Live From Future Proof: AI's Regulatory Divide 9/15/26

0:00At Edward Jones, we believe rich is more than caring about the latest and greatest. It's also taking care of what gives your life meaning. That's why your dedicated financial advisor meets you where you are, with personalized financial strategies that help protect what matters, so you can preserve your progress while creating a path forward. The key to being rich is knowing what counts. Let's find your rich together. Edward Jones, member SIPC.

0:33Scott Wapner: Oh, look. You just got added to a meeting about coordinating another meeting to prepare for the pre-meeting ahead of the follow-up meeting, which will, of course, require a recap meeting. And then another meeting. Hit your booking point, book with Southwest, and enter airplane mode.

1:01Scott Wapner: All right, Carl, thank you very much. Welcome to the Halftime Report. I'm Scott Wapner. We're live in, as Carl said, Huntington Beach, California for the Future Proof Conference, the fifth annual event, drawing more than 5 ,000 financial advisors and wealth management professionals. We'll have a lot more on all of that in just a bit. Clearly, though, the markets are front and center today with the Fed decision looming and the AI trade being hotly debated. Joining me here, our host, Josh Brown, Stephanie Link, and Shannon Sikosha are by my side as well. Let's take you to the markets. You know the story.

1:35Scott Wapner: I'm sure by now we are red across the board. Bond yields, though, they remain very much the story, especially the 10-year note yield above 5%. It is the highest level since 2007. That seems to be as much of a driver as anything. Crude oil, yes, we're watching that too because it's up. Diesel is surging. And Josh, I'll get your thoughts first. We'll talk about future proof in just a little bit. But that's a pretty decent market backdrop to start on. Yeah, I think that the bond story is tied in with the oil story. And those are really competing for attention right now. But they're all of a piece because in the end, this is a global phenomenon with yields rising.

2:17And just out of my notes here, you look at the UK, the gilt is back about 5 % as well. And that's a high since 2008. In France, the same story on their 10-year, 2008 high. The German Bund, 2011 high. Japan, it's a three-decade high. So anyone that's pointing out, well, it's the deficit or it's the budget or whatever the case may be, that's not actually true. It's a global phenomenon. The other thing that's happening is inflation expectations are heading higher, and that ties back into the oil story. WTI back above 100. It is unavoidable. There's no way you can look at the market through any prism other than people are getting concerned about energy prices.

3:02Not that they're going to ramp to 130, but is there any relief in sight? And that is resetting expectations. And so what you have here basically is a 10 year that's been rising all summer. It snuck up on people because they weren't paying attention, but it's been happening for a long time. And it is not an emergency. In 2022, we had a 255 basis point move in the 10 year. This year, not quite the same story. It's only about 79 basis points, not some sort of overnight jarring thing. But again, it is attracting people's attention. And it's important to understand this is now the driver.

3:40Scott Wapner: A little more than 24 hours until we get the Fed decision. Are you sort of resigned to the fact now and preparing for the fact that they're going to hike rates? Yeah. I mean, it changed my mind after last week. The numbers were just really high. It was touch and go for a while there. But a core PPI, Scott, a 4.6, a core CPI of 2.4 is just too high. And the Fed has to have credibility if they're going to get that number, those numbers down, closer to 2 percent. I don't think, though, it's a foregone conclusion that they're going to go in December. I think we're going to wait and see. We're going to see about the data that comes out.

4:17We'll see about inflation. We'll see about the war for sure. But I think it's going to be kind of a dovish hike, if you will, tomorrow. I think Warsh will come out and say it's just exactly that. This is not an aggressive campaign. All of a sudden that we're going to see massive hikes for the next several quarters or several months. And I think the economy can handle it. That's the most important thing. The economy can handle it. Whether the Atlanta Fed is at four or three, it's above trend. And the consumer, we're going to talk about the banks in a little bit. There have been the Barclays Bank Conference is this week.

4:51And every one of the banks are talking about how the consumer is in fine shape and credit quality is very, very tame. So I think we can handle it. I think earnings will stay elevated as well. not 50 percent like we just saw, but I think something like 20 percent for this year, maybe even into next year. And I think the market's going to get over this whole hiking.

5:10Scott Wapner: That's the real question, is how the markets are going to react, both the bond market and the stock market. By the way, I should remind you, too, that BlackRock's Rick Reeder is going to be with us in the next segment today, right here on this set with us here at Future Proof. So we'll get his views on what he thinks the Fed's going to do and what he thinks the markets are going to do. I'll get your view, though, first on all those questions, Shan. Let's just say that the market's right at plus 90 percent. Steph's right that they're going to hike. What's the market going to do, do you think? I think it comes down to the intersection of all of these things that are affecting the market today.

5:43You know, Josh mentioned oil prices, rates, the Fed. I think that they hike. They hike. We get a bit of a relief rally for a couple of days. But we come back to the fact that from now through the middle of October, all we're going to hear about are the elections, higher oil prices, the potential for higher rates. And oh, by the way, the reason that yields are higher is because there's anticipation of stronger economic growth.

