Power Lunch - Stocks waver as Wall Street digests Monday's strong rally 03/25/25

Episode Date: March 25, 2025

Stocks are mixed today, as investors tried to build on the previous session’s gains, which were largely sparked by hopes of trade tariffs being narrower in scope. We’ll tell you all you need to know today. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome to Power Lunch with the stock market and your money digesting consumer confidence, tariffs and upcoming earnings. All of that could move your money and big corporate mergers. We're going to dive into both. Plus, is the American auto industry about ready to hand Japan and Korea its market share? We may be. We'll tell you why. It's a great story.

Here's where the major averages stand right now. Dow slightly lower. As mentioned, it's been bouncing around the flat line, but moving a little bit more to the downside the past 60 minutes or so, down 70, 7. the S&P down four. And by the way, Jeff Kilberg last hour mentioned if the S&P could climb back towards 6,000, that would increase his conviction that the correction or kind of selloff is over. NASDAQ, well, that's in the green by 23.

Treasury yields have come in somewhat following a dip in consumer confidence this morning, the tenure right around 430. And the expectations component of that report really bad, no way to sugarcoat it, kind of pointing towards consumers racing, Brian, for recession. Yeah, also watching oil. Oil is slightly down today. Here's why maybe there is news of a very partial ceasefire between Russia and Ukraine. We don't have a lot of headline.

It sounds like a big headline, and it may be, but the White House saying the two sides have just right now agreed to stop fighting in the Black Sea and banning strikes against each other's energy facilities. So not a huge, not an end-of-war headline, but still something that you need to watch. and hopefully the first step toward a larger and more broad piece, just something to watch in the market. All right. Overall, as Kelly laid out so elegantly at the top of the show, it is not a great day for your investment dollars. However, here is a positive data point to begin this hour.

The S&P 500 now just under 5% higher than its intraday market low back on March 13th. In other words, in the eight trading days since March 13th, stocks have mostly climbed back up. And though, yes, we are still off our recent highs, the S&P 500 has soared 40% in just two years. And it is very important here to remember that, yes, stocks can and stocks do go down, sometimes by a lot. One of your first guests recently tweeting out a reminder that over the last 75 years, the average intra-year market drop has been 14%. And if you were stressed about the current drawdown, which was just under 10%, maybe, just maybe, the stock market is not for you. And that's okay. Let's welcome in that guest.

He is Peter Malook. He is the founder and CEO of Creative Planning. Chris Grosanti of MAI Capital is on set. And Peter, you and I were sort of retweeting and going back and forth on this. And I appreciate you coming on because we do have to remember that stocks can go down, stocks will go down. gut check, but ultimately, I thought we were supposed to buy lower and sell higher. When did we seem to forget that? Well, first of all, you're one of my favorite follows on X or whatever we happen to be calling it today. But yeah, I mean, the normal is not what we had for the previous two years, the chart you showed at the beginning of being up 45% over two years. And not only that, but with record low volatility, that is not normal. What is normal? What is normal?

is what we're experiencing now, which is a market that doesn't go straight up, and big tech stocks actually taking a breather on occasion. Average stock market drop in any given year is about 14% from top to bottom. We didn't even experience that this year yet, probably. And so, look, we're just back to normal, where the market will find its way, but it's not going to be a perfect straight line. The reason we get stocks doing better than bonds over the long run is because of the investors willing to pay the price of this volatility.

embrace it. This is, Chris, a critical, and I would expect nothing less, by the way, from Peter Malook, that's a critical point that he's making, which is stocks are more risky than bonds for a reason. Sure. They have risk. Theoretically, you are being compensated. In other words, you can have more upside, but you could also have a lot more downside because stocks will not, do not, and should not go up every single day. Sure. And, Brian, but what this conference is, conversation is missing is valuation. So where we're entering the play here is valuations are still quite high. They're the second highest in 100 years. Only higher was the internet bubble. So I would say you got to throw that into the mix too because, yeah, they go down. Yeah, they have a drawdown of 14% on average over 100 years, but there's a lot of variation there. So I don't think we're out of the woods, although I do see some comforting signals short term. What are those signals? And curious kind of how you're positioning. Sure. Sure. So we got two events in April that are going to make us or break us, basically. You've got tariffs and you've got earnings. So if those go the right way, it's like my NCAA bracket, I can find a way to victory if certain things happen. But they have to happen. Number one, the tariffs have to be judiciously applied, not laid out with a big paint roller, but targeted and small enough that the market can shrug them off. The second thing is earnings have to come in. The good thing, Kelly, is that earnings expectations.

now have come down quite a bit. And folks are not expecting kind of the grand slam of earning season. If we just meet expectations for the first time in a while, I think that's going to be settled. Fair enough, Peter, but I don't know if we should be surprised that things are going to slow down. If they don't slow down, we have a problem. And I'll tell you why. Number one, we got trillions of dollars of relief thrown at us during COVID. Only a small percentage of that actually went to COVID.

