Power Lunch - Takeaways from Fed Chair Powell on the Economy, Trump & Inflation 12/4/24

Episode Date: December 4, 2024

CNBC’s Tyler Mathisen and Kelly Evans 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.

We're all learning a lot today. Welcome to Power Lunch. Alongside Dom Chu, I'm Kelly Evans, and that was quite a tour de force. I think so. And I'm trying right now to think if I can even spell things backwards, let alone repeat words back. Yes. Kelly has that talent, by the way. Fed Chair Jerome Powell just wrapping up his comments at the New York Times Deal Book Summit. Now, as the Fed chair was speaking, the Fed itself also released the latest beige book. So a lot of headlines to kind of run you through. Let's get up to Steve Leesman, bring us those details and some initial reaction to Powell's comments. Yeah, hi. I'm just going to cut to the chase of what I think interest our viewers here, and that is his commentary on policy, and that he says we were the last major central bank to cut, and we're now on a path to bring rates back towards neutral, but because the economy is doing well, I'll just read this. The economy is strong and it's stronger than we thought it was going to be in September. The labor market is better, and the downside risks appear to be less, and inflation is coming a little higher. The good news is we can afford to be a little more cautious as we try. try to find neutral. So I don't know what that little more cautious means. I was watching the Fed

probabilities and I'll just double check it one more time where we're at a 75% probability of a cut in December. That remains the case. It looked like the March and the May data where or May probabilities are pretty much the same. So not a big change. You know, we talked about this Kelly in the last hour, which is that there's still a bunch of data to come. The Fed is in no particular, doesn't feel any particular urgency to cut. We'll see if the data itself that we get on Friday and again another employment report change the market's outlook and the Fed says, all right,

if that's where the market's price, that's what we'll give the market here or if it feels some sort of need to disappoint the market here. I did not hear the word recalibration, which I was listening for. I don't know, we wasn't asked about it, so I don't know if we're still in a recalibration mode, which would make me think, you know what, the Fed is a little less concerned about the data itself,

So we'll just have to wait and see and hear more Fed commentary as well as watch the data and try to plug that into this idea that they can afford to be a little more cautious now. What did you say, Steve, were the odds of a December cut now? 75, exactly where they were. And then if you would call up, by the way, the December 2020-5 contract, which I can call up on my thing, I saw it, it was up a little bit. I didn't see a whole lot of movement there. If you look at the FFZ-5 or G-25, which is the December contract,

And what you see is that it was actually came down a little bit more, either from Barkin or from the data that came out today, probably. The ISM disappointing, some other weaker sort of data as well as perhaps the ADP number set the market, thinking that maybe the Friday jobs report will not be as robust as is dialed in. I think there are 214,000. ADP came in at 146,000. So what does that tell you? It tells you that we don't know, but because ADP did not appear to pick up the heart. hurricanes on the strike. There is that, that's the 30 day, the December 25, there you go,

96 guys. We have another way of looking at that, which is the actual rate. Minus that from 100, and you'll get the actual rate. It didn't really move very much as the main point in that. The market is in a kind of wait and see mode here where the data is going to tell us where the Fed's going to go in December. Hey, Steve, it's Dom. The other thing we want to bring up besides deal book is beige book. And the takeaway, I guess, here is that they say that the economic activity, quote unquote, rose slightly in most areas in the economy, in the U.S. Is there anything else we need to focus on with regard to that pagebook report? Well, I was interested in this comment here. Employment levels were flat or up only slightly across

districts. I think that was an interesting commentary. You had a kind of, you still had a positive above 50 employment number in the ISM services, but it was down a bit in terms of its level. I also said prices rose only at a modest pace across Federal Reserve districts. And there was one other comment down that I thought was interesting if I could just call it up to make sure I get it right where they said and put my glasses back on. Contacts indicate they expect the current pace of price growth to persist. But businesses in several districts indicated tariffs pose a significant upside risk to inflation. And guys, if I could just take a step back, I've been here at the CFO Council last night and today. And I had a chance to talk to the guys who run the books for some pretty big companies.