6:05Scott Wapner: You said a relief rally. The stock market's going to rally. Yeah, I know. I mean, I think we get maybe like one or two days of strength, but then I think we're going to fall back into this pattern through the middle of October. I think we're priced in on the Fed. I actually think what I'm a little bit more concerned about, Scott, is that I'm not so sure Warsh is going to telegraph that this is a dovish hike because he is loath to give forward guidance in this environment. And so we could see a day, a day and a half of relative relief. But I think we fall right back into this challenging continuum of all of these this confluence of factors.

6:41The other thing that Josh pointed out is that, yes, the trend higher in the 10-year has not been at the pace, at the velocity that would create challenges in the equity market over the last several years. But we could see that pace accelerate as we move into the beginning of October. And without earnings as the foundation, as the backdrop, I'm concerned that these macro considerations are going to dominate the market and that all of this noise, especially around AI, which we're going to talk about, is going to create a ceiling on stocks, at least through that October time period.

7:12Scott Wapner: Do you agree with that, that the market goes up if the Fed hikes? I almost think the market goes up either way because we want this news, whatever it is, out of the way. I think the only thing that could really drive the market lower is a hike accompanied by an incredibly hawkish statement. And I would put the probability of that as like one or two percent. I do not think Kevin Warsh wants his first hike to be accompanied by by Brimstone. We know who his primary audience is and it's not us. And so even if there is a hike or no hike in like in either case, I think the market will say, all right, that's out of the way.

7:53The reality is 25 basis points is not going to have a major impact on the earnings outlook for the S &P. It's not going to stop the CapEx race, which is the primary driver of earnings. It's probably not going to be terribly meaningful. The market, if you look back through history, it likes when there's certainty, regardless of the outcome. And we can we can do thousands of examples of that.

8:14Scott Wapner: Let me say this. What if what if the move in interest rates starts to challenge the multiple and even. It already has. It already has. It continues to do it. We've been shrinking. We have accelerating earnings growth in the NASDAQ 100, in the S &P 500, and yet all we have is cheaper and cheaper and cheaper stocks. People talking about AI bubble, there are only 40 stocks in the S &P 500, 30-something stocks in the S &P 500 with a P.E. multiple above 40. There is no, there is no inflation. All we have is contracts. I bring it up because Wells today is out, Steph, with a new note. They cut their S &P target to 7 ,700 from 7 ,950.

8:58Scott Wapner: They see a 5 % to 10 % downside risk at first, but they raised their earnings forecast. But they believe we're in the later innings of the cycle, and they're arguing for multiple compression. So even if you get a better earnings story, you still get multiple compression, and that brings stocks down. Well, we already have seen multiple compression, as Josh mentioned. We started the year with the S &P 500 at 23.5 times forward estimates. We're now at below 20 times. Earnings are going to go much higher. I think you can deal with multiple contractions. So the market goes up one way or the other. Either earnings go up and you get multiple expansion or earnings go up and you get multiple contraction.

9:35One way or the other. I mean, I think that the market can handle it. And I think earnings are still very, very powerful. And so I don't agree with Wells today in terms of cutting targets.

9:45Scott Wapner: I agree with Wolf, which says we don't think rate hikes will mark a top in stocks. I think for the very reason that we got here in the first place, that all of you still believe in the durability of the earnings story. We wouldn't be having this kind of conversation about the Fed if the earnings picture was different than it is now. And the breadth of the earnings story. I think that's really important. Yes, you look at the top end and tech's at the top end of that. But then you look at energy, you look at industrials, you look at financials, and you look at the earnings growth that you're seeing across the board.

10:13Scott, yesterday we saw semis down over 6 percent. And yet Russell 3000 gainers were better than than decliners yesterday. So we still see that breadth in the market. And that's because of earnings. It's not because there is this continued concentration. Now, could we see a rotation over the next couple of weeks in terms of those winners? Absolutely, because some of the stocks that are actually poised to continue to grow their earnings very robustly have seen significant multiple compression. And so those values are starting to become a lot more attractive, especially if you don't want to take a risk on some of the high flyers and really continue to bank on the.

10:50We're getting that rotation now. Yeah. If you give me a chart of the XLE and pull it back three or five years, this is probably the most untold story. But it's a story nonetheless that people need to hear. We say on this show all the time, you never sell your energy stocks. I don't care how bad the outlook for crude is or how much peace there is in the Middle East temporarily. You do not get rid of your hedge. This is your only hedge against an oil price spike is the equities that where the companies make money from higher oil. On my best stocks in the market list, I now have 15, one, five oil stocks.

11:27Keep in mind, this sector is like two percent of the S &P. I have 15 names. We've been talking about some of these all year. The refiners, Marathon, Phillips 66, they look incredible. Schlumberger's on the list, ConocoPhillips, Chevron's on the list, Marathon, of course, LNG, FTI, Fang. These stocks are breaking out. Almost no one owns them. They're not expensive. The outlooks are going higher. And if you think about, like, what are people trying to do right now that's away from the AI trade, but that has this tailwind, And that's your energy sector stocks. Very easy for an active manager to outperform by overweighting this group relative to tech or relative to communication services.

