Market Matters with CNBC's Bob Pisani — 4/26/2024

all right hi everyone we are live welcome to Market matters my name is Katie C and I'm a social media editor here at CN BC I'm joined as always by our senior markets correspondent Bob Pani and today we're going to be answering all of your questions about the latest stock market moves nice to see you Bob it is a beautiful spring day uh here on the East Coast but I know you're on the west coast how yeah it's a beautiful day here too but happy that spring has arrived yeah you're right that intermediate year period it's 65 degrees right now it's sunny but there's a little bit of a a breeze so it doesn't quite feel like 65 it's we're supposed to hit 80 here wow on Monday on Monday so all right well we have a lot of stock market questions um this week Bob so let's jump into things um first up just can you give us a picture of where does the market stand right now well we had a kind of a difficult week um so uh the GDP number which is the sort of measure of US economy was weaker than expected 1.6% um and we also had some inflation components in that that were higher than expected so weaker economic growth with higher inflation that's never good um and so the market came down on that um and then today we got the pce personal consumption expenditures uh and that's the fed's preferred gauge of inflation and that came in about in line with expectations so inflation is coming down but it's been stalling out a little bit in the last few months so to today was not bad it was sort of in line with expectations but it's not it's not dropping as fast as people wanted to so the problem is nobody is really positioned to have weaker economic growth and sticky inflation nobody wants that uh and the question is whether that's a change in the macro position are we seeing like the economy slowing down rather significantly and I don't think we are um I I think the important thing is um right now even if there's a slight slowdown the FED could still cut rates later this year that's good thing uh and that's that's always out there you'll hear people throwing around this word stagflation stagflation is something that happened in the 1970s where we had really noticeable inflation and the economy wasn't growing at all and that's not really what we have right now the economy is really doing pretty well it might be slowing down a little bit but it's still doing really well so you saw the sort of reaction here today just roughly in line was enough to cause a little bit of a rally in the markets and bond yields which is what really moves the stock market these days are down today so overall I'd say the economic news is still indicate a strong economy I'd like to see some more data points on how on jobs uh you saw the joob claims reports uh on Thursday still I mean not a lot of people filing so the job market still seems pretty good overall so I I'd say the economy is still holding in there pretty well um let's talk about earning season next Bob I know we had uh some big companies reporting this week uh so how's earning season going so far the good news and again you don't get lost in the weeds look at the trends here because that's what the market looks at most companies are continuing to beat estimates we're almost halfway mark for the first quarter earnings they're be 80% are beating the estimates the vast majority importantly have affirmed the 2024 earnings guidance because that's how the stock market it it runs off a future stream of estimates for earnings cash flow and dividends and almost all the companies are affirming and a bunch of them like MC and Ford and chipotle and waste management they're raising their guidance Royal Caribbean was absolutely ecstatic the other day about talking about their bookings I mean people are booking cruises like crazy we're gonna have Viking Cruise go public next week that'll be fun to watch um and the reason the earnings have held up is because the consumer is resilient um the Visa CF uh CFO this is a good one to watch I always watch VIs Visa because they know what consumers are doing they said the consumer spend across all the segments all the segments low to highend is relatively stable they said they there was no meaningful Behavior change the AMX CEO um Stephen squ said the same thing that consumer spending is relatively strong that's what you want to watch because that's 70% of the economy that's why the earnings are holding up what's been dropping a bit is the multiple remember the PE Ratio is the multiple that's how much are you willing to spend for you know uh one $1 of earnings so if a stock is $10 and the earnings Outlook is $1 for the year then the multiple is 10 10 divided by one you could have that earnings mult that earnings at $1 stay the same but if interest rates go up for example people may not be wanting um may not be willing to spend $10 for that $1 earnings and they'll say only want to spend $9 and the stock price drops to $9 even though the earnings at $1 the same so the multiple is now nine that's what's been going on the earnings haven't been coming down the multiple has been coming down now if the earnings come down then they would come down if uh the economy was slowing dramatically if uh There Was You Know job market fell apart the market will drop more Mark the S&P will go into the mid 4000s because you don't want to see that you don't want to see earnings Trend down all of a sudden so that hasn't happened yet though so you can worry about it all you want but the the reason the we're only three or 4% below new highs on the S&P is because the economy is still relatively um strong and that's the bottom line follow the trend in the economy follow jobs Market follow the trend in earnings is the trend in earnings up or down and the trend for earnings all year has been stable to up in fact estimates for the second quarter the third quarter and the fourth quarter that's what matters those estimates have been going up since April first since the start of the second quarter that's what matters so Bob we heard from alphabet um issuing its first ever dividend what does that mean for investors well it's it's generally good news and I'll tell you why companies get older and more mature for alphabet's pretty mature company meta also did want a dividend for the first time growth companies early growth companies generally don't do dividends because they take all the money that they get and dividends is money you get from cash flow they'd rather invest back in the company as companies