VIDEO: Versace and Lang on the Market, Fed, Portfolio Holdings and More

In today’s Daily Rundown video, Chris Versace is joined by Bob Lang. The two share their views on the market, the potential (or lack thereof) for further Fed rate cuts this year, and several portfolio holdings Bob has his eyes on.

Bob calls out March seasonality for the market, reminding that the month tends to be a challenging one. Chris then layers in why next week’s economic data could keep the market volatile as it contends with the potential start of Trump tariffs on Mexico and Canada.

The two also discuss multiple portfolio holdings, including Meta META, Amazon AMZN, Apple AAPL and Costco COST.

Transcript

CHRIS VERSACE: Hey, folks. Chris Versace here. It is Wednesday, February 26th, hump day, middle of the week. But it's also a big day for the market. We do have Nvidia reporting after today's market close. As you know, it is the second largest constituent for the S&P 500, the second largest constituent for the NASDAQ composite, which means that it is going to be a market moving earnings report. Look for our comments, kind of setting up our game plan for the position, as we get ready for the results and what CEO Jensen Huang has to say. Again, it's important, so please be sure to read those detailed comments.

But now, let's move to a discussion about the markets, potentially about Nvidia, and a host of other things with our good friend Bob Lang. Hey, Bob. Welcome back. Thank you so much for joining me.

BOB LANG: It's great to be here with you, Chris, and great to be with subscribers, as well, talking about markets. It's been a kind of a rocky road here so far in 2025. The markets were up nicely in January, giving back a little bit of ground here in February. And here we are with a couple of more days left to the end of the month before we start into March, which is, you know, Chris, seasonally a weaker period for the markets as we finish up the first quarter, the last month of that first quarter, and we head into the next earnings season jumping into April.

But of course, that's far away from now. We have quite a bit to play out until that happens. But it's always going to be interesting to see how things go.

CHRIS VERSACE: I think you're right on that. If we kind of game it out a little bit, as you said, January was a very good month for the market. There was a lot of anticipation there. And I think now what we've seen over the last few weeks is some renewed uncertainty, questions, especially given all the tariff talk, what we're seeing unfold in Washington, potential impact on the economy, question marks about that, especially after last week's flash February PMI.

But also, too, we're going to move into a period of time where the earnings season really shifts towards retailers. And I think coming off of what we heard from Walmart, what we heard from Home Depot even, as well as the rash of consumer sentiment indicators that we just got for the month of February, renewed concerns about consumers and inflation, I'm a little concerned, worried, if you will, about the guidance that we can get from companies like Macy's, Nordstrom's, potentially even Best Buy.

BOB LANG: Well, Chris, you know as well as anybody, when it comes to retail, it's the haves versus the have-nots. And you know you have the haves, which on one end of the spectrum is Costco and Walmart. I'd even throw Amazon in there. You've got Williams-Sonoma and some of these other names. But then you've got the have-nots, Chris, which are-- I'm looking at you, Dollar Store, and Dollar Tree and some of these other names that have just been terrible stocks and terrible companies to own for the past several years.

And as we find this bifurcation continuing down the road, we're going to see a larger group of names that end up on the winning side of the list, and quite a few more, actually, that end up on the losing side of the list. But by and large, if you look at names like higher end names like-- I'm going to call Nike a higher end name, because the prices of those goods are very expensive, and a Lululemon, and some of those other high end names, as well, too. We're going to find that, really, is this where the consumer is spending their dollars?

Or are they going, taking a step down, step lower, and going to Walmart, maybe even going to Costco? Some of the some of the merchandise over there, especially if you look at clothing over there, is a lot cheaper than you than you'd get at some of those high end retail stores, even boutique stores that I just mentioned. So it'll be interesting to see over the next few months, especially if the labor market continues to stay strong, whether the consumer is taking it down a notch or they're still willing to buy the high end retail.

CHRIS VERSACE: Well, I have to say, when it comes to that, I think we're extremely well positioned in the portfolio. You mentioned Costco a few times, Amazon, as well. But particularly as it relates to Costco, I think what a lot of people tend to forget, they always think, oh, I'm going to buy in bulk. But a lot of what they have to offer, the draw is their sundries and fresh foods. People go in going for those, and I'm sure Bob, much like myself, you also go in for those, and you come out with a lot of other stuff, as well.

