If you're small business is booming, you might say "Cha chu" but you should say "I'm like a good neighbor, state farm is there" and will help your growing business. Like a good neighbor, state farm is there. Are you still quoting 30-year-old movies? Have you said "cool beans" in the past 90 days? Do you think "discover" isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide and every time you make a purchase with your card, you automatically earn cash back. Welcome to The Now. It pays to discover. Learn more at discover.com/creditcard based on the February 2024 Nelson Report. Market moving insight and analysis join Jim Kramer, David Faber and me, Carl Cantonea on the opening bell hour of CNBC Squawk on the street. Good Tuesday morning and welcome to the final Squawk on the street for the year of 2024. I'm David Faber with Mike Santoli and Leslie Picker, we're at post line of the New York Stock Exchange. Carl and Jim, they're missing this big day at the morning off. Let's give you a look at futures this morning as we get ready for the final trading day. Did I mention that? I'll mention it again. As you see, reversing things from a bit from yesterday where at this time we were down looking down sharply on the futures, not the case at this point in the morning. Our roadmap does begin with this final day of trading for 2024. It has been a record-breaking year, but the bulls, as you know, have been stumbling to the finish line December right now said to be a losing month. Plus, Bill Ackman expecting the Trump administration to remove Fannie Mae and Freddie Mac from conservatorship, potentially making them private companies again. And the Treasury Department hacked by China in what it calls a major incident, the fallout ahead. Alright, let's start with the markets courses. We wrap up the year. Would be the best set for the best two years in a row since let's call it the late 90s, I guess, Mike. You've been talking about that plenty of courses we set up for next year. We've all been asking that question and you make it three in a row with these kinds of returns for the broader market for the S&P. Well, in the late 90s, it was the only time it happened, really, is when you had a 20, 25% back-to-back gains and you actually repeat it for a third year. And really, four years, I think, straight of 20% plus back then. I mean, I think the big takeaway is the market kind of owes you nothing in terms of historical returns, 25% total returns for current year. By the way, David, you might have been facetious saying that Jim McCarle were missing this today, but this is the most exciting day of the year. It's when the year-to-date charts and the one-year charts are the same. I mean, it's kind of this beautiful synchrony. It's a special day for you, isn't it? I'll be feasting on that all day. Yes, all day. And into the evening. Exactly. It'll be dark out here. But three years is the one-time period trailing where the S&P looks like it's got more muted returns. It's 9.1% total return annualized. Not bad. We had a bear market in between, like a 10-month bear market in 2022. So just because the market has been kind of overachieving in that way, it doesn't in itself mean hey, game over. But I think it does mean, and a lot of people have said this, you have to kind of moderate your expectations in terms of what valuation expansion can get you from here. You do. All the forecasts are okay for earnings. I know, Mike, it's funny when I listen to you, and you reference the late '90s. Of course, you and I both were reporters through that. And I remember similar conversations at the time. Valuations then far higher in many ways. Obviously, we were dealing with a seminal transition in technology. But we are now as well, potentially. Without a doubt. And there's no ceiling. That's like a literal ceiling on it. But what you do is, you are at some point eating forward returns in the near term. I mean, even if you talk about, hey, in '98, things look like they're out of hand. You still had a year and a half to go. That's absolutely true. But look at the 10-year forward returns from '98 to '08, okay? You had a payback at some point. It just didn't really benefit anybody to start betting hard against the market in that moment. There were also a lot more stocks at that point in time, a lot more IPOs at that point in time. We still have yet to see a real native AI company go public in that form. And so that's something that people are looking forward to in the forthcoming years as well. And how that kind of plays into, well, it certainly plays into the retail investor interest. It plays into the M&A cycle, the flywheel effect there. But as that kind of next lever, alpha generation for 2025 is going to be an important component as well, especially as we think about just the way this technology has propelled the stock market forward in the last two years. That could be the attention you made it. There's no doubt. Although, I mean, back in the '90s, we had such low quality IPOs along with, of course, some of the most important companies that we're still talking about today, be it Alphabet, Amazon, literally hundreds of them in 1999. Yeah. On average, they were eight double in the first day. Yeah, I had it, but by the end, by 2000, I remember I had a seven page thing with every name that they were all zero, basically. You know, one consequence of that, Leslie, the lack of brand new exciting names to latch onto is you have this constant pile on of the same consensus thing. Right. I mean, the Palantir move is insane. I mean, in terms of the trajectory of it for a company of that size, obviously Tesla, obviously, NVIDIA in the first half of this year, and then people grabbed onto broad comets and that's the next one to move. And it's worth fine. These are more mature companies, obviously, but then you have kind of just the stuff that's been lying around. You know, we talked about the quantum names, which are kind of this silly section of the market's pure spec, and it's just really a name and a ticker and a shell and we can just trade it and trade and trade it. And or you could do the leverage single stock micro strategy ETF, which is the thing. All those kinds of things as opposed to these IPOs of companies that many of us like a name and a story and you had. But Leslie, what also has been interesting about this particular time is, I mean, XAI, Elon Musk's AI entrant, $6 billion they raised at a $50 billion valuation, I reported on that a number of weeks ago. If that was in the market, that would have been a huge story for us that day, if not for quite some time leading up to it. A data bricks raised $10 billion recently. 