12:10These are smaller companies. And these charts look unbelievable right now. The problem is it's only 3 % of the S &P 500, right? So take them to 6%. Yeah, you take them to 6%. But you know what? Technology, we know what that is. That's a huge—it's 35 % of the S &P 500. So you've got to get both of them right. Yeah, but this idea of a barbell or a hedge is incredibly important. energy, health care. You look at these names and you look at the opportunity there. And I feel like this is a great way to just take a little bit off the table in tech and just have something on the other side of this trade for these down days.

12:42Scott Wapner: I think we're investors, we as an investor class, are trying to figure out what exactly to do next with these AI related stocks, given where the conversation has gone really from the weekend. Some new headlines, and they're going to be headlines probably multiple times a day, every day for the foreseeable future. A Google Deep Mind staffer says AI may, quote, kill us all after. And that was in an exit post. So that's sort of reflecting what has really been on one side the Doomer cycle. Time magazine's cover. Take a look at this. How dangerous are you in a in a in a chat question? The AI tipping point is the title there.

13:24Scott Wapner: The president, you know by now, he's been railing on social media, calls the safety fears a hoax. David Sachs weighing in, Gavin Baker weighing in, Nikesh Arora weighing in. It seems like every significant voice within the technosphere, if you will, is weighing in. Jensen Wong did yesterday as well in the All In Summit, the president calling into that. Our Kate Rooney is in San Francisco, up the coast from us. following that part of the story. Your head must be spinning with all these headlines. It's been really busy, Scott, and you have had some really influential tech CEOs weigh in. And there are some different camps really starting to form around really whether or not to slow down AI.

14:05So on one side of this, you have the AI lab. So Anthropic CEO Dario Amadei kicked all of this off over the weekend with an essay on Saturday calling for an AI slowdown. You had Sam Altman tweeting his support for that. OpenAI also just told us within the last hour that the company is working with other AI companies, so Anthropic and Google in particular, working with them on sort of how to police this, how to oversee it. Elon Musk also agreed with Amadei on Twitter. He said, I agree with Dario, and Musk was at the All In Summit as well. He unpacked some of those comments on stage. He said, when people from Anthropic and OpenAI are telling you that their models are very dangerous, he said, we should believe them, called for a peer review of some of the most powerful AI models.

14:50Scott Wapner: What I think would be wise to do as soon as possible, if not immediately, would be to have the major AI competitors test each other's models so that you'd have everyone's security test harness testing everyone's models. So, you know, instead of kind of grading your own homework, you would at least have competitors grading your homework and raising the alarm if they see concerns. Scott, you also had Jensen Wong, NVIDIA CEO, on stage at that same event saying there that companies should take safety seriously, but they do also need to draw a line between some of the concrete risks and predictions of human extinction.

15:34He called some of the rhetoric irresponsible. He also said that slowing down could cost the U.S. its lead over China. And President Trump very much agrees with that sentiment and called some of the fears that AI could take over or destroy humanity a hoax. He called Jensen Wong on stage, was on speakerphone. And then finally, you had Pentagon Technology Chief Emile Michael also arguing some of the existing laws are already there to provide the tools needed to police this industry, Scott. But a lot going on in this space.

16:03Scott Wapner: Yeah, no doubt about that. Kate, thank you very much. That's our Kate Rooney, Wells Fargo guys today downgrades tech to equal weight. I thought Mike Santoli had a very interesting part of his market memo today. Quote, the youthful phase of AI when promise was unlimited and winners were easy to spot and vastly outnumbered losers is over. I guess my question to all of you, is it going to be harder now to find the winners from the losers? I think it couldn't be easier. The market has spoken. We have the verdict already. Give me these charts in rapid succession. CrowdStrike. I knew you were going to go there.

16:38Stocks up 104 % year to date. It is the 12th best stock in the NASDAQ 100. It's the 15th best stock in the S &P 500. I don't care what model you're rooting for. I don't care what LLM, what hyperscale. I don't care. What I can promise you is there is no AI without the appropriate amount of cybersecurity. and what the appropriate amount of cybersecurity seems to be is only going in one direction. Tell me one government or one board of directors at a public company that's having a meeting, even considering lowering the amount that they're spending on cybersecurity in the age of AI. Look at Fortinet, FTNT, and by all means, let's throw up Palo Alto.

17:21All three of these stocks have doubled this year. The market has spoken. These are the built-in winners. Can you make money in chips? Sure. Can you make money in hyperscalers? Power? Yes, absolutely. But we know you cannot bank on any spending not being accompanied by the right amount of cybersecurity. I think Crowd is the winner here. This is a long-term holding of mine. I'm in the stock for 600-plus percent. I never stop talking about it. And at this rate, I probably never will.