A lot of was just, here's some money, have fun. interest rates were at the lowest level they ever were. So we're coming off of a market sugar high. I don't tell me what you think you're the guest. I don't think we should be that shocked if the consumer slows down from here because credit card debt is at $1.2 trillion. Right. I think that there's what the consumer is going to do and there's sentiment.

I know that we have record negative sentiment came out today, which we haven't seen since 2013, of course, the stock market's up 400% since then, and consumer sentiment's actually a contrarian indicator, so it actually makes me pretty bullish. But no, if the market was going up 20% a year, that can only happen because of persistent inflation. That's, believe it or not, not good for the long-term investor, but it speaks to a degradation of the dollar that can create an existential crisis for the United States, creates separation between the working class and everybody else. It's problematic. We want there to be growth, but we don't want it to be inflation, all about inflation. We want it to be about earnings, and we want it to be about

innovation and things like that. I do think from a valuation perspective, the market, you have to segment the market. Globally, there's a lot of value all over the world, despite the recent run-up overseas, small-cap stocks, a lot of value in small-cap stocks. And the S&P 500, you take out the MAG-7, there's still some value there. The MAG-7, there's still some value there. is the one that's really gone crazy from evaluation perspective when you look at the markets. But you can even make the argument there, hey, the AI revolution is largely taking place in these seven stocks. These seven stocks are bigger than most nation's economies, big nations with large GDPs, bigger than their economies. You could even make a case that that's somewhat reasonable as well.

So I'm just much more bullish over the long run. You know, I never make a prediction over the next couple quarters. Tariffs is obviously going to drive a lot of that. And I'm not going to, I'm not overly confident. We're going to have pinpoint precision here. We've not really seen evidence of that so far this go around. So I expect some things to be broken along the way. Peter, you make a really good point, which is that pessimism. That's my last point on why I'm somewhat short-term bullish.

Pessimism is at record highs, just as Peter was saying. So we've got kind of 2009 levels of pessimism, yet we don't deserve to have that. Things are not nearly that bad. The other thing is tariffs are an overlay on an otherwise pretty strong, So I think in the short term, we're in good shape if we can figure out the tariff issue. What I'm more worried about longer term is a weakening economy as we go towards the end of the year. Well, the economy is weakening. I mean, we all agree with that, correct?

Well, you know, I don't- Slightly. The economy's been weakening for more than a year. Right. It's weakening from a very strong level. But Brian, if we can grow two to three percent. But it's from a high level. Fine.

And that gives us a little ease on inflation. so I'm okay with that. But obviously I don't want to going down to 1%, but 2 to 3%, which is I think where we are now and where I think first quarter earnings will come in should be just... It was just... And we're going to go, Peter, but I will say this.

And you know what? I had to delete a tweet because I got so much... It was like I was somebody else's rented mule was being beaten because I talked about retirement because I heard on a non-financial network that retirees are being, quote, wiped out because the S&P was down 4%. If you're wiped out

because the S&P is down 4%. You either should not be in the stock market or you are a long way from retirement. I mean, that's it, right? I just don't, there's like a craziness that's going on right now over the last couple of months about a pretty normal downturn in the market, I think. Yeah, completely normal. We should expect more of it. It happens under Republicans and Democrats.

What we came out of, I think you described it as a COVID spending haze, which is exactly correct. I mean, when you drop trillions of dollars out of the sky on top of everybody, you expect the prices of everything from a ticket to Disney World, a trip on Southwest Airlines, and stock prices to just rocket. We've got to get out of that economy and into a healthy economy with steady growth. Maybe we're on our way to a Goldilocks economy, but it's very rare to get it perfect. The plane's going to be bumpy when it lands. And the market may go down 20 percent. The market may continue to fall.