60 plus valuation. Right. So these names and not to mention open AI, which at some point, perhaps when they figure out how when they make their move to being a for profit company, maybe they go public one day long down the road, I don't know. But these are the big names and they're not coming to the public markets anytime soon. No, all the upside is being generated in the private markets, which is largely reserved for a certain type of investor. Institutional investors, sometimes pension funds, endowments and the like. Now, next year, something to watch will be kind of the change, the potential change. This will take place in Washington. I know there are a lot of lobbyists that are wanting this of who an accredited investor is and that could democratize who has access to the private markets more so than they have currently. And then there's also this huge push in the alternative space to widen and broaden the scope of their retail investors as well. So a lot of interesting themes as we head into the new year. But of course, the S&P and NASDAQ coming off three-day losing streaks and the S&P on pace for its worst months since April. Our next guest says to expect higher volatility in the year ahead, underscored by known unknowns, Matt Orton Raymond James, Chief Market Strategist joins us now with his outlook. Four stocks into next year. Matt, thank you very much for joining us. So volatility, we saw basically two spikes this year, one in August and one in mid-December in terms of volatility. If we do get higher volatility in 2025, how should investors be preparing for that now? Is it something where they should be opting for some kind of volatility hedge, diversification, buying on the dips when they see volatility? What are some of the playbooks that you would advise? Good morning, Leslie. Great to join you on the last day of 2024. And I think when we have a higher volatility, we'll market we're already seeing that play out over the past couple of weeks as we head into the end of this year. But the fundamentals underpinning this market are still very, very solid. I'm looking forward to strong earnings growth that's going to continue to broaden out cross sectors. And so I think when you have a strong fundamental basis for the market and the economy as a whole, I would be looking to use any sort of meaningful pullback in the market as a buying opportunity. I tell all of our clients when you have those meaningful pullbacks, particularly the one that we had over the summer, you should be using downside opportunistically to lean into better diversifying portfolios. I fully expect growth and value to both work pretty well next year. So there's an opportunity to maybe take some profits on your winners and make sure that you have a portfolio that can better weather some of that volatility. And also some cash that you can continue to deploy throughout the year. Despite the earnings growth that's expected next year, the market is still trading around 22 times those projected earnings above the 10 year average of 18.5 times. So what does that tell you about how much more upside or expected returns that investors can hope for from here? Yeah, you know, let's say I don't have much of a concern about where evaluations are. I get asked by clients all the time about whether or not this market is too expensive. And for a long time, I've said it's not. And I think you can use the past 10 years, 20, 30 years, but the market and economy itself have markedly changed over that time period. The market has become growthier. Part due to megacaps also part due to just long term secular growth shifts that were having. And as a result, you know, as the market has become growthier, you should be willing to pay a higher premium for it. And a lot of the companies that are more expensive have been delivering earnings. So I'd much rather own that growth with companies that are delivering solid free cash flow consistency with respect to EPS increases. And that's where you want to look. And I think that's almost where small caps are going, which is an area that I like a lot moving forward. You know, small caps aren't all low quality companies. We're going to be seeing, I think, an inflection with respect to earnings heading into next year. And they are trading cheap. And I think they can support higher multiples, particularly relative to large caps. So there's definitely plenty of opportunity, even if you're concerned about valuation. You know, Matt, one of the elements of this rotation or this hoped for rotation into smaller stocks or into the broader list of stocks or cyclicals over the course of this year has been a little bit of confusion about where we are in the cycle and what the character of this economic cycle is. One year ago, I think economists, the consensus was there's like a 40% chance of recession. There really was a very high level of concern about whether the expansion could continue. Obviously, we climbed that wall of worry. The soft landing has seemed like it basically is manifest right now. We don't really have a similar level of concern right now. And yet we also don't have those kind of early cycle dynamics