17:52Scott Wapner: Steph, you really don't stop talking about the need for cyber either. I thought Mark Newton of Fundstrat had an interesting note today. The MAG-7 is on the verge of an imminent breakout, and that should spark a sharp rally in large-cap technology. It was pretty telling, don't you think, yesterday in the way that some of the hyperscalers traded in the face of all of that negativity over the weekend. Alphabet, Meta, Microsoft, they were green. They were green. They should be green because you're starting to see monetization. Maybe not Meta, because that's where I will differ. But I think when you saw, you know, Microsoft and you saw Google Cloud and you saw Amazon, AWS, all see these numbers in their cloud business, businesses accelerate last quarter substantially.

18:34That was real confirmation that you are starting to see the ROI. We want to see better ROI. We want to see higher numbers. But we're starting to see it. And as long as they're going to spend and then they start to see the ROIs, that does benefit the entire food chain. We're going to spend$7.1 trillion on data centers between now and 2030,$1.4 trillion on the grid and upgrading the grid between now and 2030. Power,$1.7 trillion, and that has a plus sign next to it, no doubt in my mind, because we just don't have enough of it. And we don't have enough of anything, Scott. That's the whole debate about inflation, right?

19:09AI is inflationary in the short term, but eventually it'll lead to productivity, which will also be very positive. Nice thought. Core businesses that can be enhanced and improved by AI are where you want to be investing. And that's why the hyperscalers are going to outperform some of this, you know, kind of these frontier AI names over the course of the next couple of months.

19:26Scott Wapner: OK, I'll see you guys in a few, because coming up next, our halftime headliner from here at Future Proof, BlackRock's Rick Reader. He joins me live ahead of tomorrow's Fed decision. Josh also has some new moves coming up. Stephanie Link has a new buy. I promise we get to all of it when we come back. Huntington Beach, California.

20:11credit data, rental payments, and timely utility payments. Vantage Score safely broadens access to the credit economy and brings 5 million mortgage-ready borrowers into the market. That's why top lenders like Rocket Mortgage, as well as nine of the top 10 banks, rely on Vantage Score 4.0. With higher predictability and greater access to credit, everybody wins. Get started at VantageScore.com. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done.

20:47You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required.

21:02Scott Wapner: You know, Kevin, sometimes I feel like computers are the only thing around here that are getting smarter. Yeah, my model hasn't had an update in a while. But that changes now. We think that we can smarten these listeners up about all things related to this crazy new future. Welcome to Machine Gods, a new NPR podcast that will be your guide to the AI future. Twice a week, we're going to help you get smarter about AI so you know what's real, what's hype, and what you should probably install on your phone. Listen to Machine Gods from NPR on the NPR app or wherever you get your podcasts.

21:38All right.

21:38Scott Wapner: Welcome back to Huntington Beach, California. Investors betting heavily at this point that the Fed will raise interest rates tomorrow. It's sure to be a market moving meeting no matter what happens. Here with his outlook for stocks and bonds is Rick Reeder. He is BlackRock CIO of Global Fixed Income. He's head of the global allocation team. It's nice to catch up with you ahead of tomorrow. Great timing. Yeah, yeah. This is great. Well, let's just get right to it. Are they going to hike? Yeah, they're going to hike. I mean, I think the markets are pricing at over 90%. Would I have priced it at over 90 %?

22:08I wouldn't. But yeah, I think you have to assume at this point, given everything, given the position they're in today, boy, the communication, you would think, even though we're not getting forward guidance and we're not in the future, well, I think this would, given how much the markets have assumed it's the case and the variable, the volatility of the back end of the curve, I think it'd be pretty tough if it didn't happen.

22:29Scott Wapner: Okay. So you were with me just a few weeks ago, right? You told me then that you thought they'd be on hold, quote, for a period of time. Yeah. Have you moved in your own mind from they shouldn't hike to they should? No, no, no, no. No, I think you don't think that they should. Oh, I mean, I wouldn't. But that being said, I've learned in investing, it doesn't really matter what I think. It matters what they do. And it matters what the markets perceive that they're going to go. And so I wouldn't because I think there's you're not going to really do much. I I mean, talk about moving the funds rate 25 basis points.

23:03Are you really going to do anything for inflation? What's driving inflation today is interest rate insensitive. Obviously, you've got war. You've got energy price. You've got education, insurance costs, health care. It doesn't really do much. So what I do it, what it does adversely impact, look at the housing market that's frozen. And one of the things, I presented at a conference the other day, and I talked about this. It's not free to raise rates. U.S. government, when you move rates up 100 basis points, it's$100 billion. To the U.S. government, the tricky part is we're going to have a compounding debt problem in the country.

23:34Ultimately, you've got to get that rate down. So when people say we should just raise rates, boy, there's a serious cost, let alone to most of the country that's having a tough time with these rates. Not the parts that are driving capex. They're doing just fine.

23:47Scott Wapner: Do you think that a hike would be then more about credibility than it would be inflation? So, I mean, I think the narrative in the marketplace, the Fed has to go for credibility. You know, could you describe it in a way? Listen, I think now the position they're in, I think you'll most definitionally have to go. You know, I think the Fed's credibility really I don't think should be questioned. I mean, I think as long as you have, you lay out what the metrics are utilizing to determine where rates are going to go from here. As long as you're thoughtful about these task forces, what are these complex issues today?