The economy may continue to fall. It'll be like Kurtz and apocalypse now. sell the house, sell the car, so the kids. I'm never coming home. But for now, we're not there yet. Peter Malook, creative planning. Thank you. Chris. We'll see you in a few minutes. Great. Thanks, bro. And after the break, why Tim Cook's visit to China could be a bad sign for Apple. We'll have that story and much more when Power Lunch returns. Welcome back. Tim Cook is visiting China this week as the company launches Apple Intelligence, but without the Siri AI feature that was delayed. And it comes as they're losing some market share in China to Huawei as well.

see if Kovac is here to break this down. So they're launching Apple Intelligence in China now? Soon. So what they did last night was they had a developer session with some Chinese language developers. And the idea here is, okay, this is like their first step before they launch Apple Intelligence over there in China. We didn't get a release date, though. We do know that this spring they're going to release the Chinese language into Apple Intelligence. And presumably probably next month or even in May, it'll actually come to China. But like you said, Kelly, it's going to be without some of those key features. the big one that they promised that big Siri AI upgrade. And that's why it's important just last hour is on with you, Kelly.

We talked about this. WWDC is starting on June 9th, and that is Apple's next chance to kind of write this ship and talk about artificial intelligence. But back to China for a little bit, sales are just down there. Sales were down 11% in the December quarter. It's from a peak of about $25 billion a quarter in the December quarter, their biggest quarter, down to 18 and a half this past quarter, past September quarter, rather.

So a lot of work to do. So what could turn it around? One thing, not really Apple Intelligence, probably because of this missed upgrade, but there are these government subsidies, guys, that's happening now. You were just talking in your last segment, Brian, about government stimulus.

That's what's happening in China. It's going to help people buy smartphones. Tim Cook hinted during the last hearing called that might help turn things around or at least give a little boost. Will it help them buy Apple iPhones, or will it only help them buy Huawei phones? The iPhones, well, that's the thing, right? The iPhones are eligible for this

subsidy, so that's, yes, but this is something we've been noticing. They keep losing, Apple keeps losing market share to Huawei in that country. So are people going to go out and just buy that Huawei phone at a subsidized price? Or are they going to say, hmm, I can now afford this iPhone and get that instead. That's the real question right now. Well, and I guess also the, we mentioned this earlier, but people are now looking and saying, okay, is Apple turning to more Nvidia chips because it needs to catch up on this AI race here in the U.S. And it's way early to know. They've also announced the date for WWDC here in June.

So the pressure is now going to, as much as they have to perform in China, they have to perform here too. Yeah, exactly. And who knows what kind of chips they're using? I told you this last hour, actually, we do know, for example, they've used Google's chips. Google makes its own AI chips. They've used Amazon's AI chips to train some of their large language models. They possibly already have been using Nvidia. We just don't know it yet.

But then buying more chips for that makes sense. The way their system is set up now, though, and the way when you use Apple Intelligence, it's actually using their own Apple chips to run all those processes in their secure cloud. And so it's a different little take on artificial intelligence that we see from all these other hypers. They're not spending $80 billion a year like Microsoft is on these chips. We haven't seen that yet. But we will want to look at what their KAPX spend does look like if that report does turn out to be true. Yeah.

Steve, thank you. Thanks, guys. Let's just hope they buy it. And Steve Kovac is not in a line by himself outside the Apple store. Again. Again, you said it. I didn't want to say it. It was the tell.

He's like, I'm here, Joe and Becky. I'm the only one. So, Steve, thank you. Thanks. All right, China may not be the only problem for Apple, the reason why. The other reason why next in Market Navigator. All right, welcome back to Power Lunch. Before we navigate these markets, I want to show you there is a little bit of a difference of the market right now.

The Dow, which I don't know professional trader watches, but it gets headlines. The Dow is down a touch, down one-tenth of one percent, the NASDAQ, the better news. Let's focus on the green. It's Tuesday, worst day of the week. Three-tenths of a percent of a gain. Dom Chu, what are we navigating today? Well, the Dow is still the People's Index, right? And we're going to talk about a Dow component right now.

The bulk is Dow. Yeah, there you go. All right. So Apple, speaking of Dow components and everything else, shares are down 10% so far this year. Now, some are suggesting that the stock may actually be a bargain, given what we've seen so far, but your next guest begs to differ and thinks even at current valuations, Apple may be tough to justify here. We're talking to Tony Zhang. He's the chief strategist over at Options Play, and he's here to give us his more bearish outlook on those shares.

Tony, Apple has been one of the better performers among Mag 7 stocks since the recent NASDAQ bottoming. people like it. Why don't you? Yeah, I completely understand. Because of the headwinds that Apple continues to face despite, you know, the recent sell-off that we're seeing here, you know, iPhone 16 sales have been really underwhelming. They've really fumbled the rollout of Apple intelligence now to the point where Apple's, where the iPhone 17 is likely not going to have some of the features that they, you know, we're talking about last year for the 16.