And I will tell you, there is, I want to say, almost equal mixtures of optimism and uncertainty out there. And we were talking last night and guys were like, hey, if the Trump and men, and women, by the way, there were a bunch of women do the same job, saying, hey, if we get, for example, 100% expensing on our investments, that's a huge plus. if we're allowed to do more in terms of rolling back the deductions on interest payments that we had in the prior Trump administration, that's great. But over here we have the tariffs. We don't quite know what's going to happen with them. So there's just a lot of uncertainty.

I guess cautious optimism sounded like it because some people say, you know what, hey, those tariffs are coming through, but they won't be, they're a negotiation tactic or they won't affect me. So a lot of uncertainty out there, but also a good chunk of optimism. All right. Sounds like a wall of worry scenario, Steve. proverbially. Thank you very much, Steve. We'll see you later on. All right, let's get a check now on the markets following the release of both the beige book and Powell's remarks at Deal Book. You can see there,

the Dow is up by about half a percent, the S&P, up by about the same percentage amount of the NASDAQ composite up one full percent. Remember, it was a record high for the NASDAQ composite and a record high for the S&P today, and we're less than half a percent at this point, I think away from the Dow's record high as well. For more on the impact in the markets and for investors, let's now bring in Ellen Hazen, the chief market strategist, and portfolio manager at FL Putnam Investment Management. Also, Megan Shue, executive vice president and head of investment strategy at Wilmington Trust. You see her frequently. She's also a CNBC contributor, of course.

Ladies, thank you very much for both being here. Let's start with the wall of worry comment I just threw out to Steve, because it sounds like this is a scenario where the markets could be constructively higher, Megan, right, given the fact that there is uncertainty, but knowing that there is perhaps a pro-business friendly type environment coming in this next several months. and years. Yeah, absolutely. I think the trick is what is getting priced in today. And what we've seen from a very strong market return calendar year to date, as well as the post-election rally, is that our sense of it is that the markets are very much focused on those business-friendly,

positive sort of upside risks. And markets absolutely always have uncertainty, have a remarkable way of climbing a wall of worry. But there is more, I would say, asymmetric risk to the downside now, just given what is priced, given where valuations are, and the amount of uncertainty that is still to be had around some of those downside policy risks. Ellen, what's been the biggest surprise or non-surprise for you as a portfolio manager, as an investment strategist, since the election date and its result? What's really interesting is exactly what Megan said, that there are some positive elements of the policies that have been put forth. So, for example, lighter regulations.

would help the energy sector. It might help manufacturing and materials. Lighter regulation would help the banks. And certainly if the FTC and the DOJ pull back on some of their antitrust efforts, then that could help investment banks too. So there are clearly these pro-business initiatives. But at the same time, tariffs,

no matter where they are, they'll be higher than they are today. And that will be inflationary. Making undocumented immigrants leave the country is likely going to be inflationary too, particularly for those areas like leisure and hospitality, like agriculture, that are particularly dependent upon undocumented immigrants. And so that's going to be inflationary too. And then finally, you look at the deficit, no taxes on tips, right? Maybe no taxes on Social Security. And so it's easy to see how inflation stays higher for longer with the deficit where it is. And the market seems to be very sanguine about everything. When I actually

think there are more risks than the market's pricing in. I want to go back to the comments from Powell for a second. One of the things he said, Megan, to Andrew, was that with the September cut, they wanted to send a strong signal that they would support the labor market if it kept weakening. And then he said the economy is strong and stronger than we thought it was going to be in September, which would tell you, okay, well, wait a minute. The door might be open to a pause. And yet, as Steve said, 75% odds of a cut this month, and they didn't change after those

remarks. So I'm a little surprised at that dissonance. Yeah, well, I think when we're looking at the economic data, this has been a very challenging period to understand really what's happening. You've had strikes, you've had storms, you've had seasonality issues, which I think play into labor market data as well as retail data. I mean, just think about the way that shopping behaviors have changed over the last few years. So the seasonality trend is challenging as well. And when you lump it all together, I think that's where you have to really use smoothing and look at the trend. Certainly in terms of some of the

