Title: Inflation Risks to the Rally: How to Protect your Portfolio 9/18/26 Show: CNBC Halftime Report (podcast of the live noon ET show) -- Friday after the FOMC's first hike under Kevin Warsh Host: Leslie Picker (in for Scott Wapner) + Investment Committee -- Amy Raskin, Jim Lebenthal, Jason Snipe, Rob Sechan Guest: Bill Baruch (Halftime committee member, by phone -- trimming Apple); Julia Boorstin (Disney CTO hire); Mackenzie Sigalos (iPhone 18 launch); Seema Modi (CNBC News Update); Mike Santoli (Market Memo); Sharon Epperson (AI exposure in 401(k)s) Date: 2026-09-18 (Friday) URL: https://open.spotify.com/episode/2p7tV7n0fZ35L0iztYLoeV Length: 43:46 Note: Spotify auto-generated transcript (accuracy may vary), extracted 2026-09-21 from the episode page's Transcript tab. The panel is virtualized, so the full section list (746 sections: timestamped sentences + speaker/chapter headings) was read from the page's React state in one pull and joined into paragraphs, each prefixed with the (m:ss) start of its first sentence; "##" lines are Spotify's chapter headings. Coverage is CONTINUOUS from the cold open through the closing disclaimer; nothing was invented. Timestamps are real episode offsets, but this is an audio podcast with no YouTube id, so the analysis page links the episode ("listen") rather than deep-linking a time. SPEAKERS: Spotify's diarization is numeric ("Speaker N") and unreliable. From context: Speaker 1 = Rob Sechan (also tagged on the podcast outro and one Bill Baruch fragment at 25:59); Speaker 2 = Leslie Picker (also two Julia Boorstin fragments at 12:16/12:37 and the closing disclaimer); Speaker 3 = Amy Raskin (also Julia Boorstin's Disney report and Seema Modi's news update); Speaker 4 = Jim Lebenthal (also Mike Santoli's Market Memo); Speaker 5 = Jason Snipe (also Bill Baruch by phone, 24:55-26:01); Speaker 6 = Mackenzie Sigalos (Apple) and Sharon Epperson (401(k)). Relabelled by name below where context is unambiguous. Some short back-and-forth fragments (7:49-7:50, 9:30-9:39, 21:52-22:20, 23:07-23:19) may be split across the wrong speaker by the auto-diarizer. CLEANUP: fillers (um/you know as interjection) and stutters ("of of", "the the", "I, I") removed; obvious speech-recognition mishearings corrected: Rob Sechen -> Rob Sechan; the tenure -> the 10-year; 40 bits -> 40 bps; Mac 7 -> Mag 7; Josh tomorrow -> Josh D'Amaro; Karam Deep Anand -> Karandeep Anand; Character AICEO -> Character.AI CEO; whole tech -> Holtec; John Turnus -> John Ternus; Mackenzie Sagalos -> Mackenzie Sigalos; halftime committee method / Bill Berg -> Halftime committee member Bill Baruch; Mr. Avon -> Mr. Abel; why 2K -> Y2K; Killian and BAPE / Vapes -> Kylian Mbappe; Howland -> Haaland; Decker's ... hooker -> Deckers ... Hoka; four O 1K / 4O1K -> 401(k); cbc.com/money One O 1 -> cnbc.com/money101; Risks and Networks -> Arista Networks; Ito -> Itau. Santoli's "a level of 607620" is left as heard (from context he means the early-June S&P high near 7,620). Wording otherwise verbatim.
## Navigating Market Rally Amidst Inflation, Yields, and AI Fears [0:00]
(0:00) Scott Wapner [podcast intro]: I'm Scott Wapner, and you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in.
(0:16) Leslie Picker: Thank you, Carl, and welcome to the halftime report, everybody. I'm Leslie Picker in for Scott Wapner today front and center. This hour, the rally's runway as elevated yields, oil prices and AI fears raise the stakes for stocks in the weeks ahead. The investment committee is ready to break down the next move for your money.
(0:33) Leslie Picker: With me for the hour, Amy Raskin, Jim Lebenthal, Jason Snipe and Rob Sechan. Let's take a look at the markets right now near session lows. The Dow down about half a percent or so, the S&P down a quarter of a percent and the NASDAQ down about .2%. The 10 year at exactly 5%.
(0:51) Leslie Picker: Those yields, it's been a week. It has been a remarkable week in fact, especially as we kind of work our way through September. Amy, we were just talking about the 10 year at exactly 5%. How would you kind of characterize the implications of yields, the implications of oil prices for equities at this point in time, which really does kind of feel like an?
(1:14) Amy Raskin: Impression So over the past month, you've had oil up 30%, you've had the 10-year up 40 bps, which is a lot given the levels we're at. And the market's done nothing. The market's like slightly off its high. So the market's been incredibly resilient. But what you have seen is momentum slowing considerably.
(1:32) Amy Raskin: And it does feel like we're going to be in a churn for a while until something breaks one way or another with regards to AI, with regards to all the wars that are going on right now. So there's a lot of moving parts and well, now we're going to be in a month where we're just going to wait to see what the Fed does again for another month.
(1:49) Amy Raskin: So I am sort of sympathetic with maybe they should have gone more earlier and then we can put the Fed behind us for a little while. We can't do that. So we have a lot to worry about, but the market's hanging in there.
(2:00) Leslie Picker: Jim, do you think that this backdrop is inherently negative for risk just given all the cross currents out there?
