Power Lunch - Power Lunch 12/24/25

Episode Date: December 24, 2025

CNBC’s Kelly Evans and Brian Sullivan take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. ���Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hi there. It's Christmas Eve, Steve. I guess that's my read, Kelly. One hour to go until the closing bell of this shortened trading day. Welcome to Power Lunch alongside Kelly Evans. I am Steve Leesman, filling in for Brian Sullivan. Stocks at record highs. And that's a positive setup for the Santa Rally. It's typically a typically going to be in the last five trading days of the year and the first two of the new year, meaning it should begin right about now.

Okay, Tom Lee is banking on the markets and they will deliver and he will join us shortly to make his case. He is in studio on set with us. Good man. Speaking of Christmas, one day left to get your gifts, but not even one day, a few hours. But survey after survey is showing consumers are feeling a little blue this shopping season. They're still expected to spend a record amount online and in stores. So where are they buying and what will happen in the new year? We will discuss all that. Financials have also been on a tear. I don't know if you've noticed the big banks reaching new highs day after day. Is it still a good time to get into some of these names? We'll get you the answer from the bank expert over at UBS.

Okay, we start with the markets as we are less than an hour from the close of this holiday short and trading day. The S&P 500 hitting a new all-time high, fresh off of yesterday's record close. A record close today would be the 39th of the year for the S&P. And our next guest thinks there's more room to go. Before the years over, let's bring in Tom Lee, head of research at Fundstrat and the CNBC contributor. Tom, just tell me something. this Santa Raleigh, is it a thing like a fake virtual thing, or is there a fundamental thing behind it? I think there's actual real stats behind it.

You know, the stock trader's almanac, the Hershville guys actually have shown that this is a good period between basically the one week before the end of the year and the first few days. But why is it? In other words, I always thought like people around this time are maybe selling stocks to give money to charity, pay bills, those sort of things. things, I would think there would be downward pressure on the stock market at the end of the year. And by the way, especially on a good year, trying to lock in gain so it's in the calendar for the records. Yeah. I mean, I could say that I can see window dressing playing a role into year end.

You know, professional money managers want their winners to look good, so they bid them up into the end of the year. And then the first part of the new year, I think, makes sense because that's when people allocate into asset classes, so there's money going into stocks in the beginning of the year. That's the first couple parts of you. I'm an anti-technical person, Kelly. You don't like the chart stuff. I don't like the chart stuff.

I'm a fundamental guy, and I want to know if there's fundamental stuff. That was the thing. Tom, let's talk about which areas you think for the new year might be areas that are not well covered and maybe ones that are a little off the radar, the sort of, I don't know, the headwind, tail-win, tail-risk things that are out there right now. Yes, I think in 2026, there's going to be. likely a more dove-ish fed and that dovesh fed will allow business confidence to recover so the ism i think recovers back above 50 and that's going to be a tailwind for uh traditional sectors

like industrials energy and basic materials um so i think those are sort of three groups that should do better in 2026 than 2025 but then there's also i think some tailwinds building for the financial services which you guys mentioned are doing one well, which is that financial services companies are really big beneficiaries of AI and they're big beneficiaries of using blockchain technology. Both will allow them to reduce their employee intensity of their business. And so I think the large tech forward banks are going to start to see margin expansion and trade more like tech stocks in the future. And that's why, you know, the JP Morgan's and the Goldman's could actually be the next mag seven. Can I just put a footnote or

footnote question on that. What about the deregulation part? Mickey Bowman over at the Fed has been very busy trying to make it easier for banks relative to regulations. Is that part of your outlook as well with the banks? Well, that would be a very big tailwind, too. As you know, banks have been strangulated, especially post-GFC, and so removing some restrictions would be helpful as long as you don't remove safeguard rails. I've seen the market this year, Kelly, trade a little bit on some of the deregulation news. It wasn't something towards the, as the year went on, it got to be more serious and the idea that they were going to be reducing. Because I can never even, I don't read the breadcrumbs careful. Oh, God, it's so miserable. You know, but it's, I hate covering back regulation. It's not

like you wake up and someone goes, oh, this earnings report came out or you wake up and so it, like, I'll read an analyst note that says, you know, yesterday in a hearing, you know, this person indicated this. And I, and so it's hard for me sometimes to draw a straight line. You're so clever about that because that's kind of the way it happens. It drops in a hearing. It's discussed by a Fed official in a speech, and then it's proposed, and then there's a 60-day comment period, and then they adopt it. So between there and there, it could be like nine months or a year, and I'm not sure when, but I've seen some of the actual adoption things move some of the stocks in a way that seems to be