labor market data, it's come in more positive than expected. We are particularly focused on labor demand, so that would play into the job openings. And while that came in better than expected this week, the overall trend is a bit of a frightening downward trajectory that if it does not sort of level out here, we would become concerned that that would start to show up in more layoffs. And we're not seeing layoffs, that's good, but certainly we're seeing some uptick in continuing claims, which just means it's harder to find a new job once you lose it. No, you're right. I imagine this is going to be a big part of their discussion, which is to say, is that why they need to cut rates? Basically, is that just going to give companies

a little bit more breathing room to say, okay, we're going to use that, we're not going to do layoffs, you know, and now inflation's still sticky, but maybe that's a big part of the argument. And I think if you look at the Fed funds rate at four and three quarters, it's really hard. Nobody is really saying that that's neutral. There's a lot of debate about, what is the neutral rate? It's not that. So we are still in a position where the Fed can continue to ease towards neutral. I think if they pause in December, it makes their decisions in 2025 a little bit harder, when to restart, how to telegraph that. So I don't know what they'll do. Our base case is that they will cut another 25 and probably more than the market's expecting as we

move into the next year. Ellen, the constructive nature of the markets right now, we know that the markets aren't the economy and the markets, you know, the economy is not the markets, but 2025 is shaping up to be optimistically a pretty good year. If you look at all the strategist's forecast across Wall Street, what exactly then would be the biggest hiccup? What exactly would take this market down? I wonder, pro-business environment, a Fed that's cutting interest rates, probably by 100 basis points, maybe by the end of next year. What exactly is the downside? There can't be one, right? Everything is a tailwind until it's not. When is it not? I think if you look at the economy, it's very strong. Jobs are strong. Corporate profitability is strong. And moreover,

if you look at corporate profit growth for next year, it's going to accelerate from 8% this year to 12 or 13% next year, and then again the year after. And those numbers are not coming down. They're, in fact, trending up a little bit. So as long as you have the corporate profit growth, then I think the market is pretty solid. What I will say is that at 25 times forward earnings for the S&P 500, you are two standard deviations above a 40-year history. That's really high. You don't usually stay to standard deviations above median for that long. And so anything could happen to cause it to hiccup, and you're vulnerable to that. But if it does hiccup, because underlying corporate profitability is so strong,

we think that would be a buying opportunity, and we don't think it would be a run for the hills moment. It's also a Fed put, right? I mean, if you're going to be cutting rates in that kind of environment, and you can make a case for higher multiples on even lower earnings by the time it's done. But who knows? I was only going to add to that. I thought it was interesting, Ellen, that you're not really changing. facing small caps here, you know, so many people are. You're also trimming big tech. So just

very specifically, how are you making some changes? So we are trimming big tech. They have gotten really expensive, and those are fabulous stocks with phenomenal free cash flow, great revenue growth, really strong margins, strong competitive moat, strong competitive position, but they've gotten to be pretty expensive. And so we're redeploying that into other high growth areas that maybe aren't quite as expensive. Small caps, if you look over the last 24, 36 months, you will see four times when small caps have materially outperformed for one month at a time, and every single time it's given it back. And the reason—

And the reason for that, number one, if rates are higher for longer, that's going to hurt small caps for the reasons that we all know, higher debt and so forth. But in addition to that, if you look at the trend of earnings estimates for the small cap indexes, those earnings estimates just keep going down and down and down. And I think it's really hard, despite the cheapness of those indexes, for them to increase when you have estimates declining. You agree, Megan? Yeah, we actually just took down our small cap overweight on a combination of some of the things that Ellen's talking about,

as well as a little bit more softening that we're seeing in the labor market, as I mentioned. And I also don't think, you know, small caps were the value play for a while there. Very cheap. You had some really positive optionality. They're now trading in the 95th percentile of their own history over the last 25 years. So there's not really as much of that value to be had. All right. Ellen Hazen.

Megan Shoe, you're sticking with us. Ellen Hazen, thank you very much for joining us this afternoon. We appreciate it. We've got some news out just a short time ago on artificial intelligence, specifically OpenAI, and our Morgan Brennan has those details. This is an interesting development here with regard to that and another very high profile publicly or privately traded company. That's right, Dom. So OpenAI stepping further into the national security arena, and doing so with, as you mentioned, another fast-growing venture-backed darling and rural industries. The startups together are announcing a strategic partnership.

