Well debate it straight ahead. The Investment Committee is ready to go. Halftime report is ready to go right now. Welcome. Good to have you with us on this friday our Investment Committee today josh brown, jon najarian, tom lee managing partner and head of research and brian belski, chief investment strategist. We begin today with the market stocks are higher friday still, though, the s p on pace for its first losing week in the past tom, i turn to you i said in the show, were going to put two bulls to the test your year end target is 3200 and will you get there confident . Yeah, i mean, i think we could even exceed it in the next seven weeks. Because of . Well, you know, i think Economic Data is really improving. I think as people start thinking about next year, theyll see upside risk to growth and then when you look at positioning, i think people are still uncomfortably, defensivably positioned that movement of cash into equities is part of that rocket fuel belski on october 30th, i want to read something you wrote. Youre generally bullish guy on the market this didnt sound all that bullish. Hit me. As we have mentioned frequently, we do not expect significant gains from current levels for the remainder of the year with a main reason being the unpredictability associated with geo political headwinds and development particularly trade, which has been the predominant topic of our client conversations lately talk to me you are getting a little cautious at the end of october first off, when we initiated our target of 2019, we were at 3150 and then, obviously, we had the terrible Fourth Quarter last year and even worse december we thought it was prudent to move it to 3,000 you never moved it off of that why would you move a target for six weeks left in a year that doesnt make any sense to us number one number two, when we look at 12 to 1 months. You had chances all along the way to move it up. Of course we did. At the end of the day, we still think that we dont have an absolute perfect trade deal. We think the santa claus rally moved forward. Given the fact that people became way too bearish in august and positionally were way too shortterm sided if you want to nitpick and change the target by a few percentage points. At the end of the day, we think were in a big bull market stocks move higher and entering into this mid90s type of goldilocks scenario and thats why we think Large Companies are the best position in the world. What i wanted to tee up getting your perspectives between now and the end of the year which is somewhat unimportant looking that big picture. Are the calls like that that you make, while this sounds perplexing the start of a new Global Equity bull market. Welcome to the second half of the bull market implying your 20year, weve been on a tenyear run i want to open that to the panel. Is that what this is is this midcycle of bull market are we looking for a much more prolonged cycle, josh, than we thought . So, first of all, let me unveil my year end, my year end target is december 31st. So, i think i am going to nail that one im not good with target and timing bull markets. I dont really think my opinion is better than anyone elses but what i will say where i agree with both of the views that you heard i dont really understand why were talking about tenyear runs we had a bear market low in march of 2009. That was the bottom of a secular bear market that lasted from the year 2000 until 2013 you had a 13year secular bear when we talk about bear markets, bull markets, historical bull markets. 1982 to 2000 is the greatest bull market every. We dont time that from 1974, which was the low of the secular bear market that proceeded it. So the 2009 comp, the 11 year, the 10 year, its incorrect. We made a new s p record high in the spring of 2013, it is the first time we got definitively above the 2000 thigh and the 2007 high from the prior peak. Thats it. Basically a sixyear run in the midst of the sixyear run, we had a down year it was last year. So, we have had bear markets and cyclical bear markets and not as though we have been rallying for 11 years nonstop the global component of it is the most interesting to me i dont know if it will be right, but i hope it is. We may have had a nice run in u. S. Stocks, International Stocks have done almost nothing and emerging markets have been almost disastrous. If that part of the equation began to get fixed this year and it is possible, that could extend the run because youre talking about middle class populations in the billions coming on the in next ten years that have not really taken part in fuel and earnings growth. If they do, if you start seeing a pickup in consumer demand in asia and latin america and europe, thats a whole new leg not just for International Stocks, but for s p 500 companies that cater to them so, i really think that there is an opportunity for this to go on way longer than people think giving that it started much more recently than people think i think its really critical when you think about talking about whether this is a bull or bear market to joshs point, that doesnt mean every year is going to be positive are we setting up for a period over the next five to ten years where you would rather have your money in equities if you want to continue to focus on capitol hill presentation and preservation over the course of the last month or so, weve seen an Inflection Point on the economic side some firming of Economic Data. Similar to what we saw in 2012 and 2016 and weve seen the rotation back to value from momentum, similar to those two same periods. So, whether this is a shortterm period between now and the end of the year or whether expectations over the next five years or so are a shallow recession, that doesnt necessarily negate the fact that we could be in a secular bull market 18 rise is what youre looking for next year. Earnings are going to be Strong Enough to carry stocks that much the geo Political Risk that you cited earlier is going to subside. Were set up with our model and tom and i were talking a little