And then really they stake their entire future on augmented reality with the Vision Pro. And at this point, it's not really clear that they're a leader in that particular space in either the hardware or the software side of things. So I think it's becoming increasingly difficult to justify the nearly 30 times forward earnings that Apple's trading at, given that we're heading into an environment where the consumer is clearly being a lot more selective in terms of spending. And the next iPhone 17 upgrade cycle, I'm not sure is going to be. be the big driver of sales that iPhones have historically been for Apple. And I think that given the rally that we've seen a little bit here over the last couple of days, and Apple, as it approaches that 220 level, it just makes sense from a timing perspective that it's about time to potentially add some bearish exposure here to Apple that aligns with the broader story here,

which is the fact that valuations remain quite elevated relative to the S&P 500. All right. So Tony, navigate us, if you will, through the trade. If you have a more bearish outlook, at least kind of near to medium term, how exactly do you express that? Yeah, I think that, you know, as you say, it's hard to be bearish on Apple. So I think the right trade structure here from an options perspective is to sell a call spread. And what that allows you to do is take a neutral to bearish view here for Apple. So even if it just stays put here and doesn't move much higher, you'll be able to profit. I'm going out to the May 2nd weekly expiration. And I'm looking at selling, the 225-240 call spread earlier today. You can collect a little over, just a little under $5.50

for that call spread. And that allows you to basically collect some premium in this more volatile environment and be profitable even if Apple just stay here. But overall, my expectation is for Apple to potentially fail at this major resistance level and potentially start trading lower from here. All right. Tony Zhang with the more bearish outlook there, at least near term, medium term on Apple shares. Thank you for that. We'll see you again soon. chew on the chew on this meter? Oh, yeah. How risky is that trade? It's not really a risky trade. What you're doing is you're selling some upside. You're buying some risk-protected returns there. Okay. The red looked a lot bigger than the green in the graphic. There you go.

So what you have right now is if you sell the options, right? You're collecting premium. So the upside is capped at what you have in the green there. On the red on the downside, what you in essence have right there is this idea that if Apple goes way higher, right? You see that bottom chart there. As Apple shares go higher in price, you've kind of given away a lot of the upside there so far. So you're kind of selling away some of the upside, collecting premium. That's the most you're going to get. And the risk is to the upside on that selling call spread.

You make it sound so easy. I like it. That one was a pretty, that was a better one, a risk-managed one, if you will. The markets were well navigated, Kelly. Thank you, both. We're going to keep navigating. Appreciate it. Still to come, the what-ifs of tariffs.

Our next guest says tariffs on Canada and Mexico could be bad news for Detroit. and good news for foreign automakers. They'll join us to explain next. Welcome back to Power Lunch. I'm Pippa Stevens with your CNBC News Update. Ukrainian president, Vodmier Zelensky, said the truce reached with Russia in the black sea and on energy infrastructure was effective immediately. He also said he would ask the Trump administration to supply weapons and sanction Russia if Moscow violated the deal, adding that he does not trust Russia to honor the arrangements. The doctor coordinating Pope Francis's treatment for double pneumonia said in an interview, the Pope was so close to death that his medical team considered ending treatment.

Instead, he said the team decided in mid-February to put him on an aggressive treatment course that put his organs at risk. The 88-year-old Pope was discharged on Sunday after five weeks in the hospital. And the by-now-pay-later lender, Affirm announced an expansion of its services today. A firm said it reached an agreement for U.S. merchants who use J.P. Morgan to add a firm to their checkout pages. Loans will be available ranging from 30 to 60 days. The deal follows a similar announcement from Swedish rival Klarna last month. Brian, back on over to you.

All right, Pippa Stevens, thank you very much. All right, let's talk about tariffs and your costs, because the CNBC CFO Council Survey is out. And it's got some very interesting findings about tariffs. and costs. Frank Holland is here with more on the survey and the results. Frank. Hey, good afternoon, Brian. So in this exclusive Q1 CFO survey, we asked the biggest corporate financial decision makers about the Trump administration policies and the impact on their business and the economy. 20% said tariffs will raise their costs. 15% said they would pass those tariff costs over to their customers. Another 15% said tariffs will change how their company

does business around the world. And then we have 30% saying the tariffs will lead to higher inflation. Now, this last one's a really interesting one. More than half the CFOs we surveyed said it was just too soon to know the full impact of the Trump administration terrorists because they're not sure which ones will actually stick. That answer got a total of 55 percent, especially interesting in light of recent developments over the last couple of days. So that uncertainty over tariffs has influenced many decisions for businesses. We ask CFOs how they're responding. 85 percent say the policy uncertainty has had somewhat of an impact on decision making, 10 percent saying a significant impact, 5% saying no impact at all.

