'Your World' on stocks falling, omicron variant

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Omicron 'appears to cause much milder disease': Former acting CDC director

Dr. Richard Besser weighs in on the omicron variant's short-term impact and multiple doses of the COVID vaccine on 'Your World.'

This is a rush transcript of "Your World with Neil Cavuto" on January 5, 2022. This copy may not be in its final form and may be updated.

NEIL CAVUTO, FOX NEWS ANCHOR: Stocks down because interest rates are going up, the Dow tumbling today close to 400 points, the Nasdaq down more than 500 points, and all because the Federal Reserve let loose a policy that shows interest rates could move up a lot higher and a lot faster than we earlier thought.

We're on top of it all, with Art Hogan following it from the market perspective and our Charlie Gasparino on the fallout for the business world.

Let's first get the read on Charlie, what you make of what happened in the markets today and why they responded the way they did.

CHARLIE GASPARINO, FOX NEWS SENIOR CORRESPONDENT: Well, you know, these markets have been pumped up by the Fed for a long, long time.

And the Fed is out of the game and out of the game faster. That's a surprise. And markets hate surprises. And that's what you saw today. And it's fascinating what stocks really got crushed today. It's some of those really risky assets. It's the meme stocks. AMC was down 11 percent or so.

GameStop was down. Crypto is down. So what you're seeing is investors, in a higher interest rate environment, a more volatile environment, going out of risky assets and starting to put their money into more stable companies, companies with stable balance sheets and stable earning powers.

It was bound to happen at some point. It's happening now sooner. And the markets will sell off if they if they go through this, I think. And you ask Art about this. I think they sell violently.

CAVUTO: Yes, and I will be doing that.

But, Charlie, I'm curious as to what was the surprise here, the fact that it might begin tightening sooner, more? What?

GASPARINO: Yes.

I mean, the surprise was that Jerome Powell has now all but conceded he screwed up, that inflation is not transitory. It is here. It's embedded in the economy. It's depressing wage growth, right? You have inflation, inflation outpacing wage growth. So you are actually get wage decreases from -- for a lot of people.

CAVUTO: Right.

GASPARINO: You can't really have that in society. It's a tax on the working in the middle class. It'll lead to a lot of bad things. He knows it. He doesn't want to be the guy that's the next Arthur Burns. Remember him back...

CAVUTO: Sure.

GASPARINO: We both kind of remember him in the Nixon days, where inflation was embedded in the economy. You can't have that. And it's trouble for the Fed. So, if he moves faster, that's not good for the markets. Risky assets will sell off.

Now, how far this goes into the other stocks, I mean, we did have a sell- off today. People -- investors generally like in this environment stable companies, companies with stable balance sheets, stable earnings power.

And so the risky assets get hammered first. And then we will just see where it goes from there. Does the Fed get a handle on inflation fast? It's usually hard to get rid of, by the way, once it's embedded in the economy, as you know.

CAVUTO: Yes. Once it takes off, it takes time.

GASPARINO: Right.

CAVUTO: All right, thank you, buddy, very much, Charlie Gasparino, following this.

Now to the aforementioned Art Hogan, the National Securities Corporation chief market strategist.

I did notice that this not only the first decline of this new year, but sweeping, in that it particularly hit some popular technology names, the Amazons, the Teslas, the Microsofts, the Apples, the very issues that were soaring yesterday.

So what's real, today or yesterday?

ART HOGAN, MARKET STRATEGIST: Yes, it's interesting, Neil.

This is one of those phenomenons that really has been with us, I would argue, for about six weeks. So, believe it or not, the yield on the 10-year was about 1.34 at the beginning of December. December 3, that was the closing price. Two weeks before that, the notion that inflation was going to have this Fed moving faster to tighten started working its way into a lot of those long-duration speculative technology stocks.

So when we look at the -- at the end of the year, we had the Nasdaq composite, which was about 1.5 or 2 percent off an all-time high, but under the hood, 40 percent of stocks had -- were close to being down 35 percent from the 52-week high.

