Well, that's the end of regulation.BlackRock ringing the closing bell at the New York Stock Exchange.Vital Farms doing the honors at the NASDAQ.
Record closes for the major averages, again, as we wrap up the best week of the year for the Dow and the S&P 500.Tesla finishing back above a trillion-dollar market cap.That's the scorecard on Wall Street, but the action's just getting started.
Welcome to Closing Bell Overtime.I'm Morgan Brennan.John Fort is off today.Well, ahead this hour, solar stocks sitting out the post-election rally in a very big way, but Some names in the space losing a third of their value or more.
We will talk to the CEO of Sanova which has been cut nearly in half this week about why he says the market is getting the Trump trade on solar so wrong.Plus Robin Hood's
Chief Brokerage Officer joins us to discuss the historic volume from retail investors this week and what they were buying.And we will be joined by the CEO of cybersecurity company Cloudflare, which is pulling back following quarterly results.
We begin, though, with this historic day on Wall Street as the Dow tops 44,000 for the first time, although it doesn't look like we actually finished above it.And the S&P 500 climbed above 6,000 on an intraday basis.
Joining us is Ariel Investments Vice Chairman Charlie Bobrinskoy and Hennion & Walsh Asset Management President Kevin Mahn.It's great to have you both here.Kevin, you're sitting on set with me.
I'm going to kick off this conversation with you because we had a huge week for all of the major averages.The Russell 2000 were less than 2% from a new high now.We finished up almost 8.5% on the week.
Walk me through where we go from here in markets since so much of this seems to be the removal of the election overhang.
Yeah, the markets need to take a breather, and investors shouldn't expect the market to continue to accelerate at the pace they have this week, or essentially since the beginning of 2023.
However, I do think there is more room for this bull market to run.We did the research.We went back to 1946, and we've seen that there have been 12 bull markets historically.Average duration, 5.3 years.Average cumulative return, nearly 178%.
We're about two years into this bull market and about 50% higher.And I know this time could be different, Morgan, but if history averages just hold up, that means we got potentially another two years to run and perhaps another 100% upside from here.
Mm.And Charlie, we have seen tech stocks, the mega cap tech stocks, excluding Tesla, perhaps really lagging here this week.And we have seen other parts of the market catch a much bigger bid.I just mentioned the small caps, the Russell 2000.
But it does seem like we have this unwinding of election related hedges.We have a VIX retreat.We have favorable season seasonality with return of buybacks.The so-called
animal spirits and a sense of FOMO in the market right now, deregulation and tax cut expectations.
And then, of course, more recent support from rate stabilization, as we've seen the 10-year Treasury yields basically do a round trip here to its pre-election levels from earlier in the week.
Where do you think we go from here and what looks compelling at these levels?
Well, I'm glad you mentioned Russell 2000.We wouldn't mention Russell 2000 value, 2,500 value.Small-cap and mid-cap value has lagged for several years.There's been a lot of talk about how this market's gone too far, too fast.
That hasn't really been true for value stocks.And we've had a wonderful week this week for value stocks.Basically, it's not so much what Trump is going to do and the new administration is going to do.It's what's not going to happen.
We're not going to have a big increase in corporate taxes, which people thought we were. And we're probably going to have less regulation on regional banks, less restrictions on M&A, which will be very good for regional banks.
We probably have too many banks in this country.The energy industry is probably going to do better than they would have under another administration.The one big wild card is tariffs.Markets don't tend to like tariffs.
Markets like free trade and how that all shakes out is definitely in the to be seen category.
And Kevin, I want to get your thoughts on what we are seeing in the bond market because we had been hearing that it was a sell treasury trade tied to a Trump win.And yes, we did initially see that.
But the fact that that we've sort of already moved past that, what does that tell us?And I say that in a week where we also got a Fed cut.
Yeah, and we also see now that the spread between twos and tens have narrowed to five basis points.Could it invert again?I certainly hope not.
But I think what the bond market is telling us is that they believe the Fed is going to go much slower from here.I don't think they cut in December.In fact, I think next year they take a much more gradual approach to rate cuts, perhaps quarterly.
until they get to their neutral rate forecast at 2.9 percent.
Given the uncertainty around potential tariffs and the uncertainty around the inflationary impacts of said tariffs, I think they're going to be much more costless cutting interest rates unless the economy slows considerably more, unless there's more distressed in the jobs market.
So quickly along those lines then, what do you buy?I would imagine domestic manufacturers that are tied to things like national security, all of a sudden look more compelling in a tariff environment, or regardless of a tariff environment?