where you might expect things like cyclicals and riskiers and lower quality stocks to perform. So how do you navigate all that? Yeah, it's such a great point, Mike. And I think what's confused so many investors and many of our clients alike is that you basically throw on their traditional book of economics right out the window. And I think that's because we've never had zero interest rate policy persist for such a long time. And we're exiting it unprecedented monetary environment regime along with high fiscal spending. And so I think you can't expect a lot of those long term economic theories to work out in the short term. Long term sure, I think we're going to revert back to that. But I don't think we're there yet and we're still working through fiscal largesse. I think that's still going to support the economy moving forward. We're moving into an environment where the market and investors are hoping for a better regulatory regime moving forward, which I think benefits financials and benefits smaller companies. So I wouldn't focus so much on what the market should be doing, relative to what economic theory tells us. I'd be looking at the fundamentals, talking to management teams, listening to what they're saying about the state of their consumers and about their growth going forward. And when I put all of that together, I get a pretty optimistic picture, which is why. Going back to where we started with Leslie, I think we can use downside opportunistically, because nothing right now is telling me about this whole mosaic that when we see downside, something more pernicious is lurking in the background. All right, Matt, thank you very much and happy new year to you. You too. Thank you. Well, still to come, Bill Ackman expecting the Trump administration to remove Fannie and Freddie from conservatorship that sent those stocks up. We'll discuss this, give you some of the details, at least for regards his plan. Let's give you a look at futures as well. Of course, we get ready to open here less than 18 minutes from now for the final trading session of the year, and we are looking for an up open. A lot more squat from the streets straight ahead. The $150 billion pet industry is booming as people absolutely love their dogs. If you're looking for a solid investment, Dogtopia is the name to know. With 300 locations across North America, it's the largest leading and fastest growing pet franchise offering a recurring revenue membership model. Dogtopia offers safe, open play dog daycare, boarding, and spa services. Want a recession resistant franchise? Check out Dogtopia because every dog and dog parent deserve it. Go to dogtopia.com to learn more. At KeyBank, we know a small moment like, "Huh, what's it like to have a yard?" Can lead to an even bigger question like, "Am I ready to buy a home?" And that's the type of moment where we'll meet you. Prepare to talk about everything you need to know when applying for a mortgage, so you can try to turn those backyard dreams into reality. Paul? Yes? Question. Are you a hammock person? You know, I think I might be. For every financial need, we'll meet you in the moment. KeyBank opens doors. NMLS-399797, equal housing lender. If you're small business is booming, you might say, "Cha-choo!" But you should say, "I'm like a good neighbor. State Farm is there!" And we'll help your growing business. Like a good neighbor. State Farm is there. Bill Ackman posting on X yesterday that he expects President-elect Trump to remove Fannie Mae and Freddie Mac from conservatorship. That would mean they became private companies again. And that post did send shares of both stocks up kind of nice to mark up your book at the end of the year, isn't it? Mr. Ackman in putting out that post on a very low-volume day. That said, it's not without specifics certainly and possibility. In fact, our viewers may recall any number of times leading up to the election. I had mentioned that one of the key trades for those who believed President-elect Trump would win was buying the preferreds of Fannie and Freddie. Not as much the common where there is a lot more risk but the preferreds. And we can go back to it there. Well, there's, he's talking about an IPO in 2026, what they could raise, how they would meet the capital standard. And listen, they got close in the last Trump administration. Treasury Secretary Mnuchin and others, the FHA, FFAHA, had a plan. They were moving towards that. They didn't quite get there. And, you know, I've mentioned a number of times when John Paulson was considered for Treasury, perhaps, his four billion dollar face ownership of the junior preferreds there. That's been a big trade for Paulson. It's been a big trade for Ackman as well. And it's paid off. You can see what's happened just since the election as a result of the expectation, perhaps, and in the second Trump administration, you are going to see another effort made. But when it comes to the specifics of it, that's where you can sort of differ a bit with what Ackman is saying in terms of his plan, because he believes that the government will be willing to, after everything it's received. Remember, there was this third amendment that allowed for basically the sweep of all profits to the government. And it's been an enormous amount of money, hundreds of billions. But he says that would satisfy the $190 billion that the government put up for the senior preferred. They were getting paid 10% on. But that's not clear. The government might still say, hey, that, because the third amendment, the Supreme Court, by the way, agreed with it. That went to the Supreme Court. They said, no, it's fine. It was legal. They may say, no, you still owe us $190 billion. So you could see a common offering, but a lot more of that common going to the government to satisfy their continued claim. Under Ackman's plan, he says they're satisfied already. And in fact, there's a surplus