As long as there is fighting in Iran oil prices, interest rates will be ELEVATED: Market strategist

THIS RALLY STARTED TO STALL AS THEY HAVE INCREASED. NOW MY NEXT GUEST REMAINS BULLISH ON THE MARKET NEAR-TERM, BUT SAYS THESE HOSTILITIES ARE A HEADWIND. I WANT TO BRING IN TURTLE CREEK ADVISORS CHIEF MARKET STRATEGIST DAVID SPIKA. LET'S TALK ABOUT THIS , BECAUSE WE'VE REALLY FELT LIKE WE WERE AT LEAST HOPING. I DON'T KNOW IF ANYBODY IS 100% CONVINCED BUT HOPING CRUDE WENT TO 68, WEST TEXAS INTERMEDIATE MAYBE WE COULD PUT THAT BEHIND US AND IT DID FEEL LIKE WE HAD THE WIND AT OUR BACKS AND NOW IT'S STARTING TO BE A PROBLEM. >> ABSOLUTELY IT'S A PROBLEM SO AS LONG AS THIS FIGHTING IN IRAN YOU'LL HAVE OIL PRICES ELEVATED INTEREST RATES ELEVATED AND THAT'S A HEADWIND FOR THE ECONOMY AND FOR EARNINGS GROWTH. THE OTHER THING I'D POINT OUT CHARLES IN TERMS OF POTENTIAL HEADWINDS ARE WE'RE PROBABLY PEAKING IN TERMS OF EARNINGS AND REVENUE THIS QUARTER. EARNINGS GROWTH IS ESTIMATED AT 31% OVER THE NEXT 12 MONTHS. THE ONLY TIME I'VE SEEN THAT KIND OF 12 MONTH FORWARD EARNINGS GROWTH WAS COMING OUT OF THE 2008 FINANCIAL CRISIS AND COVID SO YOU NEED TO START THINKING ABOBOUT OTHER OPPORTUNITIES IN THE MARKET. CHARLES: WE'LL ALSO PICK UP ON THAT. THIS IS THE BEST EARNINGS PERIOD WE'VE EVER HAD NOT COMING OUT OF A RECESSION BECAUSE THOSE WERE ASSOCIATED WITH RECESSION SO DOES THAT MAKE THIS A LITTLE BIT DIFFERENT THEN? MAYBE DO WE HAVE TO SAY OKAY THE TIMELINES ARE THE SAME. IS THERE SOMETHING ABOUTUT THIS PARTICULAR MOVE HERE MAYBE JUST THE GENERATIONAL OPPORTUNITY WITH A.I. THAT COULD MAKE A DIFFERENCE? >> A.I. CAPEX IS ABSOLUTELY THE DIFFERENCE. THAT'S FUELING WHAT'S GOING ON IN THIS MARKET. ANOTHER STATISTIC THAT GIVES ME A LITTLE BIT OF PAUSE IS SECOND QUARTER EARNINGS GROWTH. 20 COMPANIES ARE GOING TO ACCOUNT FOR 95% OF SECOND QUARTER EARNINGS GROWTH WITH MICRON AND NVIDIA ACCOUNTING FOR 40%. CHARLES: THROW CHEVRON IN THAT MIGHT BE UP TO 60%. I'LL ASK YOU THEN ABOUT THIS SO JULY IS SORT OF A RESET. JULY ALL THE MOMENTUM INDUSTRIES INDUSTRIALS TECH MATERIALS, THEY ARE DOWN ALTHOUGH THEY ARE UP FOR THE YEAR WHICH IS ON THE RIGHT HAND SIDE THERE. THE ONES THAT HAVE DONE WELL, ENERGY, FINANCIALS, REAL ESTATE, YOU KIND OF LIKE THIS RIGHT? YOU KIND OF THINK THIS ROTATION IS NOT JUST A BLIP BUT THIS IS MAYBE WHERE INVESTORS SHOULD TAKE THEIR QUEUEUE? >> I'M NOT TRYING TO TIME THE MARKET OR PICK CERTAIN SECTORS BUT I DO THINK THERE ARE GREAT COMPANIES IN OTHER SECTORS OUTSIDE OF A.I.