Tech is well positioned for this interest rate environment: Phil Camporeale

Trader Scott Redler, who in January when NVIDIA was trading at what 575 told our countdown viewers to buy it with a price target of 1250. I think split adjusted it hit 1400 or something today. Incredible. And JP Morgan managing director Phil Camparelli, who says it's time to look at AI opportunity, sure, But outside the US. Scott, you at the great trade. Then this morning, well before the market opened, your note comes out and you said this trade is looking crowded, overheated, overheated and could be a time to take a third of your core position off or look for a cute short trade if you're active. And what, what did you see to have you put that out? Well, I, I have a little antenna that goes up that's been in me since 1997. I've been trading the markets and it was just getting so talked about, so over overcrowded. You know, I have the eight time an hour rule where if you start hearing on TV 8 times an hour, then you have to probably take the other side of the trade. Plus you also had the rebalance. So like you mentioned before was kind of weird. You're seeing some laggards rallied, say you're seeing some leaders come back. That typically happens on a triple witch and Friday, which we have tomorrow and also sometimes continues into next week, which is the end of the second quarter. So that's when money managers try and just get everything a little bit closer together. So that doesn't look so, so many extremes. So for the next week or so, we could get this kind of action where the laggards rally, the leaders retrace, and then we get into a whole new type of sequence that could start in the first week of July. So Scott is a technical trader, just so you all know that. But Phil, you're looking at the broader picture here at JP Morgan, and let's look at the broader Dow 30, not as broad as the S&P 500, but right now you've got the Dow roaring ahead. That's kind of unusual with the pattern that we've seen over the past couple of weeks where the S&P and the NASDAQ were clocking record after record. Right now, the Dow up 330 points. The leader looks like it was sales for, yeah, CRM sales force. Nice move there. Apple is the laggard. What does this picture tell you? Yeah, I think what this picture tells us is it's time to take some profits on some of these names that have run as we head to the middle of this year. But Liz, I can't, I can't stress enough how well positioned tech and some of these bigger companies are for this interest rate environment. These are the companies that don't need a rate cut at all. So from a macro perspective, they do two things. One, they're very resilient in a world of higher rates. And two, Liz, importantly, differentfromthe.com era, they have the earnings to validate the valuations, right? So you put those two things together and these are themes that we think are going to be here for a long time. And as you mentioned, you don't have to stay in the US. It's not just about NVIDIA, 40% of NVIDIA supply comes from Taiwan semiconductor. ASML is a, is a micro is a, you know, a, a semiconductor. And that's what you're saying you're saying exactly. Maybe back a little bit slowly toward the exits of the heavy US big tech market cap names and go into the big 10 market cap names that are overseas. Yeah. And there are big secular themes. One is AI, which we spoke about, and then obesity drugs, right? Something like a like an Ozempic. Who where are they? They're out in Europe. They're on Denmark. So, you know, these are the big secular themes that we're trying to take advantage of. And you just don't have to stay in the US. I'm glad you brought up the weight loss drugs because Scott, you had right here on the show January 2nd, your very first trade of 2024 was Eli Lilly. What was it then? And we look at it right now with its Zep bound and Moon Jaro drugs that are doing incredibly well. Well, it came into the year perfectly set up. It had a channel, it was digesting. There was so much enthusiasm around their drugs. And they had even more drugs. They just got approval for an Alzheimer's drug. So that was the first trade. It was the first doc to Ignite to start the year. So that's when my community was focused on Lilly. Then I think it hit the seven hundreds and then it based again in the 800 area. And then just a month ago we're like we think this goes to 1000, it could reignite. So NVIDIA and Lily have led this market. The question is now is, you know will they be the leaders of the second-half? I don't think so. It doesn't mean you need to abandon them, but you need to be aware that come the third quarter, when new sequences start, you want to be with the outperformances. And that might not be Lily and and NVIDIA, you know, over the summer time, Phil, you just talked about interest rates and the big tech stocks don't need lower rates. They're doing just fine and they're pulling in revenue for sure. We know that that's probably a smart thing because the Fed has made it very clear. Yeah, they are not moving at the moment. We've already had our 7th pause. Yeah, in interest rates. We're still at 5:00 and 4:45 and a half percent. But how do other stocks, I mean especially when NVIDIA is a huge percentage of the S&P 500's gain this year, how do other stocks manage to rise? Where's their oxygen going to come from if not rate cuts? Yeah, I think their oxygen comes from just the lower macro volatility. So if you think about a year like last year, Liz or even the year before, this three headed monster of higher interest rates, higher inflation and probabilities of recession really held a lot of those companies back. So I think when we looked at the first quarter earnings season, we saw the language that these companies were using. They mentioned inflation and they mentioned economic drawdown much, much less than they did in prior quarters. So I think that's where their oxygen comes from is just a lot more certainty. What do markets hate the most? Uncertainty. I think we have a lot of certainty, Liz. The other piece here is there's still a FOMO or a pain trade here with all the cash on the sidelines. If the economy is winning and we have a low probability of recession, there shouldn't be this amount of six trillion on the sidelines, which I always have to reference. Although I would say Bank of America's investor survey came out and they said that cash was at the lowest because people are pouring money into stocks once again. Still, I think you're right. There are trillions on there. But what what do you say Scott, is going to be that that magnet that pulls pulls it out? Is there a particular sector or name that you think X tech might do really well? X tech besides Lily? Well, there could be other names in tech like some some names have been doing really well that carried the torch for the second quarter. It hasn't been that for the third quarter. So I'm going to stick a little bit with tech. But I think for the third and fourth quarter, I think Amazon is going to do much better. It's one of the few of the old Fang names that have not made historic highs. I think that that name is going to have a big move into the fourth quarter. I think Apple also finally broke out, but still percentage wise, it hasn't done what a NVIDIA has done, hasn't known what a Microsoft. I think that's going to have a great third and fourth quarter. And also saying Meta, it's going to have a great third and fourth quarter. So not all stocks in in the tech sector have been created equal, even in the semis and even the semis now, AMD hasn't been doing so well. And I think finally today it got put back on the map for traders to stick with for the next few weeks. And overall, just lastly, you know, if you want a non tech name, I'll give you Occidental Petroleum. Everyone has been watching Buffett accumulated. I think he's got 2829% that stock just pulled back. I think if you buy the the symbols OXY for the next three to six months, you could see good performance there. Phil, looking overall at the the picture and you could take bonds, you could take anything into this area. When you look at the ability for companies to manage the current level of interest rates. What about the probability of recession? So we haven't first of all, you can never assign A0 probability to any of that. A lot of us have learned that the hard way. So we're at about 15% over the next 12 months. That's about as low as it gets. And then when you think about that, OK, so where would you want to go within fixed income? We still like the high yield trade. So the high yield trade makes sense. Why? Because it's a no recession trade. You get the yield over your your index, which is aggregate bonds. But the other piece of that is this has been a cycle of good behavior. Homeowners refinance, we know that and if they were CFO, they refinanced. So only 2% of the high yield index is coming to issue this year, only 6% next year, Liz. So that's the ability to manage the current level of rates and and these cash investors are being lapped by by balanced funds. It's not should you be in stocks or should you be in cash. The balanced fund is up about seven this year and cash is up about two to 2 1/2. So that's that's really the opportunity. And I hate this 5% risk free. It's not risk free when you can go make more in, in diversified solutions. Well, yeah, just look at the S&P overall in the NASDAQ, the huge gains year to date. Great to see you both. Thank you so much.