The Trump Trade Rally and a Fashion Faux Pas for Luxury Retail 7/15/24

0:02Live from the Nasdaq market site in the heart of New York City's Times Square. This is Fast Shares of Burberry sinking after a C-suite shakeup and taking other luxury retailer stock down with it. Is this high-end pullback a sign of deeper concerns for the consumer? We'll debate that. And later, banking on gains after earnings. Tesla tries to rev back up. And the ABCs of what could be Alphabet's biggest deal ever. What Google's parent company is looking to buy and why. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Karen Feinerman, Dan Nathan, and Guy Adami.

0:46We begin with a pivotal announcement out of the Trump campaign this afternoon. Former President Donald Trump announcing via Truth Social that Ohio Senator J.D. Vance will be his running mate for the 2024 Republican ticket. The decision coming just two days after a gunman attempted to assassinate Mr. Trump at a campaign event in Butler, Pennsylvania. Eamon Javers is live at the Republican National Convention in Milwaukee with the very latest. Eamon. Hey there, Melissa. Well, the very latest is that J.D. Vance has taken to the floor here in the arena in Milwaukee to greet supporters and do a victory lap of sorts.

1:20He's been working the floor, talking to delegates, shaking hands, giving fist bumps, and a broad, broad smile on his face as they prepare to select him officially now on the floor of the convention as the nominee for vice president for the Republican Party. NBC News reporting that J.D. Vance learned just about 20 minutes before he was selected as the vice presidential running mate that he would actually get the nod. He didn't have a whole lot of time to prepare for this. Of course, he's been considered one of the frontrunners for a long time. So this may be not coming as a total shock to J.D. Vance himself.

1:52But it's worth looking at the reaction around the media world and the business world. Elon Musk putting out a tweet within the past hour congratulating J.D. Vance on his selection. as vice presidential nominee here for Donald Trump. And it's also worth looking at J.D. Vance's connections to Silicon Valley. He's somebody who is seen as a creature of sort of the conservative element in Silicon Valley. Silicon Valley, a lot of folks assume sort of left-leaning, but in fact, we've talked about Elon Musk and so many other technology leaders who are on the conservative side who are Trump supporters.

2:31J.D. Vance is very much a creature of that world. He has called for the breakup of some of the big tech companies. And Vance, as we've talked about, is somebody who takes an aggressive approach to antitrust, an aggressive approach to breaking up large companies. He has said that he thinks that Lena Kahn at the FTC is one of the few officials in the Biden administration he thinks is doing a good job. So this is somebody who approaches economics and business in a very different way than Republicans of a previous generation, Melissa. All right. Eamon, thank you. Eamon Javers in Milwaukee for us. For more on the election impact, let's bring in Stiefel's chief Washington policy strategist, Brian Gardner.

3:07Brian, great to have you with us. What does this do for the Trump ticket, in your view? I think it reemphasizes the populist tone, the populist movement in the Republican Party. I mean, I don't think this is a geographic move. It's not trying to unify the party because the party doesn't need it. It just underscores that Republicans are moving more in a working class direction. And I think Eamon kind of summed that up in some of his comments. This is not your father or your grandfather's Republican Party. What are your odds that you have for a Trump win come November? How has it changed after the assassination attempt?

3:42How has it changed now with J.D. Vance as a VP pick? So let me take him, I guess, in a little bit of reverse order. I don't think the Vance pick changes my view that much. I think it just kind of fits into what's been going on. on post assassination attempt. Odds definitely went up. I don't think you can you can state too much, though, that how much the odds are going to go up because there still is always going to be a cap on Donald Trump. You know, you have a huge portion of the country that is never going to vote for him and you have solidly blue sections of the country that are never going to go Republican.

4:17So there is a cap there. That being said, the odds have gone up. So I was probably in the 60 percent range, you know, before, certainly before the debate, debate ticks it up a couple of points, and then this weekend ticks it up a couple of more points. So I'm probably in the 65 to 70 % range. That means that, you know, he can still lose it. So I think that maybe that's the best way to look at it now, Melissa. It's Donald Trump's to lose. Brian, it's Karen Feinerman. Thanks for being on. How does the calculus change, if at all, if Biden were to step down from the race and somebody else were to come in?