as well. That could be the way they approach it. Just don't know. So there was a CBO report from just a few weeks ago that said that just the overall operations of Fannie Mae and Freddie Mac have improved over the last four years, since the last time they conducted kind of an in-depth research into them in 2020. And they said that the two have enough funds. They are able to raise enough funds to allow both of the GSEs, the government sponsored entities, to repay the treasury for its roughly $190 billion in outstanding preferred shares. You know, we'll see if that's true or not. But to your point about Ackman tweeting this at the end of the year, year to date returns 10.5% through December 24th. For Ackman. For Pershing Square, yeah. So this helps. And by the way, this is, I mean, they're already has helped and it helps even more. You're right. I know a number of portfolio managers who certainly have gotten a great deal of performance out of this trade. It was seen as a key one going in if you thought Trump was going to win. But again, to your point, how they treat that $190 billion is a key. Yes. How much, if in fact, you do get this IPO, how much common goes to the government, how much dilution. That's why the common is also more dangerous. The key was also aside from whether it satisfies the claims of the government. Backstop is on a foregoing basis whether these companies will require an explicit backstop from the government or just that much more capital, right? I mean, that's that's the piece of it that has never been resolved. No. And it'll take years, by the way, to IPO this thing. Yeah. I mean, he's saying 2026, which would seem to be pretty quick. That's it. That's pretty amazing. Maybe they can just take up the plan they had underway already. But it's going to be Scott Bessin issue, potentially as an incoming Treasury secretary as well. And we'll be following me closely. Speaking of Treasuries, the US Treasury saying it was breached by Chinese hackers in a major cyber incident. We're going to have details after the break. Let's give you one more look of futures as we get ready to begin the final day of trading here at the New York Stock Exchange for the year 2024, looking for an up-open. The $150 billion pet industry is booming as people absolutely love their dogs. If you're looking for a solid investment, Dogtopia is the name to know. With 300 locations across North America, it's the largest leading and fastest growing pet franchise offering a recurring revenue membership model. Dogtopia offers safe, open-play dog daycare, boarding, and spa services. Want a recession-resistant franchise? Check out Dogtopia because every dog and dog parent deserve it. Go to dogtopia.com to learn more. Let's say your small business has a problem, like maybe one of your doggy daycare customers had an accident. You might say something like dog on it. But if you need someone who can actually help, just say like a good neighbor, State Farm is there and get help following a claim from your local State Farm agent. For your small business insurance needs, like a good neighbor, State Farm is there. Welcome back, U.S. Treasury officials saying Chinese state-sponsored hackers broke into the department systems earlier this month in what they are describing as a major incident. Emily Wilkins joins us now with the latest, Emily. Hey Leslie, well, yeah, the U.S. Treasury said that a state-sponsored Chinese hacking operation was able to access the desktop computers of Treasury employees through a third-party software, according to a letter seen by CNBC. That letter goes on to say that the hackers were able to access certain unclassified documents that were on those computers. Now, the software company Beyond Trust said in a statement that the case involved a remote support product and said no other products were impacted in a statement Beyond Trust said they notified the limited number of customers who were involved and it has been working to support those customers since then. They also say in the statement that no other Beyond Trust products were involved, law enforcement was notified and Beyond Trust has been supporting the investigative efforts. Beyond Trust also said they disclosed the incident on their website when it happened in early December and since then they have provided updates as they've looked into what happened. A Treasury spokesman said in a statement that Treasury takes very seriously all threats against our systems and the data it holds and says over the last four years the Treasury has significantly bolstered its cyber defense and we will continue to work with both private and public sector partners to protect our financial systems from threat actors. Guys, of course, this is not the first time that we have seen state actors hack into US systems or target government employees and I think at this point we're still waiting for additional information on what if any type of information or type of data they might have gotten from this potential hack. And of course, a larger question I think as to the future of cybersecurity here in the US. Guys? Yeah, Emily, the Chinese are unrelenting when it comes to cyber espionage whether it be Treasury, whether it be the salt typhoon hack which continue we continue to learn about into telecommunications networks and listening in on telephone calls, amazing stuff and will obviously be a key consideration for the incoming Trump administration as well. Emily, thank you. Emily Wilkins, opening bell just a few minutes away here don't forget you can catch us anytime and anywhere by listening to him following the squawk on the street opening bell podcast. We'll keep an eye on energy prices of course you can see that gas is pulling back this is after what was a huge surge yesterday had been up as much as 20 percent first there been some forecasts that say and a couple of weeks things are going to get very cold in