(2:06) Jim Lebenthal: I don't think it's negative for risk just based on the assumption and I think it's a very sound assumption that profits are growing wildly fast. The economy is doing well 5% versus the Atlanta GDP. Labor markets are pretty stable. So I don't think that in that condition one has to get negative.
(2:23) Jim Lebenthal: However, I think to the point, Amy, that you just made for the market to have done nothing in light of what's been going on pretty darn good. I think though if we look under the hood a little bit and we say, OK, well the S&P 500 is where it was in June, flat fine. Momentum as Amy you pointed out has come off quite a bit since June.
(2:41) Jim Lebenthal: And so that means that other things as measured perhaps by the equal weight RSP or the small cap index have done quite well. So really what this is saying, Leslie, and answer your question is it isn't negative not only because of the fundamental backdrop that I pointed out, but because there's rotation going on.
(2:58) Jim Lebenthal: We've talked about this a lot. Clearly momentum has given up some steam, but there are other sectors that have pulled up the slack, whether that's healthcare, energy, financials. To a certain degree. I think that's healthy, quite frankly, the broadening of the rally.
(3:11) Leslie Picker: Well, at the same time though, Jason, you've got Goldman saying that the AI investment boom has accounted for nearly half of the S&P earnings growth this year and that this tailwind should begin to fade next year even as CapEx spending begins to grow. So the question I think investors are grappling with is how the earnings driven rally kind of works from here, especially since it has been so tethered to AI working.
(3:37) Jason Snipe: There's no doubt about it. And to that point, Leslie, 52% earnings growth this past quarter, right? And the guide for this coming quarter is around 28% of those. So it's quite a difference, but still extremely strong. Now when it comes to kind of infrastructure, AI infrastructure CapEx again $900 billion planned spend this year, 1.6 trillion next year.
(3:59) Jason Snipe: I think that to Jimmy's point, the broadening story is an important one as we closely follow other sectors like healthcare, industrials and the like, financials as well. And I think that is a story I'm acutely aware of and focused on as we look into next year because I think as it relates to earnings that that will subside in terms of the outsized growth from the AI and AI infrastructure names.
(4:25) Jason Snipe: So it's really about what are the other sectors doing? And I do think there's some downstream effects will to impact them in a positive way.
(4:33) Leslie Picker: Does the inflation stickiness, if it were to be realized here you've got Morgan Stanley raising its inflation outlook, expecting two more hikes from the Fed, expecting restrictive policy to weigh on growth in 2027. Rob, does that create an additional headwind for that broadening story?
(4:52) Rob Sechan: Of course, it creates a headwind, but there's some positive things that have come out of this. The Fed is now in a position as they've reloaded the gun, so to speak. If there is an issue to be able to address that issue, it has the tools necessary to do it.
(5:11) Rob Sechan: I also think the Fed did what they had to do. The market backed the Fed into the corner to have to tighten rates and Chair Warsh had to talk tough. This is the best outcome we could have had.
(5:27) Rob Sechan: Now when you look at rate hiking cycles in the last seven rate hiking cycles, markets in the forward nine months returned 9%. That was a normal market. That was not a market with this hyperactive CapEx in the most important part of the market, which is a 30% constituent, which is already re-rated.
(5:54) Rob Sechan: Boy, I like the setup right now that we're typically seasonal weakness, seasonal chop. You see that right now when I look at it, I say, OK, what's gotten hit as a result of a possible rate tightening cycle should be getting hit because the reality of it is they're more exposed to rates.
(6:13) Rob Sechan: There is nothing going to derail this CapEx spending except intolerance by the market to accept the debt issuance and accept the fact that these companies are moving from capital light to capital intensive.
(6:29) Rob Sechan: Guess what would you like the other choice that they have to not do it and fall behind. And so here you have a chance to buy some of the greatest businesses in the world at much more reasonable valuations. In 25, they were trading at 34 times earnings.
(6:47) Rob Sechan: Now they're down to 24. You have some of them that have re-rated down to 18 times with visibility like we've never seen before. You talk to the data center builders, the demand is insatiable. Yes, you have not in my backyard.
(7:05) Rob Sechan: Yes, you have energy concerns. Those will get resolved. What I am not worried about is AI being derailed and derailing the market. Not at all. I'm not even worried about a Fed mistake because they did the right thing here.
(7:21) Rob Sechan: Whether you're for rates going up or not, no choice. So when I look at the landscape, it's not all sunshine and rainbows. There's definitely issues that can happen, but inflation is transitory. It is completely based on what is happening in the Middle East right now.
(7:37) Rob Sechan: We are not still cumulative right now. No, we're not. And by the way, this too all clear. I'm glad we have a lot of things to worry about.
(7:49) Leslie Picker: We spoke on this show.
(7:50) Rob Sechan: One more thing, one more thing, and fixed income is finally a hedge to all this. We have been buying bonds like maniacs because we think that story was over everybody. We're going to lose control of the curve.
(8:05) Rob Sechan: We are not losing control of the curve. Actuarial yields are now at a place where they can insulate portfolios and now is the time to do that.
(8:14) Leslie Picker: Yeah. We've seen a lot of inflows into bond funds lately as investors seek yield and some cash sweeping implications there, particularly as it pertains to money market funds. Jim, I know you wanted to say something, and I think it was.