BOB LANG: You're not talking about hot dogs, are you?

CHRIS VERSACE: Well, I didn't say what I do after I hit the checkout. I hit the other checkout, which is, of course, I always take advantage of that hot dog. It is probably one of the best values out there. I think $1.65 hot dog and a drink, you can't beat it. But let let's step back a little bit more, Bob, because you did mention the market, the market set up. Earlier this week, the S&P 500-- and you and I talked about this. We posted an alert to members that it kind of broke through its 50 day moving average, a little bit of a warning sign.

But now, it looks like the market is kind of-- I won't say finding its footing just yet, because we have the January PCE price index coming. We have a lot of other start of the month economic data next week that'll tell us more about job creation, inflation, and the true vector velocity of the economy, as well as concerns about tariffs, all this stuff. But it looks like the market is trying to find some direction here. What are you seeing?

BOB LANG: I agree with that. And, frankly, the market is going to have to figure out how to move forward without any official help by the Federal Reserve. And I think that by the end of the year, do not be surprised. And, Chris, again, this is something you and I talked to about excessively. Don't be surprised if we see federal funds rate still where we are right now, 4.25% to 4.5%. I would not be surprised. In fact, the fed, funds, futures market is only pricing in maybe one cut at the most by the end of the year. And I think that that's pretty generous for the markets right now.

So I think that, really, we have to we have to see if the markets can move on their own, let earnings drive the markets. And if that's going to be the driver of stock prices and company growth, well, then so be it. Then we have to look at multiples and see if the market is too expensive or not.

CHRIS VERSACE: Agreed, agreed. You kind indirectly raise a question, where I think based on what we're seeing in the data, and we think about the potential implications, like I said earlier, of tariffs, the one question I think a lot of people are focused in on, boy, what if things don't go as planned? How bad could it get? But at the same time, like we're seeing last night, the House passed a blueprint budget. And then we have to raise the question of, well, what if President Trump is able to get tariffs lower across the board? What if he is able to get tax cuts passed?

What does that mean for the US economy, that combination? What does it mean for the US economy? What does it mean for consumers, consumer spending? What does that mean for stocks? I mean if things go right, the market could move nicely higher from here on a sustained basis.

BOB LANG: I agree with that. But I think the two operative words there that you mentioned, Chris, as it relates to markets, is, "what if". That uncertainty right there is creating a specter of worry, and concern, and fear in the markets. We did see the VIX rise, Chris, earlier this week to above 21%. About a week and a half ago, it was 14. So that was a 50% rise in market volatility in the span of about three days, three sessions. So there's plenty to worry about. The worry there, Chris, when we see volatility starting to rise, is the uncertainty.

And the uncertainty of such of the ideas that you're talking about, can the markets get a move above that level, which is resistance right now, with all those potential headwinds? They could be tailwinds, but probably going to be headwinds. But it's the uncertainty that's the that's the worry right now for the markets.

CHRIS VERSACE: Oh, look. I totally understand that. That's why we've recently boosted up the portfolio's cash position. We're still hanging on to those inverse ETFs, because we do realize that in order for Trump to be successful-- and we'll see if he is. But in order for him to be successful, he is going to have to-- there are several fights that he's going to have to push through. And the biggest one is going to be tariffs. And as he said earlier this week, hey, the timing for tariffs on Mexico and Canada, they are still looking to be early March, and that's March 4th.

So I do realize that in order for the successes to happen, we're going to have to slog through a lot of uncertainty, potentially some greater battles, so to speak. But my point being is that we need to be mindful that, if things work out, it could be good for the markets. I think what you're saying, and I agree, though, is that as we move through this, we have to assess the probability of things either playing out or not playing out, and constantly revisit those probabilities as we think about the market and the portfolio.