the northeast part of the country. For example, also some questions about the ability of Russia to continue to ship gas to certain parts across Ukraine believe it or not which I didn't even know that that was still happening given yeah what's been going on for three years sort of a leftover deal. Yeah, leftover deal that may ultimately come to an end and then of course that means perhaps Russian gas won't find a home in some way and more pressure on the US to produce and therefore an export but a pullback today yeah definitely a pullback it's a dramatic move on from the early 2024 lows but I think it's fascinating if you just like a really long-term truck these are not challenging levels in terms of expense under four dollars for for natural gas I mean you were above it you know you're at five plus twenty five years ago you know I mean so it's the domestic production story remains very friendly so this is on the one hand beneficial for gas levered energy stocks they benefited yesterday on the other hand it's not really inflationary obviously so pretty low on nominal basis because there it is y'all came out final time to the year to take a look at the real time the big ball drop in times square the confetti before the confetti of course is we again our final creating a lot of tears here mike I'm sure where you want to start this morning in terms of coming up obviously a down day yesterday but we did make progress as the session continued off the lows somewhat interesting dynamics yesterday you were down about 1.6 percent in the s&p at the lows in the morning kind of clawed back and you'd still were down one percent or more two trade straight trading sessions a pretty rare in the final stretch of the year the theme over the last couple of weeks really since the Fed meeting on December 18th has been more stocks down than a very tough time for the market to gather up any upside momentum yields even though they pulled back yesterday 10 year treasury it was still about four and a half percent now that was the level that was surpassed the day after that fed meeting so I don't think the fed outright slammed on the brakes for the rally the bull market brought the expansion into threat but I think that the investor base has a little bit of misgivings about whether this rhetorical turn toward the hawker side fewer cuts next year maybe just raises the chance of some kind of policy mistake I don't think the markets are trading outright as if uh oh we're in trouble but they're essentially saying we have a shorter leash the fed's going to be a little bit more vigilant and if you think that the weakening of the softening up of employment conditions has been something to be concerned about if these late cycle anxieties are going to become more evident then the fed might be seen to be a little bit you know hurting that situation and keeping rates a little too high now again that's all surmise about how the market's been behaving we've spent 10 of the of the training session since the election I was just looking today inside the gap up in the s&p that happened the day after the election right so you had this big pop once the election result was clear on November 6th so that big move on the chart you've kind of been spending a lot of time in there figuring out if that's okay it's like 5850 on the downside would be the threshold that said okay maybe we're going below that range we haven't done that now the market's getting also a little bit oversold more stocks down it up more new lows than highs going into next year maybe that's a decent setup for a little bit of a of a relief trade maybe if you get a more of a bid in treasury so yeah again it's at the end of a really strong year you don't want to make too much out of this softness but yeah I think some people are on alert for weather in fact equity exposure were already high a lot a lot of people needed to buy more and so if we weren't gonna ramp in the year end more likely to be lightning up than adding but at the same time sentiment is very high you had that BMA fund manager survey showing record excitement around stocks 57 record highs for the year and the s&p 500 and it sounds like at this point you just have this kind of tug-of-war between momentum and excitement over just this sea change in potential regulation and potential policy shifts in 2025 versus the reality check of what those policy changes might actually mean for companies and might mean for the economy and the market is trying to figure it out there was a period especially writing immediate blush after the election where you could just decide your preferred policy priorities and when they were going to get done and what it was going to mean for the economy and earnings and deregulation and now maybe as we get closer it's seeming a little bit more cloudy in terms of you know the order of things obviously the budget fight didn't really clarify this idea that there's going to be some efficient policy making machinery in in Washington so you know to the extent you were hinging on that I guess that's that's become a little bit less favorable but again I think directionally everyone seems okay you know economy still well clear of true recessionary levels earnings for the majority of stocks headed higher rates are up but not necessarily at punishing levels all that stuff means that the market should actually remain relatively well supported but you know again the starting point is pretty elevated here yeah it's always interesting when you look back at the year the things that you you know had expected and perhaps didn't if I told you a year ago that electricity providers were going to be one of the best places to be and the constellation energy shares were going to do a lot better than constellation brands remarkable you you might have wondered what I was talking about but that's been the case I mean you know the we knew AI coming into the year