24:23Listen, I think people are pretty harsh when they say a couple of meetings and now they have a credibility issue. I don't really.

24:30Scott Wapner: Well, haven't or hasn't the chair put them in this position by being as hawkish as he has publicly been? He said, we're not going to tolerate inflation where it is. We're above target. And then at Jackson Hole, he was hawkish. So how can you do all that and then not hike? Doesn't that create a credibility problem? So, listen, I mean, can you, to say you are going to be vigilant on inflation going forward, I still think you can do it. And I think there's a whole series. By the way, you can use the balance sheet. You can use liquidity. You have a whole series of tools that you can utilize to get there.

25:06To your point, though, and the reason why, gosh, at this point, I think you almost have to go. You have laid out a dynamic and you've had a series of speakers, not just the chair, who've outlined that you have core PCE that is above target. And, you know, if you had a reasonably soft, if you had a softer employment report and inflation report, CPI, PCE, then, gosh, could you have waited? Yeah, I think you could have.

25:29Scott Wapner: But the data last week forced their hand? Yeah, I think so. I mean, that was even when you break down CPI, there was some exogenous influences like telecom services that shocked the number higher. But, yeah, I think those numbers, if you have a committee, and I think the key is people focus on the chair. You've got a committee that's got a series of people on it that feel like you're above target, time to go, let's go. And I think he has to manage that dynamic. What do you think the long end does if they hike? Listen, I think one of the things, and we've dabbled a little bit in the back end of the yield curve.

26:01I still think you've got to be careful about interest rates. I know I've talked about it for a long time. Long end interest rates haven't been interesting. For the first time, you're getting to break evens. that are, I mean, you know, I was looking at when the 10-year hits 5%, 95 % of the time in history when it does, it's a really good forward investment environment in terms of buying interest rates. So we've dabbled a little bit. That being said, I still think rates could move a bit higher. Assuming they hike, yeah, I think the yield curve will flatten. I think the back end will hold in just fine.

26:28Scott Wapner: You may get a little bit better opportunity, but why fight it? Why wait for it? Well, so we've been significantly underweight for a long time. And I think now... Well, you say you're dabbling in it. Yeah. Yes. You're dabbling. You're buying some long-end treasuries. Yes. But I think today, we could still own a whole lot more than we have. We're pretty significantly underweight in terms of the back end of the curve. So yeah, we bought a few pieces. But at the end of the day, listen, you've got influences. The amount of supply that's coming to market is significant. Obviously, you get treasury supply, but also the amount of credit supply is significant.

27:03Pressure on long rates, you know, is real. And so, you know, I think you can own a bit here. I think if you took a longer term time perspective to it, yeah, you can own rates. But I think today, you know, we're going to buy a little bit, but be careful.

27:16Scott Wapner: What about the fact that you've liked the belly of the curve? Yeah. Most. Yes. Is that starting to change? So, no, I mean, I still, I mean, I like actually a bit more. I actually like the front end, the very front end now. I mean, so you can create. So we have this ETF called Bank. We're running it under three years of duration. And over now, we're running actually 7.2 % yield with an A-minus average rating. Boy, if you can sit in that part of the yield curve where volatility, I mean, we're having a decent year. We're up money this year, which in fixed income has been pretty tough to do. So yeah, I like, but I've moved it a little bit in the front.

27:51And then, like I say, a couple of pieces out in the back end. You think it's one and done? um listen i think you know it's dependent on where the inflation goes i mean the concept what's part of why it is in my mind just hiking 25 bases doesn't do anything if you're gonna hike and you want to make a difference you got to go more the problem is the pressure you'd put on most of the country to do that doesn't in my mind doesn't make any sense so yes my ultimate view is i think you probably do this hike i don't think we're going to get much forward guidance that seems to be the philosophy. And then, listen, I don't think they should go any further.

28:26We'll see what the data says.

28:28Scott Wapner: What do you make of the Treasury's intervention and the fact that yields have continued to back up even though they're in the market? So I think the Treasury has been quite clear, and they're not trying to manipulate or they're not trying to set where the rate should be in the back end of the curve. I do think what they are doing, and I do think that intervention is suggesting that, gosh, we have tools. If people get short the back end or people are aggressive and pressing against it, they have tools to combat that. And so, listen, the amount of size they've bought and people are focused on, the fact that you think about the$40 trillion of debt we have in the country and the fact that people were so wrought over, it was$6 billion, not$8 billion, it's kind of ridiculous.

29:10I think at the end of the day, Secretary will make a determination, does he have to do more if rates become unanchored? But today, they're not really unanchored. I mean, you talk about the move we've seen in the back end of the curve. I mean, people get crazy in exaggeration. You've got an economy that's running on a real-time basis well over 6%. You know, you've got a 10-year, when you look at the yield today, I mean, people say that's de-anchored or unanchored. It's not really unanchored. It's reflecting the fact you've got strong growth in the economy.