This is to develop and responsibly deploy advanced AI for national security missions. Now, this brings together OpenAI's models with Andrel's defense systems and lattice software platform. And put this simply, this enables Andrel to leverage Open AI models to assess drone threats more quickly, more accurately, to give military personality information to make better decisions while staying out of harm's way. This is really a counter-dron initiative, at least initially. Open AI CEO Sam Altman saying in a statement, quote, OpenAI builds AI to benefit as many people as possible and supports U.S.-led efforts to ensure the technology upholds democratic values.

Now, in the press release, the company is highlighting that in light of the race against adversaries like China, this strengthens the U.S. commitment to maintaining a technological edge and ensures that AI tools upholds democratic values while protecting military and critical. critical infrastructure. It's very similar sentiment to what we've heard from, for example, Palantir, where Alex Carp has said AI has and will be critical to the notion of future deterrence. OpenAI has been expanding into the space. It's been working with the Air Force DARPA. But this partnership represents the first time for the startup with another company. And in this case, it's the $14 billion fast-growing defense tech company that's founded by Oculus crater Palmer Lucky. Andrell.

Now, it comes after Palantir struck a recent partnership with Anthropic and last month that meta said it too would make its llama AI available for defense work. So guys, this is very much a trend we are seeing within not only the national security realm, but also in the tech sphere around AI. Very big different shift, I would say, in sentiment from what we saw just a couple of years ago from Silicon Valley. All right. Morgan, Breton, live from the CNBC CFO Council with that news on Open. AI and Andrew, thank you very much. We'll see you later on this afternoon. I guess, Megan, if we're going to talk about this AI craze that's going on in the marketplace, this is just the latest kind of salvo, the latest headline. Does this kind of partnership make you even more excited about it or a little bit more wary, given the valuation concerns

you cited in the public markets, translating into the private ones? Yeah, so I think as it relates to AI, valuations are definitely something to be mindful of. There's a lot of good news priced in. There's been a tremendous amount of spend that needs to be monetized at this point. I would say going forward as we think about a Trump 2.0 economy, regulations particularly interesting. And typically we think about lighter regulation as playing very much into financials and energy. I think it's going to play in really big to tech and AI and how that transpires. You also have on top of that the prospect for more partnerships, more M&A, and I think that is definitely one of the upside sort of support.

that we see for market that's probably not fully priced in at this moment. So I would say it is encouraging the defense industry, industrials in general, are kind of caught in the crosshairs here because there's tremendous potential as we think about AI investment and what that could do to productivity and earnings. But you also have, obviously, tariffs and slower global growth that plays into that, as well as maybe a more cautious tone than you typically see from Republicans as it relates to defense spending.

All right. Okay, we'll have a lot more, obviously, on this coming up in the show later on. Thank you very much. You're sticking around with us. Coming up after the break, though, we have details on an extremely tragic event. Shocking corporate America and Main Street America. The CEO of United Health Group's United Health Care Unit shot and killed in Midtown Manhattan, New York City. We'll have those details coming up. Power Lunch will be right back afterwards. Welcome back to Power Lunch.

The CEO of United Health Group's United Health Care, unit was shot and killed early this morning in Manhattan. Absolutely shocking turn of events. Bertha Coombs is joining us now with the very latest details. Bertha, what have we learned? Well, the New York City Police are offering a $10,000 reward for information leading to arrest of the shooter who murdered Brian Thompson this morning. It happened about an hour before United Healthcare's investor conference was set to begin. Thompson was walking from his hotel to the Hilton hotel where the conference was taking place. Surveillance videos shows that the gunman had laid in wait for him, shot him point blank with a weapon that was equipped with a silencer and acted

quickly and deliberately. The shooter steps onto the sidewalk from behind the car. He ignores numerous other pedestrians, approaches the victim from behind and shoots him in the back. The shooter then walks toward the victim and continues to shoot. It appears that the gun malfunctions and as he clears the jam and begins to fire again. The shooter then flees on foot northbound into an alleyway between 54th Street and 55th Street. They say he then took a rented e-bike and continued north into Central Park.

