>> i will go with the same pics from yesterday, crm, and we talk about it today, i will see my time. >> bill? >> microsoft. i expected to outperform the nasdaq between now and the end of the year. >> stephanie, bring us home. >> target, low expectations, value proposition, getting people in the stores, price cuts, that is good, i expect a solid quarter. >> interesting moves from retail in the next week or so. that does it for "halftime." "the exchange" starts right now. thank you very much, courtney, and welcome to "the exchange". i am kelly evans and here's what is it ahead. the trump team is gradually taking shape. we have the latest. the potential policy implications, and why our trader says the air is getting thin above s&p 6000 and why it may be time to rebalance. he is here with where he is adding and trimming. plus, tears will hit retail but not evenly. morgan stanley updated its list

of winners nd losers, and we are here with the trades and retail trends right now. and our market guest on trump 2.0 will be a tech administration and the way to play it is through small a.i. she will tell us exactly what she means by that and what is the opportunity. before all that, though, let's start with the numbers. dom with the numbers. what a ride it has been. >> and we are coming off those record highs we have seen the last couple of days, kelly, but to your point we are now pulling back from those levels losing some omentum and as things stand right now, we are currently at session those for the market. again, broader context, very strong rally since the election this week. dow industrial is down 367 points, to 43,927, we eclipsed that 44,000 mark. the s&p 500 is at 5962, down 39 points, this is the session low right now, we were actually up about eight points at the high of the session, so modestly positive there.

nasdaq composite about two thirds of 1%, 122 points on the downside for the nasdaq composite index which currently stands at 19,176, and the u.s. 10 year note, 4.41%, so bond prices falling and yield ticking higher. three earnings reports focused on the consumer, they were getting some attention today, home depot shares now swinging to the downside here off by about 1%. america's biggest home- improvement retailer, dow component, better than expected results, and they raise their full-year guidance. shopify also a better report there, better-than-expected results on profits and revenues up 25% and then live nation also up 5% after the concert and live venue operator reported earnings that were better than expected but revenues that narrowly missed, so there is your consumer look right there. and then, we will look at

digital gold and regular gold. right now we talk about bit point corn prices near record highs, 89,000 was the record level, 87,041 and changes where we are right now, massive surges you are seeing since the election. meanwhile, real actual physical gold, the yellow metal, has actually seen about a 7% decline since the end of october. you can see this gradual drop off here. some of the concerns about the stronger dollar waiting here, as well. we will see whether or not that pullback is a buying opportunity but digital gold, yellow gold, an interesting divergence there, kelly. i will send things back over to you. we are just a week removed from election day and president- elect trump is wasting no time putting together his administration and laying the groundwork for a speedy approval process of his nominees. marco rubio is among the people picked for positions so far, we have full team coverage. where in west palm beach with the latest as the trump transition takes shape. raymond james, policy analyst is looking at trump 2.0, what is different and what is deja vu, and cnbc contributor jeff kilburn from kk and financial is here with the trades he is making in the wake of the election. welcome, let's start with you. what is the buzz? >> reporter: well, kelly, marco rubio as you just mentioned, he is expected to be the pick for secretary of state, and as of

this morning, the list of potential trump treasury secretary just got a little bit smaller. billionaire john paulson of paulson and company pulling his name out of contention earlier today, suggesting that he has complex financial responsibilities. he says, "my complex financial obligations would prevent me from holding an official position in president trump's administration at this time. however, i intend to remain actively involved in the president's economic team." so, paulson signaling he wants to have a role with trump, but not a full-time position at this time. we will see whether or not that means he could come on board later on, and that leaves open the question of who trump treasury secretary will be. a lot of speculation about scott besson's of key square group, a lot of speculation about howard let nick, who is running the trump transition right now, also robert lighthizer has been mentioned in the mix for that job. we just don't know. and kelly, we don't know exactly when the trump team is

going to make their economic team announcement, but i would expect that what we saw with certain defense and national security side, we will see a bunch of those all at once, sort of national economic council director, treasury secretary, all of those jobs might go within a day or so of each other, as all of that settles out, because the finalist for treasury secretary who doesn't get it might get national economic council director. >> and what about the confirmation process? >> well, the confirmation process is what it is. the president-elect has a signal to senate republicans that he wants to be allowed to use the recess appointment power, under the constitution, which hasn't really been a thing in recent decades because the senate has blocked president's from doing that. all of the leaders in the republican side who are running for republican leader in the senate have agreed that they will allow him to do that. that might allow him to get some people through the confirmation process without going through the senate voting process, if he thinks he has