what Tom is talking about, this idea of thinking about banks having to hold somewhat less capital as the year goes by, especially, by the way, interestingly, I don't know, you went to the regional banks, that they're an area that may benefit. more than the larger banks? Yeah, regional banks, I think, are part of the reason we like small caps, because as interest rates decline and as business activity picks up and potentially M&A pick up, this really plays into the favor of regional banks. Tom, it seems like you're describing a year next year that could have strong growth but

also low interest rates. Are those two things at odds with each other and intention? You know, I'd say, I know when people talk about low rates, it depends if they're looking at, you know, long-range, short rates, or even, you know, usable rates. But I do think next year is a year where parts of the economy that have been suffering from high monetary policy rates may actually do better. Kelly, can I have a macro minute here. Oh, please. So follow me on this, guys. I'm interested in your thoughts.

Guys, if you have in the back there, let's do the real spending chart, okay? We just made that, that's CBHM in case you're interested, and it shows pretty good spending, right? If you adjust for inflation, it's not too shabby. I don't know if we have it. I'm sorry that we, I'm pulling this on them in the back. Anyway, it shows, it's like this. There we go. There's the real spending.

Good numbers, right? Yeah. Let's go to the real income chart next. And I'm still within my macro minute here. Oh, they're so good. the back there. Wow. Doesn't look so good. Face plant. And now let's look at the difference between the two, which is the savings rate. And that's how we do math on national television. And there's the savings rate coming down. Suggest Tom some pressure there for the consumer. You can't keep

going with incomes being flat adjusted for inflation and spending being higher because something's got to give. What's your take on those three charts right there? Well, I mean, I think you're hitting a key point, which is inflation, hopefully, is tamer next year. And I think that that's going to be a... And at a constant wage growth, that means incomes would be higher. Yes. In real basis, right. That's right. And in terms of spending, I didn't realize that that was, there was such a gap the last two quarters. Well, it's the last quarter especially, yeah. Yeah. But, you know, in some ways I can see consumers, you know, next year there's the wealth effect from stocks. And the tax refunds as well.

Yeah, so I could help. Yeah, so I, you know, I'm not, I don't spend that much time thinking about savings rates for consumers, but I think leverage is still not too high for consumers. So I think there's still room for the consumer to be healthy. Yeah, so you see a good year for the market. Yeah. I think we've rarely had more than three years of double-digit gains. Sam Stilvall was saying last hour.

But, you know, we have had a five-year run of them, and it was in the 90s when we were having something called the Internet, and here we are in the AI boom. So I don't know how lofty my expectations should be about what this market can achieve now, or if the fact that I'm even asking, if we could have a run that strong means sentiment is to one-sided, and we're all due for some kind of correction. Yeah. I mean, I think as 2025 comes to a close in the markets up in the pool, I think we have to remember that this was a very difficult year.

because from February to April, we had a bare market, and we've had seven corrections of more than 3% this year. So as much as this is like an up 18% year, it was a year of a bear market and then a recovery. So I think next year probably feels that way, too, that it could have a replay where there's a very big decline and a recovery. But since 1928, there have been 12 large markets where three years of 20% gains have been realized. And in the fourth year, half the time, the market does better. So there's equal odds that we could actually do better than 20%. Tom, we're out of time. But real quick, your biggest risk to this whole lovely forecast?

Well, I think that complacency still is the biggest risk, you know, that we are underestimating risk, and that's watching the VIX. But, you know, my clients are pretty cautious. So I think the good news is people aren't that complacent. They're worried enough. Yeah. Tom, we'll see you a little bit later this hour for more. We really appreciate it today.

He'll give us his top stock picks, individual stocks, a little bit later on. And we also just had the last Treasury coupon auction of the year. There was some pretty good demand for those seven-year notes around $390 right now. Rick Santelli has more. Rick, how do you grade it? Yes, I gave it a B-minus. It was a pretty solid auction all in all. You could see the chart there.