So you clearly had a lot of damage already coming into this new year. And this is a continuation of the same thing. We're seeing the riskier long- duration technology trade get sold, on the concept that we will likely to have higher rates as we work our way through 2022.

And the math is pretty simple. If you're if you're using a net present value calculation, and you have to increase that what -- that multiple that you're using to get back to that net present value, with a rising interest rate environment, the multiple you will ascribe to these types of stocks is -- has to be lower.

So if you were willing to pay 30 times cash flows for one of these fast growing software companies in '21, you will likely be willing to pay 15 times in 2022. And we have already seen a lot of that priced in.

CAVUTO: Yes. And that impacts how soon you get in or, in this case, out of stocks.

But let me ask you. The other underlying economy seems quite strong, this ADP report on private sector job growth, a little more than 800,000, 807,000, in the latest period, double what most folks thought it was.

Is that, in a weird way, the worry, that the economy could be overheating, ironically, and now the Federal Reserve is in the position of trying to cool things down? And rarely can that be pulled off flawlessly.

HOGAN: Yes, that -- the soft landing, the proverbial soft landing is always a tricky play to pull off.

But I will tell you this. The economy is in better shape this year than it was two years ago, and, certainly, we're going to have above-mean GDP growth, probably 4.5 to 5 percent this year. We will have above-mean earnings for the S&P 500, low double digits, call it 11 percent growth.

So clearly, there are a lot of positives here. What we don't know is when inflation starts to roll over and how effective the Fed can be at slowing that down, especially since a lot of the inflationary pressures are coming from things like supply chain disruptions.

CAVUTO: Right.

HOGAN: So higher rates aren't going to loosen up our supply chains. They're not going to make...

(CROSSTALK)

CAVUTO: But how much higher, Art? When you say higher rates, I mean, we're used to now zero percent rates, as the Fed has forcibly kept it that low, at least for overnight money, and interest rates that have been ridiculously low for a ridiculously long amount of time.

HOGAN: Sure.

CAVUTO: Many people say we're going to go up a few percentage points here. That would still keep rates relatively low, at least for a guy my age. I can remember a lot higher.

But it's going to be a whole new experience for a whole new set of the population, right?

HOGAN: Yes. I would say yes and no, right?

So when we think about the yield on the 10-year, for example, that averaged 1.5 this year. The range was 1.25 to 1.75. That range in 2022 will likely be -- call it 1.5 to 2 percent, with the average being about 1.75. The Fed Funds Rate will likely move from zero to something like 75 basis points, or maybe a full percentage point.

Neither one of those things, when I think about the effect on the markets, likely is going to slow down what is going to be good economic growth and good earnings growth for this year. That problem is, we're just getting there so quickly. The yield on the 10-year went from 1.34 to 1.71 in 30 days.

CAVUTO: Right.

HOGAN: So people get a little shell-shocked when things move that quickly.

CAVUTO: And that's a great that's tied to a lot of mortgages. It's tied to a lot of automobile and other related financing. And that's going to be a shock for some, but still low in the scheme of things. And it's addressing an economy that is still strong.

What wins out for people. Is it just the skittishness? Because all these reports that say that housing is going to still be strong this year, retail sales are going to be strong this year, consumer sentiment remains strong this year, do you see that still panning out?

HOGAN: I do.

Consumers' balance sheet has never been stronger coming into a point in time where they still haven't been able to satiate that demand for the goods and services they wanted coming out of pandemic, right? You can't buy a car, very difficult to get a lot of the things because of supply chain disruption.

So I think we're going to have robust retail sales. I think we have elongated a second on recovery because of the fact that we have had these bottlenecks. So I think that heading into this first and second quarter, we're going to see that consumer using its strong balance sheet, continuing strong demand.

We will likely have put the latest COVID variant in the rearview mirror. I think that burns itself out in January, and we will likely start focusing on the fact that we have probably overdone it in markets because we are just overreacting in a knee-jerk fashion to just how quickly the yield on the 10-year has gone from 1.30 to 1.70.

CAVUTO: All right, got it. Thank you my friend very, very much.