We conducted this survey between March 10th and March the 18th. During that time, we had a quarter than expected CPI report, the lowest Michigan consumer sentiment figure in over two years, and a soft retail sales report. It was in this environment that CEOs shared their thoughts about this Trump administration indirectly. 30% saying U.S. trade policy, that was the top risk for their business.

And the number two and three answers, they seem to be connected, at least somewhat. They were inflation and consumer demand. And of course, tariffs seen as sparking inflation and the uncertainty overall seems to be hitting consumer demand. Brian and Kelly. Were they, you know, we always joke that the CEOs are optimistic. The CFO is a little bit more pessimistic. Did you pick up on that vibe overall, Frank?

Well, you know, it was really interesting. So we had some other questions about tariffs. So one of the answers about tariffs is do you think that tariffs are going to help or hurt the economy? So we got one answer that was very clear right here. They strongly agree 25% of them that it would not help the economy or basically tariffs. would hurt the economy. So yes, a bit more pessimistic about the economy, about the impact of tariffs overall. But when we talked to them about their individual industries, they were a bit more optimistic. But certainly some very strong feelings about these policies and the direction the

economy is going in. All right, Frank, thank you. Appreciate it, Frank Holland with the latest there. And with the new round of tariffs expected on April 2nd to some shape or form, let's look at the impact on the auto sector, where there could be clear winners and losers and a 25% tariff, our next guest says, will be too much. He points out that half a vehicle sold in the U.S. are made in the U.S., but they contain almost 60% imported parts. Here to discuss the impact is Daniel Ruska, senior auto analyst at Bernstein. And what are the deadlines on our minds now for the auto sector? Daniel, welcome. Hey, Kelly, good afternoon. Well, it's any second between now and April 2nd. I think the president said he would announce it by April 2nd. I think that's the

date everybody's looking at right now. it could be between now and then. Others interpreted as maybe after April 2nd. It's largely up in the air right now. What is the state of play if we just go on the facts of what is currently the case with terror? Where do we stand for the major automakers? So essentially there's a 25% tax on steel and aluminum imports for the U.S. There is a 10% additional tax on any imports from China. And then there are some taxes on imports from Canada. But there aren't any wide-ranging tariffs yet that have really hit the automotive industries so far. There aren't. Okay, so the real question is what, you know, given the input tariffs already,

that they kind of have to figure that out a little bit, but if there were those broader tariffs put on that have been repeatedly discussed and then kind of pushed off, what do you think the impact would be? Why do you think it would benefit foreign automakers? Well, if you look at what happened earlier in the year, a 25% flat tariff on imports from Canada and Mexico, that would increase the cost significantly, would probably add around 40 to 60 billion of costs for the U.S. industry. But importantly, this does not tariff companies like Toyota or Honda or Mitsubishi who are importing cars from Asia.

And so while Ford and GM cars would be more expensive, both from imports from Mexico and parts imports into cars made in the U.S., other OEMs that do not manufacture in Mexico, Canada or the U.S. would go Scott-free. Yeah, going back to that chart, I'm not a math-wiz, but it says 25% of respondents strongly disagree that tariffs will help the economy. It's a double negative. But I don't know what the other 75% say.

Maybe they said it would help the economy. 75% are missing, Daniel. Is there any upside to tariffs at all if they come with tax breaks? And maybe you haven't looked at it, but we often forget the idea of tariffs, I think, is to pay for other tax cuts. Have you done any analysis on that? We haven't done a bigger analysis of the economy, Brian, in that sense. But we, of course, have looked in details in the individual segments.

And what we've found is that unless you tax everybody around the U.S., it'll be very difficult to kind of benefit the U.S. OEMs, to put them on equal footing. Because somebody is always kind of falling through the cracks if you just do one country or the other. And so I think the message we have is very clear is, number one, if you want to bring manufacturing back to the U.S., well, you can try and use tariffs as a stick mechanism, but then they have to be broad-based and you should implement them step by step, so companies actually have an ability to respond to it. Just broadly speaking, Daniel, I'm a car guy, I've raced cars from us 30 years, I've driven

everything under the sun, I've owned EVs, I've driven EVs, where do we stand in the auto market? I know EVs continue to gain share. That's great. But I also know that gas-powered car engines continue to sell very well. Where are we right now in cars? Where is it going? So, I mean, if you think it from the end, we're going to EVs. I'm sorry to tell you that.