BOB LANG: That's true. But I think on the flip side, Chris, as things working out the way Trump is looking for and the administration is looking for, it's also possible that we have huge layoffs coming out. And it's not just in the government, but also, in the private sector. And how is that going to affect the economy? I think it's going to have a negative effect, obviously, on the economy. And also, much of what's talked about with tariffs coming into place is somewhat inflationary.

And I think I heard seven Fed speakers, Chris, last week talking about how tariffs are going to be inflationary for the economy. And if that's the case, why does the Fed have to get off of 4.25% on the Fed funds rate?

CHRIS VERSACE: Well, bring it all the way back to what you said earlier, where the CME FedWatch tool is showing one rate cut. Depending on what we see with tariffs, and their duration, and the impact, you could see that one rate cut getting moved off the board.

BOB LANG: That's exactly right. And I think the Fed, I think they pretty much punted on 2025, Chris. I don't think we're going to be looking at any rate cuts here. And I would not be surprised if some of the rhetoric that we hear from coming from the Fed, coming from Jay Powell, is saying that rate cuts, rate hikes, everything is on the table, and that perhaps even-- nobody's really thinking rate hikes, but still, listen. You know what? We've talked about this quite a bit, you, myself and Lindsey, about how inflation just remains sticky, and it's just not going away.

And we would need to see, Chris, not only one or two months of inflation going down, but probably, three months.

CHRIS VERSACE: I would disagree. I think the wording that Powell said is "several". Several is not one. It's not two. Maybe it's three. But if you trace the data back, whether it's core CPI, PPI, what have you, there have been several months where the core figures on a year-over-year basis are stagnant. The core CPI in particular, it was at one level for three months, and then it moved higher for three months. So I understand what you're saying, but I wouldn't be surprised that for them to deliver more rate cuts after delivering 100 basis points, the Fed needs to see more than that.

BOB LANG: That's right. And stagnant doesn't mean going down. If we're up 0.3 and we're down 0.3, that's a net of zero. That's not inflation coming down in a steady trajectory of what they're looking for towards the 2% goal.

CHRIS VERSACE: Agreed. Agreed. All right, Bob. So let's take a look at the portfolio. Is there anything that's kind of jumping out at you? We recently added to our positions in American Express and ServiceNow. We picked up some more Eaton earlier in the week. Yesterday, we added shares of Axon, and they're up nicely today. We boosted our price target. But we do have Nvidia earnings coming on. We've got Costco next week. Anything in particular catching your eye?

BOB LANG: Yeah, well, first of all, that Axon move was just stunning and it's been up sharply. And that was really a-- I'm sorry, Chris. I have to give you a compliment here-- but a stroke of genius

[LAUGH]

On that. And I know I know a lot of the members probably gave you a nice pat on the back for that, well-deserved. I'm telling you, that was just a great timing move. But I would also say that what's got my eye here is Meta. Having coming down sharply from the recent highs of about 720 or so, it did actually hit about 760, Chris. So that was about an 8.5% move to the downside. It's bouncing back nicely today. And I think with the news that says that they're going to boost their spending even more Capex on AI initiatives, i think that that's right then and there.

And if we couple that with a strong number from Dell tomorrow, and then obviously, this afternoon, Nvidia coming out with their with their earnings, couple that together, I think Meta is in a great spot right here. I think they're going to make a run towards the 800 plus by the end of the year.

CHRIS VERSACE: OK, OK. Now, in one of our conversations, you had called out-- I think it was yesterday afternoon-- that Amazon shares kind of fell and then reversed markedly. So what were you noticing there?

BOB LANG: So what we have is a what's called a very bullish looking Morningstar pattern. Now, Morningstar pattern comes in where you have a candlestick charting. You have a bearish day, and then you have what's called a doji, which is a reversal day. So yesterday on the 25th, Chris, was that reversal day. And then you have a reverse move to the upside which is different from the from the day, from two days prior. So you have a down day, a down day and a reversal, and then a bullish day, which would be today.

So if we get a follow through day on this, I think that that signals that all clear for the buyers coming in to add Amazon. And I think that's going to start making a move back towards the old highs. Call it about 240 or so.

CHRIS VERSACE: OK. And then outside of Meta and Amazon, anything else catching your eye?