29:38Scott Wapner: Yeah, but when you were with me last time, you did use the word untethered, that it was starting to look a little untethered at the back end. There are days that it gets a little bit, that gets volatile. But when you step back and look at where these yields are, and you think about, gosh, you've got an economy that's doing really well. Our view is you'll start to see it peak. You know, you're back, you're on the back end of the fiscal stimulus. The first derivative of CapEx growth from AI should be a bit lower. So I think the, I don't know, I think you've seen some pretty amazing growth. So I don't think the Treasury has to jump in and see if it can size.

30:11Scott Wapner: What do you make of the fact that Treasury, the secretary, says I'm the House and whether the market is testing that a little bit? So, listen, I mean, it's, you know, I will say one thing. I mean, it's a hard job and I understand, you know, I understand what he said around asymmetric information. And listen, whether it's what Japan is doing or looking at deficits in terms of what the forward is. Listen, he's got he's got good information. And so I mean, we can debate the words he uses, et cetera. He's got good information, and I think he's looking at a world where he thinks that if you grow at this sort of level, tax receipts are high enough, then you could manage that.

30:53Scott Wapner: Let's finish on stocks. Okay. What do you think the stock market's going to do if they hike? So, first of all, you know, one thing I've learned, no matter what the stock market does, people will say it was because of the Fed. And it's funny. It's like, I think it was on your show once. and the day before the market rallied or the day the Fed moved, the market rallied, then people say it's the Fed, and then it got hammered and people said it was the Fed. Listen, I think the one-day change is pretty hard. I think people need to see the Fed moving. And I think as long as you get, I think Josh said it was, I think, is right.

31:23As long as you get behind it, I think the equity market will have an okay time with that. Listen, I will say, I don't remember a year ago we were here, we talked about it was the best investment environment of all time. Yeah, of course I remember. I don't think that today, particularly with regard to equities. I mean, you think about where we are a year hence and how much things have changed, whether it's multiples, whether you just had a tremendous GDP dynamic that we're going through that buoyed stocks. The fact that I could build a portfolio of over 7 percent with a three year duration single A, it's like all of a sudden the alternative to stocks is real.

31:54And then if you say, well, you know what, you know, AI, you know, I think AI is still going to be significant terms of growth. But you said, you know, when I go through sectors and I say, OK, that sector is OK. There are not a lot of sectors. I say, gosh, you know, the convexity upside downside is great today. So anyway, I think stocks are fine. But I think they're a B minus today relative to like we came last year. It's like you had opportunity to get yield. Not as great as today. An opportunity to get yield. You had an opportunity to get equities in what was, I would argue, was a pretty good point in time.

32:26Today, I think it's just OK.

32:28Scott Wapner: You think there were an A plus a year ago and there are B minus today? I don't know if I would characterize it back then, but we talked about it was an amazing environment. Today, I think they're just okay. And I think the volatility of equities will be higher going forward because you've got to grow. We've been growing at 20%, 25 % earnings growth. That is a pretty hard bar to eclipse when you've got on the backside of fiscal tailwind, when you have a war that obviously creates some duress around it. So, yeah, I think they're just okay. Well, I mean, if you think that earnings are in the process of peaking and that yields are going to challenge the multiple, then that's a significant issue, isn't it?

33:09Yeah. So let me throw out one thing. You know, it's one of the many years we've been on together and people said, you know, if the tenure gets to 3 % or 3.5 or 4 or 4.5, like it's over. 5 is now the round number that it's over. I actually don't think. As long as you move there in a deliberate way, I don't think there's a number. But I do think something has evolved. And there is rollover financing risk in a number of sectors today. And I do think you'll see that whether it's in real estate or bilateral credit finance, there is some rollover risk in the market. So I think that is real. But what has changed is that with these real rates where they are today, if you're running, if you're an endowment, a pension, a foundation, and you say, gosh, I've got an operating budget to fulfill, and usually that return is about 7%.

33:52And if you say, gosh, if I can do it in a really low, volatile, stable way, versus I got to hope for earnings growth again, the needle will move. And you're seeing that. We've seen some clients who said, gosh, maybe I'll move the needle. Not a lot. I think most people feel pretty good about equities today. But I do think that all of a sudden the alternative is quite significant. We'll leave it there.

34:14Scott Wapner: I appreciate your time, as always. Thanks for having me. I'm going to see you on the stage in a little bit, so don't go too far. That's BlackRock's Rick Reeder, of course. Quick programming note as well. It is, of course, Fed Day tomorrow, which means we'll be speaking with Double Lines' Jeffrey Gunlock immediately following Chair Warsh's news conference. So huge interviews. You get to hear from Rick Reeder today ahead of the decision. You get to hear from Jeffrey Gundlach right after the decision. So got you covered all the way around. Still ahead, we're back to the committee. Josh and Steph both have new moves.

34:42Scott Wapner: As I said earlier, we're going to get to the names coming up next live from Future Proof.

35:08Scott Wapner: We'll be right back.