Brian Thompson joined United Health Group in 2004. He worked his way up through the insurance division and was named CEO of United Health Care in April of 2021. His widow, Pallette Thompson, issuing a statement today saying, Brian was a wonderful person with a big heart who lived life to the fullest. She said he will be greatly missed by everybody.

Our hearts are broken and we're completely devastated. And she asked that we all respect their privacy at this time. Earlier she spoke with Breaking News reporter for NBC News, David Lee, and said that Brian Thompson had been threatened. It's unclear what that was, according to police. They told NBC News in the Minnesota area. where they live, that they didn't have any reports of that. It's not clear that he had any kind of security this morning as he was heading in. It appeared that he was walking by himself. He

had been here since Monday preparing for the conference. The conference did start a bit late this morning, but shortly into the program, it was canceled and the arrest of the events were canceled today. Again, police are offering a $10,000 reward leading to the arrest of the killer in this shooting, and a manhunt is very actively underway. Back over to you. All right, thank you very much. Bertha Coombs with the latest on that situation and, of course, the tragedy down in Midtown Manhattan today. Just terrible news. Let's now, if we can, turn back towards the markets overall, as you're seeing here. The Dow is just short of the 45,000 mark, the S&P 500. And that's a lot. NASDAQ composite, both hitting record highs in today's session.

With that in mind, let's get out to Rick Santelli in Chicago now for a look at how the bond market is reacting to both the beige book and what we heard from Chair Powell at Dealbook, Rick. You know, it didn't react much to either, but then again, the stencil was already made early this morning. If you look at twos and tens on the same chart, going back about six hours before the opening, what you could see is that rates were on the downslide. And at 10 o'clock Eastern Dom, after we had the data that was out at 815, as expect in terms of ADP, we see very weak service sector ISMPMIs. And that really changed everything and put a real thruster on the back of that bind that pushed yields down.

And as you can see on that chart, they're near the lows of the session. Now, if we cover two days, some important distinctions here. If you look at the two-year, it has an outside day. It has a higher high yield than yesterday and a lower low yield, whereas the longer maturities do not. Why do I bring that up? Many times it may imply a trend change, and there's very little doubt what the trend has been of late. It's been of yields moving lower. And if you consider the fact that we're getting close to the end of the year,

let's open a chart up and let's put our tens on the same chart as boons for the entire year. And what you'll see is that boon yields are virtually unchanged on the year. near the lowest yields of the year. They closed last year at 203. They closed today at 206. Contrast that with the one and a half month low that we're hovering near in our tens, which settled at 388 at the end of last year,

and we're still up 30 basis points. So we want to continue to monitor all of that as it effect not only capital flows, but ultimately it may really showcase the weakness that's perceived by investors in the European Union. Dom, back to you. All right. Thank you very much. Rick Santelli. Kelly, I think it's interesting, right?

The way that that dynamic is shaping up, and I'm kind of curious how that all kind of lays out. No, totally. And Megan, we've seen this. Initially, we saw a big run-up in bond yields after the rate cut in September 18th, kind of had caught everyone off guard, had them rethinking. It's been a little bit calmer lately. But it's still higher than I think many people thought we'd be at year end. Yeah, and I think we have seen some election, pre-election and post-election movements in rates markets as well.

And a lot of the pre-election into immediate election reaction run up has come back off. So to me, I mean, that tells me that maybe there's a little bit more skepticism from the market around those inflationary concerns than we were discussing earlier. But as we think about fixed income more generally, we're neutral. I have a hard time seeing bonds doing anything really spectacular outside of a material deterioration in the economy or an increase in recession risk. But one thing that I think in a year like we've had as we move into the end of the year, stellar returns from equities, very lackluster from bonds. We're probably going to be watching some rebalancing flows that could actually put some more downward pressure on rates. We rebalance client accounts a couple of weeks ago on that same sort of mentality that we've, you know, extended.

You've had drift in portfolios. So I think that could be another tail-in for bonds. It would be nice if that gets us kind of more down towards 4%. It sort of feels like we can breathe a little sigh of relief with some maybe sticky, inflation readings coming up. Bond inflows can. Push prices higher. Rates lower.