Now, that's a two-day chart of sevens. A couple things to point out. On the left side, of course, that big up and down was the volatility from GDP. and what usually happens when you get big ranges based on a fundamental release, the market sometimes average it out and trade right in the middle, which is exactly what the seven year did. Up until the end of that chart where it starts to move lower, that's when the results of the seven-year note auction came out,

last coupon auction in the year, and yields moving a bit lower. Now, let's take a step back and look at a one-month chart of twos and tens. See, two-year yesterday and the day before basically was bouncing off, the bottom of its range. The 10-year was bouncing off the top of its range. You can see the difference in patterns there. Now there's some evening up going on. The evening up comes in the form of flattening yield curve. Those two charts really argued for a steep curve, but lately we're reversing those one-month patterns. Now, if you look at a week today to choose tens, you can see that we've steeped basically from 67-68 down into the low 60s. And the reason that's important is

because mid-month, mid-December of this year, we touch a four-year-wide, as you see on that chart. And the fact that we're going into year-end to me says we're evening up and that trades are coming off, not new trades going on. And finally, the dollar index continues to be the main antagonist for the end of the year. Right now, it's treading water virtually or near unchanged.

But do keep in mind that low for the year was made right around September 6th. at 96.63. It's that point on the left side there. And what you should notice is we kind of had a double top over 100. And today and yesterday are the lowest we've traded since that double top, which means that low for this year is going to be a huge support level for 2026. Kelly, back to you. Hey, Rick, just a quick question. You taught me over the years that a bond yield is like an electron. You can't pinpoint at any particular base in time. But think about it in terms of

ranges. It seems like we're in a 4-4-20 range now. What's your outlook for next year in terms of the range of the 10-year? You know, I think that for the beginning of the year, I am going to look to challenge more towards the range of 4.3 to 4.45-ish, just under 4.5%. But I do think that the big range in terms of high frequency, meaning if I had to tell you what I thought the most, the largest amount of trades at what yield for 2026, I think I'll pit four and a quarter. Always good to be a little conservative with those forecasts of the bond market. They're like steering big ships.

It takes a lot to kind of. No point in, but also no point in saying. Well, but do keep in mind, we have a Fed that's easing, okay, and everybody always wants to put everything in one sentence. Oh, we're in an atmosphere of lower rates. But that doesn't mean the long end's going to cooperate. And for the long end to be sticky in that conservative range I just depicted, actually really, in my opinion, shows how high long-term rates want to stay relative to the rest of the curve.

That is a discussion we can have, right, which is you look over the course of the, what is it, 175 basis points that's been taken off, and what's happened to the 10-year over that time is not very much. So there's some elevation underneath the tenure that keeps it up and higher. As much as the Fed may want rates to come down, it's not really been the case. And it's fiscal, I would argue. I mean, right? I don't think it's inflation. You know, absolutely.

I think it's fiscal. I think, you know, there's a little bit of inflation. Listen, I don't think inflation's running away, but it isn't really moving down. And I think that is also a sticking point for 10-year, 20-year, 30-year yields. All right. Rick, thank you. We appreciate it. Last bond auction of the year.

Retail is looking to close out at third straight positive year, but we'll look at the stock still worth unwrapping for 2026 right after this. It's been quite a December for the retail names. Here are some of the top performers, Warby Parker. You've heard about it on the show a number of times, up 31% for its best month and more than a year. Victoria's Secret, how about that, a revival story, up 31% as well, best month at almost two years or more than two years.

And American Eagle, up 30% for its highest level since 2021. So if you missed on some of those moves, what do you do? Our next guest says, don't worry. We've got other retail names for 2026. Joining us now as TD Cowan's senior retail analyst, Oliver, Chen. Oliver, welcome to you. First of all, do you stick with any of those winners? Kelly, hi, happy holidays.

We are still excited about the future ahead for Warby Parker. Warby Parker's in a very unique industry, eyeglasses, which is very duopolyistic. What's happening there is real high net promoter scores in terms of pleasing customers. Also, their partnership with Google and the future of glasses. That's a positive, too, and continued store rollouts. Everybody does need glasses, or increasingly so. So structurally, it's a good industry with plenty of growth and innovation ahead. And it's one of the original digital innovators.

Lastly, it's glasses at a great price. So it offers you compelling value, too. So we have a buy rating on Warby Parker. My colleagues are also very bullish on denim in terms of what's happening in denim. And Levi's is a top idea there. Yeah, I've heard that. that actually, Gabrielle von Ruge was saying, American Eagle isn't even doing well

because of their famous Sydney-Sweeney denim campaign. They're actually selling a lot of pajamas, but regardless, they're doing well. So they're on the list. Victoria's Secret had a great month. Either one of those, you mentioned Levi's might be the way to kind of play the denim trend. What else is on the list for 2026?