get more mature they tend to pay out dividends about 80% of the S&P 500 pay some kind of dividend so biggest ones are Microsoft Exxon Apple JP Morgan Johnson and Johnson Verizon so it's not you know surprising that alphabet is essentially becoming a more mature company even though it's growing still um so the key to this whole divid end story is cash flow you got to have money you got to have money left over at the bottom to go out and you know pay a dividend um so the companies that have the largest dividend payouts on a dollar basis also have the highest um revenues in cash flow too um so the the important thing is Dividends are a critical part of the long-term profits associated with owning the stock market um so the particularly important thing is that S&P pays a dividend of about 2% right now so a lot of people own the S&P 500 in dividend funds ETFs and they take the 2% dividend you get every year and they reinvest it and that reinvest the dividend grows over time that's a very important part of wealth creation so um that's very important thing to do now you can take the dividend and consume it you know take take the money and put it in your pocket but smart people reinvest the dividend by the way one comment on dividends I don't know how to characterize this in economic theory they don't really matter by that I mean it shouldn't matter to anyone whether a company pays a dividend or not because if a company that's a $100 pays a 1% dividend they give you a dollar by definition the stock has to go to $99 you can't get something for free Dividends are not free it's not free money people delude themselves in the thinking it is but it's not so under under you know economic theory if I have a stock that's $100 and it pays no dividend and then I have a stock that's a $100 that pays a 1% dividend and I get a dollar that stock that pay the dividend has to go to $99 so economic I'm getting the same thing um and it's not really even income in the sense that you know an income it's something that you're growing you're just getting paid from the company and the and the balance sheet goes down changes as a result of that I guess what I'm saying is some people love dividends because they're getting paid something and they think they're getting paid and they are but it's not like it's free money it isn't uh and people have a hard time understanding that concept I'm not against dividends at all some it's a great way to live off of if you can do that um so that's the primary reason I'm in favor of it but people seem to think it's free money and it's not so it's just important thing to understand yeah that's definitely helpful uh to keep in mind thanks Bob um so our next topic to talk about today is gold so what is the outlook for gold right now well gold is a very interesting um investment um gold throughout the ages has fit the definition of money what is money well it has to have a store of value it has to be a medium of exchange gold has had a store of value Through the Ages and at times it has functioned as a medium of Exchange in other words you can offer a certain amount of gold and you can get something in return for it that's a medium of exchange today gold is not really a medium of exchange you can't go to the grocery store and you know an ounce of gold to $2,000 and buy groceries they won't take it uh it's so it's not a unit of account either uh you know a unit account is something that's you know stands in for something so when you go to a gasoline station you can buy gasoline for $3.50 a gallon uh you can't you know exchange gold for it and you can't do Bitcoin either by the way uh so it's not a unit of account it's not really um it it's not something you really exchange anything for but it does have a store of value so for this reason alone gold is an interesting alternative investment um the important thing about gold is the supply is relatively set I mean the amount of gold that's mined every year in the world fairly consistent so what changes gold prices is demand so Supply is consistent therefore demand varies and there's three things that really matter in Gold uh demand number one is China number two is India number three is central banks so the consumers the biggest consumers of gold in the world are Indians uh particularly households in India which considered a store of wealth so it's very typical for brides to get gold for wedding presents and they you can go into shops in India I've been in them you you literally walk in gold in India is absolutely um u a medium of exchange you can walk in give your jewelry uh they'll weigh it they'll M make sure it's the right uh Purity and they'll give you cash you can walk in very easily now you can do that here but to a less extent it's much more gold is much more a medium of Exchange in India um and the Indian consumer often sets gold prices the Chinese consumers are the same way they too buy gold um and sometimes uh in the past Chinese consumers have bought real estate as an alternative they don't like the stock market maybe they'll buy gold or buy real estate real estate goes down they don't think it's a good investment they'll buy more gold you're dealing with you know 1.3 billion Chinese it's a lot of people and they can move the gold market the final thing is the central banks of the world central banks have always had a certain amount of gold but in recent years there has been a little bit more movement by central banks to buy gold I think probably just as an alternative uh currency to to having dollars sitting there so if you think about that there's been somewhat more increased demand in the last few years now a lot of people tell you gold is a hedge against inflation to be honest with you I don't see it if you can Pi cherry pick certain times and say it it's a it works as a hedge I think if you look at the academic studies you'll find that that's not true but people definitely use it uh as a store of value people definitely use it um as some some hedge against uh currencies so I have no objection to Gold I don't have any opinion on the price of gold by the way I don't own any I never have I've done specials on gold I've been in gold mines I've never wanted it as an asset class myself but I don't have a negative opinion of gold at all so there's sort of my position all right and then last up for us today Bob um let's talk about the IPO Market uh you mentioned Viking are there any other big IPOs in the Horizon and where does that stand well we had a really good IPO this week a rubric which