35:16Scott Wapner: You can live call 877-8HOPE-NY. And be visit mdgamblinghelp.org. Offer not available in all states. Terms apply. See Fanatic app for details. If you like YouTube, you'll love YouTube Premium. It's destroying athlete, creator, and YouTube maxer. YouTube Premium enhances how I use YouTube with awesome features like offline downloads so I can download my favorite training videos before I hit the gym. So no Wi-Fi doesn't turn leg day into loading day. Plus, I get ad-free videos, background play, and so much more. YouTube Premium is like YouTube got some extra gains. Try YouTube Premium for two months free at youtube.com slash premium.

35:49Scott Wapner: Trial eligibility varies. Terms apply. Cancel anytime. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required.

36:25We're back on Halftime Report. I'm Christina Parts-Nebulus with your CNBC News update. Nick Reiner won't face the death penalty for killing his parents, the Hollywood director Rob Reiner and Michelle Singer Reiner. The L.A. County District Attorney announced a surprising twist today, saying the decision comes after a rigorous review. Reiner has a history of mental illness and has pleaded not guilty to the deadly stabbings. Italy's defense minister says the drone shot down in Lithuania's airspace overnight by an Italian NATO fighter jet most likely came from Russia. Separately, Denmark said a Russian warship fired two flares at one of its military helicopters.

37:00The incidents came just one day after NATO's chief said strikes close to NATO territory would only increase the military's alliance support for Ukraine. And the United States just confirmed for the first time it has weapons in space. U.S. Air Force Secretary Troy Mink confirmed the deployment during a conference, but didn't specify what kinds of weapons were actually in orbit. Halftime Report is going to be back after this short break.

37:26Scott Wapner: All right, welcome back. The fifth annual Future Proof Conference came with a very big announcement this year down on the main stage. Anthropic unveiling a set of AI tools for financial advisors through its Claude chatbot. Josh is Ritholtz Wealth Management, named one of the design partners for that new product. We'll start there before we get to the conference at large. What does that mean? Tell us. I think what was announced yesterday is a landmark situation for the wealth management industry. We are an industry where we have spent the last 10 years basically cobbling together hundreds, if not thousands, of different point solutions.

38:00Software programs that do everything from portfolio accounting to asset management and trade rebalancing, customer connection points, like everything that you can imagine there's a software solution for. That's in part the success of this event is because of the way the ecosystem is thriving. The problem is nobody has come up with an intelligence layer that can pull all of those things together and allow the financial advisor, the wealth management firm to coordinate and not have to log into 50 different things, move customer data, trade on one platform, trade on another, pull them into a spreadsheet, do some sort of reporting.

38:41So now for the first time, having Claude in our ecosystem, pulling together all of our systems, reporting to both us and our client in real time, everything we need to know before every conversation, before every market moment. This is, in my opinion, the holy grail. We finally found it. On behalf of Ritholdt's Wealth, we are honored to be working with Anthropic on the project. And I think everything is about to change.

39:08Scott Wapner: What does that mean? You're a design partner and you're working with them to design exactly what? What the whole experience is going to look like between the advisor and the client? What does it need to do? How does it need to operate? What integrations does it need to have? Which custodians does it have to be plugged into? How does it work with the existing data lakes that firms of my size and larger have already built? This is the most important. Anyone can say, OK, great, here's enterprise software. But if it doesn't get the job done, it's just one more SaaS product that people don't want to pay for.

39:40Scott Wapner: So it doesn't take anything away from the human to human contact. It only sounds like it enhances it. Tell me what the client at the end of the day gets out of this, because I think that's what our viewers probably want to know more than anything else. How is this going to help me be better at, you know, my advisor making more money for me? Yeah, I think that's exactly right. Like, what is the externality in the eyes of the end customer? I know a lot of people see me on TV, and I talk about the stock market, but my real job is running one of the fastest-growing wealth management firms in the country.

40:16I'm not just a pretty pair of kneecaps.

40:21And we're almost$10 billion in assets under management. I've got dozens of certified financial planners working with thousands of households. It is exhausting to sit on a call with a family where they're going through a transaction of a small business they're selling or a matriarch or a patriarch has passed away or they're creating trust and estate documents for the first time and trying to decide who gets what and when and what are the contingencies and who gets to sign off on. These are emotional conversations. They're not market conversations. The markets are the tools that enable us to satisfy the goals and objectives that we're setting out with the planning.

41:04What does the customer get as a result of all this tech? Clarity, number one. More of their advisor's attention. I have very highly paid certified financial planners. They have they're brimming with empathy and wisdom and experience. My clients are paying me for access to that. They don't care who pushes the button. They're not interested in who does the rebalance. That stuff has to work, has to be executed flawlessly. if AI can help us get that done, that's more time for the human connection, which in the end is the most important part of the engagement. And I don't care who you talk to. You could talk to an advisor at Goldman Sachs.

41:45You could talk to a two man or two woman operation in a strip mall in Dubuque. Both of them will tell you the same thing. The client cares about attention and FaceTime and understanding their situation. They do not care about tech. We care about tech because we're trying to run incredible businesses and satisfy a lot of customer demand.