(8:25) Jim Lebenthal: I want to extend what Rob's saying and I like the positivity in what you're saying. And I'm thinking about our viewers. I probably can speak for all of us. I maybe shouldn't. But look, this is another episode that we're going through in this time period where people are talking about the end of the world, right? AI is going to kill us, yield curve control, the dollar is going to lose supremacy, all these things.
(8:44) Jim Lebenthal: And I don't want to sound dismissive. That's not the tone I mean to strike. I mean to speak clinically that in our long many decades of doing this business, there have been multiple, multiple, multiple times where clients have called up en masse and said, Oh my God, the world is ending.
(9:00) Jim Lebenthal: I mean, I can and I'm not again being dismissive. But think back four years ago, the Ukraine crisis strikes and now we're talking about global nuclear warfare didn't happen. I'm not saying that the world isn't at some point going to end, but it's highly unlikely that the things we're talking about now are anything more than the wall of worry being constructed.
(9:19) Jim Lebenthal: And Rob, this is what I think you're saying, the wall, you want the wall of worry to be constructed so that the market can climb it. And this marking time over the last three months, in my opinion, is setting up for the climb.
(9:30) Rob Sechan: Jim, do you remember Y2K? What an event I mean.
(9:34) Jim Lebenthal: We can do this all day long. We can spend the whole A block talking about times that the world was going to.
(9:39) Leslie Picker: End tail risks. But sometimes the tail risks do materialize.
(9:42) Amy Raskin: Well, I don't know if this is going to be the end of the world for AI, but I disagree that this. I think this is a financially unsustainable arms race for AI dominance that is not going to end well. You can't argue that higher yields is better for this.
(9:58) Amy Raskin: It's not. I mean it's going to raise the cost of capital. Prices going up for all of their components is actually raising the bar in order to earn a good return. You have too many players simply competing. I agree. None can stop because they don't want to lose the race, but that makes this all sort of unsustainable to earn great returns in the long run.
(10:17) Amy Raskin: And these multiples have come down a lot, but have they come down enough to compensate from going from a capital light business to a capital heavy business. Capital heavy businesses usually have much lower most.
(10:27) Rob Sechan: So she's right in one way, in my opinion, many ways obviously, but one way in this case we will overbuild. We will. That is not today's problem, right? Every investment cycle sows the seeds of its own demise, right?
(10:48) Rob Sechan: So.
(10:49) Amy Raskin: The question is, how close are we to that?
(10:51) Rob Sechan: Demise. And by the way, we're riding a train from here to California. It may crash, but I'm not getting off and walking the rest of the way yet, I can tell you that.
(11:00) Leslie Picker: Wow, that's a question. You're wearing your seat belt. But to your point, we did hear from Bruce Flatt of Brookfield on this show yesterday. And when I asked him what your main concern is with regard to the AI infrastructure build out, it was not the safety concerns or the slowing of the pace of the models or Holtec pulling its IPO or not pulling it, but delaying its IPO.
(11:21) Leslie Picker: That's a nuclear provider that's seen levered to this trend. It was compute and the access to energy, and that's still just a supply issue for them.
(11:30) Amy Raskin: And as the cost of that rises, that also increases the bar to get a higher return. So almost everything is sort of raising the bar. And we've had, according to Roger McNamee, $200 billion of cumulative AI revenue to date and we're spending a trillion this year on CapEx like so you have to hope that the timing matches up and that eventually this trillion dollar market appears.
(11:55) Amy Raskin: And it's not completely clear to me where that money is coming from, right?
(11:59) Leslie Picker: Oh, sorry, Rob.
## Disney, Netflix, and Apple: Analyzing Key Tech Stocks [12:00]
(12:00) Leslie Picker: We do have some headlines crossing on Disney and Julia Boorstin has that for us. Julia.
(12:07) Julia Boorstin: Hey, Leslie. That's right. Disney is creating the new role of Chief Technology Officer, reporting directly to CEO Josh D'Amaro, and is hiring for this new position.
(12:16) Julia Boorstin: Character.AI CEO Karandeep
(12:18) Julia Boorstin: Anand. Character.AI is a platform for chatting with fictional and custom bots now. Anand was previously at Meta and Microsoft. This move by Josh D'Amaro, just six months into his role as CEO, speaks to the value he places on technology as a growth driver for Disney and.
(12:37) Julia Boorstin: In particular, the power of AI. D'Amaro saying Karandeep has quote a clear sense of where technology and creativity meet.
(12:45) Julia Boorstin: And shares our belief that technology creates the most value when it helps people do their best work. This comes after yesterday D'Amaro named a new Chairman of the Direct to Consumer Business, overseeing all elements of Disney Plus and Hulu's business and with a number of Character.
(13:02) Julia Boorstin: AI's technical team expected to join Disney as part of this news, along with D'Amaro's commentary about his work to deepen Disney's direct relationships with fans with Disney Plus as the digital centerpiece of that. You can imagine after this news, Disney might want to add interactive characters on Disney Plus.
(13:21) Julia Boorstin: So, Leslie, we'll have to see.
(13:24) Leslie Picker: Fascinating. D'Amaro wasting no time there, Julia. Thank you. You own Disney? Yeah. You like these new moves?
(13:31) Jim Lebenthal: Well, I'm intrigued by them. It's too new, too breaking of news for me to say that I like or dislike. But I'll tell you what initially my thoughts are, is that there have been a couple of controversies or conflicts going on with Disney over the past many years. One is between the cost elements of the creativity and the others between the creativity it costs to create.