But we will see. If that's what you see, that's great. I just don't know how many people are going to, if it's their only car, how many people are going to pay $55, $65,000 for cars? car that goes 330 miles on a charge, if that in the winter. You'll need to get the price of EVs down. And if I'm thinking from the end, the end in my mind is 2050, right? So if we think about the penetration of EVs in the U.S.

that will increase in the upcoming years. But I don't think we're going to see it going as fast as Europe between or China, for that matter, because driving behavior in the U.S. is just different. But EVs will gain share year after year. Yeah, BYD, I know, is getting a huge amount of attention. Daniel, you probably don't cover them. But let's be honest, until somebody could show me their labor costs and conditions and where they source their battery materials, not sure it's coming here.

So you think we're going to have a market that for another 25 years will be relatively split? No, it'll kind of move slowly. I think it's going to be bit by bit. I think plug-in hybrids will be big part of that interim phase. We're seeing significant growth on plug-in hybrids in the last couple of months, and we expect that to continue in the next couple of years. but it will be kind of step by step.

And there are some applications. I mean, towing big, heavy things is just not something you should be doing with an EV, at least not on the technology we have today. All right, Daniel, thanks for joining us. We'll leave it there for now. We appreciate it. Daniel Ruska with Bernstein. All right before the break here, we got chairs of Lumen following on a Bloomberg report

that AT&T is an exclusive talks to acquire Lumen's consumer fiber business. According to the report, the deal would value. The unit at more than $5.5 billion that is less than the $6 to $9 billion that a previous report speculated that any deal could be valued at. Lumen telling CNBC, it of course does not comment on rumor or speculation. If it did, it would be the first and only company to ever do so. We have reached out to AT&T as well. Right now, Lumen Technologies, L-U-M-N is the ticker, is down about 12%. Forget more headlines, more clarity. We'll bring that. to you. All right, still ahead. Deal or no deal. One of the world's top deal lawyers is here with what they're seeing right now and what tariffs and rates may do to all of it. That's next. We have a lot of running room within our own portfolio. We are able to grow 10% free cash flow per share between now and 2030 by focusing on what we do and what we do well. That's what our focus is. By the way, that doesn't mean we will not look at inorganic opportunities, but the bar is

very high for inorganic because the alternative is to plow some of that capital back into our own shares, which trade at an attractive free cash flow yield and whose risk that we really understand and we can control. And that's always the balance we're looking at. That was Shell CEO. While so on with me this morning on Squawk Box when I asked him about whether or not Shell his company would be willing to buy BP. Of course, he was non-committal, but he also did not give a firm, no. Anyway, Shell is now worth more than twice as much as BP with the market. cap of $217 billion to BP's $92 billion. And there is some speculation about BP's future, given that hedge fund Elliott management has now taken a 5% stake in the company.

Elliott is known as pressing for change. The larger question for this segment is whether a deal of the size between any companies and industries could get done right now. Let's talk about that and dealmaking in general. Joining us now is Mark Tierfelder. He is co-chair of global law firm Deckerd, Deckerd, advised some of the largest private equity buyouts, a longtime friend. Mark, thanks for joining us. Brian, pleasure to be here with you and Kelly. I'm not going to put you on the spot about oil and gas and BP. Don't worry.

But could a deal of that size or even close to it in this environment get done right now? Look, as your headline said, uncertainty and impact on dealmaking, right? The uncertainty right now and the volatility that flows from it is certainly good when you're thinking about trading, right, and ability to make money in that sense. But underwriting to M&A and strategic investments, whether financial or strategic buyers, you need an intermediate, to long-term view of how your assets are going to deploy and the return on capital that you're going to get. So all this uncertainty is going to make deals very difficult to get done. As each of you know from being long students of the market, right, the first quarter after a new president comes in,

even when that's a pro-business, anti-regulatory presidential administration, you often see deal flow really become more bond. And it doesn't start to pick up until you start to see how that first 100 days settles. Plus, look, oil and gas, when you talk about needing to know the ROI, how do you know the ROI? I mean, this is an industry that's still in transition. You still have major questions about these assets. And I was going to ask if you think that would even go for a premium at this point. Or, I mean, look at some of the take unders we've seen in the industry lately with the deal environment. Would that potentially be one of them?

Absolutely. Great point. And I think one of the things that's important to remember, though, is even with all this uncertainty that's out there, there are some segments of the economy where there is actual certainty. So I was just with a very senior banker who's advised on a lot of large deals yesterday. And he was talking about that even if you discount the AI power projections by 50%, the driver for M&A and for equity capital market activity in around the power, utilities, certain parts of the energy sector and the correlated parts of the infrastructure business should be going full steam ahead. So Schill just needs to have an LNG data center angle, a electrification angle. That's what it sounds like. Wael, if you're out there.