Regardless of the tariff environment, I'm very bullish on aerospace and defense.There was momentum in this area during the Biden administration.I think that momentum only accelerates during the upcoming Trump administration.
And we need to replenish, we need to upgrade, and we need to modernize our defense capabilities.And three names that we hold at SmartTrust in each one of those three areas
First, as it relates to replenishing, how about general dynamics and our need to replenish ammunition and military warfare capabilities?
And then if you want to look at upgrading, how about a name like L3 Harris in terms of upgrading our missile defense capabilities?
And then a smaller cap name as it relates to modernizing Kratos Defense and Security Solutions drone technologies, which will allow us to have unmanned and less casualties in the event of war or defense situation.
So those are three areas I think that are going to benefit from the upcoming administration, but they were already taking place during the Biden administration.
Yeah.And of course, Kratos had earnings this week and overtime viewers know many of these names.
Well, we're gonna talk a little bit more about them later this hour, but Charlie, I'm gonna put the same question to you since I know that you are a stock picker, whether it's financials, whether it's, we had earnings from Paramount as well, which I know you're invested in, uh, what you like here and why.
Well, what's easy is there's going to be more deal activity, and that's for sure.Goldman Sachs and Lazard are going to have a lot more M&A fees next year than they did this year.
And frankly, they're going to benefit from a positively sloped yield curve.Big investment banks tend to borrow short and lend long, and they're going to do better.Not so much 2 to 10s, but bills to 10s.
They tend to borrow in the overnight repo market and then they invest longer term.So we like that space a lot.And then I happen to like energy and natural gas.
Natural gas has been under a lot of restrictions, a lot of restrictions of liquid natural gas exporting.The price in Asia of natural gas is about $13 in MCF.It's about $2.50, $2.75 in the U.S.
There's a huge opportunity for us to export liquid natural gas.There are big tankers that have been coming from the Middle East to the U.S.for years.There should be tankers of liquid natural gas going to Asia from the U.S.
So I like those spaces a lot.
Okay, Charlie Babrinskoy and Kevin Mann, thanks for kicking off the hour with me with record highs, record closes for the major averages.
And even though we're only six days into the month of November, we're actually on pace, the Dow, for the best month since November of 2023 so far.All right, we'll see if that holds.
Let's turn now to NVIDIA pulling back a bit today in its first session as a member of the Dow, but still sharply higher on the week.Seema Modi has a closer look at the move.Seema.
Morgan it feels like a long time coming but Nvidia joined the DAO today replacing Intel and shares were down slightly in the first day in the index but we know Nvidia has merged as one of the largest companies in the world but it took some time for that to play out and of course the AI revolution helping the company outperform
Remember, the Dow is a price-weighted index, so even though Nvidia is a nearly $4 trillion company, it is only around the 21st most expensive stock in the index.
Contrast that impact with the S&P 500, where Nvidia is weighted at more than 7% of the entire index. While shares have rallied since the news, history shows us that additions to the Dow don't always lead to higher gains.
In fact, Honeywell and Walgreens underperformed the stocks they replaced one year after the change was made.The reason?
Well, a lot of analysts say most of these companies had such a strong run-up into their Dow inclusion that gains were likely already priced in.
For NVIDIA, this means there may not be much more to gain by adding to the Dow, but we know AI as a way has been a powerful driver to offset historical trends.
Look at case in point this week and this year, one of the best performing stocks and earnings are less than two weeks away, Morgan.
All right.Well, watch it, Seema Modi.Thank you.A lot of good context there.Let's bring in Mike Santoli for a broader look at the reshuffle in the Dow.
And of course, Mike, it's worth noting, we're talking about a price weighted average, not a cap weighted one.
Exactly.And just to amplify what Seema was saying, here's where Nvidia sits in terms of its weighting in the S&P 500 as the largest company in the world.7.1 percent of that index.
It's only 2.1 percent of the Dow weight because it has a relatively lower share price.And then you see Sherwood Williams also entering the Dow today.It's only two tenths of 1 percent in the S&P 500.However, it's the sixth
most influential stock at this point in the Dow because it does have a much higher share price, good for about 7.2% of the Dow.So there you have the quirks of the antiquated Dow Jones Industrial Average coming into play.
Now take a look at some more specific numbers on how entrants and stocks exiting the Dow have done historically.This is from Ned Davis Research.
So this is the point at which a stock goes in or out of the Dow Jones Industrial Average throughout history. So you see those that are getting kicked out, they've been bad performers.That's why they get kicked out.