(13:52) Jim Lebenthal: But there have been some CFOs over the past several years who have wanted to clamp down on that. The other aspect of which goes hand in glove with this is what are we doing about AI? We can't put our heads in the sand and say that we're just going to be making animated movies by hand. So there has to be a way to basically co-opt AI, and there have been some attempts by Disney to do that.
(14:12) Jim Lebenthal: So far they've kind of fizzled a little bit. There was an OpenAI partnership that really didn't go anywhere. For those of you who own the stock like me, where I end up on this is this is still a very cheap stock. And even as it goes through a little bit of back and forth here about how it's going to engage with AI, I think it's worth hanging on to.
(14:31) Leslie Picker: Rob, I wanted to circle back to you because I cut you off for that news alert. I know you had some comments about the AI build out and you're not too concerned. OK, we'll skip it. We'll skip it. We'll stick in the media space. Netflix getting a downgrade to sell today at Wells Fargo.
(14:47) Leslie Picker: Jason and Rob, you both own that one.
(14:50) Jason Snipe: Yeah, yeah. So I think for me as it relates to Netflix, I mean, it's been a tough story ever since kind of the Paramount deal didn't happen, right. So the stock's down 20% so far this year. Engagement is a real story. I think YouTube, short form media is really taking center stage, is trying to pull, even though I believe Netflix is the streaming winner.
(15:11) Jason Snipe: There's no doubt about that. Licensing for sports is very expensive, it's obviously very expensive content. I think they're going to continue their foray there and I also think they're going to double their ad revenue.
(15:26) Jason Snipe: I think that's a place I'm strategically focused as it relates to Netflix and I think the content slate will grow over time. So I hear Wells Fargo on this downgrade, but I think that the future is brighter going.
(15:38) Leslie Picker: Forward. Rob, what do you think?
(15:40) Rob Sechan: I think it's a matter of what content comes out. I think there can be multiple winners in this space. The beauty of right now is that you've been able to add to the name after it's re-rated. Historically, you've been paid for that. A nice hedge to the other side of that is also owning YouTube, which we own through our other ownership stakes.
(16:00) Rob Sechan: So I think this can be more than a one horse race. They're still clearly the dominant player in the space. And I think as Jason has said, super opportunity within sports that I would look at this as a way, hey, can I get this exposure more cheaply than I've been able to get it in the past.
(16:22) Rob Sechan: It's about the eyeballs that they have and the subscribers that they have. You can always monetize that. I feel very similarly about Meta in the engagement with the ecosystem.
(16:33) Leslie Picker: Yeah, well, shares of Netflix down about 24% year to date. We are still keeping an eye on tech with the Mag 7 ETF hitting a new high today, the group being led by Apple this year. The iPhone 18 Pro and Pro Max go on sale today.
(16:48) Leslie Picker: It's the first big sales test for John Ternus as CEO. Mackenzie Sigalos has been following this story. Mac.
(16:57) Mackenzie Sigalos: Hey there, Leslie. So Apple using the iPhone 18 cycle to solve 3 problems at once, supply, margins and the seasonality of its revenue. Instead of launching 4 new iPhones together, it's staggering them. Pro and Pro Max now, the foldable Duo next month, and then the more budget mainstream phones are expected this spring.
(17:16) Mackenzie Sigalos: That eases pressure on a supply chain already dealing with expensive component constraints at a time when Apple reportedly just agreed to pay Samsung even more for memory starting early next year. It also gives Apple another major iPhone selling window next year instead of loading so much revenue into the holiday quarter.
(17:34) Mackenzie Sigalos: And the mix gets more expensive in the process. The entry point for a new iPhone on sale today is $1200, helping lift average selling prices as Apple tries to protect margins. But the new Apple Upgrade leasing program softens the hit. You can get the 18 Pro for about $35.00 a month.
(17:53) Mackenzie Sigalos: The trade off is that some buyers may simply wait for the lower priced phones coming this spring. And then next month comes the bigger swing. The Duo that starts at $2000 scaling all the way to 3200 with two terabytes of storage. It's Apple's first foldable phone and the clearest test yet of just how far the company can push customers up.
(18:12) Mackenzie Sigalos: Market, Leslie.
(18:14) Leslie Picker: Yeah, $2000 for a phone Mac. What seems to be kind of the consumer response to just the price tag itself? And does that leasing program really seem to solve for some of the concerns around the sticker price?
(18:30) Mackenzie Sigalos: It does take the sting out of it, right? I mean, to this point you've looked at monthly installment plans either through the carriers or buying it outright. So I was comparing the prices today on the 18 Pro and it's $50.00 a month if you want to purchase it, $35 this leasing program.
(18:45) Mackenzie Sigalos: So that certainly takes away some of the scare factor. What do you think about the pricing? And what I will say about the foldable is they're very much serving this up as an additive phone. So something where you'd buy the 18 Pro, but then you'd have this as a second phone. That's where this whole handoff where you can have the same number across 2 phones comes in and also this is typical Apple playbook, right?
(19:06) Mackenzie Sigalos: The foldable market, it's expected to grow by 40% next year according to Counterpoint estimates. This is a market that Samsung has been in since 2019. They're on their 8th generation of the phone so Apple kind of waits on the sidelines and then you've got IDC modeling for them to sell 6 million of those Duo phones this year, which would already put them at 25% market share.