Well, listen, Cal-Pline. Better than Kong Sol. That's it. Good reference. But Calpine getting bought for $19 billion by Constellation, maybe something. But listen, I know you travel over the country. I've known you for a long time, all over the world. And, you know, we saw Europe struggle for years.

The European stock markets have been kind of hot lately. Their borrowing costs are about half ours. Is Europe back? You think Europe's private equity, M&A game is going to start to resuscitate? You know, it's a little bit too early to tell. We've certainly had lots of negative growth across Europe in the M&A business. It's been quite slow for a number of years. Whether or not now is the time that that's going to turn, I'm not so sure.

I think there are a lot of things, though, the long-term trends that are lining up to refocus capital coming back into the U.S. It's still the best consumer economy that's out there. There's lots of opportunities. So I'm not necessarily sure, notwithstanding the fact that you see a rise in the equity markets over there, that that necessarily means that investment dollars and strategic M&A dollars will be directed at Europe as opposed to eventually coming back to the U.S. I think we just need a little bit more stability.

There's a tremendous number of drivers that are backing up to create, like, what could be fairly insatiated demand. Sorry to jump at. Your data point was in the first 100 days of a new administration. We tend to see people kind of wait and see, right? Is that fair to say, what's going to happen? Yep. Fair to say, without being political, this 100 days might be a little more busy.

Shall we say? Yeah, we don't. There was tariffs and there wasn't. It was tariffs. Now it's April 2nd, Day of Liberation. We don't know if that's going to happen. Are people just kind of sitting back waiting for, they can deal with tariffs. Correct.

You just need to know. Incredibly, incredibly strong point. I was just talking to someone talking to a number of CEOs, right? If a tariff comes into effect, you can figure out how to model around that, how to underwrite to it. Where do you allocate your capital? Where do you place your manufacturing? Right. All the different decision points.

What you can't underwrite to is constant change or uncertainty or lack of direction about where tariffs may or may not be going. So until we resolve through this point, I think that uncertainty will continue to inhibit M&A demand, other than a few sectors out there that are a little bit, you know, not as directly tied or as impacted by the uncertainty. Right. And curious also to bring this back to the IPO market, also affected by uncertainty and where private equity has been looking for a lot of these exits. And we've started to see some of these companies go public, but very lackluster returns. How is that affecting kind of returns throughout the industry and what they see their options for exits or for other investments as? Yeah, so I think, you know, talking to a number of CEOs and investment professionals over the past few weeks, you know, the three biggest drivers seem to be uncertainty around tariffs and general policymaking.

Certainly whether or not we're beginning to see the beginnings of a consumer-led recession and including whether or not that's certain to melt up into the higher discretionary income spenders and the discretionary market. And then the third thing is lack of capital market activity. And so the ability of exits to get there, you know, it's interesting. I spent a lot of time in the private equity sector. And private equity's got $2.5 trillion of capital to invest. There's half a trillion dollar right now. Two and a half trillion. That's more money than most governments, as was said earlier on the show.

Interesting on the government point, which is also going to impact liquidity, particularly as it comes in. By the year 2030, sovereign wealth funds are going to have $7 trillion of liquid assets. to invest. A lot of that may be, if they're coming from friendly countries, be directed into the U.S. So when you couple that with the fact that private equity, to your point about they're trying to get out and get exits, there's somewhere around $5 or $6 trillion of private equity dollars stuck in the ground that need to get monetized so the capital can get returned back to limited partners so they can continue to invest in next generation funds and the next opportunity. And if it's not IPOs, maybe it's deals. At some point you just sell to the next, you know,

buyer if you think you can get that done. Correct. And so there's, you know, there's a variety of exits that people are looking for, right? And there's a variety of new technologies have been deployed, but M&A or an IPO, MNA is actually oftentimes a better exit because you get all your dollars out at the same time, right? Even when you come out through an IPO, it still takes a little while because you have to sell your position out over time. True. I think what Mark, and I'm no Mark for a while. I think what Mark is trying to say nicely is that we've wasted our lives. Oh, really? Because we should have been private equity deal attorneys because that market is hot and only getting hotter, $7 trillion in sovereign wealth fund money. And I assume that's not even

including potential U.S. sovereign wealth fund. You have to convince it to go into private equity. I mean, this is my point about showing the returns. It's been a great 20-year track for that industry. But what does the next 10 years look like? Well, look, I tend to be bullish. Especially with high-interest rate. Yeah, although not necessarily from a historic perspective. But look, I wake up every morning feeling pretty optimistic about the future, as Brian often says, right, the human race and the economy has a great amount of energy behind it to keep moving forward. I continue to think that we're going to see the private equity industry play a very, very dynamic role in innovation and economic growth in this country, but on a global basis as well. I do think a lot of that sovereign wealth fund capital will be coming in right alongside private equity or taking private equity assets that are in the ground currently and being a liquidity solution

and then buying and holding these long-term assets. Oh, interesting. They could do it for 30, 40-year period. Correct. I mean, there are investment horizons oftentimes. Maybe they should buy BP and Shell and all the rest of it. Hey, you never know. Give it time.