but perhaps we hadn't yet focused as much on the power deficit that may come into play the need for it and therefore the performance of stocks like that up 93% because they own they're the largest owner of nuclear in the country and that is there are recommissioning going on there's discussion of course of new plants if only we could make them as quickly as China seems to be able to but nonetheless seen as given this enormous potential deficit if we don't actually produce a lot more power in the country on the other side of each constellation brands by the way been terrible nobody's drinking alcohol I don't know what's going on with these young people they're not drinking I don't know what they're doing I think they're getting hot but I don't think they're drinking very much for sure yeah yeah it is amazing and that's also in the context of you know just sort of consumer branded goods just not being a strong part of this market I mean that's been if anything that's a bullish thing and meaning that they're truly defensive stuff food and beverage you know the kind of paper products all that stuff has really not done anything to the extent the consumer staple sector has worked at all this year is because of Costco and Walmart Walmart because there's another one Walmart shares up over 72% for the year I was just looking at the momentum ETF and the S&P and Costco and Walmart are like in the top eight you know because that's just the way the math works if you if you within a sector if you show that much momentum you're going to get in there well and also kind of speaks to the psychology that you mentioned earlier on in the show which is that the you know those names that do tend to work in a specific sector kind of just get all the attention get all the flows and then continue working from there yeah I mean it was the case without a doubt before the election or maybe let's say before mid-year in banks where it was like D.P. Morgan just consuming all the oxygen in the group now there's been a little more catch up it's been a little more diverse but of course Goldman and and the rest have have come on along as well but yeah that's that's been this very much a feature of this market it's kind of a winner take most attitude across a lot of different sectors buying one or two like the top one or two in a specific market going from there speaking of banks there's this interesting dynamic and the FT kind of did a deep dive on this between the FDIC and BlackRock and it's over this whole issue related to the concentration of ownership in banks particularly among those like BlackRock and Vanguard that own passive stakes state street as well those state streets technically at banks it's regulated a little differently but the FDIC has put forth some new rules which would be a little bit more patrolling over those who have passive stakes in banks to make sure that they do keep them passive and this is a bipartisan perspective that they want essentially to make sure that the concentration of ownership of investor ownership in banks doesn't get to the point where they are influential in things like you know maybe on the right it would be things like ESG on the left it would be also potentially ESG and other issues and so they put forth these rules and they're going back and forth with BlackRock and they now have this deadline of January 10th to give to BlackRock to essentially accept these proposed measures for greater oversight if they're going to own more than 10 percent in bank stock now this largely applies for BlackRock for smaller community and mid-sized banks those are the ones where they own about 39 banks that have they have a more than 10 ownership and BlackRock's perspective is like look if you put these onerous rules on us you're going to make bank investing less attractive we are not going to want to do it but the government says well you need to you know comply with these rules so we can ensure that you are truly passive since you and some of your peers yield all of this concentration in the sector that is critical to the economy it's kind of an interesting dynamic yeah for sure i mean it is interesting how the concept of passive has evolved in multiple different directions for a while do you want to say there is a definite effect here of buying the laggards so the January effect as it's commonly referred to is that you know small kept out performance but more specifically laggards leading so i have the worst performing stocks in the S&P of the year-to-day basis ranked Walgreens, Intel, Moderna, Cellinies, Estee Lauder almost all them up more than 1 percent most of the top 50 worst performance of the year are being scooped up things like mosaic and the materials area so that's just some of the mechanical stuff that you might actually see happen around the turn of the year tax law selling is finished up and so you know some of these even though calendar year shouldn't matter that much in terms of how you treat a portfolio and how your returns get get reaped this this stuff does tend to matter because of the tax year effects and the performance year effects yeah i was gonna say also that's kind of when you mark your performance and share with your clients so you need to make sure that you know it is looking the best that it possibly can as made evident by what we were talking about earlier with Pershing Square yeah yeah uh although fanny freddie i think down now actually a little bit yeah so yeah but uh you can try your best to do what you can to put up some performance numbers in terms of marking the portfolio yesterday we're slamming the buy button on fanny weren't thinking fourth quarter 2026 IPO like it was much more like somehow we're getting saved at January 20th yeah i mean again they've already been to us if you got in prior to the election you were very happy yeah regardless because of the possibility certainly that we've talked about