42:07Scott Wapner: Do you feel like this is a if you build it, they will come thing for future proof in general? The fact that you've got 5 ,000 people here, you've got thousands of registered investment advisors, Anthropic came here to make the announcement with all of you and what that says about what this conference has become? Anthropics announcement is unbelievable. There are 12 logos on there from companies like Schwab and BlackRock and all of the biggest players. They're all in on the provider side. On the RIA side, again, it's a small handful of firms, mine being included, where we're helping them understand what is the need of the advisor.

42:43The fact that that's going down here at the fifth version of Future Proof, it's like a dream come true. It's unbelievable to be right in the center of it all.

42:52Scott Wapner: All right, quick break. We come back. Josh's move and Steph as well. We are back and let's talk about that move that Stephanie Link just made. So you bought back Wells Fargo once your largest position that you had exited. Now you're back. Why? Yeah, because I think the turnaround is starting to become evident. The asset cap was lifted a year ago. It has taken them this long to really build the momentum in their business. And they are starting to talk very positively. They were at Barclays this week at the conference. I'm talking about gaining market share in investment banking. In M &A, fee growth is accelerating.

43:28Most importantly, NIM, net interest margins, have bottomed. And net interest income is growing. And that is, by definition, positive operating leverage to be seen. So this stock has actually lagged the big five by 14 percent year to date. It's down 2 percent in the year. It's trading at 1.4 times book, 11 times earnings. I think they're back.

43:46Scott Wapner: What do you make of Bank of America yesterday? Worst day since April of 25. They said they expect Q3 investment banking fees to fall more than 10 percent. Morgan Stanley, who's out today, said the stock reaction was way overdone. They reiterated overweight. You own the name. I do own the name, and I was surprised that the stock was down that much because they did have a lot of positive things to say. I was more not concerned, but just surprised that positive operating leverage this year, instead of 500 basis points, will be 200 to 300 basis points. That's a yield curve thing. I don't think it's really in their control.

44:16But he was out very positively on CNBC. What was it last week or the week before talking about the business momentum and then seeing loan growth and demand growth, et cetera, and deposit growth? And so I just think this was just a backtrack a little bit, but I'm not concerned at all, not at this valuation.

44:32Scott Wapner: Shan, you like the group? Yeah, I mean, if you if you look at the opportunities in terms of net interest income, but also, you know, even with the decline in investment banking, we're still going to have a lot of transaction volume. And so trading is still going to be a huge driver for these financials as we move forward. So you real quick, you bought more Netflix, you bought more Delta. I did. Netflix is 38 percent below its 52 week. It's all time highs. I think the stock is just too cheap. Mark Mahaney came out yesterday. One hundred and ten dollar price target says the market is missing all of the positives.

45:02I agree. Also added to Delta on this dip. Delta is being depressed with the other airlines because of crude oil back above 100. You wait and see how fast that reverses one or two week weekdays for oil. The airlines will rip and Delta probably more than the others because it is the best player in the group. I think anywhere under 80 gets a steal.

45:22Scott Wapner: All right. Good stuff, guys. We'll take a quick break. We'll come back. We'll do finals from Future Proof coming up. All right. We're back at Future Proof for closing bell at 3 o 'clock Eastern time. Tom Lee, Dan Ives, Sarah Malek, and Cheryl Penny of Dynasty. And I look forward to having you all with me this afternoon as we count down to the end of the trading day here. We'll do final trades now. Well, Josh Brown, you were first. Yeah, we did a segment a couple of weeks ago about Target hitting my list of the best stocks in the market. We have just put the stock in client portfolios for our porterhouse concentrated momentum strategy.

45:57Basically 16 times earnings with 33 percent growth expected over the next year. I think it'll keep running.

46:03Scott Wapner: Telsey reiterates it. Outperform 182 is the target. Welcome to the party. You've known that name for a long time. Hasn't always been a fun party. It is not a fun party, but it is this year. It's up 61 % year to date, and they have a lot of momentum in their business. What's your final? Truist Financial. Another new CEO doing it. All right. All right. So we're going a little more regional. They're super regional, if you will. How about you, Shan? Health care, managed care, improving margins, and might get a little bit of a bump if the Democrats take the House. All right. I'll see you in a couple hours back here in Huntington Beach at Future Proof.

46:34Scott Wapner: For closing bell, the exchange begins right now. All opinions expressed by the halftime report participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet, or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of opinion. Such opinions are based upon information the Halftime Report participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such.

47:06To view the full Halftime Report disclaimer, please visit cnbc.com forward slash Halftime Report disclaimer. Black Friday is around the corner. It's your biggest chance to grow sales this year. Don't wait. Realize is Taboola's advertising platform for businesses, letting you launch campaigns on top premium websites beyond search and social. Add Realize to your media mix and scale this Q4. Exclusive for podcast listeners, new customers get$700 credit back. Just search Realize Podcast on Google or use the promo code podcast26. Don't miss out on this limited time offer. Terms apply.