And maybe Shell will come here. Maybe Shell will be a U.S. listed company. We don't know. They've already changed once. Maybe you didn't miss the calling. Maybe you've already started to bank some of these deals. We're just talking about it. Mark, your brother, co-chair of Decker, appreciate it.

Thank you very much. Pleasure being here. Nice to be with each of you. Meanwhile, one member of the Mag 7 has been on a roll to start off the week. We'll reveal in three-stock lunch coming up. Welcome back as markets move towards session lows this afternoon. The Dow's down 108, giving up its earlier gains, and the S&P is down about six points. The NASDAQ is still up about 20, though, and it's higher for the past four out of five sessions with a 4%

gain during that time. Meanwhile, treasury yields are largely mixed. They were up this morning, then down a little bit after the Consumer Confidence Report disappointed, right about 4.3%. That expectations index plunged nearly 10 points to 65, well below the 80 threshold. Kind of warning about a recession there. We had the two-year auction. That also went reasonably well, but you can still see kind of a holding pattern. Power Lunch will be right back with much more right after this. Welcome back. Let's close things out here with a real solid three-stock lunch, hitting two stocks moving on quarterly results today and a Mag 7 name that's rallying. That was our mystery chart. Chris Grosanti is back for this. He's the chief market strategist at MAI Capital. Let's start with Meta. I haven't heard your take on this. And it's up 4% now since Monday. That's the big reveal, trading higher again today. So what do you think? I like it, Kelly. I mean, it's still trading at a market multiple. It's going to grow earnings double digits for the next. three to four years. The rub on it, of course, is huge AI spending. But the good news about that is, one, it's in the stock. But the second news is, if that's not panning out, you can dial it back

pretty easily. They announce one cut back to AI spending. The stock will go up 10%. So I like it a lot. All right, stock number two is KB. Holmes down today. The CEO saying that sales were muted, but as Bank of America notes, and we all know this, we don't need a bank to tell us, There's a huge housing shortage in America. KB Home does have some pricing flexibility, what you take on KBH. You know, as you know, I've liked home builders in the past. I don't like them now, Brian. And the reason is, it's funny, because interstates are probably going lower.

You think, well, that's a perfect thing for the homebuilders. But I think they're going to go lower for the wrong reason, which is the economy is slowing. And it's hard to pick a more cyclical industry than the home building. So you think, wow, it's down a lot. Wow, earnings are coming off. But in this cycle, those things can go a lot. lot for that. And you got into that. That was one of the great trades. When these, they were trading it four and five times. You go back about two years, four and five times earnings. And the,

fear was that rates were going up, so nobody was going to buy a house. The mortgage rates would be too high. Well, people do buy houses if the economy's good, even if rates are up. And conversely, even if rates are low, they may not be buying. This is now moving on to one of the stealth plays, McCormick, often gets mentioned as a way to kind of play higher prices. Consumers turn to more spices and all the rest of it. Fractually higher, they did miss first quarter estimates. continue to see here on your volume growth. What do you think? You know, I'm kind of a hold on McCormick. I think it's done well because the rest of, you know, the highly sexy stocks have really sold off and McCormick held its own. That's what it was supposed to do. But now things like meta, I think, which have dropped 20 or

30 percent are more interesting than McCormick, which is trading near its highs and has okay, but not great earnings. You also mentioned you were kind of out of the Verizon trade right before that stock tumbled. That was the great Verizon Tesla pair trade from a year or, or year, maybe two years ago, anything like that jumping out to you in the market now? No, you know, no, my largest position remains health care. So I think whatever happens to the economy this year, it's underperformed for two years in a row. Stocks like United Health Group, which love them or hate them, they're going to be part of this economy. Don't give Brian and I started on the subject of United Health Care.

And so the, you know, just try to reach somebody. It's another story. Sure. Chris, thanks. Sure, Kelly. Always pleasure to be with you. Thanks for all your time. Thanks, Chris Grosanti.

Remember, you can recap every three stock. lunch by scanning that QR code on your screen or head to cnbc.com. And that is it for power lunch today. Thanks for watching everybody. Indeed. We'll see you tomorrow. Closing bell starts right now.