4:53I don't. Well, it obviously depends on who that person is. Let's start with the idea that's probably would probably be Kamala Harris. I mean, it really is difficult to see at this point if Biden stepped aside that anybody else but Harris would be the nominee. And I think the odds of Trump winning would then go up. I mean, there are some polls out there suggesting that she runs better against Trump than Biden. And but those are very hypothetical. They're very sketchy. I wouldn't put a lot of stock into those polls because voters, you know, are seeing her not in the same light they're going to see her later.

5:29And once she gets in the target of Trump attack ads, campaign ads and media blitz, I think her numbers will go down. So, yeah, I think if if Biden steps aside, the odds go go down for Democrats. You know, as bad as he's had the last couple of weeks, Biden is probably their best chance at this at this point. Hey, Brian, it's Tim. Thanks for joining us. Not surprisingly, global themes around politics sometimes are very similar. You say not your father's Republican in terms of J.D. Vance and in terms of what we're seeing from the party. And certainly we saw this in France with Marine Le Pen. And she's you know, the left sometimes is the right.

6:07The right is the left. Get back to a Trump presidency with J.D. Vance and what you think this means budget wise. What you think this means for fiscal policy and conservatism that certainly hasn't been the hallmark of, I think, either side of the aisle probably for 15 years. But clearly not a Republican old stalwart approach. Tim, the irony is that Donald Trump and his tax agenda is now going to look more like old style Republicanism. I think the J.D. Vance style of Republicanism that is coming into vogue that is shared by a growing number of congressional Republicans. So they look at the budget.

6:48They look at the numbers that it would cost to to extend all the 2017 tax cuts. That's at four trillion dollars over 10 years as of right now. Then they look at their constituents who are working class, not particularly well off. They're not going to spend a lot of political capital to defend tax cuts on the wealthiest. And if it means that they have to offset some of the tax cuts to extend the tax cuts on middle class and working class voters, if that means that they're going to tick up the corporate rate by a couple of points, they will do it. Trump may not say it right now, but the budget math plus the populist movement of his party, I think, gets gets to a place where, you know, I think corporations should start to think about a 24, 25 percent corporate tax rate.

7:39Well, Brian, thank you. Thank you, guys. Of Stiefel. And that really underscores this notion that whatever the Trump trade may be in the markets right now, we don't really know how that trade will play out once he is in office, because the conventional wisdom was corporate tax rates. The tax rate will be lower. And he's saying, no, brace yourself, corporations, for a tax increase here. So energy, health care, the sectors that will benefit, will they actually benefit? Yeah. So I'm see, I understood Tim's question and I understand what's coming from. I would ask the same and I'm surprised by Brian answer.

8:13Maybe that's the correct answer. I'll say this. You know, I thought that regardless of who wins in November, it's going to be inflationary. And I thought, again, a Trump administration would be inflationary almost by definition. And I think the way to play it again, my opinion would be, you know what? I think 10 year yields are going to go higher. And I think the front of the curve is going to go pretty dramatically lower. So you're going to see this re-steepening for the first time in three years. Who favors that? Probably the banks. But defense stocks should do extraordinarily well. And I agree with you on energy.

8:42Maybe that's somewhat counterintuitive. Maybe it doesn't add up with what happened in 16 through 20. But I think these energy stocks are going to unlock a little bit to the upside. Yeah, I thought that comment by J.D. Vance about Lena Kahn is very interesting to me, because if you think about when Trump was in office before, I mean, he really did focus a bit on big cap tech. I think that was an easy one from a populist standpoint. Also, obviously, the stuff that was associated with however the 2016 election went down. And the fact of the matter is, is like the CEOs of those companies were generally people that opposed lots of policies from the Trump administration.

9:19It just took about a couple of weeks. Remember the Muslim ban and all those folks got off of a whole host of a bunch of committees and that sort of thing. So I would expect large cap tech to still have a focus from the regulators. I just look at, I mean, both parties are completely fiscally irresponsible, right? So I think that there is no way for someone to win with a fiscally conservative agenda, right? You can't buy votes with fiscally. So I feel like then something has to break, right? And whether that's ultimately, not tomorrow, but somewhere down the road, a Treasury, you know, situation that goes very poorly.