people he wants who can't get nominated in the senate, but i think some of these big names for treasury secretary, clearly marco rubio for secretary of state, they should be able to get through a normal senate confirmation process without too much trouble. >> so, to what extent with this team to be ready to go on day one, so to speak? >> reporter: i think they are moving very quickly, here. we are still in november and they are nominating a lot of key players. this is a much faster pace than what we saw back in 2016 under trump one. so, clearly, this team is disciplined, focused. they had a list of names ready to go and they are marching through that list pretty quickly. i would expect that we would have the bulk of the big ones done by the middle of december, and then we will see, once the new year begins, the president can officially nominate anybody until he is actually sworn into office, right? so, none of this can officially start until we see that official nomination on january 20th. or, thereabouts. but, for now, this president is sending a signal of who he wants in these top positions. >> amen, we appreciate it. republicans are on track to win

the house which would give the president control of both chambers of congress when he takes office in 2025 but the margin not as wide as in 2017 when the gop had a double-digit majority and that has implications for trump, for more let's turn to edwin mills, washington policy analyst at raymond james. what else strikes you? what should investors be expecting in the months to come and when he officially takes office? >> reporter: kelly, when we we are sitting here in 2016, trump had won, republicans had swept, and we thought big moves in the market on heavily regulated entities. we are seeing that all again so that is part of the deja vu. what is different especially with what amon just mentioned is we are getting faster nominations out there, or announcements for nominations. trump really didn't have a full transition team back in 2017. he has that, now. what is also different as you highlighted this that the margin in the house of representatives, it was a 47

feet difference between republicans and democrats. so, in 2017, when republicans passed the tax bill, there were for 13 republicans who voted "no." they don't have that margin that time. it is one thing to have a majority, it is another thing to govern, and where that is going to truly come to a head is where we look at the extension of the 2017 tax cuts, which expire on december 31st of next year. >> and tell me how you think that could come to a head? >> reporter: kelly, i have been telling folks that the base raises an extension of those tax cuts but that is not donald trump base case. he wants to add in a number of different provisions, no tax on tips, no tax on social security, that is adding up to an already expensive bill. are they going to need to be offsets? when you look at the makeup of the republican majority, there is a lot of republicans who just won in california that is going to keep them with their majority. are they willing to vote to keep salt limits at $10,000? you probably had a compromise that brings that up to 15 --

$15,000 or $20,000. you have republicans willing to vote for terrorists? i think one of the biggest things i have been hearing in this market, there is an expansion out there that republicans could repeal the inflation reduction act which has really been impacting clean energy. i just don't see how there is the votes right now, kelly. >> so, you think they will try to leave in place the full tax bill, may be due more, like you said, on that front? of course, it will be costly -- should we look for any creative -- do they push tariffs into that process? >> reporter: yeah, kelly, when we look at some of the estimates, it is about $3.7 trillion to extend out the individual portions of the trump tax cuts from 2017. estimates on the tariff policies of donald trump range from somewhere between 2.7 to 3.7. almost all of this, i have heard donald trump say, let someone else pay for this. it could be a compelling argument. now, congress has not passed a tariff bill like this since the 1930s, and came with economic

consequence, so some of those takes are also a big part of the conversation here, there is absolutely a lot of positives from this agenda, but if there is this inflation concerns, if there are job concerns, especially with the immigration policy. those trump, the transact or, start changing some of those personnel and policy decisions? >> anything else you would focus the investment world minds on, right off the bat? or, maybe a year or two after that? >> reporter: yeah, one thing we said is that regulation, no matter who won, was going to be last four years from now. look to the courts. number two, what can be done on a bipartisan basis? things like energy and carbon reform are things that absolutely could get done and then on the flipside, there has been this conversation about recess appointments. colin is skeptical for now because that is still ubject to a filibuster in the supreme court after barack obama used the recess appointments in 2014, said he did so illegally, putting a lot more hurdles on actually getting the judges on