(19:25) Mackenzie Sigalos: And yes, it's arguably a much smaller market than the overall set of smartphone sales, some 23 million against 1 billion. But you have to think maybe a rising tide lifts all ships here with Apple getting into the market. I just tried out this phone last week down in Apple Park and it was incredible.
(19:41) Mackenzie Sigalos: I've looked at many foldable phones out on the market today. I've not seen anything like this in terms of no crease in the phone. It's very impressive.
(19:49) Leslie Picker: Yeah, I mean, just the pictures from where I sit are impressive. I can't imagine holding it as well. Mackenzie, thank you so much. Everybody here owns Apple. You're all nodding. Everyone seems happy with what they've seen. Amy, we'll start with you.
(20:03) Amy Raskin: Yeah. No, look, Apple's not cheap anymore. It's had a really good year. It's leading the Mag 7 and I think that tells you something. I actually, we own the stock. We still like the stock. We're holding it. I'm not sure I would be adding right now, but I think Apple's earnings are incredibly stable.
(20:19) Amy Raskin: They're an incredibly good steward of capital. They're one of the few Mag 7 whose CapEx has not been blowing out. So I like that a lot and I think they have pricing power. I think they're going to get these prices. They have an incredibly loyal consumer base. And I keep watching for any competition or anything that's going to knock them off their throne.
(20:39) Amy Raskin: And I don't see anything yet, Rob.
(20:41) Rob Sechan: Nothing's knocking them off their throne. I don't think you're going to see it, and here's why. Short term, it's going to trade around the rich valuation, the healthy fundamentals, the lofty expectations, everything that we know.
(20:57) Rob Sechan: Long term, Apple owns the customer, period, full stop. No different than the wireless networks. The benefit in all of this eventually moves from the infrastructure layer to the application layer and the application layer is sold into the customer.
(21:18) Rob Sechan: Apple owns the customer, they will benefit. And timing aside, you can't be underweight Apple. You can be market weight, you can be slightly overweight at times, but being underweight with that balance sheet, fortress balance sheet, tons of innovation, owning the customer is a very dangerous proposition for active managers.
(21:40) Rob Sechan: If I was a valuation person alone, I would be underweight Apple right now because as Amy said, it's expensive. Okay, but you can't ignore that.
(21:49) Leslie Picker: Yeah, 36 times forward. You can see on your screen right there.
(21:52) Rob Sechan: Roberts, talk to me I.
(21:53) Jim Lebenthal: Like that jacket I told you that when we started. I don't like your call that you can't be underweight. This stock. I trimmed it in half back before the last earnings.
(22:03) Rob Sechan: I'm sorry to hear that.
(22:06) Jim Lebenthal: This is what makes a market and we can agree on the jacket, but not. I do think you have to have a core position, right, I mean.
(22:13) Amy Raskin: For the record, I'm underweight as well. I do have a big position, but it's not at the market.
(22:20) Rob Sechan: I am neutral to begin.
(22:23) Jim Lebenthal: That's fine. I mean, look, it is a question about valuation. All of us can acknowledge the quality of the business itself. And what you're saying about owning the customer, that's of course not news, right? They've owned the customer for quite a long time. The new lineup is awesome.
(22:39) Jim Lebenthal: I'm going to look for that Duo. And I think the price point is actually very attractive compared to what was talked about $2000. Okay, all right. But I do think at 35 times forward earnings, historically this has been, to use Amy's term, a level at which it's hard to add.
(22:56) Jim Lebenthal: So own that core position. But this has been a stock that over the years it has made a lot of sense to have a trading position in addition to the core position. Look at how much he's smiling. He wants to come at me hard.
(23:07) Rob Sechan: I do. I do.
(23:10) Jim Lebenthal: Just go. I made my points made.
(23:12) Rob Sechan: So Jim manages money for individuals that are tax payer? Oh.
(23:19) Jim Lebenthal: Come on. No. Oh, God, this conversation on the show, the half that I own has a $15 cost basis. I'm never going to sell.
(23:28) Rob Sechan: OK, good. So being able to be in this stock, my long term call is different than my short term call. My long term call really has to deal with the application layer on top of AI and that's where I really think the opportunity exists because in the infrastructure layer, and this is why everybody gets so concerned with the build out.
(23:52) Rob Sechan: Typically we over build the infrastructure layer and the benefits accrue to the application layer. So, and again, Apple will own that. If you have an app that sits on top of any AI based technology or data center, what you're going to end up doing is doing it on something that allows you to have that interface and Apple owns that customer.
(24:18) Rob Sechan: Every app is going to have to pay them to do that. So my call is more long term about not being able to be not in it. And so that's my comeback. You said you can sell and get back in if you want Jimmy to your.
(24:32) Jim Lebenthal: Friend, you said you can't be underweighted. Of course you've got to be in it.
(24:35) Leslie Picker: Well, I think we may have a little bit of support for Jim's take here because Halftime committee member Bill Baruch is actually trimming Apple. And he joins us now on the phone. Bill, I'm sure you were listening in to the debate we're having here on the desk.
(24:51) Leslie Picker: What was your rationale for trimming the stock?
(24:55) Bill Baruch [by phone]: Hi, Leslie. Yeah, I'd like to pick this up with talk about the valuations. Like Rob just mentioned, we're trimming it in a concentrated portfolio because it's at the upper band of historical valuation. It's 2 standard deviations above its median valuation. We leaned into it. Now this is Jim's side.