On some level, there's a momentum representation type of story here.But starting a little while after they're out, they start to outperform again.
Those entering the Dow, you see that they've generally been positive because markets are generally positive, not as aggressive. But they continue to do OK for a while.
So it's not a pure contrarian call, but it does show you that when perhaps a company gets kicked out, they definitely have at least the possibility for it to be kind of a capitulation type move, and their fortunes might be about to turn for the better.
Though I know I've mentioned to you, Morgan, how many old Dow components I remember.Bethlehem Steel is one of them.They're not really around anymore.
Yeah, and you just used the word antiquated to talk about the Dow.I guess perhaps I'm not surprised given your track record of talking about the Dow.
But I do wonder, just given this point, we talked about it recently as well, if this means that you need to keep a closer eye on Intel.
Yeah, I mean, I think just for this reason, right?I mean, it's still it's a monumentally important company in a very important industry.
Whatever is going to happen to it down the road, whether it's going to get a return on all this investment, the restructuring works.
But yeah, I do think that you have to be aware that we have the makings of a little bit of a sell the bottom type dynamic when it comes. By the way, I do also think it makes sense to pay attention to the Dow.
And it is important that the Dow kind of refreshes itself by making sure its components are somewhat representative.And my take has always been that for baseball people, the Dow is like batting average.It's the old way of measuring performance.
It's not the best, but it's what people have the numbers in their heads and they know what they mean.
Mm.All right.That's a good metaphor, too.Mike Santoli, we'll see you later this hour.Thank you.After the break, are there any bright spots left in the solar trade?
Well, the sector is seeing a massive reset lower after Trump's victory, but the CEO of Sonova says investors are fundamentally misinterpreting the impact of a second Trump administration.He will join us next to make that case.
And later, Robinhood's chief brokerage officer breaks down the stocks and crypto assets that customers were most excited about in this record-setting week for the market.Overtime is back in two. Welcome back to Overtime.
Stocks may have reached record highs this week, but the same can't be said for solar.The industry is seeing a sharp reset lower after President-elect Trump's victory, with Sonova among the biggest decliners, losing nearly half of its value.
Well, joining us now is Sonova CEO John Berger.
John, it's great to have you back on the show, and that's exactly where I want to start, because you say the market is completely misunderstanding the impact that a second Trump administration could have on solar.Why?
Well, first of all, yes, the market is out of control in the sense of wildly emotional, a lot of speculation out there.But when you look at what we had earnings right before the election, we laid out a very strong cash forecast.
We still feel very good about that cash forecast.And when you look at a stronger economy, that stronger economy is going to be met with stronger power demand. We're struggling right now to supply enough power in this country to meet that demand.
The demand goes higher.We need even more power that this company provides.And we deliver a better power service at a better price.Lastly, I would say, when you look at, Sanova went public under the first Trump administration.
We hit an all-time share price high of $54 a share under the first Trump administration.We look forward to the second Trump administration and having even more success and more growth.
I mean, there has been talk out there, and I realize we're still in this, to your point, speculation phase about what future policy is going to look like, but there has been talk out there that you're going to see a scaling back or rolling back to the extent that you can of the IRA policies of the current administration.
What would that do?How much can actually be changed there?
We don't think the IRA is going to change much, maybe around the edges a little bit, but it's been so successful.
Looking at, for instance, domestic manufacturing, which both parties agree with, of solar panels, of batteries, of inverters, electric vehicles, and so forth, that's been hugely successful.
In fact, 85% of those capital investments, those plants that make solar panels and batteries, they're in Republican districts. And so we're seeing a huge amount of success to the point where our company doesn't buy much that's not made here anymore.
And we're likely not to buy anything at all that's not made here in the very near future.So it's been a success.We see it driving home more and more power generation.And this country needs all of the above energy.We need more power.
And we're a part of the solution.
What I hear you saying is that you are a domestic manufacturer and that most of your supply chain, if not soon, all of your supply chain is gonna be domestically sourced.
So I would imagine you have some thoughts on potential tariffs, especially knowing that solar and specifically solar parts and supplies tied to the solar industry where China is concerned have been some of the first areas where we've already seen tranches of tariffs over the last couple of years.
Yes.So Sanova went to all sales having had domestic manufacturing equipment on September 1st.We are now next month going to that all installs have to be with domestic manufactured equipment or are dominated by domestic manufacturing equipment.
So we're already there. And again, the IRA has been successful in this.And again, that matches what a Trump administration, President Trump policy appears to be.