the supreme court to agree with you, if you use those recess appointments, so just be a little bit cautious, it will still take time on everything. i have never lost a bet in d.c., taking the over on timing for a lot of these agenda items. >> other major implications from the senate leadership, whatever happens there? >> reporter: i think there is going to be a view that if you have someone like rick scott, who is more aligned with president trump, would be more aggressive. is there going to be less of a push to impact the agenda of donald trump with a through and or acorn? i think that is a little bit misplaced because what i am highlighting is in 2016 when donald trump was elected, he did not have a lot of natural allies in congress and one of the biggest changes now, you look at all the new members who have come in since 2016 on the republican side, a lot of them have been elected with the support in their primaries from

donald trump. so, really, almost no matter who is the leader of the senate, they are going to be much more aggressive in pushing forward donald trump's agenda, then if you saw the previous leadership back in 2017, mitch mcconnell and speaker ryan in the house, just a fundamentally different political environment that exists, here. >> are you expecting anything on the healthcare front? with obama care, prescription drugs? >> reporter: i think there will be headline about this, there is going to be push for this, there will be conversations, could medicaid reforms be a pay for that? it is going to be part of the conversation, but very quickly, when you look at the margins, is there time to do that? is there the votes to do that? you look at the senate, there are a couple senators up for re- election a couple years from now that come from states that have seen huge benefits from the affordable care act, obamacare. i am skeptical they are going to see significant changes to that. on the flipside, i wouldn't expect major expansions on things like prescription drug negotiations, either.

so, headlines, but actual follow-through, that is a little bit hard to see. the personnel on some of the picks, we have gotten questions about rfk jr.'s role, what that could be in the administration, that seems to be investor focus. >> ed, thanks. appreciate it. ed mills with raymond james. stocks near a session low today. russell 2000 is the weakest and well trump's victory initially pushed stocks toward record highs, our next guest says the air about the 6000 level on the s&p is extremely thin. let's bring in cnbc contributor jeff gilbert. he is founder of kk and financial. jeff, welcome, and what do you think has been going on with the stocks levitating the way they have been since today? >> kelly, we all know marcus loves certainty, but we have senior for you. we have seen stocks stuck on automatic. we were just at 5700 in the s&p 500, and now we have faulted

above 6000, so i think you have seen volatility come ff. i think you have seen a lot of people who were afraid of not deploying cash pre-election, and has been chasing this. we are also seeing a gambit squeeze, some names in the tech sector, names like tesla explode on the upside, so shorts are covering, in this type of chaos, if you will, it is causing people to reposition, but i do think we settled back in, i do think we understand that certain policies and tax consequences will not be implemented day one and i am just afraid the last 5% of the s&p 500 has been pulled forward from q2, q1 of 2025. >> so, what do you do strategically? >> i think be considerate. we have always talked about the top 10 holdings of the s&p 500. they are over evaluated, overstretched right now, over 35% versus the historical averages of those top 10 holdings around 25%, so we have to think of names like oracle, power -- palo alto networks. at is there more to run?

i think the name is yes. in video, of 200%. i can't believe i'm talking about names that are up 100% and 200%, but i think having true mere exposure and i am actually about to hop on an investment committee meeting here with my friends in short hills, new jersey, to talk about epositioning portfolios. it is a very considerate amount of time and you have seen it in a historic amount of time, kelly, we saw in 2023 the market was up 26% but here we are in 2024 up 27% so i am not going to say book province and walk away from some of these names but i think you have to trim and recalibrate some of your portfolio exposures. >> you mentioned palo alto and oracle are a couple of stocks you think you can rotate into. what others come to mind? when you look at where to take capital away, you are basically talking those seven names, right? >> reducing that exposure, we still want to own some of those names, but look at financials, ever since president-elect trump won the election last

week, you have seen financials on fire, a bit of a come back here, but i think financials will be the thing. the one component, everyone has been talking about, what is the catalyst that will make markets move lower -- i don't think there is one catalyst, but one concern that don brought up earlier is the 10 year note. here we are knocking on 4 1/2%, that is going to weigh heavily on these tech companies, even some of the smaller cap names, but some things have to be considered, taking profits and rebalancing. we like equal weight exposure. i know goldman talked about equal weighting, that is going to make some sense after such a phenomenal run. oracle 1% in one year, so if things get back, pigs get slaughtered, or an old average on the board of trade. >> quickly what about tesla? you have just described how you feel about it more broadly, but it also has been painful for people to try to short these things. if you like maybe in the long run even though they go through bouts of media, they are in one of the best generators of returns, do you ever feel about walking away and leaving gains on the table? >> tesla is a long-term hold.