And is it the case-shaped economy? Is that a real thing? Is that just a narrative? Are there investments you're making there? I mean, you're bringing lots of great points. Our top idea is Walmart. We've recommended Walmart for several years. I'm a great example.

I'm wearing a $50 blazer from Walmart free assembly. And Walmart's capturing the lower and middle income consumer, as well as higher household income. The K-shaped economy looks very real to us because what we're seeing in our data and our research is lots of pressure at the low and middle income consumer. The economy and what's happening, it's somewhat fragile in that the lower 50% of the population doesn't really particularly. in the equity market upside we've seen. Furthermore, the top 20% of the population is accounting for 50% of consumer spending. So bottom line, Walmart captures both

in that our data shows a higher household income customer coming to Walmart with Walmart Plus, the marketplace, AI, great clothes, their apparel trends are great. But Walmart's also famous for everyday low prices. I grew up in Nacch, Louisiana, going to the Super Center. They have the best deals.

on organic. And pharmacy and food and grocery is a hard, low-margined business. So our top idea is Walmart because you're getting that defense and you're getting the offense. You're getting chicken as well as diamonds when you think about Sam's Club. We also love Costco too. I saw that Costco receipt on your GPT of the year. I was wearing the earrings the other day. You and I are similar, Oliver. I grew up at the Super Center in Rockbridge County. But Steve, what were you going to say? I was going to ask Oliver, Oliver, I don't cover the retail stocks that I'm not much for brand names, as you might expect. But I've never quite understood American Eagle.

It seems like that's a company that was the flavor of the month, and then it was hated, flavor of the month, hated, and now it's liked again. What are they doing over there? If you look at a five-year chart of American Eagle, it's like up and down and up and down, it's riding a real roller coaster. They seem to have the ability to hang around, though.

Well, Steve, the name in the given retail, like very heightened competition. Also, the mall has been a tough and volatile place to be. Over the decades, mall traffic has unfortunately been negative. So, and there's constantly winners and losers. That's why we like Walmart with the stability of the food business. As you think about specialty retail, fashion volatility is just part of part of the reality of what you're facing and trends can come in and out. Retail investors are looking for timelessness. There's also a major AI story. So our top ideas include Walmart and Costco. We also like Richmont and Cartier, but you and I have talked about the consumer. The consumer is really at a crossroads with lots

of things happening, meaning the consumer is very fundamentally strong with low unemployment and wage growth outpacing inflation, but the consumer is sentimentally weak. So we have a bifurcation in terms of how consumers are feeling versus what they're doing. And all of retail is kind of caught in this crossroads and having to execute at change. Generally speaking, apparel is a very tough category because there are many low-cost alternatives and it's a willingness to pay model. That's why we like beauty. That's why we like wellness. That's why we like Ulta. And then gold, Cartier, luxury, high-end, lots of different ideas, but you can't own them all and you really have to change. And fashion matters too in some of these stories.

Indeed. Amazing, the higher that metal prices climb, the more people want it. Oliver, thanks so much. We appreciate it today. Happy holidays. Happy shopping as well. Thanks, Oliver. Speaking of gifts, before we go, Steve, should we check on Santa? Gregi, do you want to see Santa? Come on over here, bud. Do you see what's on the screen right here? Do you see what that is? That's Santa in his sleigh? Do you know where he's going here? Step on over here into the light, sweetie.

Right here. Look, that's right on your screen. Step up, right there. Where do you think that is? Do you recognize the map? He's flying over Tajikistan, Steve. St. Nick, Gregi, he's delivered so far more than two billion gifts. So how far away is he from our house right now?

What time do you think he's coming tonight? 12 noon 12 noon 12 noon a.m. 12 noon a.m. Is that lake by collies flying over? What is that body of water there? Seems like I fished there. No, I didn't fish there, but I did visit it. I don't know where that is. Is that Tajikistan? Yeah, so he's coming our way. Fascinating. Uzbekistan now, we're told coming up. Healthcare having a moment. The sector is headed for its best year since 2021. Thank you, Greg, for that help with all that. So which names could lead health care next year? We're going to ask a top strategist next.