And Art referring to that 10-year note, a popular trading instrument. A lot of things are tied to it, mortgages, car loans, and the rest. That has been backing up. Now, the Federal Reserve can't control that rate, but it can set the tone that sets the market reaction to that. And, as you can see, the fear that rates go prohibitively higher weighed on stocks today.

It's just one day. It's pretty early in the year here, but, again, something that a lot of people didn't expect. They knew rates were rising. They knew maybe we could see several rate hikes. They weren't prepared for this. So we're all over that.

Also over, as Art was saying, what's happening on the COVID front, more specifically, the Omicron front. Good news is that, despite the fact that cases are soaring, they're not too severe.

That could be the good news -- after this.

(COMMERCIAL BREAK)

CAVUTO: All right, here is the good news on Omicron. It is very contagious, more than a million new cases over each of the last two days, and more than nine out of 10 of those Omicron.

Now here is the good news. It's so far not too, too serious. But the White House, in threading the needle on that, could be getting itself in more of a fuss.

Jacqui Heinrich at the White House with more -- Jacqui.

JACQUI HEINRICH, FOX NEWS CORRESPONDENT: Hey there, Neil.

Well, the White House is defending the CDC amid criticism its new post- infection isolation guidelines are confusing, to say the least. The new guidance says that you don't have to take a test after five days of testing positive in order to go back to society, that you can go back after a positive case after isolating for five days without getting a test.

But if you can get a test and if you want to test, go ahead and do it. And, by the way, if you turn up positive stay away from others for another five days. It is also -- excuse me -- the CDC also denied that a nationwide shortage of tests influenced their initial guidance, which omitted any need to test to return to society.

Listen to what the CDC director said in the COVID briefing today.

(BEGIN VIDEO CLIP)

DR. ROCHELLE WALENSKY, CDC DIRECTOR: This has nothing to do with the shortage of available tests, because you can see in our quarantine guidance that we actually do recommend a test for people to emerge from quarantine.

(END VIDEO CLIP)

HEINRICH: Just a few days ago, the CDC said testing after five days of isolation is unnecessary because the tests don't reliably measure whether a person is contagious.

But they changed their policy following public backlash, with people concerned this newly shortened quarantine time -- they moved it down from 10 days to five days -- was risky. That revision, by the way, was also prompted by public pressure, but this time from business leaders.

The White House says, though, the living mantra is still follow the science.

(BEGIN VIDEO CLIP)

HEINRICH: This -- is the CDC still led by science and not by other factors in determining its policy?

JEN PSAKI, WHITE HOUSE PRESS SECRETARY: Well, Jacqui, the CDC is absolutely led by data and science. And, again, if they hadn't changed their recommendations over the course of time, schools would probably be closed across the country.

(END VIDEO CLIP)

HEINRICH: Also new today, the CDC announced it's got no plans to change the definition of fully vaccinated to include a booster shot, despite a months-long campaign to promote them.

The White House would not weigh in on whether potential challenges like intensified opposition to employ your vaccine mandates or an additional strain on an already depleted work force factored into their decision.

Instead, the CDC is recommending that people stay up to date with their shots, and they're keeping fully vaxxed status as just the primary round of two shots.

Meantime, lawmakers on Capitol Hill are gauging the need and also the willingness to pass another COVID relief package. The White House says they are in constant communication with congressional leadership. But at this time, there is no specific request for any new aid -- Neil.

CAVUTO: Got it.

All right, Jacqui Heinrich, thank you very, very much.

What's confusing here, as Jacqui pointed out, is this whole testing requirement, how far it goes and, if you are diagnosed with Omicron, just how long you should be quarantining or avoiding contact with other folks. The mixed signals are beginning to compound here.

Let's get the read right now from Jonathan Serrie in Atlanta -- Jonathan.

JONATHAN SERRIE, FOX NEWS CORRESPONDENT: Hi there, Neil.

A lot more new data on the Omicron variant and the severity of disease it causes. There's -- it's kind of a double-edged sword. In terms of the proportion of COVID patients with severe disease, the figures, the rates are much lower for Omicron than previous variants.

But Omicron is so highly transmissible that the sheer numbers of cases are pose a serious public health threat. Take a listen.