is still holding up this is a big um it's really a cyber security company to a certain extent but that's done really well um and there's a bunch buch of companies Vikings going next week but there's a rubric was really important because rubric is a tech company that's growing but doesn't make money it's not profitable so um we've had some tech companies some software companies go public iata uh just less than two weeks ago and what that's a company that's a software company that is growing and is also profitable so there was a lot of questions about how the market would greet a company that's a tech company that's growing but not profitable if the market is in a cranky mood people will find an excuse not to buy something and they'll say oh it's not growing the I'm sorry the profits it's it's not profitable we want profitable companies um and the fact that it did very well uh was a really good sign it priced above the range and ended up nicely on the day first day of trading that's a good sign because there's a lot of these companies these tech companies some of them are unicorns valued at over a billion dollars that don't make money but are growing so it's a good sign that rubric did well so there companies out there um uh I'll throw out a few there's Toro there's a car sharing service uh that's that's out there um there's uh tech companies like Ingram Micro uh they do tech services and software uh service Titan is a big company they do software for residential and Commercial Heating believe it or not that's a huge IPO potential that's floating out there um there's data bricks which is um a data software company uh Clara which is you know there's buy now pay later companies that's one of those that's out there uh there's some video game companies epic games is out there um potentially that's on the rumor list um then there's other companies like um food companies uh there's Chobani the Yogurt Company liquid def the Water Company's floating out there Delonte uh canned fruit company I grown up very famous company when I was growing up uh that's floating out there and Panera Bread the restaurant chain Panera uh floating out there uh there's a few other ones SeatGeek you know they do the online ticket uh ticket Marketplace uh that's floating out there so there's a lot of these companies and some of them have been floating out there you know rumored for a year two years some of them have um what we do what we call um confidential registration where they registered with the SEC but the data about them is not public and they do that because they don't want everyone to see what all their information is um until they're ready to go public because the information they have to file when they're going public really tells their competitors a lot about what their business is like and if they're going to not go public for a year but want to get ready to go public they can hide the the filing it they're officially registered but the data is not public yet so we'll we'll find out what's going on the bottom line is this this month we have priced almost five billion dollar in IPOs that is a lot it's the best that's been in a while um a good way to look at this is about a billion dollars a week um you you should get 50 to 60 billion dollars a year in a good year for IPOs and this month we've had almost five billion that that's a lot that's good and that makes that's what makes me excited because you can say oh we're thinking of going going public but that doesn't mean anything I mean what matters is if you actually set a date and you actually go public and this month we've had a whole bunch of big companies go public and they've done well you know Reddit is still above um the offering price so there is reason to be optimistic right now and I did a whole piece on it this week um you can go to Trader talk. cnbc.com and you can you can read about it if you want all right I'm before we go Bob um last week CNBC celebrated its 35th Anniversary um I know you got to be part of the uh closing bell ceremony at the stock exchange you know how did it feel being up there on the balcony um kind of being on the other side of things I have uh been on the balcony several times ringing the closing bell and it's always fun it's always terrific Casey Sullivan the president of CNBC came uh we went on the air in April 1989 I was a guest in the first year but I wasn't a hire I was not hired until one year later in 1990 um I am the last person that was on the air in the first year but I wasn't on the air on the first day um so it's a small distinction but I make that distinction um so it's been 34 years since the NBC and it's been wonderful I'm still here and um I think the important thing people ask me why I'm staying there so long but uh number one uh cmbc is a very congenial place to work it's a lot of work it's hard but it's it's a very nice work environment I work at the New York Stock Exchange I don't work for the NYSC but I've been there so long that I'm practically part of the wallpaper 20 well I got there in 97 so 27 years and that's also a wonderful institution uh to work at you know I always say in my book shut up and keep talking which you can buy on Amazon um what would you give to meet all of your Heroes every rock star you ever wanted to meet every politician every anybody I've met them all because they all came in r the Bell I've seen north of 10,000 Bell ringings since 1997 that's a lot of people and you walk down the street or excuse me walk down on the floor and there he is the CEO Chevron is standing there or the CEO of Exxon and there you walk up to him what's it worth to you to spend five minutes with the CEO of Chevron or artha Franklin or some rap star and you know it's five minutes that's it but it's pretty interesting if you add it all up it's a lot of fun and uh I'm very grateful to have the opportunity to have been a part of this whole thing for so long yeah you definitely have some great uh great stories from over the years so you can read about them and shut up and keep talking yes yes I definitely encourage everyone to go and check that out uh because like I said great stories and lots of memories um but yeah so happy 35th to CNBC um congratulations to everyone who's been here for so long and we'll talk to you again in a couple weeks Bob thanks thank you all right guys thanks for the questions take care

Channel: CNBC Television

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Id: scD94Gq91Mk

Length: 21min 0sec (1260 seconds)

Published: Fri Apr 26 2024