Welcome back. Healthcare is the best performing sector over the last three months as investors rotate out of high-flying tech and AI names. In favor, better valuations. Our next guest is here with his outlook for the sector and his best ideas for 2026. Jared Holtz is a health care strategist at Mizzouho. Jared, before we get to what I think is the most interesting part of this,

let's do the broad overview. Had a nice run? Yep. Is it over? Does it continue to 20? 26 for the sector. I think it'll continue for a little bit. It's still been a multi-year laggard, underperform the S&P by 20% in in 2023 and 24. This year, about a 5% laggard. So I think there's still room to go. It's been a nice six months, but I think there's a reason to be

bullish. You can have a rotation because people are scared of where they were, or you can have a rotation because people are happy about where they are. Which one is it for health care? I think it's a combination of both. I think you obviously have to be cognizant of what's happening in big tech is the main driver of the market. But I think we're finally starting to thaw out a little bit. I think the drug pricing rhetoric for me is the biggest thesis behind getting more positive on health care. It's been such a noisy year as far as drug pricing. We have the IRA kicking in next year. Most favored nations has been discussed. A dozen pharma companies have agreed with the White House on pricing mechanics. So I think that out of the way leads to a better

year for pharma, biotech, and kind of anything associated with it. I still have one more question. before we get to the most interesting part, but walk me through the day in the life of the health care analyst who wakes up in the morning, and the president has tweeted out that he wants drug prices lowered by 30% at 3 in the morning. What's that like? It's nightmare. Is it really nightmarish? It's been tough. I think it's been, it was tough in the first administration. I think even with Biden, with the IRA and trying to figure that out, it's difficult. And now with, you know, all the theatrics behind, you know, the second Trump administration, it's very difficult. So do you like wake up, cup of coffee to the spread?

sheet, put the new drug price in and come up with a new P.E. Outlook? Is that how that works? I think it's a little bit more complicated. I imagine. Right. Yeah. Part of it is that. But, you know, the multiples in pharma have obviously, they've gone up a lot since all this pricing. So I think investors are finally saying maybe we can own the group now that the news is out of the way. All right. Let's come back to that. But I do want to get to this issue of biotech, which you think is the most interesting look for next year. Walk me through why that is. Well, it's been a great four to six months, the best we've seen. I don't believe that the XBI, and that's really the best proxy for a small and mid-cap biotech,

has ever had six months of positive returns in a row, dating back to the genesis of this index. You've gone through some bull markets for biotech. So the fact that you're saying that about the stretch now is really significant. Can they get that up, the XBI up? I'd like to take a look at that. Because walk me through what the outlook is. Yeah, so it's been a nice ride. I think a few things are of note.

I think the negative narrative around drug pricing and so much. many of the things that we've talked about for the better part of five years are starting to evaporate a bit. You do have this narrative around interest rates going lower. I think that's helpful. Although there isn't perfect correlation, I think it does help investors get their hands around this. The denominator of biotech stocks stopped increasing exponentially. That, to me, was the biggest reason to be bearish for so long. We had too many assets to kind of contend with and analyze. And then the other thing is there's been so much merger activity. Deal mania. 20 deals over $500 million just this year in publicly traded equities, not to mention a bunch

in the private domain too. What about the AI promise in this field? People are talking about the idea that the computer puts molecules together that humans can't do. If anything, it's a positive, right? It's tough to say how dramatic of an impact it's going to have. If you ask the pharma companies, I think they've been using computer guided models for drug, discovery for the better part of a decade. So I don't think the industry thinks there are major shifts happening, but if you had to gamble on one way or the other, it's going to be more helpful. I'm sorry, I have one more question on the politics of it. Is this a sector that you think is one where investors should be concerned because there's so much interest from the political world

in the idea of, for example, when the president says health insurance companies are making too much money and basically sort of cramming down on that and all that influence, is that one where investors should be wary of the sector for that reason? I think that's been the chief variable that's caused its demise or underperformance over the past few years, for sure. Yeah, no, and now that overhang perhaps is removed and look what a run it's on. Jared, thanks so much. It's nice to finally talk to you about a better run for these stocks as well. Jared holds.

It's not just health care that's been doing well. The financials are also flying with some names hitting new record highs, but can you bank on the banks for 2026? That answer is next. Welcome back. The financial stocks have been on fire lately. It's not just the AI trade and things like that that have been doing nicely into year-end. The financial sector is up almost 8% over the past month and hitting a new all-time high today. It's been driven by a lot of the large-cap banks with City, Wells Fargo, JP Morgan, and Bank of America all hitting 52-week highs today. Can the momentum continue into the new year? Here to give us her take on the best and worst position is Erica Nigerian, senior large-cap bank and consumer finance analyst at UBS. Yes. Erica, what's driving this? I know for a bank like Goldman, this is the second year now of really strong returns. So are we starting to get back to less interesting entry points or no?