So that also means that we are relatively immune, if not completely immune, to tariffs from China on equipment.We don't buy very much, if anything at all, from China anymore.So when you look ahead,
We're in a totally different picture than we were even two years ago.Again, the IRA has been successful on this front.
But we're certainly in a materially better position than we were under the first Trump administration with regards to importation of equipment from countries such as China.
So then can we say that tariffs on Chinese imports relating to solar have worked?
Well, I would say the IRA has worked.When you look at the tax credit for manufacturing called 45X, that's been successful.It's brought manufacturing plants here, again, predominantly, dominantly in Republican districts, I may add.
And then the domestic content, part of the investment tax credit that my company captures, that is also incentive to grow and build domestic manufacturing plants here in the States.It's been very successful, and that's my point.
And that's the only thing that both sides of the aisle seem to be able to agree on.So we're in a great spot going into what we believe will be a very strong Trump economy.
You talked about earnings before the election and what you're seeing with cash flow and basically focusing on the fundamentals here.We have a Fed that just cut rates again yesterday.
As you do start to see, and we haven't really seen it yet, but as you do start to see rates move lower, are you starting to see a rekindling of demand for your products?
We've been seeing strong demand because it's mainly based on utility rates and utility rates have gone up over 40% of last five years.This goes to affordability problem that frankly got Trump back into office.
And so when we look ahead, we see those utility rates moving up.Why?Because we see the economy in even better shape as we move forward in time.So when you look at interest rates, interest rates dropping, the Fed cutting rates yesterday,
That was fantastic.That's fantastic for all companies.So it is helpful for us, but it's more about our success and the demand we're seeing is based on two things.One, utility rates, which you continue to see to move up.
More LNG going out, which we feel very strongly that that should be done. That is going to push natural gas rates up a little bit, at least here in this country.That's going to push retail rates up.
The other thing that's happened, we've had a very active hurricane season.We've had reliability problems here in Houston, Texas, where we're headquartered, in Florida and Puerto Rico and other areas.
We have a solution with solar and storage, working together with natural gas fire generation and so forth to provide resilient solutions that this economy needs more than ever.
We talk about Elon Musk because of SpaceX, because of Tesla on the EV side, and the fact that he's emerged as this key advisor and part of, officially or not, part of his administration for President-elect Trump.
But the other piece of it with him, of course, is renewable energy, and specifically solar.So I wonder what you think he brings to the table there.
Obviously, Mr. Musk brings a lot to the table.
I will say this, that we have done a lot of business with Tesla over the years, starting way back in 2017 when Maria was catastrophic with Puerto Rico and built a very, very large amount of Tesla Powerwalls in our customer base, in our fleet.
We think that he is going to be a very big proponent of, again, having more competitive choices for consumers. in power across the entire United States.So in Houston, Dallas, we do get to choose as a consumer, our power provider.
We think that that should be something that everybody should be able to choose from seed to signing seed.And we think that he'll be a big proponent of that and saying, look, here's provide some options.
It's just like Trump said with electric vehicles. Let's not mandate electric vehicles, but let's not make them uneconomic or not available to consumers.Let the consumer decide.Let the market decide.
So we've been a big proponent at Sonova of letting the market decide.Been a big buyer of Tesla equipment.The costs have come down on batteries.And we think Mr. Musk is going to be very, very strong in terms of making those points.
Like, let the market work.Get out of the way.Deliver the power to the consumers where they need it.
OK, John Berger, as you're speaking, your stock is moving higher here in overtime.It's now up 3% in after hours trading.It's great to hear from you, the CEO of Sanova.
Well, shares of brokerage companies like Robinhood and Interactive Brokers are taking off this week as investors poured money into stocks on election night.
So up next, the chief brokerage officer of Robinhood on the unprecedented surge in volume and the top names that customers were buying.
And later, don't miss our exclusive interview with the CEO of cybersecurity company Cloudflare, a key player in election security as that company's stock moves lower following last night's earnings.Stay with us. Welcome back.
Robinhood shares rocketing 28 percent higher this week as Wall Street poured money into stocks on election night.The company saw historic volume from investors at 11 times the typical overnight volume.
So joining us now is Robinhood chief brokerage officer Steve Quirk.Steve it's great to have you back on the show.That's exactly where I want to start with you.
The fact that we saw this explosion of trading on election night and that benefited Robinhood.Walk me through it.
Well, I think in addition to the winners that we saw election evening, if you talk to our 24 million customers, they would picture themselves as winners because this is the first cycle where they have been able to either capitalize or hedge a portfolio in the equity markets.