many times with privatization of of the two GSEs we'll see certainly something would be focused on a 2025 let's also turn to technology in 2025 because you know we'll be focused on that our next guest predicts the sector will be up 25 percent in the new year spurred by the AI revolution some of his top picks are Nvidia Microsoft Tesla and Palantir he's Dan Ives woodpress securities analyst Dan welcome for the final time this year i'm sorry you're not here i i'm fairly certain in saying that you were the most frequent guest on CNBC during the course of 2024 we greatly appreciate that and even more so the fact that you largely have been right Dan you're going to be wrong one of these days but it wasn't this year why don't you think it will be next year as you continue to be so incredibly bullish on so many different names in technology no thanks so much for that it's been uh it's been awesome to be on uh you know the whole year look i took me it's all about hand holding investors through this AI revolution and i think we're looking in our opinion this is still only the second inning of the nine inning game and everything we see from all of our spending is about the multiplier for every dollar spent on godfather vay i tend to be on those chips there's a eight to ten dollar multiplier across the rest of town which is why i continue to believe the tech stocks are going to be up 25 percent into next year and it's only 10 p.m. in this AI party that goes to 4 a.m. right and you've been saying that for some time i think you may have moved us an hour later i'm not sure along the way it's starting up at 9 p.m now it's 10 p.m. it's 10 p.m. you know dan there is this question as to our investors going to start to demand to see a real return from all the investment that's been made the hundreds of billions frankly that will have been invested and will be invested in the coming year as well by the hyperscalers for example do you think there that demand will be made and will it be met well that's that's been the big question i think we started to see that in flexion point with the messy of a pat pound tier because i think if you look at pound tier that was the first one in the use case that we started to now see these things play out across enterprise then sales force that was a huge moment where we start from bending off in terms of that last quarter i actually think software is going to be the key i think the use cases are expanding across the border and we have use cases and enterprises that we're talking to up five x in terms of deploying ai and would i ultimately use cases even over the last six months and i think that is going to be the key is this all played out put two trillion of catbacks ai catbacks the next three years fighting that is going to be tough and that's what i continue to say the bears can find ai and spreadsheets i get it these companies have to execute but execution has been there now it's going to be about the rest of tech that's why we laid out those are the top 10 plays that we see for ai in 2025 in terms of enterprise ai in particular you think the two best software plays are palantir and sales force what are some examples of software companies that you are more doubtful of their ai potential okay i think it would be you'd have to be a little more doubtful in terms of you know what they can do i think obviously still a huge potential you know i think when you look at i think ibm's had a lot of success but to me it's really who are the ones proving it out its palantir its sales force i think it's mango DB it's snowflake i think Oracle is having a huge renaissance of growth and then you're also going to see with condona dftc you're going to see M&A skyrocket across tech these big tech players are going to get stronger they're going to get bigger and i think that's going to be a huge theme that plays out across 2025 is a strong good stronger then just tell me why i shouldn't be concerned if i own palantir that it trades at 50 times sales and that the insiders have been selling hundreds of millions of dollars worth the stock in the last six weeks and it's gone vertical and they keep trying to goose it by getting it to different end it just feels like a very promotional situation for an admittedly strongly positioned company that just seems like it's become a little bit of a cult yeah look like i definitely uh bull bear debate it's almost reached hassle like sort of emotional bull bear debate on palantir but to me it's really about it's not about it in the next year in terms of what this thing's trained at i view it as a compound tier be the next oracle the next sales force if that's true and i believe that's true then then this is a name that goes much higher from here in terms of what you're talking about i think that's like you got to focus on AIP as they prove out this sort of enterprise use cases and can this be something that expands to ultimately 30 40 percent of this overall revenue i think that's the key but i don't get too caught up in some of the noise i just focus on all of our checks and that's why palantir the haters they hate is a teenager as a stock the spies is a senior citizen and i think this is stock as potential to be three digits and higher finally dan i love that on microsoft because and again as i said you've you know you've been right to be bullish and so many of the names that you've been behind have had great years microsoft is not it's trailed certainly mega cap tech it's trailed the s&p it's only up less than 13 percent for the year why are you positive on the stock going into 2025 yeah and i look that's one i think others have sort of joined when you look at google and you look at amazon terms on the hyperscaler a lot of this it's all the work with you talking to microsoft partners i think as these use cases and all these cloud deployments start to come through i think the streets massively underestimate