the purest artificial intelligence playback in late 2023 and in 2024. i have aggressively sold calls into this move. it didn't feel great when i was selling the 325 calls as it was trading above 350 last night, but here we are seeing some profit-taking so if you have the ability to cover your position in a covered call position, that will mitigate downside risk. i think we will see a lot more volatility as we go into q4 but a name like tesla specifically, relationship between elon musk and president trump i think has a continued upward trajectory, but i think it trades $300 before it trades $400, kelly point michael wright, 328, put a mark on it. jeff, thank you for your time. for more on the market, join cnbc's delivering alpha investor summit in new york city tomorrow. investors and leaders will convene to provide ideas, insights, and analysis to help deliver portfolio returns. to register, scan the qr code or go to cnbc.com . coming up, retail has been on a roll with the xrt etf hitting its highest level in 2 1/2 years but some of those

gains could be erased if trump's tariffs go into effect. we will tell you the three names morgan stanley says are most exposed. but first, box ceo erin levy will join us from the annual box works event for his first interview since the election. he was, of course, a supporter of vice president harris, what will the next four years look like now with a.i. regulation and so much more under president trump? we will get his thoughts on that and more. ishe exchange" is back after th.

software stocks might be staging a comeback. as investors see some opportunity in the adoptive a.i. agents in the workplace. cloud storage company box just added a new agent at its annual box works conference, the shares are affectionately higher. we are live at the conference with box ceo aaron levie, welcome to both of you. >> reporter: kelly, thank you so much. aaron, thanks for being with us fresh off the stage. we appreciate that. as kelly was talking about, we have seen this massive performance of software stocks over the past few months and especially since trump's victory. why do you think that is and is it sustainable? >> probably two separate time periods, there. first, i think we just have been in this wave of, you know, companies are investing more and more in a.i. to drive automation across their enterprise. i think you are starting to see some signs of that play out

within the software landscape. you know, maybe a year or two ago we have seen a software spending drop, pretties precipitously. the has leveled off. we are seeing some signs of positive direction but post trump's victory i think there is some sense of, okay, we could have less regulation, that could be a boom in various manufacturing sectors, energy, you know, technology spending, correspondence to those booms. so, i think we are seeing that regulation overhang, and some of the investment cycle overhang begin to subside. >> reporter: we have seen some false starts over the past few years. do you think this time it is more sustainable, given those two forces? >> i think we are too early to talk about sustainability, but in general, we are here at our customer conference and the tone of customers is super oriented toward innovation, how do we grow our businesses? how do we leverage technology to automate core parts of our business, drive efficiency, drive growth? that is what you want to hear

from customers to drive these cycles. >> reporter: key buzzword right now in enterprise software is "agents." you, microsoft, salesforce, and others say this is the next phase of generative a.i. -- do you think that will lead to more enterprise software spending? >> so, the power of agents is, you can, you know, go beyond just sort of going back and forth, talking to an a.i. assistant. >> reporter: right, like the initial stage of a.i. >> right, that is what we saw for the last couple of years, agents is really moving into a phase where you can tell an agent to complete a task for you. that is how you get real automated workflows. today, we announced box a.i. studio where you can create these agents and we introduced an app called box apps, we can create no code applications were agent and other workflows can help you automate core parts of your business processes. think contract management or

digital asset management or maybe you're in life sciences, you want to automate workflows around clinical drug trials, that is where we are bringing a.i. and workflow together for the future of content. >> reporter: so, more productivity gains hopefully in this stage. let's get to the election, i know you were a vocal supporter of the harris campaign. you are also very quick to congratulate trump on his victory last week. what did you learn or observe from his first of ministration that will shape how you think about interacting with the second administration? >> i think if you compare the two administrations, already thus far, trump is surrounded by a set of individuals and leaders that i think point toward more discipline policy in some tacos -- topics as well as progrowth, pro-innovation, sort of, let's get rid of some of this red tape that has been slowing down innovation in the past, people like elon, i think, are going to be positive influences on driving that forward, so i think it is a potentially very different administration moving in, and one that obviously you want to be extremely constructive with. >> reporter: is the tone from the tech world, from silicon

valley, different going into this second term that it was the first time around? how much does elon have to do with that? >> yuan is a major factor, the tone is a bit different. it is interesting, even in this campaign cycle, i would talk to democrat meeting friends and say, what are the challenges that democrats have? a lot it came down to things like, we have too much regulation. democrat friends working in climate tech, things that you would expect democrats to be super in favor f, were basically not able to do, you know, what they signed up to do because of regulation. so, i think there is a tone, which is, well, what if we could actually have a progrowth supercycle that was about, how do you get more manufacturing? how do you get more energy? how do we get more autonomous technologies? if whether that is cars or a.i. products. and i think there is a sense of, you know, we could be entering one of those cycles.