We rolled out 24-hour trading about two years ago in equities. in addition to the crypto market, which already trades 24 hours.And of course, we rolled out prediction markets a week before the election.
So they really had multiple ways to be able to either capitalize or look at the probabilities of wins for each candidate. and then adjust their portfolios accordingly or take advantage of opportunities that they saw there.
So I think this cycle is something that was quite unique for them.
We had Thomas Petterfy of Interactive Brokers on earlier this week.They have a prediction markets product as well.We talked a little bit about that.
And he seems to be very bullish on where those products, those offerings are headed over the next, call it decade, 15 years.He says he thinks it could actually become bigger than the equity markets in terms of the business opportunity there.
What did you see, especially since you only launched it so, close to the election.What did you see in the prediction markets?How accurate were they versus the outcome of the elections?
And how much traction do you think this can now gain as an offering on the Robinhood platform?
Yeah, what we saw in the evening or in the week up to the election is a half a billion contracts traded.
So there is strong, strong, strong demand for this for event contracts in ways I would call this almost an institutional product that is now available for retail to be able to, as I said, capitalize or hedge a portfolio.
And I think the future is pretty bright there.We saw that those heavy volumes, they sort of exacerbated as we got closer and closer to results coming in.About 7 p.m., we started to see the difference in the contract.
In other words, the contract started indicating that they thought that there was a a indication there would be a winner.And as a result of that, you saw all the other markets moving.And that was in advance of swing states being called.
So I think for a retail trader, this is an amazing instrument for them to be able to protect portfolios or capitalize.And I would anticipate, as he had said, that we would see a lot more growth here.
So if I do look at equities, specific stocks that were most active in terms of trading volumes and appetite from your retail clientele, what were they?
Well, I think the one that we saw a very large spike in volume on right out of the gate, as soon as I said 7 p.m., we started to see it right out of the gate was Tesla.You know, anticipation that this would be very positive for them.
And if you look at where it's settled, I know you've had people on talking about it. over the course of the week, you know, it's it's much higher than where it was at that point.
Also, DJT, NVIDIA, there's a lot of belief in in the tech sector in general, and a lot of optimism around that.
And then on the crypto side as well, even the individual securities in addition to the crypto, native crypto trading, which we had, which was a huge, huge week and evening as well.
Okay.Steve Quirk, thank you for joining me.
Doge has been getting more attention, too, as of late.Well, time for a CNBC News update with Leslie Picker.Hi, Leslie.
Hey, Morgan.A federal judge approved special prosecutor Jack Smith's request to pause Donald Trump's election interference criminal case.
The decision removes all deadlines in the case except a December 2nd decision on how prosecutors will move forward with the case now that Trump is headed back to the White House.
The FBI said today it was aware of a video that used the agency's name to make false claims of an attempt to poison 20 electors in three states with anthrax.
The announcement is the latest in a string of fake election-related videos the agency says used its name to spread misinformation to undermine the electoral process.
And rapper Sean Diddy Combs asked again a judge to be released on bond ahead of his trial on federal sex trafficking charges.In a court filing, Combs asked to be released on a bond backed by his $48 million Miami home and members of his family.
I'll send it back to you.
All right, Leslie Picker, thank you. After the break, the return of the 60-40 portfolio.Mike Santoli looks at a milestone reached this week for the classic portfolio construction.And later, is Trump's win a red flag for retail stocks?
We will take a look at why tariffs could hit the industry particularly hard and the names that are most at risk.Overtime.We'll be right back. Welcome back.
Mike Santori returns with a look at how the 6040 portfolio fared in this record week for the market.Mike.
Yeah, Morgan, among all the thresholds that were broken this week, the 60-40 portfolio, as measured by the Vanguard Balanced Index Mutual Fund, finally hit a new high after the bear market of 2022, when stocks and bonds went down together, recovered all of that value in price terms for the first time, or at least the first time to stick right here.
You see what a precipitous drop it was.And it also reflects the fact that bonds, now that they have some yield in them and they're moving a bit independent, of stock prices.
They're kind of doing their job within the portfolio again, acting as an offset, creating some sort of an income bolster.
Now take a look at the total return version of this same five-year chart, which of course accumulates all the dividends and interest income that come along with that stock bond portfolio.And you see that it actually hit a new all-time high
several months ago.So that's just another reminder, obviously, that you have to consider the fact that it's all in.It's the cash that you get off the portfolio as well as the price change that's going to tell you exactly how it's doing, Morgan.
