And so while both Democrats and Republicans are hawkish on China, Democrats couch it in human rights, lack of democracy. Trump doesn't have those concerns. if they can come to a deal of some kind and he can say, I got a better deal, just like he says, I got a better deal out of Mexico. I think there's actually a deal to be done there.

And part of bringing in people like Rubio to your point is to send a signal he's going to be tough. DeWorgic, what would you add to that? I think the Chinese are very aware that Trump is transactional. I mean, the real issue here is deal for what. And, you know, they tried to float some early conversations about Taiwan and sort of of becoming less supportive of Taiwan's diplomatic space and weapon sales. And none of that went anywhere ultimately. But it doesn't mean that the Chinese won't try and it doesn't mean that Trump won't listen.

But I think this administration, at least in terms of the way it's shaping up from the National Security Advisor of Mike Walsh, if he picks Rubio, if Lighthizer comes back, this is a real hawkish administration that I think will try and keep much of the competition agenda that we've seen in the Biden administration in place and ramp it up. But the Chinese will certainly take their shots and try and cut a deal. To Ukraine, am I remembering correctly to Wardwick that Senator Rubio voted against additional funding for Ukraine? Correct. I think Michelle is spot on here. I think on Ukraine, separate from China, I think Rubio is in line with where most of the Republican party is, with the exception of Mitch McConnell and others, about bringing this war to a close.

But I will make note, Tyler, that China has a role to play here. They have been Russia's lifeline. And so for Putin, this is golden. There's a broad open chessboard now for him to play both sides off of each other in the Ukraine conflict. So look for Putin's diplomacy to really kick in the gear here and try and leverage China and the U.S. on Ukraine. Very interesting. DeWordrick, thanks. DeWardrick McNeal.

We appreciate it. Michelle Hang tight. We also just want to make notice of one item on the president, Alex, agenda. Argentina's president, Javier Malay, will be meeting with Trump and Tesla's CEO Elon Musk at Mara Lago. We're about at the one-year anniversary of Malay's ascendancy, I believe. How has his track record been? He cut inflation dramatically. It was running at more than 25% a month.

He's gotten it down to depending on the measure 2, 3, 4% per month. He's cut spending dramatically. He cut the federal budget of Argentina, 30% in one month. Wow. Elon Musk is a confidant, close confidant of both Javier Millet and Donald Trump, and undoubtedly based on what Musk did at Twitter, now X, cutting, you know, pop, the number of people working there dramatically, and seeing what Javier Millet has done in Argentina,

if there's political will, there can be cuts in spending. I don't doubt that he's inspired by what he's seen there in terms of trying to reduce the size of the federal budget, if the president will let him go that far. So that's the lesson. Malay is coming to impart? I probably, yes. Here's how I did it.

Here's how you can do it. That you have to have political will to cut spending. Like even Stephen Mnuchin was on two mornings ago and saying, oh, yeah, we got to cut spending, but you can't do it too fast because, of course, you know, that can lead to a recession. It led to a recession in Argentina, but they felt that they had to do shock therapy because the economy had been so bad and so inflationary for so long. How's his support been, given that he introduced that recession, and inflation is still, you know,

it's still existent. Yeah, so they did bring on a recession. It wasn't bad as people expected. His popularity is still very high, even though they cut government jobs dramatically by thousands and thousands. I think that's partly because when 40% of the population is living in poverty, even though 60% of them get some kind of government transfer, you vote for something else because what wasn't working before you don't want anymore, right? So I think they're willing to give Millay more time. Poverty rose, definitely, but they They've also increased the Social Security network in terms of the basket of goods that when you go to the supermarket. So previously, the way they subsidized our version of food stamps, it was only covering 50 percent of the food basket in exchange for all this cutting. They raised that to 100 percent, so they shifted some of the social spending to make sure that the poor were not starving.

That was their goal. So that may have helped him keep his popularity up as he tries to make the economy much more competitive. That's going to be the difference between him and Trump. Trump is talking about tariffs. Argentina's had lots of tariffs. Argentina's had lots of intervention in the economy. Javier Miele wants none of that.

He's a hardcore libertarian wants to get rid of that. So on that way, I think they don't agree necessarily. The economy in Argentina recovering, still in recession? What? Actually, in April, they actually had a slight uptick. It was people were supplied. Yeah, yeah, yeah, which was shocking people considering how much spending it had happened. So a couple of things have happened.

The black market rate and the official rate have become much closer in Argentina, which is a sign on the market. Exchange rate on the dollar. Exactly. So that's a good sign. That means that people believe much more in the currency. $18 billion worth of currency deposits have returned to the banks in a system that was very, very untrusted.