(25:10) Bill Baruch [by phone]: We leaned into it in May and June. We traded Apple. We went pretty heavy into it. It got to a 14% weighting. So here's the thing. I see in the way we build our portfolios with the idea about performance, especially these concentrated portfolios, we see two risk on thrusts per year.
(25:27) Bill Baruch [by phone]: One of those risk on thrusts is going to be led by the largest names in the market. Apple's already up more than 20% this year. And with this little bit of exhaustion on the valuation side, we're trimming it back from a 14% weighting in this concentrated portfolio that only owns 10 names to an 8% weighting.
(25:43) Bill Baruch [by phone]: What we're doing is we're then leaning into other names that we think will outperform right here and help drive that. You mentioned that Mag 7 ETF that's breaking out right now. We want to own the names more heavily that are going to drive the breakout in that Mag 7 ETF. We're buying more NVIDIA, we're buying more.
(25:59) Bill Baruch [by phone]: For broad time that we're buying more Amazon.
(26:01) Bill Baruch [by phone]: To lean into that right now.
(26:03) Leslie Picker: Interesting trades there. Bill Baruch, thanks for joining us by phone today.
## Buffett's Succession, Bank Performance, and Market Indecision [26:07]
(26:07) Leslie Picker: Up next, big news out of Berkshire as Warren Buffett steps down as chairman. The committee's take is straight ahead. Halftime is back in 2 minutes.
(26:37) Seema Modi [CNBC News Update]: We're back on the halftime report. I'm Seema Modi with the CNBC NEWS UPDATE. Governor Gavin Newsom issuing an executive order today that calls for stricter AI guardrails, including a kill switch for rogue AI systems. His order sets up a panel of experts that will come up with safety regulations for the industry over the next two months.
(26:54) Seema Modi [CNBC News Update]: Newsom blaming President Trump and Congress for failing to rein in AI. President Trump's Board of Peace will meet on the sidelines of the UN next week to discuss the future of Gaza. The Trump administration established the board last year to oversee Gaza's post war governance and reconstruction.
(27:09) Seema Modi [CNBC News Update]: But since the ceasefire and release of hostages last fall, the US peace plan is frozen. Hamas still maintains weapons and governance of Palestinian controlled areas. Israel holds more than half of Gaza's territory and civil rights groups suing the Trump administration today to block armed agents from showing up to polling sites.
(27:27) Seema Modi [CNBC News Update]: They argue the Trump administration's suggestions it could send agents to polling sites violates the Voting Rights Act. Leslie, that's the latest. I'll send it back to you.
(27:36) Leslie Picker: Seema, thank you. Warren Buffett is stepping down as chairman of Berkshire Hathaway today, being succeeded by his son Howard Buffett. Shares have underperformed this year, up just about 1%. Jim and Amy, you both own Berkshire.
(27:52) Leslie Picker: It feels like a passing of a torch that's been a long time coming, but still, does it signal anything just about the future of Berkshire and the direction it's headed?
(28:01) Amy Raskin: I think this has been a long time coming and I think some of the underperformance this year is probably due to the management transition changes. But I also think this is just not Berkshire's market. When you have a strong momentum market, which we did until a couple months or weeks ago, Berkshire's not going to usually lead that market.
(28:20) Amy Raskin: If we do have a downturn, I expect Berkshire will continue to do its job and it will get access to these great deals. I mean, when you have a war for capital, which we have going on right now, Berkshire, which has a lot of capital, should win in the longer term. So we like this as a longer term holding.
(28:37) Amy Raskin: I'm not uber disappointed in what the stock has done this year. I think I was on the show in April and it had really had a tough couple of months. It's come back since then. So we're going to continue to hold it as a multiple. It's actually not very high compared to its own history.
(28:55) Amy Raskin: So we like it here.
(28:57) Jim Lebenthal: That was a great synopsis. Totally agree with you. I want to just address Warren Buffett and his stepping down from the chairman. Amongst the many positive attributes of Warren Buffett, he has always focused on proper corporate governance. And I believe that he would agree that proper corporate governance is difficult when you've got the former CEO as the chairman.
(29:17) Jim Lebenthal: It's hard for the new CEO to really breathe and flourish in his own style when the former CEO is the chairman. Now, I know this is a very unusual situation. This is Warren Buffett. But I think this is very much in keeping with his standards for corporate governance to step down and let Mr. Abel do his thing well.
(29:37) Leslie Picker: Former CEO as chairman has been kind of the playbook lately for succession planning. I think that was the case at Disney. Jamie Dimon has said when that time comes, he will ultimately be and we saw that at Morgan Stanley too. And it's kind of that year timeline where they are chairman and then kind of think it's a bad happen to the sunset.
(29:54) Jim Lebenthal: I think it's a bad idea. And the last thing I'm going to do is speak for Warren Buffett. But just knowing his, I mean this is not just Jimmy speaking out of the blue. There's a lot of people who would agree with that assertion that if you've got the former CEO as the chairman, it's hard to kind of look, what if Mr. Abel wants to initiate a big dividend, right?
(30:10) Jim Lebenthal: That would go against what Warren Buffett has always said. So it's hard for him to do that with Mr. Buffett in the chair position.
(30:17) Leslie Picker: But Buffett will still be a big shareholder, so could potentially wield influence that way. He is. He's not completely stepping away. Let's talk about financials because week to date they have been the biggest underperformer. There are a few reasons why we have seen financials underperform this week and move lower.