How much should we be watching the two-year Treasury yield right now?We were just having this conversation with Kevin Mahn earlier, and yes, we've seen this round trip in the 10-year this week, but the two-year actually has moved higher.
It has moved higher to account for the fact that I think there's some questioning as to just how much more room there is below current levels in the Fed funds rate for the Fed to go.
You know, in theory, the two year yield should be the average Fed funds rate over the next two years.
It never quite conforms to that, but in theory, that would be fair value if you had perfect prescience about exactly what Fed funds is going to average over that span.
And right now, I mean, arguably, if they're only going to get down to around 4% before they have to pause and wait and see, which is plausible, it's, I guess, three more cuts from here, then, you know, maybe where it is right now makes some kind of a sense.
So it's going to just be a pretty good, you know, thermometer of Fed expectations for the most part.
All right.Mike Santoli, have a great weekend.Thank you.
Cloudflare investors feeling a bit under the weather today after the cybersecurity company forecast weaker than expected Q4 sales guidance.Up next, CEO Matthew Prince breaks down what's behind that disappointing outlook in an exclusive interview.
And check out shares of Insulet.This was one of the big winners in the S&P 500 today.The company beating earnings expectations, hiking its full-year revenue outlook thanks to strong sales of its insulin pumps.Those shares finished up 9.5%.
Stay with us. Welcome back to Overtime.Cloudflare under pressure today as investors focus on the company's revenue guidance, which came up short of analyst estimates.
Sticky inflation, high interest rates, intense competition all playing a role in that outlook.Joining us now in an exclusive interview is Cloudflare CEO and co-founder Matthew Prince.It's great to have you back on the show.Welcome.
So that's exactly where I want to start with you.The fact that the outlook for Q4 was softer than analysts had been anticipating.Why, especially given the fact that you did put up such a strong Q3, including a record amount of large customers?
Yeah, I think that we're going through a process where we're rebuilding our sales team in order to make sure that we've got the right talent on board to service the larger and larger customers that are coming to Cloudflare in order to make sure that they're fast, safe, reliable everywhere in the world.
We've done that successfully in Asia and Europe, which posted record quarters.We're now in the process of doing that in North America, and I think We had a couple of deals that slipped out of the quarter.Those are still closing.
We're not actually seeing competitive pressure.We're not seeing anything in the macro.All of these are things that are very much under our control.
And I think what we see is an inflection point that sets us up incredibly well for 2025 and the years ahead.
And you've been revamping your sales department really for the past year and a half.So it sounds like that process continues.
Yeah, I think we're getting to the end of that process.
But when we've brought on incredible sales leaders like Mark Anderson, who had opportunities to be CEOs at other places and came in really at the next stage of his career on Cloudflare, the people who are coming to lead that sales team have set us up to continue to sell to more and more enterprises.
And today, we're up to 35% of the Fortune 500 using Cloudflare. to make sure their networks are fast, safe, and reliable everywhere in the world.
And we want to make sure that every major company is relying on our network in order to get the benefits that we can deliver and make sure that we have the team that can satisfy those needs.
When I think about cybersecurity, I think about a secular growth trend.So when I hear you say that there's nothing in the macro, how much would the macro actually matter?And what does that mean for how you're looking to 2025 and beyond?
I think the macro matters at various times.I mean, we certainly saw a year and a half ago when the IT spending environment really just froze up across the board.
So we're not completely insulated from that, but I think we are more insulated than most. Cybersecurity tends to be a must-have, not a nice-to-have, and Cloudflare is the leader in network cybersecurity.
We're finding that we're able to continue to close business even when there are difficult times in the macro environment.But right now, I think we've actually seen a real stabilization in the macro environment.
We don't see it getting significantly better or significantly worse, but it's an environment that we think we can perform in when we have the right team in place.
OK, you also play a very key role in election cyber security.So what did you see as we now come out the other side of that?
Yeah, I have to confess, this is my last stop on what's been a very busy week.But our team was on call 24-7 for the last two months protecting election security.Both the Trump campaign and the Harris campaign were our customers.
But I think even more importantly than that, more than half of US states, most of the so-called battleground states, rely on Cloudflare's Athenian project, which is a service that we provide at no cost to anyone who's helping administer an election in the United States.
in order to protect them from attacks.And there were attacks.In fact, we saw a very dramatic increase in the first week of November, targeting specifically election security or election sites around the world.
We saw more attacks in the first week of November than we did in all of September and October combined.But nothing out of the usual, nothing that caused us great concern.But we're proud of the fact that we helped make sure that the election
went off without a hitch that cybersecurity was not part of the story.And I want to just thank all of the Cloudflare team who stood by to make sure that we made sure that democracy wasn't impacted by cyber attacks.