9:58I think it's very inflationary, either party. So I agree with you. I think the 10-year or further out the curve is going higher. I don't know what – I hope that's good for banks because I do think a lot of bad things can go along with that. Everything you're all saying, it sounds like I'm supposed to be buying gold and then buying some more gold and then buying some more gold. And gold didn't rally today. It's interesting. And Bitcoin did. So digital gold rallied, which I think is somewhat a function of it trades immediately. It traded on the news over the weekend. Also, it had not traded up as gold had in the previous couple of weeks around the things that were really more related to both political dynamics.

10:38I think certainly post-debate. That was another argument. The other two things that also are attached to J.D. Vance, very anti-China. So if you think about, I don't know, China traded down dramatically. They had a terrible GDP number last night. But I don't think it was really about that because I don't think we're really trading China GDP anymore. And yet K-Web and some of these names, which I think are going to be very difficult time here, even if they already have had a very difficult time at home. Mexico, obviously border security. This is going to be another big deal. The Mexican pesos sold off.

11:06Mexico had been re-rating aggressively. It's still an oil economy. It's still a place where nearshoring for the U.S. is part of the story that actually still could actually get some benefit here. This is why we don't know. I mean, all these traditional trades. And I would say this about either party candidate. it, we really don't even know what they stand for, because that's where we've gone in politics. And I think in Trump's side, it's even more the case. No, but the spending part of the equation, Karen, unless you can GDP your way out of this and, you know, the math just doesn't work. I mean, we're talking about one and a half, two percent GDP growth on top of the deficits and the debt that we have.

11:39It's just at some point it's going to be unsustainable. And, you know, there's this Warren Buffett indicator that's out there. Doug Cass has put it out. I mean, that's the Wilshire 5000, I guess, over GDP, the total stock market, market cap. I mean, that's at levels I don't think we've ever seen before. If not, we're within a whisper of an all-time high. Again, those are not timing indicators. But what that says to me is you have very little room for error if something were to happen on the downside. You know, it's interesting. You know who agrees with you on rates is Jamie Dimon, the CEO. Really?

12:07Yeah. Of JP Morgan. I just think that. But he had a comment in the Q2 results just saying that basically, while they've made progress under inflation, he thinks higher for longer. He thinks there's inflationary forces out there. All right. Quick programming note here. NBC News anchor Lester Holt is sitting down exclusively with President Biden today. You can catch the full interview on nightly news at 630 p.m. Eastern time and again in prime time at 9 p.m. Eastern time only on NBC. Turning now to today's market action, the Dow setting its first record close since May 17th. The S &P 500 hitting an intraday record, falling just short of that at the close.

12:41The Nasdaq wrapping the day in the green. But the Russell 2000 small cap index today is big standout, touching levels not seen since January 2022. Fed Chair Jerome Powell indicating at the Economic Club of D.C. today that the central bank won't wait until inflation hits 2 % to cut rates, which is actually what he said in the past. So it's not entirely surprising. The comments were fascinating because you could have taken glass half full, glass half empty. I think he pretty much indicated that they're not going to cut in July. That's what I heard. But they're impressed enough where I think September, which we knew had pretty much priced into certainty, is a dynamic.

13:18Stocks were kind of mixed on this. I mean, again, it's a day when stocks were digesting a lot of different cross currents. But to the extent that it's been a market that over the last three or four days, the outperformance of the small caps, 6.5 % to the S &P in just three days, the regional banks, which we're going to talk about banks next block. I think the dynamic, though, around what is working in this market, especially in a world where we are now digesting political cross currents, Certainly some change and some rotation in leadership. I want to go to the VIX real quick, because even when the market was at its highs today, the VIX was, again, elevated VIX.