bit off stage about this my 30th year in wall street, his 27th year in wall street we have some perspective that wed love to share thank you for having us on to talk about it. I run seven portfolios and we average 350 basis points above the benchmarks that we run our turnover is 20 . I believe the market is a market of stocks. Late cycle, midcycle growth value. Guess what, were set up for earnings to surprise to the upside because analysts have been so negative, scott. In fact, earnings dispersion, earnings estimate dispersion remains at or near alltime lows earning estimates are all slumped together no added value to that so, guess what, i think ceos and analysts are way too defensive and that money is coming back to the United States in terms of dollar denominated assets. The s p 500 now that were through it, 75 of Companies Beat bottom line and the average over the last five years has been 71 we were way too, i think, negative also, we were looking for 3 year over year drop and ended up being more like 1 which is very manageable within the conextt. You can have those types of quarters i think thats a really important point. Pessimism is everywhere. Pessimism is always everywhere because when people have money that is at risk, theyre worried about it but when you take a look at what is actually happening, money is going into the market. The average is going up. To me the whole conversation is interesting to have, but is meaningless in terms of how i invest and how most people would invest to think you could look at five years and predict the global economies and no less ten years, absolutely pure folly. I agree with you its stocks by the way, its not that difficult. Markets go up 80 to 85 of the time you are going to pick that one in ten chance or one in nine chance when the market is going to go down and sell your stocks . Trigger. We had a great year for stocks theres an uncertain world ahead. Thats exactly you have election and all these other things it doesnt matter. You still have, you have 18 . So, youll get through. If you look at theb numbers gog back 50 years, 60 years. Youll see what the market did in the prior year really doesnt do much for next year. Ive gone through. When markets have been up 30 and next year up 20 market is up 20 next year and up 30 and to think particularly now when youre seeing more machines that come out and read earnings estimates and quantitative models that are controlling the market and come on and say, its a different market to try and just place your bets on a daytoday basis or a sixmonth basis or on a five yearbasis youre looking for relative value, john, and the way we talk about which markets will outperform we had a great year, as you said maybe next year is more muted because the risk reward and the value equation sways more outside the u. S. Maybe becomes europe and emerging markets are the outperformer. Certainly could they have not had their day in the sun for a very long time but weve seen, for instance, the rates come down from the 3 that we were at last year at this time down to 1. 7 that we are talking about right now. Thats huge tailwind for us going into 2020. Do i think that well see three rate cuts in 2020 . No i dont know if well get any rate cuts in 2020 no matter what the bond market might be saying. At least right now i think the fed does want to step back, scott so, i think the pessimism was a combination of, you know, we had some ihs versus ism readings which i dispute because of the changing of how those two are calculated the ihs market i thought much more representative. But nonetheless, we also had the longest strike in General Motors history. That fed into that when people were really getting ramped up. Are we going into a recession in 2020. But if you look tom lee, trade deal drags on. Earnings and growth are weak election looming who knows what is going to happen on the heels of whatever impeachment, trial vote. Those are risks to your outlook, are they not are you ignoring those risks sounds like you are. Im not, i dont think were ignoring them. I think earnings could really surprise next year we saw that upturn in ism exports. Four of the last five times it was leading to a cyclical earnings people are forgetting that earnings could be up 18 are you assuming the manufacturing economy comes out of its funk . Yes inventories are pretty lean, but you could look, theyve been destocking weve got this goldman right now this huge financial conditions easing impulse that is adding 0. 5 growth risks are to the upside well hear from jim, too. Jims take, too you mentioned destocking in inventories. If you add up industrials, manufacturing and the materials as a percentage of the s p, i think theyre under 16 now. But, yet, all of the Economic Data that we cite on this show and that people write reports about and obsess over have to do with that tiny component why arent we exclusively talking about the consumer and if jim wants to jump in. I wouldnt mind you are going right where i want to go. Earnings growing next year margins are too high top line expansion and do you know where that will come from, josh come from the consumer which is 70 of the economy how does the consumer grow from here you need continued wage Growth Without inflation. In order to get that more Capital Expenditure and in order to get Capital Expenditure, get phase one signed by the way, phase one of the china trade deal is empty. What does have to do with whether the consumer remains strong or not. Ill explain again. Thats why i didnt get it, i threw it back at you Capital Expenditure product enhancing whether its i. T. Or factories and that allows them to increase wages without inflation. Thats the goldilocks scenario where you dont have a fed but get wage gains that allows the consumer, 70 of the economy to start expanding the top line in the s p 500. More than anything, though, scott, were spending our money in a different way, right . Thats why its very difficult to not be overweight communication services, right, because of the content Consumer Discretionary