So what does a second Trump administration potentially mean for the company and for the industry more broadly?I've seen a number of analysts notes in the last couple of days saying
Listen, you're going to have to fortify and strengthen the cyber fortresses around industrial bases and around key strategic infrastructure.
Anything that's a national security priority, is your expectation that you're going to see much more focus on that?
Yeah, you know, I think, as I said, both the Trump campaign and the Harris campaign were customers.
And I want to congratulate President-elect Trump on his election victory and also acknowledge the hard-fought campaign that Vice President Harris went through.And we're proud of the fact that we could help protect both of them.
I think that while politics is partisan, cybersecurity is not.And we have worked very closely with the Biden administration.We worked with the previous Trump administration, the Obama administration before that.
in order to make sure that our nation has the cybersecurity that it needs, that our critical infrastructure has that protection.And I actually don't think there's going to be that much of a change for a business like ours.
We expect that we'll work closely with the Trump administration to make sure that U.S.
infrastructure is protected in any way needed and that we will continue to provide our services to protect the most critical parts of our system, including the democratic functioning of our elections.
Okay.Matthew Prince of Cloudflare, great to have you on.Thanks for joining me.
We have a news alert out of Washington.Eamon Javers has the details.Hi, Eamon.
Hey Morgan, two sources familiar telling NBC News that Scott Besant, the founder of Key Square Capital Management, excuse me, is the leader to be, leading candidate to be Treasury Secretary under a Trump 2 administration.
Scott Besant, of course, former Chief Investment Officer at Soros Fund Management.He also has been a Yale professor, he's taught economic history.He was on our air earlier this week in which he said he would do anything
that President-elect Trump asks him to do but didn't specify which particular role he had in mind.Now, NBC reporting that he has emerged as the leading contender to be chosen as Treasury Secretary in the incoming Trump administration.
Again, that is according to two sources familiar speaking with NBC News.We're trying to confirm that directly ourselves as well.
But obviously, Morgan, now that the election dust has settled, there's a lot of jockeying for position in the upcoming Trump administration. as the president-elect puts together his economic team, we'll be following all that very closely.
And he does have a number of economic advisers and Wall Street scions around him.
So I do wonder what this means for some of the other names that have been bandied about for positions, including for Treasury, if this is, in fact, the pick that moves forward, a name like John Paulson, for example.
Right, exactly.Paulson, somebody who's been obviously very close to the Trump effort here, and maybe not getting the nod.It's unclear to me, Morgan, in all candor, other than Trump himself, who was involved in making this decision, right?
I mean, it'd be a very, very small group of people around Donald Trump would actually be making that decision.We know that he picked Susie Wiles as his chief of staff yesterday.
So he is putting together the White House team and also now looking to fill out the cabinet-level officials as well.We'll wait to see whether we get any official confirmation of this from the Trump team down in Mar-a-Lago.
Obviously, you know, there is a lot of jockeying for position.There are a lot of leaks, a lot of things spun out.But as of right now, two sources familiar telling NBC News that Besson is the leading candidate for treasury.
All right.Well, they're definitely hitting the ground running.We'll see how all of this continues to evolve.Eamon, thank you.Eamon Jabbers in D.C.
Up next, a look at whether the defense and space industries could really take off under the incoming Trump administration. Welcome back, and a huge week for the S&P 500.Aerospace and defense stocks outperformed, with the ITA ETF gaining almost 8%.
Earnings from Axon, which were up more than 40% this week, and Howmatt helped, but much of the move is tied to the election.
So RBC Capital Markets sees the preliminary implications of the election as positive for the sector, anticipating improved outlooks for defense spending and the business jet market, so think General Dynamics and Textron, and increased M&A.
Analysts there say the commercial aerospace outlook, though, may be more mixed, thanks to trade uncertainty and risks from blanket tariffs.So keep an eye on Boeing.One wild card, military support for Ukraine.
Uncertainty there could weigh on drone makers like AeroVironment.Now, while that supplemental funding for Ukraine may go away, Cowen thinks that base DOD spending could actually go up three to five percent, maybe even more.
That would be above expectations, with priorities including an increase in missile defense and additional aid to Israel.
Now, President-elect Trump is also widely expected to push NATO members to continue to spend more on defense and to focus on strengthening the industrial base and adopting new tech to support his peace through strength stance.
Now, regarding space, the first Trump administration made big policy moves.