13:50It still had a 12.5, 13 handle. But with that said, it was up the majority of the day, and it sort of rallied later in the day. That's something you absolutely have to watch. And again, I keep coming back to that one NVIDIA day, that June 20th day. But at 128.5 or 129 or wherever it's trading now, on the back of an upgrade today, I mean, that stock since that June 20th has now underperformed. And this, again, it harkens back to what we saw in early March in terms of the individual stock and I think potentially the broader market over the next couple of weeks. I mean, Tim's Intel at one point today was up more than a percent.

14:21There you go. Praise the Lord. Broadening out. But again, if I want to take the Intel trade around what happened over the weekend, I would say that Intel is America's national champion. There's no question they have money thrown at them. They got four and a half billion in subsidies. They sold a big piece of Arizona to a private equity firm. They sold a big piece of Ireland to Apollo. So to the extent that Intel is absolutely going to be our semiconductor company on the global stage, you know, I mean, hang in there. It's going to happen. Yeah, I'll just say this. So guys looking at the VIX, if you look at the move index that tracks, you know, the volatility in the bond market, it's also very near lows, right?

14:56And so when you start to see this and you start to see all these volatility measures, you know what I mean, really approaching lows, you say to yourself, how good, how much better can it be right now? You know, you just mentioned it was the first high, you know, since mid-May, which seems crazy to me because it feels like we've been making new highs inch by inch for the last month or so. So to me, I don't know. I still go back to last summer and I go to the just kind of white hot sentiment that we had into Q2 earnings period. And I say to myself, well, that was as good as it got that period. And I think all of you would probably agree taking a little foot off the pedal is probably not a bad thing.

15:31As we get through the first half of the year, we're up 18 percent in the S &P. We're up more than that in the NASDAQ. So when you say it's as good as it gets, so you don't think earnings will beat or you think the pace of growth will slow? I think they're going to have to beat a lot in the guidance. You know, I think that, you know, the Q2 is baked in the cake when you think about the actual quarters. So NVIDIA, which obviously is so central to the whole story, they don't report for another, I don't know, month or sometime late August. So we'll get a sense, I think, when we hear Microsoft talk about their cloud business and Alphabet and AWS.

16:03But that's sort of a I don't know. It's this market proxy that we're not going to have enough data on. That's sort of interesting to me. I like getting away from some of these political issues and into. All right. What are companies actually earning? Right. Hopefully they need to be good earnings now, particularly for the Mag. And if these hyperscalers actually confirm their CapEx plans, which were expanded in the previous quarter, then that's right. That's obviously helpful for. But it's not just CapEx. I mean, it's consumer spending. We saw the lowest University of Michigan consumer confidence number on Friday.

16:36And I'll just mention this. But it's also a cloud revenue. Right. I mean, listen, but Meta's traded very poorly over the last week. What's really cyclical? Advertising is really cyclical, right? And a lot of these platforms are not allowing political ads, too. So you go into a period where, you know, it's not particularly great. If you have, look at what Pepsi said, okay, about the consumer, you know? Like, do you think they're dialing up advertising in this environment, or do you think it's coming down a little bit? So to me, I think that, I know we're going to talk luxury. I know we're talking about consumer discretionary.

17:03Even on the low end, I think there's some weakness. Oh, well, there is definitely, you know, weakness in the low end. Well, what we saw with the hyperscalers and what they were agreeing to spend or what they've indicated they're going to spend on CapEx, for Meta, it was terrible. They were the first ones out of the gates, and everybody thought, boy, this is terrible. And then everyone slowly got rewarded. We know NVIDIA got rewarded the whole time. That, to me, will be the fascinating part of this earnings season is what are you going to do with hyperscalers when they say, actually, we've upped it from, you know, the$35 to$40 billion to$50 to$60.

17:31because the jury's still out as to what it means for the hyperscalers. I mean, we know what it does for some more than others, but a lot of this investment is still not totally proven, whereas we know what it means to NVIDIA's bottom line. 85 % of this move since October, I think-ish, has been predicated on multiple expansion. In the other part, 15, on earnings growth and revenue growth. I mean, that's got to flip. Maybe not flip entirely, but there's got to be some, you know, getting back to some sort of equilibrium in terms of 50-50 split. So it is an important earnings cycle because at a certain point, I think people are going to be reluctant to pay the multiples they're paying right now.