He got rid of rent control, so rents have come down and life has become more affordable for some people in some ways. So has it recovered yet? No, but it's not as bad as people thought, and the population's willing to be patient. It's fascinating. Good to see you. You too. Thanks, Michelle.

All right, sticking with politics, how would an America first platform from President Trump impact international markets? We're going to look for some ways to hedge the risk in the market navigator when power lunch returns after that. Welcome back. We've got some Fed speak to tell you about. Let's get to Steve Leesman with those details.

Steve? Hey, Kelly. Yeah, Minneapolis Fed President Neil Koshkari, saying the Fed will not really consider or model the policies of the president-elect until they become clear. He calls tariffs a one-time price change and not inflationary in the first round. But he then goes on to say that tariff inflation, the effects of tariffs on inflation depends on whether on other countries retaliate. You get into a back and forth on that.

That has a longer-term inflationary effect. He expects the strong labor market and the economy to continue to be strong over time. And he says consumer spending continues to surprise to the upside. If inflation surprises to the upside, he said that's the one thing that could give the Fed pause in cutting in December. So he's sort of backing into the idea that he doesn't expect the Fed to cut in December. He said he doesn't expect a big surprise from the labor market, more on the inflation side is where a surprise would come from. It goes on to discuss this idea of the neutral rate and where will it settle. That's the big question.

He suggests it may have gone up, at least in the short run, talks about the possibility of higher productivity remaining, and that can mean a higher neutral rate. However, he goes on to say, we all agree we're above neutral now, as in the Fed, is restrictive and does need to come down, but doesn't say where, saying we're not saying we're close to neutral right now, so he does see scope to reduce the rate. Have to wait until he says we get whatever is enacted by Congress or in the executive branch before figuring out how fiscal policy will have. affect the Fed. Some move in short-run expectations on inflation, but not in the long run, he says. He says the Fed is modestly restrictive. And finally, the bar for stopping balance sheet runoff is quite high. And one other thing, Kelly, asked about this idea of potential presidential interference in Fed policy. He says he is confident the Fed will focus on its economic goals and not respond to pressure from Washington. Kelly? All right, Steve, thanks very much. Time.

Let's give you a quick market check right now. The Dow industrials are off about a half percent. the S&P 500 and the NASDAQ are basically flat with a small gain for NASDAQ and an equally small sort of loss for the S&P 500. The Russell 2000, however, is moving lower, I believe at last look by a little bit more than a percentage point. Tom Chu, let's turn to you, the market navigator. All right, so let's dovetail Tyler off of some of the tariff and trade comments we just heard from Steve Leesman here. President-elect Trump is vowing to take that America-first approach when it comes to foreign policy. So what will that mean for those international markets? Joining me now is Gilles Moek, the chief economist and head of research for investment managers at AXA Group.

Thank you very much, Giles. If you take a look at the comments we just heard, this is very front and center for many investors right now with regard to just how the economic impacts could ripple from tariff and trade policy. Where do you see the biggest impacts? Well, if it's just a 10% generic tariff on everything that enters the U.S., it's probably manageable for the rest of the world because you don't really change the relative positions of each country. You simply deteriorate their relative position compared to U.S. producers. In many cases, there are actually no U.S. producers. So if it's a 10% generic hike, it's probably okay. Not great news, but only okay.

I think the 60% hike on Chinese products, that could be much more disruptive. Because especially in Europe, China has become a key market for our exporters, which means that if as a reaction to the tariffs, we end up with a further slowdown in Chinese demand, that is going to impact exporters the world over. The second round effect is probably also where we could get from our, fiercer competition from Chinese producers on third markets, on the European markets itself, more on other emerging countries. So that's probably the key to me.

And there's a third element, which I think is a bit fuzzier, if you want. It's the possibility that we end up with some contagion from the U.S. bond market to the other markets. Obviously, what is currently the platform is probably consistent with a bit more inflation, clearly, potentially a bit more growth, but that is consistent with high interest rates across the curve, I would say. That is okay for the US, but as you know, the US bond market tends to be dominant. The other bond markets in the world tend to align themselves on the signals coming from the US,

and such an increase in long-term interest rates would actually not be in the interest. of many other countries, which at the moment are facing disinflationary pressure and are not facing the kind of fiscal push that we can now expect from the U.S. All right. So really quickly, before we kind of, that's a lot to unwrap here and a lot to unpack. There's got to be a relative difference, right, between certain markets around the world on the emerging or otherwise that are more geared towards the U.S. or more geared towards China.