So, you know, you asked first what's driving it. It's really three things. Number one, it's deregulation. Number two, it's the return or the acceleration of activity levels, whether it's capital markets, which is clearly impacting Goldman's stock or lending and lending to middle market companies hopefully into next year. And the third would be the dream of a steeper yield curve. And those are really the preconditions for outperformance. Now, can this continue? I think you have to be a little bit selective in how you ride the momentum into 2006 because it is rare. It is rare that bank stock outperform the S&P for two years in a row. And when they do, it's typically when they come out of recessionary periods.

So they're coming from much, much lower valuation points. The only time they outperformed in a non-sort of recovery scenario was 94 and 95. So we'll see if we'll have that kind of sort of unicorn two years for the stocks. Right. And Bank of America is one of your picks for next year. So is Capital One in Huntington. Tell us why. Sure.

So for Bank of America, the valuation is still undemanding. And you get all of the things that I mentioned, dereg, you know, exposure to a steep curve, and the acceleration activity levels in both the lending side. capital market side for a more reasonable valuation that you're seeing in a JP Morgan, for example, Morgan Stanley or Goldman Sachs without really sacrificing quality. You know, Capital One, in my opinion, is a multi-year story. You know, keep in mind that while it's very tethered to the consumer, they have actual competitive advantage in that they're one of one in terms of being both a debit issuer and a network in the United States and one of four global credit card

networks around the world. And for Huntington, look, I think the message for me, too, here is that the regional banks have not participated in the rally as much as the money centers have. And I think it's time for them to shine in 2026. So Huntington is one of the best position banks. It's done two deals in Texas already. It has outsized growth relative to peers. And it's got a great management team. Erica, first of all, it looks like you're really prime there for Christmas. I'm looking at the tree and you got the wreath and the stockings on the on the fireplace looks awesome um but here's my question and i want to get the two-parter what's the deregulation worth to the banks and is it worth more to the smaller banks than the bigger banks so the deregulation is worth about 150 basis points near term

and returns now we're in a very commoditized business and jamie diamond loves to paraphrase Jeff Bezos, your margin is my opportunity. So that's sort of a short-term opportunity for ROE. However, what's very different, Steve, in this administration versus last, is a lot of the DREG has actually focused on the money center banks. So under Trump 1.0, it was very regional bank focus. And this time around, it's big bank focus. And that's why, that's why the gap between, you know, book valuation and future ROEs is wider with the money center banks, because they're anticipating a much steeper improvement in returns on equity. Okay, here's the most complicated question I think I can ask on national television.

You're ready? Ready. I happen to know, having covered this dismal industry for a very long time, that banks do not want to merge because they don't want to reach a regulatory cap. In other words, don't get bigger than X because then you're subject to worse regulations. Under the Trump administration and the new regulatory regime at the Fed, is that any longer a constraint? And as a result, could you expect to see potentially some bigger mergers that put some of the bigger regionals together that now might require or necessitate or

otherwise attract a premium because of those mergers? And I'd be a little bit of a grinch this Christmas. Do you know why banks don't merge? Because you could be like the king of your country club make tons of money and, you know, be one of four thousand banks and not be under scrutiny, right? Banks are sold and not bought. So there hasn't been a significant motivation, right? Because you can, you know, make a decent amount of money and whatever. So that's just me being grinchy. But to your question, I think that investment bankers are not having a fun Christmas. I think you could see big sweeping announcements in the first quarter and the second quarter of next year. Why do I say it's front-loaded? Because you do have the midterms coming up, right? And

while the administration's permissiveness in terms of large deals should last through the duration of the presidency, you know, there's still a little bit of hesitation in terms of doing large sweeping deals if you're going to get yanked in front of Congress and, you know, ask to explain that deal. But I do think, by the way, all of those sort of limitations that would sort of cap your desire to grow is part of the deregulatory construct, right? They're trying to get rid of those sort of, you know, false, like, you know, levels where you're saying, okay, I can't reach 700 billion because then I will have much more. We have to go, Erica, but I just want to make sure I understand. You're saying that the first half of next year could see some bigger bank mergers because they're trying to get

in before the elections and make use of the greater regulatory permissiveness, I guess, the administration is what you're saying. Huge. Good. That's a big deal, Kelly. Almost as big as that tree. Do you know how much guilt and shame I feel looking at Erica's house right now. We have a three-foot tree that I found in my mom's basement and I'm missing stockings for two of the kids. I'm like, I'm like, Erica, move a little bit to the side so we can see the full tree there. That's at my parents' house. Don't feel guilty. This is my mom's. Oh, I see. Taking credit for not your tree. Taking credit for that should be, that's a now. Now, new favorite person, Erica.