The relaunch of the National Space Council, the founding of the Space Force, the establishment of the Artemis program to send NASA astronauts to the moon, and even the commercialization of low-Earth orbit.
Experts now expect Artemis to accelerate to avoid falling behind China, that a plan for Mars will materialize, and a Space National Guard to potentially come into existence.This is something Trump had been vocal about on the campaign trail.
All of this, of course, as SpaceX's founder and CEO Elon Musk is a key advisor to the president-elect and is expected to have a heavy hand in cutting bureaucracy and government spending, which could also help create more opportunity for commercial space and defense tech.
For more on the sector, check out my podcast, Manifest Space.You can scan that QR code on your screen or download it wherever you get your podcasts. Well, President-elect Trump's tariff threat could lead to a reckoning for some retailers.
So up next, we will break down the stocks that could be hit the hardest. Welcome back.
President-elect Trump's plan to increase tariffs across the board could have a huge impact on the retail industry, specifically companies that have their products, make their products in China.
So Courtney Reagan looks at which stocks could be the biggest losers.
Court.Hi, Morgan.Yeah, so even before President-elect Trump levied tariffs on many Chinese imports in his first term.Retailers had already been diversifying manufacturing away from China, but it's complex and it takes years.
So Stephen Madden told investors it's now accelerating plans to move production out of China in anticipation of higher tariffs, dropping from 70% of production there to a quarter about a year from now.
Bank of America is downgrading shares of five below, the firm noting it likely doesn't have pricing power to mitigate tariffs because it's already reprioritizing lower-priced items, hoping to better resonate with shoppers.
Bank of America also estimates that 40% of Yeti's production is in China. estimating a 60% tariff could impact margins there by 500 basis points.
Now, Gordon Haskett's Chuck Graham points to Academy Sports as a tariff loser, estimating 65% of its products sold are made in China, while Dick's Sporting Goods and Foot Locker are actually a bit more insulated than Academy.
Now, Piper Sandler's Peter Keith says Dollar Tree's fixed price point make it really hard to pass along tariffs.
Shares of Crocs, Boot Barn, American Eagle, Wayfair, that's just among some of the names on analysts' worry list when it comes to higher tariffs.Morgan?
And of course, we've seen so many of these stocks sell off so dramatically this week, Courtney, in anticipation of all of this.But then I look at something like the furniture makers, and RH has a key piece of its manufacturing in China.But
Some of the other players have actually moved more of their manufacturing to the U.S.So I wonder if you actually start to see more of that happen, particularly in anticipation of these tariffs.
Yeah, exactly.And so we talked about Yeti, how Bank of America is worried about what's going on there, whereas Jeffrey's Randall Koenig uses that as an example and says, actually,
it already has plans to begin moving out of China more of its production out of there by the end of 2025.So actually those fears are overblown.
And so Jeffrey says actually that's an aggressive buy for shares of ready while Bank of America is worried about the amount of production there.So look it's all sort of unknown right now.
We know that many of these retailers have been trying to move production out of China.As I mentioned actually well before President Trump's first term, because labor has gotten more expensive there, as well as input costs and other things.
So, to your point, we're seeing companies either reshoring or nearshoring, but it takes a lot of time.It's complex to find the manufacturing space, but also the labor, the people that have the skill and or are willing to do those jobs.
And that's sort of how the trade went overseas in the first place.It just made more sense, and it was more efficient to do so. This is a very complicated problem.
I think it depends on how you look at it with these retailers, how quickly it could be done, moved around the world.And again, these aren't even in place yet, right?So who exactly knows?
Yeah, we'll have to see.Not to mention what it can mean in terms of prices for consumers.Courtney Reagan, thank you.All right.I wished him a happy weekend.But Mike Santoy, you're not off the hook yet.So I'll take it.
So, just to get your sense of what you're watching as we go into another week after we did set records for the major averages.
First thing is how the market itself reacts to the fact that it has gone into the weekend in a somewhat overheated state.By the way, bond market closed on Monday for Veterans Day.
And then the CPI number, there's been a bit of a pause in the disinflation story.I think the policy expectations have insulated the market a little bit from surprises on inflation.
Even with a tolerant Fed, gotta make sure that doesn't become a problem again.
Yeah, OK, lots to watch.You mentioned CPI.We've got retail sales to a lot of Fed speak as well.Mike Santoli.Now I'm going to say it.Have a great weekend.
We did have all the major averages finish the day and the week higher best week for the averages of the year that does it for us here at overtime.Fast money starts now.
Sign in