Take us through maybe the thesis there. Yeah, definitely. I mean, you've got countries in the emerging world. which are very, very still dependent and reliant on U.S. demand. If U.S. demand goes up, countries like Mexico would certainly benefit. But you have other countries, for instance, in Latin America, in Latin America, sorry, countries like Brazil or Chile, which increasingly have put themselves in the orbit of the Chinese cycle.

If China slows down as a reaction to the policies implemented in the U.S., That could be really problematic for these countries, which have moved away from the American traction, so to speak. All right. Jules Moak, Adaksa, thank you very much, sir. Have a nice day. It's an interesting ballet that will be conducted here if tariffs go up. Sure. Because, as he pointed out, in some cases, while it might penalize foreign manufacturers who are exporting into the United States, there may not be U.S. manufacturers to take the place of them. And of course, one of the interesting points that was brought up there for a while. For a while, and this is a long-term trend.

But the other thing, too, is if you take a look at some of those emerging markets that are geared more towards the U.S. like Mexico, if they can relatively outperform economies like Brazil that are more dependent on China, then there might be a relative ETF play for some traders out there as well. Dom Chu, thank you very much. Kelly, back to you. Thank you both. Crypto's big bet on politics is paying off and look at Bitcoin back in the green as it re-approaches. 89,000, almost 90 as we speak. We're about 180 points shy. The industry has spent more than $130 million on key races this election season. Bitcoin is up 25% just since, 29% now since the election alone. More after this. Welcome back. I'm Kate Rogers with your CNBC News

Update. The State Department says the U.S. does not plan to change its policy on arms transfers to Israel as a 30-day deadline to improve humanitarian conditions in Gaza expires. State Department officials say Israel has made good but limited progress to address concerns laid out by Secretary of State Anthony Blinken and Defense Secretary Lloyd Austin last month. Meanwhile, President-elect Donald Trump has nominated former Arkansas Governor Mike Huckabee to become the U.S. ambassador to Israel. Huckabee has been an outspoken supporter of Israel amid its war with Hamas. And the Federal Aviation Administration is barring U.S. Airlines from flying to Haiti for the next 30 days. It comes after two planes traveling in the country were

struck by gunfire. On Monday, a Spirit Airlines plane headed for Haiti's capital was diverted to the Dominican Republic after it was hit, and Jeff Blue said it discovered a bullet hole in one of its planes that departed Haiti after it landed in New York. Kelly, back over to you. All right, Kate, thank you very much. Turning back to the markets, which are taking a breather, although as mentioned, Bitcoin just went positive, and so did the NASDAQ. This coming after the Dow closed yesterday above 44,000 for the first time. The S&P and NASDAQ are on pace for their first negative day in six, although the S&P's down only four points right now. And our next guest says a mild correction would be a very welcome event. Hugh Johnson is chairman and chief investment officer

of Hugh Johnson Economics. Good to see you, Hugh. Talk us through it. What's going on here? Well, there's a lot going on. Obviously, since the election, we had to move up in stocks, which was quite something to see. And I would say that based on the sort of number crunching, call it speculation that I do, it moved from being roughly a little bit undervalued to being overvalued. And we're about 6.5% as I do the numbers right now,

overvalued or above the level that the S&P should average for the current quarter. And I think also I might add that the upside potential between now and the end of 2025, is not that great. It's only about 1.7%. As you go further out, the returns look like they're going to be much better. But right now, we're very fully valued.

And that's, you know, always valuation is a primary concern of myself all the time. And it's a deep concern right now. We're a little bit overvalued or pricey. Is there too much optimism? Yeah, that's the second thing that really bothers me. It's not just that we're overvalued, but it's that there's a high and widespread optimism. And you know, Tyler, that historically when you see a combination of overvaluation, which is one of my concerns, and then, of course, when we have high and widespread optimism, that's usually a signal that you should be a little bit careful right now.

And after a move up to the upside that we've seen, that certainly makes a lot of sense. That's very rational. Hugh, have we talked to you about Bitcoin? You haven't talked to me about Bitcoin, but you don't have to talk to me about Bitcoin to, to get me to be obviously looking at it and thinking about it. And one of the questions I continuously ask myself, and that's true of whether it's Bitcoin or it's true, whether it's Nvidia, which I own Nvidia, I don't own Bitcoin.