Thank you, Erica Nigerian, UBS Senior Large Cap Bank, and Consumer Financial Analyst. Let's get over to McKenzie Sigales for a CNBC news update. Hey, Steve, Ukrainian president Vladimir Zelensky says that he would be willing to pull back troops from the Eastern Dinesk region in Russia, also pulling back in the area. Zelensky said it could be a free economic zone monitored by international forces. It's part of the 20-point plan that negotiators from Ukraine and the U.S. agreed to in recent days. Russia has yet to comment. heat guard Terry Rozier asking a judge to throw out sports gambling charges against him,

arguing that the government overreached by turning better's use of non-public information into a federal case. Prosecutors alleged Rozier tipped off a friend in 2023 that he would leave a game early, which gamblers then used to make more than $250,000. And Taylor Swift is donating more than $2 million to charities this holiday season. According to the organizations that received the funds, the singer gave a million dollars to Feeding America, another million to the American Heart Association, and a, quote, generation donation to the Recording Academy's program for struggling artists called Music Cares. Steve, sending it back to you.

Thank you so much time now for a mystery chart. This stock underperformed in the first half of 2025, rebounded in the second half. Investors hoping it can deliver on its A-Dash-I ambitions to keep up with its peers. A-E. A-E! We'll reveal the name next coming up. Welcome back. Apple shares up roughly 10% this year, but that headline number mass a choppier story, the stock underperformed through much of the first half, weighed down by China demand concerns

and questions around Apple's AI strategy and tariffs, I believe, also. Now the focus shifts to 2026. Steve Kovacs joins us now with the tale of two halves. Yeah, let's talk about that first half because a year ago, when I was here telling you what to expect for Apple the next year, we knew Trump was coming into office and we knew no one was more exposed to Terrace and Apple. Oh, boy, did we see that, you know, going into the Liberation Day in April and so forth. And remember, the first six months of this year, guys, we just saw Apple vastly underperform. It was down as much as 20% year-to-date for so much there. That's the middle of the chart right there. That's the middle of the chart that you're seeing that tip there. And then guess where things turned around? Tim Cook shows up in the

Oval Office, presents that nice little golden trophy to the president, get some tariff relief, and then we're off to the races. The last six months up, as you can see here, about 33, 34% there, only up 9% on the year and underperforming. So the tariffs, big overhang for those first six months, but then the last six months, going to the end of the year, we're really talking about AI and whether or not they can land this plane that they failed to do earlier this year.

So who shows up next year? Jekyllar Hyde, the Yinnardang, which is the guy. It's, well, they've had so much. We've been talking about this a lot, too. the last couple weeks is all this executive turnover and whether or not they now have this team in place to actually realize their AI ambitions. And like I was telling you guys yesterday, even if this new series is amazing, doesn't matter because it's got to be so amazing that it gets people out there to upgrade their phones because they're giving it away. Could you just walk

through the upgrade story, which is that the Siri ends up being so awesome. Yes. That my phone is all the 15s and younger is? You need a 15 or better? So 14 and below, which is a huge component of what's out there. Right. Ends up being too old and clunky to run the new awesome series that I can't live without. That's exactly right. And when we were here a year ago, we thought that was going to happen coming into 2025. Dan Ives and all these big mega Apple Bulls thought that scenario is going to play out.

It absolutely did not. So this is another chance for Apple to make that happen and potentially use that artificial intelligence system to enable some new hardware products. The phones sold well, though, no? The phones, not the 16th. This current cycle is selling well without AI. Without AI. Are we in 17? We're in the 17th cycle right now.

I see. And no AI on here. It's just new designs and better cameras and things like that that are getting people excited. But to see some benefit in the stock, in the revenue sales growth and so forth, you're going to have to see it move more iPhones. And it has so it's going to really have to be amazing. Enormous pressure on Apple next year to make that happen. Or we're going to have another interesting first six months. For Apple.