All right. Thank you very much. We'll have much more coming after the break for Power Lunch. Keep it right here. Welcome back to Power Lunch. Disney Plus is making a move to integrate ESPN Plus in the platform. And ESPN Plus tile is now going to be inside the app overall. Now, it might seem like nothing or just a minor thing.

But Julia Borson joins us now to explain what it says about Disney's overall media strategy. Julia. Dom, this is a strategic step to get Disney Plus subscribers to adopt a bundle and to ultimately drive adoption of the ESPN flagship app when it launches next fall. ESPN's giving Disney Plus subscribers a free taste, about 100 live games and two studio shows targeted at more casual sports fans. ESPN's programming will also be integrated into Disney Plus search, similar to Hulu's integration earlier this year. When Disney Plus subscribers click on content behind a paywall, they're then prompted to subscribe to these other apps as part of a bundle. Now, Disney's looking to show its 123 million Disney Plus subscribers that this app can be their go-to for a variety of content, including sports, Hulu, and its other content add-ons, looking to keep the nearly 26 million ESPN Plus subscribers locked in by making sports easier to access and also looking to grow that number.

This is all part of the plan to give the 71 million linear TV subscribers that paid for ESPN as part of a bundle an option to pay for ESPN a la carte as the media giant battles cord cutting with a risky, but Bob Iger would say necessary move of breaking ESPN free from the bundle. So now Disney faces the high stakes decision of how to price its flagship service. Sources tell me that the sports bundle venue would have offered valuable. insights, but since it was blocked, the response to this ESPN tile can help Disney figure out engagement and pricing, which could be make or break for flagship when it launches next fall. Dom? All right. Thank you very much, Julia, for that. We appreciate it. Megan, just kind of quickly on the media thing, I thought it was so interesting what's happened with AT&T shares this year. So they finally divest of all the media stuff a couple of years ago. Now they're up 40%. They had this great day

yesterday, you know, talking about raising projections and so forth. So we're entering into a world now where the distribution seems like it's going to be divorced from the content in large part. The content might reassemble on its own in many ways we can't predict. And it's ESPN and figuring out its pricing might be key to figuring out, you know, what this new world is going to look like. Yeah, it's in flux for sure. And I think that that is sort of weighing on, on, it adds a bit of a risk premium, if you will, to those shares. But I think as it relates to Disney and the ESPN Plus move, it's really a move to broaden the base to try to compete in a very competitive environment where we're all, you know, we're looking at a consumer that for a while

was just sort of grabbing up all of these different streaming services and subscription services and our view of the consumer is a little bit of softening going forward. So I think that plays into having to be really competitive about pricing and offering content that you can't get everywhere else. And Disney's a very unique product, as we know. It's very focused on family and trying to make it a more direct pass-through to the sports and some of those other viewers. Yeah, it'll be very interesting to watch ESPN make that transition. Coming up, we'll dig into some of the other key stock stories of the day. We'll key up three-stock lunch after a break. Welcome back, and it's time for three-stock lunch. So we're picking out

some of the movers of the day to get our trades. Eva Ados is here to do the honors. ER shares and chief investment strategist, Ava, welcome. And let's start with Marvel, Sir, Marvell. Marvell. You know, every time with the superhero and the chip maker. Cinematic universe, yes. Thank you. Kind of having a Superman story up 24% today

after posting better than expected results yesterday and robust demand for AI chips. It's a top custom AI chip play over at City for 2025. Eva, are you a buyer here? Do you agree? I would hold the company, especially after today's appreciation. The company is up about 25% after news about a partnership with Amazon. It's a five-year partnership.

That's great news. And many analysts predict that this is going to be the next AI play. But let's make no mistake. This is no Nvidia. It is no up-loving. It does have a bright future in front of it. But we believe much of it has already been baked in, especially after today's 25% pop.

For example, now it's enterprise value to EBITDA is 105 compared to 13,000, for the risk of the category. And so the EBITDA has dropped from 30% to 15% and the revenue growth is negative. It is not a bad company to own, but we wouldn't buy it after today's pop. All right. Next up, Eva, is Campbell's. Campbell's soup, but it's not just Campbell's. It's down 6% after a mixed quarter. Falling short of sales estimates also naming a new CEO is because Mark Klaus is departing to be the president of the Washington Commander's NFL franchise. Take that dynamic. And what's the trade for Campbell's? It is a sell.