and azure numbers and i think ultimately what ai is going to do i believe this could be 10 15 percent incremental revenue over the next 12 to 18 months i actually think microsoft is probably one of the most mispriced on large cap it was google but i think going to 2025 that's why it's a table pounder along with with the godfather veya jensen of india and i think four trillion will be on the horizon for apple microsoft and of course for india too all right but wait mispriced so it's mispriced because people are underestimating the the the opportunity that they still have even though co-pilot's been out for a year and it doesn't seem to at least be grabbing a lot of uh people you know in terms of enthusiastically responding to it i think they are underestimating what this is going to do their enterprise business as use as use cases actually deploy you're in microsoft in the delas backyard in terms of enterprise ai use cases and as that comes through i think we see here a year from now this has a five in front of it is a stock and this will be the name that i think is really kind of proves it out along with the rest of the software all right well the good news is i know you're going to be back really soon for me to ask you about it again so damn thank you have a happy new year uh enjoy danaives from wed bush before we head to break let's give you a quick look at the bond market check out our treasuries have been fairing this morning of course reminder by the way the bond market's going to close at uh two p.m. today uh so a bit earlier than usual four point five two five is where we stand on the tenure obviously down in the yield from where we ended the week last week uh but up over the last month or so let's call it as you look at the spread four point five before two two over the two year we'll be right back turning now to real estate where a former laggard is making a big comeback and could be the darling of 2025 diana oh it joins us now with the latest on that hi dana hey mike a retail real estate has seen big demand coming out of the pandemic vacancies are low and rents are rising in q3 investment volume in the sector was up 49 percent compared with q2 according to a new report from jll that was driven by a rise in high value transactions jll also said the recent fed interest rate cuts are anticipated to stimulate even more activity in the coming months leading the sub sectors open-air shopping centers like this one where we are with the highest leasing rate of all shopping center types and nearly 46 percent their vacancy rate is on the lower end at 5.3 percent versus closed in malls at 8.7 percent i spoke with the CEO of kite realty group a neighborhood shopping center read about why he's seeing this recent surge in business and value it's both for practical reasons for shopping to get you know goods and services but also socializing and i think after covid people put more value on that aspect of their life so open-air shopping centers have had a great resurgence there's very little supply that's also an important factor people aren't really building these things that much kite is concentrated in the sunbelt which also happens to be where demand for open-air shopping centers is strongest now this center here in maryland is owned by federal realty truss another readstock to watch in the coming year back to you guys and uh you mentioned that um you know this the anticipated decline in interest rates from the fed might be uh kind of boosting some of this activity i just wonder given that we're not really expecting that much uh in terms of further cuts whether it feels as if uh you know the group might actually be a little bit restrained well it might be because as you said we're not going to see as many cuts as we're expected but we did see two cuts already and you see the boost in the numbers that we just showed you but it's not just the fed cutting rates it's more about demand coming back people wanting to be outside shopping again gen z is a big driver of this as they'll tell you in the sector and so they are seeing more demand in general and again the biggest issue is supply there just isn't any they're not building a lot of these types of centers and so with supply so low and demand rising that's why they're doing well diana thank you diana olek in maryland somewhere we're gonna take a quick break here uh as we uh keep an eye of course on the market as we uh in the uh in the year a few hours from now you can see the s&p is up uh a little less than a quarter of one percent we're back in three you've been listening to the opening bell on cmbc squawk on the street all opinions expressed by the squawk on the street participants are solely their opinions and do not reflect the opinions of cnbc nbc universal or their parent company or affiliates and may have been previously disseminated by them on television radio internet or another medium you should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy but only as an expression of an opinion such opinions are based upon information squawk on the street participants consider reliable but neither cnbc nor its affiliates and or subsidiaries warrant its completeness or accuracy and it should not be relied upon as such to view the full squawk on the street disclaimer please visit cnbc.com forward slash squawk on the street disclaimer if your small business has a problem you could say just my luck but you should say like a good neighbor state farm is there and will help get you back in business like a good neighbor state farm is there
The opening hour of CNBC’s "Squawk on the Street" with Carl Quintanilla, Jim Cramer and David Faber is broadcast each weekday from the floor of the New York Stock Exchange, on site at the opening bell with the up-to-the-minute news investors need to know and interviews with the most influential CEOs and greatest market minds.
Squawk on the Street Disclaimer