Just like we talk about with the commodities world, you need a super cycle. Exactly. Super cycle. It's always right around the corner, Kelly, that's super cycle. Thank you for reporting

and thinking on this for us. You got it. Thanks, guys. Merry Christmas. And then coming up, he is making that, me, but somebody else, he is making his list,

checking it twice. Market guru, Tom Lee, back with his picks that look nice. Welcome back to an early edition of Power Lunch today, and why are we early?

Because the market's closed in four minutes, as you can see, So let's bring you right to that point with Tom Lee. We brought him back, and he has some stocks that are making his nice list this holiday season. They're going to kill me in the back. But Tom, we have to start with something that everybody's lighting us up about since we talked to you 45 minutes ago, which is do tell us about crypto, okay? If they want to know what's your target there, Bitcoin, what do you do with it?

It's the one thing that's not part of this meltup that Steve's been observing here. Yeah. Well, crypto was having a good year in 2025 until October 10th. And suddenly the paths of crypto and gold and risk assets diverged. You know, I think as we look back at that moment, there was a liquidation event that was similar to 2022 when FTX collapsed. So it took eight weeks for markets and market makers to sort of recover in markets to begin to find their bearing. I think that's what's happening now.

The outlook for crypto is still really good for the next five to ten years. I don't want to overuse the word super cycle, but we know that Wall Street wants to tokenize everything, whether that's Vlad at Robin Hood or Larry Fink at Black Rock, and that's going to bring a lot of efficiencies to Wall Street, but it really brings the use case forward for something like Ethereum. So we're pretty bullish. I think Ethereum, which is around 3,000, can easily get to 9,000, 7,000 in early 2026. And then over time, as it starts to be competitive with payment rails, you know, could get to the 20,000 levels. So I'm pretty bullish.

I like Bitcoin. I think Bitcoin is suffering from gold envy right now. Yes. And that liquidation event, gold's been a great asset now over $30 trillion. But I think, you know, again, Bitcoin is a genuine store value. It's supply limited. So I think in next year is really when Bitcoin can sort of begin to recover. And, you know, the 200,000 level makes a lot of sense to me.

I want to run through some of your picks, and Steve can take the server. We need to go with it. NVIDIA, top five idea, AMD, meta, Goldman, Areston networks. Your bottom five is that names you guys disfavor or they're just the second half of the top five list? Yeah, it's our core research core list of stocks we like. But the bottom five are the ones that maybe might. or our technician, Mark Newton, don't think are as timely. So they're naughty, but not like, sells.

Okay, they're not. CrowdStrike, Costco, Palo Alto. Tesla is on that list. What is your message to the Tesla bowls and the list, Towers Watson? But go ahead. Yeah. I mean, I think, you know, Tesla has been on this research list since 2019, so we would never sell Tesla because Elon Musk, there's so much future present value

created from a lot of his ideas, whether it's going to be Optimus Prime or Robotaxies or X-A-I. But in the near term, you know, Tesla's had a huge move recently, so I think it is just a question of consolidating those gains. Tom, when you talk about the top five, it's diverse industry-wise. Is there any particular industry that you like more than others as opposed to just the individual stocks? When I think of 2026, I mean, I still like tech. for next year, but I do think it is ISM sensitive and interest rate sensitive and

dovish Fed sensitive. So it's also financials, industrials, energy, and basic materials. So the Fed probabilities, when I look at them for next year, I got nothing happening in January, not so much happening in March, maybe April, more likely June. What's your take on the importance of that to the market? I mean, that timeline makes sense because I think until the second half of next year, we're going to have a Powell as Fed chair. Yeah. And from that nomination to confirmation window, I mean, you'd have a better sense. That's really when I think the market starts to price in a more dove-ish Fed.

So it makes sense to me that the first half is as a market that's legacy pricing Fed share Powell and monetary policy. And you're sticking with the Mag 7? Yeah, I still like Mag 7 for next year. Let's give a quick check as we wrap this up. Friends, this is the closing bell. And the easy headline from today is going to be that the S&P is going out on this holiday shortened session at fresh, all-time intraday highs. Steve, we hit that level earlier today.

The Dow's up about 280 points. Remarkable, isn't it? There you can see. Okay, the market closing on this shortened Christmas Eve Trading Day at a new record high. It's good to be here. Yeah, it means it'll be a record close as well. Merry Christmas Eve, everybody. And Steve, thanks for being.

here. Tom Lee, thanks as well. Closing bell. Overtime starts.