We never owned. We would never own the company. The company has been down by 20% in the last 25 years. So investors haven't made money in the long term. And this company does have a dividend yield of 3.3%. So some investors might be interested in the company just for the dividend yield. But in this market, there are much better opportunities when it comes to appreciation. Now, there is concerns about the health.

There is a very high concentration of sodium in these soups and millennials especially, and people that are interested in having a healthy lifestyle are avoiding this kind of condensed soups. And so we don't see the category in general having a bright future. And at this point, we think there's very little upside. All right. Lastly, then, Chewy. Let's go to pet food. The shares are down 4% after missing on Q3.

profits. They saw a drop in active customers, Ava. What do you do with this one? So this is a hold. It was a great COVID play. We used to own it during COVID. We haven't owned it since then. Its revenue growth has come down from 47% to 3.7%. That's a huge drop. And so it's enterprise value from EBITDA now. It is 36 compared to 7 for the rest of the category. So not only is the growth down, but the company is very fully priced. So we don't encourage investors to own it right now. And let's realize that millennials especially were into comfort pets back during COVID, but we don't see this pattern coming back.

And so overall, this is a, it was a great company during COVID. We don't see a bright future going forward, at least in the foreseeable horizon. And in this market, again, there are so many great. opportunities that I would encourage investors to look at. Ava, before we let you go, is the market higher or lower in 2025? It is higher. I think I'm very optimistic. We have been very optimistic all year round. We think we're potentially have a Christmas rally.

And I think the next year will be great, especially when it comes to high growth companies and tech stocks in particular. All right. Eva Otto, it's always a pleasure. Thank you very much. Some headlines from France where the government has a lot. officially lost that no-confidence motion. And Dom, this is now the first time in 60 years that it's effectively collapsed. The first successful no-confidence vote since 1962. Macron has to appoint

a new prime minister now, no new legislative elections until July. So it's more of a stalemate than a crisis situation. But again, they're under EU pressure to reduce the 6% budget deficit. And that's what Barnier was trying to do. I mean, so the prime minister, Michelle Barnier, is going to be widely expected to be asked to stay on as an interim or caretaker prime minister in this situation. President Emmanuel Macron will have to likely find some kind of a replacement, but we don't know exactly what that's going to be. I think it's interesting right now. If you take a look at one of the ETFs that tracks the French market, the ticker EWQ, that's the I-Share's France ETF. It's actually still higher right now. It's been down markedly, admittedly so for the course of the last several months. But, Megan, are the opportunities now outside the U.S.?

I don't know. It's cheap. The market is cheap. Europe has trailed the S&P 500 by about 24 percent. which is remarkable. So the valuation is a positive. We're also seeing some upturn in loans to businesses and consumers. But for much of the year, it was the story about really slow growth out of Germany. Now, this short-term sort of political headline risk, I just don't see a whole lot of momentum there. We've been underweight to international developed for the majority of the year, and we're going to remain there for a night. And as if to underscore the point, we have all-time highs on our markets again today.

And the stat that I think that gets people thinking about this is the percentage of our market cap of global market cap, which is just soared over the past 15 years, but in some ways deservedly. So, you know, is that a sign of lookout below or a sign that, you know, our engine of prosperity is working better than the others. I think there's U.S. economic exceptionalism. It's something that we talked about a lot at the beginning of this year. We've seen a tremendous amount of capital flowing into about a trillion dollars over the past three or four years. So I think as you look at it, valuations are sort of, leaning in that direction outside of the U.S., but there's a lot of momentum here. Next time, when we have more time, we can talk workout routines. That's why I wanted to talk deadlifts. I've been working on my deadlifts.

Love those. 15-pounder dumbbells, Dom. Megan does them very well. I do not do them well at all. You've got to get that form right. You don't want to throw out your back, especially at our advanced time. All right, so markets right now,

as you point out at record highs right now for the S&P and for the NASDAQ. Thank you very much for watching Power Lunch. And thank you, Dom. Closing bell starts right now.