BOB LANG: Well, Apple, really curiously, it's been anti-market for the past couple of weeks. Every time the market's gone down, Apple's been up, and every time the market's been up, Apple's gone down, like today being the same day. I can't understand what's going on there. But of course, outside of earnings, Apple seems to be news driven with all these different developments going on. They did have a investor day, or a new product day coming out a week and a half ago, and seemed to be taking taken in stride.

Not too exciting about that lower cost iPhone, Chris. But I think that that, by and large, the opportunity for Apple, especially with AI out there, and the new phones that are going to be coming out with AI installed, are going to be a huge hit over the next 16, 18 months.

CHRIS VERSACE: So that's a key part of our thesis on Apple and the upgrade cycle. We do think it's a protracted upgrade cycle. But giving us, I think, a little more comfort and confidence in that, in April, Apple is going to release a new iOS update that brings Apple intelligence to the European Union. So really, as these staged rollouts happen, it's almost like when the iPhone, several years ago, the new models weren't released everywhere at once. There was a staged effect. And we're kind of seeing that happen again.

I think it tells us that the upgrade cycle will continue. But as that upgrade cycle happens, too, I think it's also a positive for the higher margin services business. And, Bob, you know that I'd like to get under the hood, and I like these differentiated business models. Whether it's Costco and American Express with membership, what we're seeing with Axon and the shift towards the higher margin services business, same thing at Apple, we like to identify these opportunities and companies that there's either something very different about the revenue stream and the earnings stream, or that mix shift that can help drive incremental earnings.

So sorry to take up your time. But anything else or any parting messages as we get ready to close out February, move into March, and recognize that we've got a lot of data and a lot of Fed speakers next week?

BOB LANG: Well, we have a lot of that going on, Chris. But also, one thing I was going to mention earlier is that as we move into to the month of March, seasonally weak period for the markets, traditionally. We haven't always had the best month of the year in March. In fact, probably, I think it's the second worst month of the year, Chris. But as we move into March at the end of the quarter, I think it's going to be important for everybody to understand and realize that coming off of two strong years in a row, 2023 and 2024, where the S&P 500 grew by more than 20% each of those years, we can't really expect that to continue for a third year.

And especially, with Fed policy, probably stuck at 4.25% earnings, I know we talk about this a lot. I think earnings estimates are always a little bit too aggressive by the analysts. Those numbers have to be coming down a little bit. I think by and large, in this particular stock picking market right now, you have to pick and choose the right names. And hopefully, the picking, like an Axon, like you did, is going to work out for you all the way along, all the way around.

But I think by the end of the year, we're going to find that-- I think maybe if we get a single digit gain, maybe 8%, 9%, 10%, that's going to be great.

CHRIS VERSACE: Well, that's for the market. Of course, we don't buy the market we buy, or we look for well positioned companies, pronounced multi-year structural tailwinds, poised to deliver superior earnings growth. So that's kind of our secret sauce, and we will stick with that. But hey, Bob, thanks for joining me today. And members, you may not know this, but we intend to share these conversations on a monthly basis. I think you're going to love them.

What I think some folks kind of don't maybe realize, and Bob kind of mentioned it, but let's just clarify here and now, Bob, I would say that we talk several times every day.

BOB LANG: Yes. And it's good to touch base very frequently, Chris, because it kind of clears my head and clears out what I'm thinking about. I'm more technically inclined, but I get a little perspective from you on the fundamentals of the markets and the fundamentals of companies, and it blends in with what I see on the charts, and it gives me a really good perspective. Hopefully, I give you the same thing when talking about charts, as well, too.

CHRIS VERSACE: Without a doubt, you do, Bob. That's why we talk so often. So all right, well, let's leave it there. We got a lot. We got a busy afternoon coming. We've got Nvidia earnings. We've got office hours. So folks, please be sure to check your emails, your alerts. We want to make sure you get our latest thoughts. And like we did earlier today, if we make any moves with the portfolio, we want to make sure that you are right there with us. Thanks for watching.

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At the time of publication, The Street Pro Portofolio was long META, AAPL, AMZN and COST.