obviously, i was still pushing for that cycle no matter who won, but certainly with the lawn next to trump i think there is a positive signal of what they can look like. >> reporter: it sounds like your tone has shifted a bit too, you were a big supporter of harris' policies toward text, now you are thinking trump's will be good in the industry? >> during campaign cycle, obviously if you pick a side than you want to try to find what we can do to make sure that side is as productive as possible. election is over, trump won, so i think there is a lot of positive things we can do as a country to move orward, and again, i think if you look at the potential people surrounding trump this time around, you can see the positive influence they could drive manufacturing growth, and are -- energy production growth, tech production growth, so i want to be optimistic with how that plays out. >> reporter: kelly has a question for you. >> that was a great line of questioning there, aaron. i just want to know if you think the killer app of a.i. at this point is really in code, in generating software, where we have seen incredible productivity, and those who

wouldn't have had the technical expertise previously. i am shocked at how much these are already enhancing workflows and a lot of companies, maybe you can speak to that. >> yeah, so, code was the original killer app for a.i.. copilot, invented a few years ago was kind of the first breakthrough where you saw these generative a.i. models really drive instant productivity gains, so you are writing out software code, and predicting what is the better next line of that code, that was sort of the big aha for so many in software and then chatgpt was the big aha for consumers and more of society at large, and what you are going to continue to see is this idea with a.i., which is can we lower the barrier to executing, you know, critical tasks or work? whether that is generating images for a creative task, whether that is generating code

for building software, whether that is reading through a legal contract to provide a summary, review, or labeling digital assets, so you can enable a digital asset management workflow, that is the real power of a.i. and it is meant as a supercharger for all of our collective productivity, starting with code, but i think you will see across some of the other spaces. >> >> reporter: what did sam altman say, the next billion- dollar business could be built by just one person. >> it is not inconceivable. it absolutely is not inconceivable at this point. >> reporter: aaron, thank you for sharing these insights with us, and thank you for setting up box works, too. kelly, back to you. >> i'm going to get on that billion-dollar line of code. that sounds pretty good. >> reporter: i will join you! >> we could do 2 billion! coming up, costco is hovering near a record high as it has been for so long, but the new numbers from morgan stanley show there might be more room to run. show you why costco could be poised for a netflix moment in a good way, that is next. as we head to break, shares of honeywell hitting an all- time high, asset management looking to seek to break it up

into two businesses. honeywell is just the latest in a long line of companies elliott has built stakes in including southwest where it struck a deal to avoid a proxy fight by ainddg six more directors. starbucks, we know what is happening there, softbank, texas instruments, among these names you can see here. it is busy. that is the target. we are back after this. an iness is easy once you know the moves. with godaddy websites plus marketing, you can quickly create a website, and ai will customize it for you. get your business out there and get more customers in here. no sweat... for you anyway. create a beautiful website in minutes with godaddy.

welcome back. i am tyler mathisen with a cnbc news update. earlier this afternoon, israeli president herzog met with president biden at the white house, which herzog said was productive. the leaders discussed the conflict in lebanon, the hostages still held by hamas and humanitarian aid in gaza. israel must boost aid to gaza or face a u.s. pullback on military support. fire crews continue to battle wildfires in parts of new jersey fueled by drought. the largest fire is the jennings creek wildfire which has grown to 3500 acres and is only 20% contained. we don't get this kind of stuff in new jersey! national weather service warned that wind gusts up to 35 miles