-RELATED TECH ET CETERA THAT DESERVE ANOTHER LOOK AND WE'VE GOT A FEW WE LIKED TO. CHARLES: LET'S START WITH FINANCIALS BECAUSE JPMORGAN IS ONE, WELL ACTUALLY WE'LL START WITH JOHNSON & JOHNSON. >> OKAY. CHARLES: START WITH HEALTHCARE. IT'S A WONDERFUL CHART AND THERE IS TRUE EXCITEMENT THERE. WHETHER IT'S FROM THE GLP-1S AND OTHER THINGS AND IT FEELS LIKE ITS MOVED ONIONED LILLY. YOU CAN SEE HEALTHCARE NAMES AND J & J IN PARTICULAR HAD A LONG PERIOD WHERE THEY WEREN'T KEEPING PACE AND J & J HAD A GREAT QUARTERLY RESULT EARNINGS AND REVENUE WERE UP. IT'S ALSO COMPOUNDING REVENUE AND EARNINGS AND EARNINGS AND DIVIDENDS AT A VERY RADICAL RATE CASH FLOW AS WELL AND THERE ARE GREAT PIPELINE. IT'S NOT JUST ABOUT THE GLP-1 DRUGS, AND THEY HAVE THEIR MED TECH BUSINESS TOO. CHARLES: BECAUSE WE ALSO HAVE BEEN HEARING ABOUT THIS SORT OF CLIFF. THIS CLIFF AND THIS INDUSTRY AND MAYBE WHY BIOTECHS HAVE DONE SO WELL BUT YOU DON'T T THINK THEY HAVE TO BE WORRIED? >> NO THEIR PIPELINE, YOU LOOK AT THE MED TECH BUSINESS THEY SPUN OFF THE ORTHOPAEDIC PART AND NOW THEY ARE INVESTING IN CARDIOVASCULAR THAT'S ANOTHER GROWTH ENGINE. CHARLES: NOW I THINK WE'LL GET JPMORGAN. >> OKAY. CHARLES: WHAT CAN YOU SAY THE STOCK IS BROKEN OUT TO YOUR POINT, SAMAME SORT OF SCENARIO. IT WAS THREADING THERE A LITTLE BIT. THESE KEY MOVING AVERAGES I'M NOT SURE IT LIVED UP TO THE HYPE AT THE BEGINNING OF THE YEAR BECAUSE IT FELT LIKE EVERYONE SAID FINANCIALS, IT IS NOW. >> WE'RE GETTING A STEEPER YIELD CURVE WHICH FAVORS THE BANKS, WE'VE GOT GREAT INVESTMENT BANKING RESULTS, YOU'VE SEEN VERY GOOD CONSUMER AND COMMERCIAL BANKING RESULTS, AND ALSO GOT THE WEALTH MANAGEMENT BUSINESS BUT AGAIN A VERY STRONG COMPANY WITH A VERY SOLID BALANCE SHEET THAT'S RETURNING CAPITAL TO SHAREHOLDERS, AND HAS AN EXCELLENT OUTLOOK OVER THE NEXT -- CHARLES: ALL THESE BANKS ARE SAYING CONSUMERS ARE DOING OKAY. ARE YOU SURPRISED? NO ONE SAID ANYTHING NEGATIVE ABOUT CAPITAL ONE THIS MORNING HAD SOMETHING POSITIVE TO SAY ABOUT IT MAYBE BANK OF AMERICA. THEY AREN'T SAYING ANYTHING NEGOTIATION ABOUT THE CONSUMER DESPITE THE FACT WE KEEP HEARING AT INFLATION PRESSURES. >> I THINK THERE'S ENOUGH CONSUMERS IN THAT TOP 10% THAT ARE CARRYING THE ENTIRE CONSUMER CLASS TO DRIVE THOSE KIND OF COMMENTS. CHARLES: EOG, WHICH IS THE ONLY PART OF ENRON THAT SURVIVED, IT'S A WONDERFUL LOOKING CHART BUT HERE IS MY CONCERN. WHAT HAPPENS IF THEY DO RESOLVE THE IRAN WAR? WHAT HAPPENS IF THIS TIME IT STICKS, BECAUSE IT WASAS RUNNING LIKE CRAZY ALL OF A SUDDEN LOOKED LIKE IT PULLED BACK. YOU LIKE THIS AS A BUY HERE THOUGH? >> I DO AND IT'S A GREAT QUESTION CHARLES SO TODAY WE GOT WTI AT 86. EOG'S BREAKEVEN LEVEL FOR WTI IS $50 A BARREL SO THERE'S A LOT OF CUSHION PLUS THEY ARE DOING A LOT OF LNG PRODUCTION TOO. THE NEWS OUT OF EUROPE THIS MORNING IS RUNNING OUT OF NATURAL GAS AND THEY NEED THE LNG AND EOG IS RETURNING 70% OF THEIR FREE CASH FLOW TO SHAREHOLDERS THIS YEAR SO THEY ARE DOING THE RIGHT THING THERE SO AGAIN, IT IS A PLAY ON WHAT'S HAPPENING IN IRAN. IT IS A BIT OF A HEDGE AGAINST THAT BUT LONGER TERM WE STILL LIKE IT.