But nevertheless, when I think about Bitcoin and I look at the move that we've had to the upside, and we've seen this before, is that I ask myself the question, is this a move that is speculative? Have we moved from something that's rational to something that's irrational? Trying to figure that out with Bitcoin, when you really have no underlying fundamentals, is very, very difficult. But I would say, just looking at the performance of the chart itself, I would say, quite frankly, it looks to me to be very speculative, and we might be headed towards some difficult times

for Bitcoin. But everybody argues the same thing, and that is, look, there's a very limited supply, and there's a very strong demand for the underlying Bitcoin. And it's hard to fight against that kind of a combination. So I'm just, I'm giving you my reflections, but these are only reflections and they should not be really adhered to or really thought seriously about by any investors. I'm not an expert on Bitcoin by a long shot. Let's talk about something that where I do consider you an expert, and that would be which sectors may prosper most. And let's go from speculative to sort of long-term investing.

Under a four-year Trump administration, what would be the sectors to favor and the sectors to put in your, you know, for disfavor box. Yeah, it's a great question, Tyler. I think you first look at the performance of the market since, of course, he was elected. And interestingly enough, what we see is that essentially bull market sectors, like industrials, like technology, have been performing very well, like consumer discretionary stocks also performing very well. It's good to see that.

And the reason it's good to see that is because those are bull market sectors. I'd like to see those performing well. that gives me a signal that investors basically are on board the bull market. On the negative side, I leave utilities out of it. That's ordinarily very negative, but of course we've got a lot going on with AI and utilities, which kind of takes that out of the consideration. But there are others, like consumer staples, healthcare, avoid those. Those are bare market sectors, and they're performing like bare market sectors. So the good news is, both market sectors, sectors that are going to benefit from a Trump administration, I think.

I hope across my fingers are performing well. And the so-called bare market sectors, the ones that will not perform well or not perform as well in Trump administration, are at the bottom of the performance ladder. Did you say utilities was on that list? Hugh, or did I miss here? Maybe we lost our connection with Hugh Johnson.

So our thanks to Hugh, I think he said utilities being a non-bull market sector would be one to stay away from. You know, normally, yes, but of course everything happening with AI. the AI and power demand. Yeah, absolutely. All right, let's turn to the bond market, shall we? Big jumps and yields today ahead of tomorrow's inflation report. Let's talk to Rick Santelli for more. Hi, Rick. Hi, Tyler. Indeed, you nailed it. CPI tomorrow, PPI the next day. The market has a much

different prognosis or diagnosis for inflation in the U.S. economy, much different than many economists, as rates pop even before we see the data. And it isn't only that. As the Wall Street Journal 23 Nobel laureate economists had it completely wrong on how the equity markets would respond after the election. So if you look at a Dow Jones chart now after you looked at the interest rate chart, you can see her it's a mere image. It is taking a breather. Finally, a breather after such an excited response to the obvious notion that we're going to have better growth under the new Trump administration. And if we continue to look at tenure, look at a two-day. Let's drag Friday back to. into the picture. Now, you can't really see it very well on this chart, but Friday's high yield established early before a time zone was 435. Today, the tenure got much more excited once it traded

above that yield. And finally, the dollar index. It is on pace to either close at the best level since the end of June or the end of April. It is a very close call. Tyler, Kelly, back to you. Rick Santelli, thank you very much. We appreciate it. Netflix, reaching 70 million global monthly active users for its supported ad-supported tier and just in time for some huge sporting events set to hit the platform. And it's your last chance to join our CNBC Delivering Alpha Summit. It happens tomorrow in New York City, very excited about it. Scan the QR code on your screen right there or you can visit CNBC.com slash delivering alpha to register for it. We will be right back. Welcome back to Power Lunch, everybody.

Shares of Netflix are hired today and up 12% in a month. Today, the company giving an update on its advertising ahead of two major sporting events coming to the platform. Julia Borsden joins us now with more. Lots of excitement at Netflix. Julia? That's right. Tyler, Netflix announcing some new numbers about its ad business two years after that ad business launched, a period over which Netflix shares have gained 180%.

The company is saying its ad supports. options now reach 70 million monthly active users. That's up from 40 million in May. They also say they're seeing progress across all countries and that now over half of new Netflix signups are for the ads plan in the countries where it offers an ad supported option. The company also announcing that for its two Christmas Day NFL games, Netflix has already sold out of all available in-game inventory, announcing that they're partnering with Fandual to be the exclusive pre-game sportsbook betting partner and that Verizon will be the Netflix Christmas kickoff sponsor. Those NFL games and those ad partnerships are building on the live event business that Netflix has been investing

in with events including the Mike Tyson and Jake Paul boxing match, which is coming up on Friday. They also have the WWE starting in January. Now, these sporting events are seen as key to building the audience for Netflix's ads. The company also announcing today some new measurement tools, including a partnership with Nielsen to rate the NFL games and some new ad tech to improve targeting and measurement, which they'll roll out next year. Guys? Very interesting. Who do you like in the Jake Paul Tyson fight, Julia? I'm not going to weigh in on that one, but I also think I'm not the target demographic for that one. I'm more likely to be watching those Christmas Day NFL games. But I think what's really