per hour passing through the region today could increase the risk of the fire is spreading. starting today, anyone in los angeles will be able to use the waymo robotaxis, that includes the 300,000 residents, who have been on the company's waitlist. los angeles home to more than 3.8 million people, join san francisco and phoenix as the third city where the alphabet owned waymo has made its robotaxi service fully available. deidra is a big fan, kelly. >> i was going to say about those wildfires, i didn't know about you but we had to stay inside all weekend long. >> we were out of town, but we were reading about smoke warnings in the town where i live. >> yes, it was crazy. see you soon. as steve wiseman has been reporting all day long, consumer spending bounced back in october, helped by falling gas prices. that is the good news for retailers, but then there is the threat of tariffs under the new administration. our next guest, says that three names could be especially hard

hit because of their time exposure. it is great to see you here, first of all, welcome. so, i mean, let's put it this way, cataclysmic lee exposed to tariffs, or more like, hey, this could be a problem on the margin and who are these companies potentially? >> could be a problem at the margin, it depends on a lot of things. 60%, who knows if that is the right number? high exposure to china, home furnishing companies, dollar stores, those are the general buckets. last time this happened, it was probably a 1/4 to 2/4 adjustment in demand so a dip and a recovery. in a couple of these cases in home furnishings, a lot of the product, the same product you see on marketplaces that you and i are comparing is all coming from the same region, so if you are shopping for it, you are not going to see a price that different unless a company decides to be more aggressive.

if you are in the high end, it is a different story, but in a couple of these industries, especially dollar stores, toys, there are even some auto parts coming from the same region in china, you can't get around it, so the prices you are going to see everywhere, there will be an adjustment, probably a pullback in demand. the margin hits weren't so bad last time. >> how much did we increase terrace last time? >> it depends on the product category but we went from 10% to 20% based on the product category and we have a couple rounds of it depending on the product category. >> so it was significant, this would potentially be more, but it is not like we haven't had more template, and we were talking about this yesterday but the fact that sketchers i think it was was so easily able to say we are going to source more product out of china -- it sounds like more retailers have been preparing for this, at least as a possibility. >> you hit the nail on the head. the apparel and footwear manufacturers have been moving production for years. why? it is a generally easy process to move, home furnishing, some

of the toys within dollar stores, auto parts, bigger factories, bigger production, more difficult to move it down, so slowly but surely, our companies are doing that but we are not there, yet. still 20%, 30% exposed. >> and we have seen the dollar stores trade down since the president was elected. home depot said yesterday the company says only 10% of its product comes directly from china so i don't know if that is the best example or not. there are many companies in that space, but they are not really the ones pricing this in, i don't think. they don't seem to be the ones having knee-jerk weakness. >> and you picked home improvement, i also had auto parts, those sectors have pricing power. if something breaks in your house, you have to get it fixed, you have two companies, large companies that control a large part of the market. that is where you are going to get the product, same with auto parts. if i flipped it back to the dollar stores, you have choices, there is more value,

there is consumer shopping in different marketplaces. walmart is taking a lot of shares. so there are more options, those sectors, the consumer has left little room of where to go. >> speaking of walmart, speaking of china, how exposed is that retailer? i thought i remember them making a series of announcements over the years about such and such percentage of our sales are made in america products. >> as a company, walmart is a grocer and a lot of grocery and the supply chain is the u.s. so about 80% of their sales are consumables, domestic sales are probably 10% to 15% call it the general market is exposed. the percentage, we don't know exactly but probably in that range. they have scale, they have ability to negotiate as do many companies and at the margin, i think it is safe to assume that the largest companies will do among the best negotiating with their suppliers. >> plus, maybe throw in some corporate tax? doesn't look like the rate is going up, but shares are at 50% and no sign of concern this year. on the question of costco, people keep asking, for how much longer can it trade at 60 times forward earnings but it has been such a performer. you think there could be yet another level to pull if they

are cracking down on membership, i don't want to call it sharing, but if your daughter does use your costco card. >> actually she does, but not anymore. there is a structural shift happening in retail, walmart and costco are in that category fueling part of that costco moved to date. the membership piece we wrote about, they assault checkers. during covid, i think people were using membership, especially when they assault self checkout and they have had success, when you scan your picture, you see your picture blowup onscreen, they know if it is you are not and they will say, would you like to buy a membership? because otherwise, you are not shopping here today and the value proposition is that good, it resonates that much worthy of traits during the trial has been good. we acutely coined it the netflix moment because when they got tighter with their membership, they saw a bump. this is a 60 million-member business that could, call it a single digit bump to its membership. >> we have to go, but i am