18:09Coming up, Golden Goldman. Shares jumping to a fresh record after a big earnings beat before the bell, the numbers, and what it means for the rest of the sector next. Plus, a fashion faux pas. Burberry shares plunging amid a CEO shakeup. A closer look into this high-end meltdown right after this.

18:27This is Fast Money with Melissa Lee right here on CNBC.

18:40Welcome back to Fast Money. Banks getting a boost today as earnings season kicks off. Goldman Sachs and BlackRock both reporting EPS beats this morning. That stock along with JPMorgan and the XLF ETF all hitting records today, But BlackRock closing the day slightly lower. And take a look at the regionals. The KRE up nearly 3 % today, hitting its highest level since mid-December. Bank of America and Morgan Stanley are set to report tomorrow. Can the financials continue to climb? Goldman Sachs seems a little bit idiosyncratic in terms of, you know, achieving their strategic initiatives after the abandonment of the consumer business.

19:12They're on track. They've made some mistakes. I mean, David Solomon talks about it all the time. They're also trading at an all-time high, so good for him. And if you pull up a stock during his leadership, it's done extraordinarily well under that five and a half now, six year period of time. So good for Goldman Sachs. And I think the stock probably continues to work in this environment. I'll say this quickly about Bank of America as it made, I think, a multi-year high today. It's getting towards the price to book value that we haven't really seen in BAC in quite some time now. Maybe it deserves a higher multiple than Citi, which it gets.

19:42But at some point, it's going to get a little too expensive. And I think you're going to learn a lot more tomorrow. Personally, I think here at$42.5,$43 with a$34.5 book value, I think it's gotten itself a little expensive. So just to go to Goldman Sachs, we've seen a lot of good trading revenue, M &A, although actually they did lose the number one M &A advisory spot. But still, I think it's interesting because they traded a little higher multiple, even though it's a lumpier kind of earning stream, right, trading and sort of one-offs. So they've done a good job, though. I think that can push into consumers really in the rearview mirror now.

20:16I mean, that was trading terribly relative to book. Bank of America will see this higher. If they're higher for longer, remember, they have that huge hold to maturity issue. We'll see how they address that and how deposits are hanging in. That was something that J.P. Morgan talked about for some pressure on NII. I just think that the cyclicality of investment banking and some markets data and whatnot is what it is. Banks aren't usually outperforming. They're not usually underperforming on those numbers. The reason banks are outperforming is they're re-rating. They're re-rating on a regulatory environment that probably gets easier for them in a Trump presidency.

20:52They're more importantly, though, able to give capital back. They've gotten to a place where the interest rate environment is also higher rates but structurally moving lower. There's a lot less pressure on them. J.P. Morgan, you know, the six largest money center banks, J.P. Morgan leading the charge, are raising a ton of debt right now and ultimately doing it because it's a great time for them to do it. So rates are a little bit lower. They're getting out there ahead of the election cycle. I think banks go higher, and they're going higher on multiple. You know, it's interesting on the capital return, though.

21:18I think Goldman, because they have certain capital requirements, they're talking about scaling back their buyback. Jamie Dimon said they are not buying their stock back here. You know, as far as the cyclicality that you mentioned with capital markets and, you know, the IPO calendar, you know, if you can't bring a deal in this sort of market, what are you going to be able to bring it? I mean, like an IPO and that sort of thing. So the idea that you're waiting for after the election is kind of interesting. But then you also see, and I know we're going to talk about the Google thing with this company, you know, Wiz.

21:46I mean, that's a massive deal that's going to face a lot of, you know, regulatory scrutiny. So we might see a bunch of stuff get on the tape as far as M &A that obviously wouldn't be approved until next year anyway. All right. And do not miss a first on CNBC interview with Bank of America CEO Brian Moynihan. That's tomorrow, 1030 a.m. on Squawk on the Street. There's a lot more Fast Money to come. Here's what's coming up next. A deep dive into some retail wreckage. The former CEO of Walmart US, Bill Simon, joins us to break down a major fashion faux pas at Burberry and a would-be blockbuster department store deal that just couldn't cross the finish line.