(30:35) Leslie Picker: We had the Barclays Financial Services conference where we heard some management commentary. We had obviously the Fed decision which the big banks in particular took a decline on, on that news and during the press conference. How do you see the setup for financials from here?
(30:50) Leslie Picker: Do you think it was kind of a knee jerk reaction this week?
(30:55) Rob Sechan: Yeah. I mean, I think there's banks, there's banks that are engaged in capital markets activity as well. There's deposit oriented institutions, there's those that are going to benefit from the M and A cycle as well as the capital issuance cycle.
(31:12) Rob Sechan: So I think there's going to be haves or have nots. The JP Morgans, the Morgan Stanleys, the Goldman Sachs I think are going to do incredibly well in this environment as you're seeing a lot of deal activity, you're seeing a lot of capital market raises, you're seeing a lot of volatility in fixed income, which creates an enormous opportunity on their trading desk.
(31:36) Rob Sechan: These guys make markets, but they also take positions and they happen to be pretty good at it. So I think this was more of a scare. Do I think net interest margin spreads may get compressed a little, but it depends on which business is most exposed to that.
(31:57) Rob Sechan: So try to separate and not all of them are created equal. So I don't think you can just brush it as financials well.
(32:06) Leslie Picker: Go ahead. Oh, I was going to say, Jason, you own Goldman, which is the biggest laggard week to date on mostly the comments from CEO David Solomon where he talked about some guidance, gave some qualitative guidance really about the bank's fixed income currencies and commodities trading business to be slightly softer in Q3.
(32:24) Leslie Picker: We've seen some volatility in particular with that business in recent quarters. So what do you make of that guidance, especially given some of the commentary from here, some which believe trading will be weaker this quarter and others who say it's actually fine for them?
(32:40) Jason Snipe: Yeah. So obviously the first part of the year for Goldman was really strong. It's kind of slowed down over the last several weeks. The commentary, a little bit of concern. I think fixed income trading will be fine. So I continue to believe that Goldman is best of breed in IB and I think they will kind of get through whatever softness they are guiding to in the next quarter.
(33:06) Jason Snipe: The other name that we own as well is Apollo. Like to Amy's point earlier with rates and kind of the cycle that we're going through, Apollo has gotten caught up in that whole alt manager sell off, so I do think realizations, raising capital will probably get a little bit tougher.
(33:25) Jason Snipe: But companies like Apollo, which I believe are a little bit more diverse than the typical alt manager, like I really like their insurance business. So I'm still going to hold these names. Goldman and Apollo are kind of our favorite picks, very different companies, but that's kind of where we are, where I stand kind of on the space that we're involved.
(33:44) Leslie Picker: In. Yeah, a reflection on the expectation that credit quality will hold up. Mike Santoli's market memo is next.
(34:08) Leslie Picker: We're back with senior markets commentator and Overtime co-anchor Mike Santoli with his market memo. Mike, what are you looking at on an eventful Friday of an eventful week?
(34:17) Mike Santoli: It has been eventful, Leslie. I think that most bulls anyway are looking to escape the week without further damage. For most of August, as the market kind of stalled out, there was a lot of focus in the S&P 500 on a level of 607620.
(34:33) Mike Santoli: That was the high from early June and we kept in that range above that for most of the month. We actually popped below there in the Fed reaction on Wednesday. We recovered yesterday. Where do we sit right now, right on that line. So I do think that this market is a little bit indecisive and noncommittal because of the wear and tear that's occurred on the cyclical parts of the tape.
(34:55) Mike Santoli: So consumer discretionary not traded well this week with rates going up, you actually have industrials also giving back. Some of you guys were just talking about banks. So whether this is again going to be one of these kind of rolling stealthy internal pull backs that then resets the market and sentiment gets subdued and we can launch higher from here to then try for new highs or is this the early stages of a breakdown?
(35:20) Mike Santoli: I think that still remains the debate right here as we're going to stay in suspense even about an October rate hike and obviously 10 year Treasury yields of 5%, oil not going down anymore is kind of all you had to know as to why yesterday's rally did not see follow through today.
(35:35) Leslie Picker: Yeah, macro backdrop certainly in focus, even more so after this week. Good questions, Mike Santoli, we appreciate it. Thank you.
## ON Holdings, Competition, and Stretched Consumer Spending [35:43]
(35:43) Leslie Picker: Coming up, a big win for ON Holding as shares try to turn around their worst year since 2022. The committee's take on the retail trade business.
(36:09) Leslie Picker: Welcome back. We're watching ON Holding, giving back earlier gains after signing soccer superstar Kylian Mbappe away from Nike. Both stocks are down big this year. Jim, you used to own On Holding. Is this the type of news that would get you back in? No.
(36:25) Jim Lebenthal: But I mean, I want to find a reason to get back in, but I'd need to see a more sustainable growth rate in earnings than what we're seeing right now. This was a great stock for a long period of time and it traded at a very premium multiple because of it. It has now come down to well below the market average, very much value territory.
(36:43) Jim Lebenthal: And that's on the basis of earnings estimates that have come down. I think the shoes are fabulous. I think the apparel is fabulous. Nonetheless, the earnings are not good enough. So apparently I'm in the minority opinion as far as the quality of the goods and until those earnings estimates start going up, this is a no touch.
(37:00) Leslie Picker: What is it, Amy? Is it just too competitive? Is it?