hearing walmart, costco, amazon, obviously, tj maxx -- is home depot one of the platform is? will they be okay no matter what happens? not to use mac seven, but of these retailers right now? >> you hit them, walmart and costco for sure, home depot will be in a category of itself because of that home improvement category. general merges walmart and costco, for sure. target is on the outside, on the bubble. they have a chance and they are trying to establish those, but you named the right ones. >> simeon, thanks as always. >> interesting couple of months. simeon gottman with morgan stanley. still ahead, traditional economic indicators show a robust picture of the economy but a different gauge y magive a more accurate snapshot of what is going on right now. the corporate credit markets, what exactly are they telling us? we will talk about that, next.

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connectivity is a big part of my boys' lives. it brings people together in meaningful ways. ♪ ♪ well, markets debate the health of the u.s. economy, my next guest says corporate indicators are pointing to stronger growth ahead and he believes they are a better gauge than traditional economic data. joining me is robert cohen, director of developed credit, great to have you in the house, welcome. i mentioned i'm really glad you are here because it is

important to point out while we can argue about what exactly is going on with cpi and what exactly is going on with valuations in the stock market, pretty clear signal coming from corporate credit space, they are the tightest they have basically ever been. can you elaborate on what you are seeing right now? >> for the last couple of years, many of the macro indicators you mentioned, yield curve, ism, cpi, all of these indicators have recently indicated, economic weakness, just has been disrupted by inflation, rising rates, fiscal stimulus. i think right now, you have the fed pressing on the break, while you have fiscal stimulus pressing on the gas. i think it has cost a lot of the indicators to go haywire. corporate credit is maybe closer to the ground, talking about individual companies, seeing what their earnings are doing, and that builds up to credit spreads, so credit spreads have been falling all year. high yield in particular, people refer to it as the

canary in the coal mine, these are companies most sensitive to economic conditions. >> they are the weakest, highest debt levels, the most potentially likely to default, but where are we these days? >> record lows. but, there is a reason for it, some logic to it, you have very low default environments, you have -- really, credit quality has been improving since the fed started raising rates, i think something that is underappreciated is once the fed starts raising rates, it basically froze. where we are in the credit cycle right now, and normally where the fed is cutting interest rates, that is usually coincident with a big room, that is where the risk spilled in the economy that starts to spill over into the broader economy. you have weakness, then the fed is forced to cut because of economic weakness. we haven't had any of that so that is part of the reason why the credit market is in good shape, because we haven't had this excessive risk-taking. if anything, credit quality has been increasing for the high yield.

over 50% double b, duration is much lower, it is three instead of four. there is a large portion of security credit in the market, and part of the story is tail risk, the riskiest parts of the high-yield market have been going to the bank loan market and depriving credit. >> which is a great point for those who are thinking about getting into the private credit space, it is more open to retail investors and some of what used to be here is being pushed in that direction. i guess my question would be, watching all of this, and we were talking about this a little bit yesterday, is this a sign to you that there is too much liquidity in the economy right now? i appreciate that the fundamentals are good, but are the fundamentals better than they have been since 1997, to justify spreads this type? or, do you think there is just literally too much capital that is pushing rates lower and a

sign that even the fed might be running a policy that is too loose, not too tight? >> i think it s a combination of both. clearly, they have credit quality, but also because there is no mna i was speaking about, issuance has been mostly refi, there hasn't been the supply of new bonds. i think the hope for 2025 is, as mna improves, you start to get more issuance, and you start to get i guess a more equal supply-demand balance, but clearly part of the story is a lack of supply that is pushing spreads tighter, you can't ignore that. >> one final question -- normally, you would say, listen, you can get high-yield at 6% or 7%, just about what a great opportunity that is, but people are looking at a stock market that has gone gangbusters. so, is it harder to coax people, when they think, well, it is a similar risk profile. in equities, i have this incredible upside and maybe credit is a little bit more capped? >> valuations are stretched everywhere. a little bit of comparison versus 2017, we talked a lot about the new trump .0 versus 1.0, in 2017, equities -- s&p had a multiple of 20, so that was an earnings yield of about 5%. high-yield, yield at 5%, then. and then, treasuries earned the two's, so, equities were much