interesting here is Netflix wants to have a little bit of something for everyone. They want to make sure that they have content, just like the entirety of the TV and cable TV universe. And just like we saw that bundle of channels work so well with pay TV and with advertising, what they're looking to do is have this assortment, if you will, of channels within that Netflix platform and have the option of it being ad-supported to cut down the cost dramatically. All right, fantastic. Julia Borsden, thank you very much. Speaking to the NFL, this Thursday, CNBC Sport, will have an interview with Minnesota. Vikings owner Mark Wilf. He'll discuss private equity ownership, navigating politics, and much more.

Be sure to click on the QR code or visit cnbc.com slash sports to watch the interview. The Wolf family, very prominent, actually, in New Jersey. They're a real estate family, but they happen to own the Minnesota Vikings. All right. Still ahead. Stronger Apart, activist investor Elliott Management, pushing Honeywell to break itself up into two companies, threatening to leverage its $5 billion stake in the firm to make that happen. The shares are up almost 4% on the prospect.

We'll ask our trader for his take in three-stock lunch. Welcome back. Let's do a little three-stock lunch. We're training some key movers of the day with Michael Landsberg. He's CIO at Landsberg Bennett Private Wealth Management. Michael, it's great to have you here. Let's start with Home Depot. After earnings, it's training down fractionally, they did have a third quarter beat. They expect comp sales, though, to fall about two and a half percent in the fiscal year.

Sales are still a little bit cautious. kind of coming off a tough stretch. What do you do with the stock? I think, Kelly, it's actually that number that's a decline is still an acceleration of where they've been. So we do like the story there. A couple things we do like they did acquisition of SRS, which is a company in the roofing, landscaping, and pool business,

which hasn't really hit the bottom line yet. That's a positive. And also they benefit from hurricanes. They benefit from natural disasters, which is awful to say, but a lot of people are going to do renovations and things like that. Home Depot is at kind of the forefront of getting that business. And I think at some point, rates go lower, and that'll also be a positive for them. So we do like the stock.

All right, let's move on to another one that begins with H. Honeywell, the shares there rising after the activist investor Elliott disclosed a $5 billion stake in the industrial giant. It's pushing the company to break itself up into separate aerospace and automation businesses. What do you think of Honeywell and Elliott's calls to break it up? So we haven't owned the stock for probably five or six years, and thankfully, it's underperformed the S&P 500 by about 50%. Part of that reason is exactly what Elliott said. They're not getting that multiple for the aerospace part of the business, which is the faster-growing, more marginal business. I think with Elliott getting in, and they're not somebody that just makes a lot of bets, they take their time, they do good research.

I think it's attractive here as an entry point given the fact that even if they don't get the multiples that Elliott's talking about it probably has upside here. If they do start to break it off, or at least they have that discussion about cost savings, I think it's a buy here. Again, we don't own it, but it's a name that we certainly are going to look at now that it's kind of, you know, breaking it up as a possibility. Do you feel the same way about Tyson Foods? They just posted better than expected Q4 results. Somewhat higher prices, actually, for beef and chicken lifted revenues. What do you do? And I think Tyson's a name. Again, we don't own the name. It's a name that's attractive for a couple different reasons. The chicken business has been picking up. I always thought, you know, until I got in this

business, that Tyson was more of a chicken business. They actually got more beef revenue than chicken. But what's been interesting is the beef revenues, the margins have been squeezed. The chickens kind of saved their quarter, if you will. But the other thing I think is important to look at is the success of the GLP1 drugs, which is, you know, the Manjaro's or Zemps. People lose a lot of weight, but they're mostly losing muscle. And if you don't have protein to replace it, that's a problem. I think protein replacements and obviously, you know, chicken, pork, poultry, things like that are good things to own. I think you could own it here for the fact that I think people have to change their diets a little bit because if they lose the weight, they need to keep the muscles, certainly as we age.

So go for the protein and count your chickens. Michael Lansberg. Michael Lansberg, thank you very much. We appreciate you being with us today. Can we do a quick final check on the tenure? Sure. I believe tomorrow morning brings us the CPI. It might be off by a day. And it's going to be key. Look, right as we're talking about we heard Kaplan top of the hour saying December should be a question mark for additional rate cuts. 443, we're heading back up towards the 449 one-week highs. All right, folks. Thank you very much for watching, Power Lunch. Did it be with you.