(37:02) Amy Raskin: There's a lot of competition out there and the consumer is getting stretched and the rise in interest rates aren't going to really help right now. So you have the wealth effect that has been supporting the consumer, but I think it's been about 18 months where real income has been negative for the most part.
(37:18) Amy Raskin: So we've kind of bounced up and maybe dipped positive or touched a positive for a month or two, but you're seeing higher gasoline prices, higher mortgage rates. It's just not a great environment for the consumer right now.
(37:33) Leslie Picker: What do these companies need to stand out?
(37:35) Rob Sechan: Well, listen, I think Nike's crafted a niche. We're sticking with soccer. They have Haaland, they have Ronaldo, Messi's with Adidas and Mbappe's with On now.
(37:53) Rob Sechan: So I just think these models, we went through a period of time where they brought to market something new, whether that be Deckers with their Hoka or On Holding with their shoes and it kind of forced Nike to wake up. I think this has always been a branding business, but you also need a very strong consumer and the lower end of the K is very stretched on the consumer side.
(38:18) Rob Sechan: I actually think you need to get inflation in check. You need to get real disposable income up a little bit and the incremental dollars will flow to those that have made investments like this. But that's going to take some time. Now is not that time.
(38:34) Leslie Picker: Yeah, there was a piece in the Wall Street Journal this morning about just everything that people spend money on is higher going into the midterm elections, and that leaves less for discretionary spending. Up next, AI stock swings in your 401(k). We're breaking down the risk and the reward coming up.
## Protecting Your Retirement: AI Exposure and Portfolio Picks [39:03]
(39:03) Leslie Picker: Tech has had a tough week amid new concerns about the pace of AI development, capacity constraints and safety concerns. For millions of retirement savers, the AI trade may already be inside their 401(k)s. Our Sharon Epperson joins us now. Hi, Sharon.
(39:18) Sharon Epperson: Hi Leslie. Even if you don't own an AI stock or an AI theme fund, market swings may still affect your 401(k). Tech giants NVIDIA, Apple, Microsoft, Alphabet and Amazon account for about 30% of the S&P 500.
(39:34) Sharon Epperson: That doesn't mean an S&P 500 fund is not diversified, but it does mean a handful of mega cap stocks can have an outsized effect on returns. That's because AI can show up in companies that supply chips, power, data centers and other infrastructure for the AI build up.
(39:51) Sharon Epperson: And that exposure can also show up in target date funds. That's the automatic default option in so many 401(k) plans through stock allocations. If the AI build out slows, investors could see more volatility. But financial advisors stress that AI linked stocks are not your entire portfolio.
(40:10) Sharon Epperson: So what should 401(k) savers do now? Look beyond the fund's name and check its top holdings. Rebalance if you're overweight in one area. Consider portfolio bucketing investment strategies, keeping near term retirement spending in safer assets like cash and bonds while giving growth investments, including volatile stocks, some years to ride out market swings.
(40:31) Sharon Epperson: And keep your retirement goal in mind. Moving to a more conservative mix may reduce volatility, but it could also mean you need to save more to stay on track. The bottom line is know what you own, know the risk that you're taking, and make a long term investment decision for your retirement savings based on not short term volatility, but what those goals are.
(40:54) Sharon Epperson: For more retirement saving strategy, subscribe to my Money 101 newsletter, use the QR code on the screen or go to cnbc.com/money101. Leslie.
(41:04) Leslie Picker: Sharon, thank you. Jim, I guess some would say on the flip side, you want to be exposed to AI because that's so much of the economy right now.
(41:10) Jim Lebenthal: Well, you certainly did in 2023 and 2024, right? I mean, part of what we're talking about here is 401(k)s and there are limited choices in 401(k)s. But the S&P 500 is probably going to be in every 401(k) program. So if you were in the S&P 500 in 2023 to 2024, Hallelujah.
(41:30) Jim Lebenthal: Now, since the middle of 2025 through the current day, we've had a little bit of a broadening of the rally. I think it's going to continue. So what I say to the viewer is look in your program at what the alternate choices are. Maybe there's a value stock international stock fund, maybe it's a small cap stock fund.
(41:46) Jim Lebenthal: Maybe the equal weight S&P 500 is an option. But look at some things that you can broaden your exposure along as the rally broadens.
(41:54) Leslie Picker: All right. Thank you, Jim. Stay with us. Final trades are coming up. We're back with final trades, Rob.
(42:05) Rob Sechan: Broadcom AVGO up relatively little year to date, it's re-rated a bit lately, 60% revenue growth this year, 60% next. I think it's a relatively attractive valuation at 20 times.
(42:20) Leslie Picker: Jason.
(42:21) Jason Snipe: Arista Networks. Data center networking is still extremely robust.
(42:25) Leslie Picker: Jim.
(42:26) Jim Lebenthal: Well, based on what Jason just said, Cisco Systems, this has been a winner all year and I think the last couple of months of consolidation sets it up for the next leg higher.
(42:35) Leslie Picker: And Amy?
(42:36) Amy Raskin: We like Itau. It's a new, relatively new holding in our portfolio. It's a little risky with the Brazilian election next month, but nine times earnings and if the election goes the right way, we think there's a lot of upside.
(42:47) Leslie Picker: Right. Just looking at the markets, we're coming back a little bit from what we saw earlier in the hour, down about .3%. That does it for halftime. The Exchange starts right now.
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