more attractive on a valuation basis, back in cnbc .0. fast forward to today, multiple of 25, so really that is a 4% earnings yield, you see where the 10 year yield is now, in the mid-four. >> yes, treasuries are above that level, let alone -- >> and you can get in high- yield set in, so while spreads are tight, all in yields are actually quite high and they are quite competitive, actually, with equities. street estimates now -- which maybe they get updated and revised -- but a lot of street estimates that came out after the election, calling for 6% to 9% total return on the s&p for the next 12 months. if you can get 7% in credit, that is actually a pretty favorable comparison, and don't

forget, while spreads are tight, all in yields are high and that protects you against some of the downside. >> i think that is true. itlmt fes aosellike everywhere you look, you can do well here, you can do well everywhere, and we will see how long that continues, but robert, thank you for joining us, really appreciate it. >> thanks for being here. >> robert cohen with double line. the nasdaq hit its highest level since july and gold at its lowest level since december. we will break down some of the days biggest movers when "the exchange" returns. friend sold their policy to help pay their medical bills, and that got me thinking. maybe selling our policy could help with our retirement. i'm skeptical, so i did some research and called coventry direct. they explained life insurance is a valuable asset that can she future payments. who knew? we sold our policy. now we can relax and enjoy our retirement as we had planned. if you have $100,000 or more of life insurance, you may qualify to sell your policy. don't cancel or let your policy lapse without finding out what it's worth. visit coventrydirect.com to find out if your policy qualifies. or

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the cnbc max seven index is up 7% in the last week on the back of trump's victory. my next guest says he is continuing to do well under the new administration. she even says it will be a tech administration. chief tech investment officer, kim, as you are talking us through this, a lot of people were curious about your small a.i. play, as well, so maybe explain both concepts, the mag seven backed to what is worth making here? >> sure, all the attention on the a.i. room is focused on large language models, and that is great, and it is quite an accomplishment. it allows us to do some pretty wonderful things, if you are trying them out. my problem with the whole thing is they are still very prone to error, so i can't really be as

productive as i would like to be, using them. that brings me back to small a.i., which is where i came from. i was a software engineer, worked at a couple of places that had a.i. tools. i worked at nora where, an a.i. toolmaker, so i really support these models, and what i am calling small a.i. is a targeted solution at one specific problem. and i think that is where productivity can really come from. not necessarily these exotic 9000 for you, space odyssey fans, that can do everything. but, i like the smaller, targeted models. i think that is going to win in the long run, although god knows we can't get enough of large language models right now. >> the issue is i don't know if

a lot of those are investable right now, many of them have yet to come on the scene. in the meantime, you invest in the chip space, that natural space is nvidia, but i know amd is still a favorite of yours despite how much it has lagged this year, still looking at the likes of micron, maybe talk about if it is synopsys. where are the places in the public markets that you do think makes sense, given what you just have described? >> sure, microsoft is in the business of giving us access to large language models, but even they are trying to narrow it down. i know they are working on finance oriented generative a.i., where, you know, you use their product for accounting and it will be answer -- able to answer your questions in your little database. so, that is kind of an example of it. powell and tina kind of has that, as well, although we aren't buying that. and then, finally, i think it is c3 a.i., i always inferred

that -- >> c3 a.i., yes. >> which ever, you know. yes, but, they, too, have delivery mechanisms. now, i am a pure software nerd/snob, where if you had services, i know that that kind of cuts into the scalability of a company, and both c3 a.i. largely do have a lot of services mixed up in their revenue. so, that is kind of a cautionary tale. don't expect it to her in the margins that microsoft does, for example. >> yeah, we almost need to do that as a segment next time where you give us the barricades on some of the popular, trendy a.i. plays. that is quite useful. kim, appreciate your time today and we will check back with you soon. kim forrest with boca capital partners. that does it for "the exchange" on a busy day. tyler is getting ready for power lunch, and i will join him and see you on the other side of this break. better sol. t. rowe price. invest with confidence.

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with verizon, anyone can trade in any phone, any condition. and get iphone 16 pro with apple intelligence, on us. and ipad and apple watch series 10, all three on us. that's up to $2,000 in value. only on verizon. welcome to power lunch alongside kelly evans. i am tyler matheson. stocks have given back some recent gains but the focus remains on the fed as a new report suggest jay powell is willing to fight if president trump tries to remove him as chair and we will talk to the dallas fed president in a moment but the question of that looms large as this new administration comes on board. >> yes, no, you