because of the strength of the consumer and the economy. Financials because the worlds most hated sector and still with respect to where cash flow and dividends are the strongest Dividend Growth and Technology Spending money there, too, in terms of the consumer and the second biggest sector in terms of growth in the world thats where we want you to be in 2020. This whole conversation about value versus growth. Where are we on that a decent mix there yeah, i mean, i think the last six weeks has been interesting because two bulletproof trades have bipartisan breaking down assetlike stocks really took it on the chin and they worked for almost ten years and Growth Stocks are starting to underperform to josh, when you talk about earnings, you have to keep in mind 16 deep cyclical could have a plus 100 next year. Thats where the earnings volatility comes from. Percentage points from those three groups s p earnings thats why, you know, if you think about groups that have been absolute dead for two years really tied to inventory correction, you know, they could be monsters next year. What is interesting is that we talked about europe being left behind. Keep in mind that europe just didnt stop growing in 2008. Italy never grew i mean, their gdp was basically flat for a decade. France, also i mean, germany was the only one that was really growing because of the social issues they have now, theyve come in and they modernized where, for example, retirements no longer at 45. They have to work until 55 or 65 in france. So, things have changed. But, still, i think the u. S. Market is going to be the place to be. So, maybe you can make more money in trades in europe and so forth. But i want to go back to what josh said. Depends when you come back in the market nice from 2002 to 2008, if thats when you got up market was up nicely we can make the chart say whatever we want them to say but the history of the market is a series of rolling bull market and it depends when you get it now, if you got in and you were flat from 99 through 2013 or whatever, thats one thing but i think there are always opportunities in the market. Thats a fair point and one point that gets lost in the shuffle when we talk about the starts and ends of bull markets. The majority of people dont take a lump sum and decide on a date and invest it and hope theyre right. Even in a secular bear market like the one i described from 2002, the middle part of this decade the majority of Market Participants were going to work and a portion of the portfolio was purchased. They did okay if they stayed the course i think that a a really important. A fiveyear or tenyear bull market. Expand on this line and i want you to clarify exactly what youre talking about we believe that a leadership shift that many investors were praying for and hoping for is at least a few years away not enough believability in the u. S. Even after the performance of the past ten years. What does that mean . Were not believing in u. S. Stocks yet and the whole leadership shift that everybody wants to be in and you mention it is this whole notion of trying to buy europe and emerging markets still we believe that europe is the next japan and emerging market still has some serious fundamental issues being that those two areas are linked together because they are each others best trading part iners. We think it is two or three more years before you can see any strong fundamentals there. Therefore, believe in the u. S. Havent people believed in the u. S. This year no. Talking about money on the sidelines and money being put in other markets rather than the u. S. Eight out of the last ten years we had outflows from eq equities and inflows into bonds my market around the world a lot and there still remains very reluctant buyers of the u. S. Theyll buy it when they feel they absolutely feel the effect of absolute amount of pain in their europe trade where they still try to bottom tick europe and emerging markets i dont think the foreign flow has come back to the u. S. Yet. Hasnt started yet this still remains the most hated bull market in history that is part of the fuel you think why the bull market has so much room to go . Just in terms of the last, you look at the last 20 bull markets since 1940 this ranks third to the lowest in terms of compound growth rate when you measure it, the longest bull market in history die of fundamental reasons and we dont see the fundamental impact of the market changing in 2020 you, i guess where is the fed factor in . The fed can kill the bull market well, in january the fed kind of did kill the bull market in december, right if you think about the parallels between 1994 and what happened late last year and early this year, thats why in january we came out and said that 2019 this generation 1995 thats why in our report we talked about this notion of hiphop and the 95, 96, 97 to get people to assimulasimulate has been a notorious bull market just like the notorious b. I. G. 1997 ushered in a large cap driven market, i think that is where we are going for the next three years. Shannon i think that, you know, from my disagree. If they are using a relative benchmark, europe, japan, uk, emerging markets i think what i have seen globally is that we have seen, i think, two or three years ago flows from those markets that were underperforming in a traditional u. S. Asset allocation portfolio and go into the u. S. Market. I think that trend has started to deterrierate and interest in emerging markets and the technical move that we had from momentum to value. Some of it is Short Covering and some of it is us and we have gotten to a point where were dramatically underweight outside of the United States and were reallocating our portfolios to make up for that there is a fit and start here, but more interest outside of the United States. The other thing, its a spread like markets they dont publish the odds, but the odds you can look at relative valuations. So, if i tell you this years super bowl the patriots and the giants based on how they are right now but im giving