(BEGIN VIDEO CLIP)

DR. ANTHONY FAUCI, CHIEF MEDICAL ADVISER TO PRESIDENT BIDEN: Because a certain proportion of a large volume of cases, no matter what, are going to be severe.

(END VIDEO CLIP)

SERRIE: The Biden administration is doubling its order of Pfizer's COVID treatment pill, Paxlovid, for a total of 20 million treatment courses.

Because of a lengthy manufacturing process, about half of the treatments are expected to be delivered by the end of June, with the remainder arriving in September.

Today, the CDC's vaccine advisers are discussing whether to recommend signing off on the FDA's authorization of Pfizer's COVID booster shots for children as young as 12. They're talking about that even as we speak. The CDC has decided not to include boosters as part of its definition of being fully vaccinated, but instead refer to boosters as a way of keeping your vaccine protection -- quote -- "up to date."

(BEGIN VIDEO CLIP)

WALENSKY: We are now recommending that individuals stay up to date with additional doses that they are eligible for. And we have now available how you can stay up to date with your COVID-19 vaccines, based on what vaccine you have received and what age group you're in.

(END VIDEO CLIP)

SERRIE: The president of the American Medical Association is criticizing the CDC's decision to shorten the isolation period for persons infected with COVID from 10 days to five days without requiring a negative test.

Dr. Gerald Harmon issued a statement saying: "The new recommendations on quarantine and isolation are not only confusing, but are risking further spread of the virus."

Starting Friday morning, fully vaccinated people traveling to England will no longer be required to take a COVID test prior to boarding their flights. They still have to take a test after they arrive in country, but are no longer needed to quarantine as they await the results.

For now, the changes only apply to England, but U.K. officials say that they anticipate that Scotland, Northern Ireland and Wales will follow in the very near future -- Neil, back to you.

CAVUTO: All right, thank you very much for that, Jonathan Serrie.

We should also say that the Grammy Awards, because of all of these developments, have been put off for another year. This is the second year in a row. Not put off for a year, but they're going to push them back from the January 30 and 31 show that was tentatively planned. We will keep you posted on other moves like that.

But, again, people don't know exactly how to gauge where they go, how far they go. You have New York's Mayor Eric Adams saying that he was talking to a lot of New York area businesses that are telling people to work from home, that that's a step too far and won't help the city or those workers.

Let's get the read on someone who can maybe comments down and get a look at the big picture, Dr. Richard Besser back, the former CDC acting director, Robert Wood Johnson Foundation CEO.

Doctor, good to have you and happy new year.

DR. RICHARD BESSER, CEO, ROBERT WOOD JOHNSON FOUNDATION: Happy new year to you, Neil. It's nice to be here.

CAVUTO: Same here.

I don't know how happy -- or maybe it's confusing for a lot of folks when it comes to Omicron. As you said, right, in the earliest stages of Omicron, you had a hint that, while it might be contagious and spread fast, it would not be, for example, along the Delta variant wave. That still seems to be the case, but it is still confusing to a lot of folks.

What should they do in the face of this?

BESSER: Yes, you -- Neil, you summed it up really well at the beginning of this section, in that this is spreading rampantly, it's spreading quickly.

But on the good news front, this is a strain that appears to cause much milder disease. That is good in terms of the long-term outcome of this pandemic, I think. If people get this strain and it provides some protection against future strains, this could be the path out of the COVID pandemic.

But in the short term, it really is going to cause a lot of havoc. And we're seeing that around the country. We're seeing hospitals that are that are full to capacity, health care workers who are stretched beyond their limits. And we're seeing a lot of confusion among the public around what to do.

Everyone, it seems, knows someone who has COVID.

CAVUTO: Right.

BESSER: Most of those people have cold symptoms.

And determining what you do in the face of that is very, very challenging.

CAVUTO: What confuses me, Doctor -- you can help me with this -- in Israel, they're working on a recommendation of a fourth shot of the Pfizer vaccine that they have studied and shows a fivefold jump in antibodies to deal with the virus.

And a lot of people in this country are saying, are you kidding me, a booster shot on top of a booster shot on top of two other shots? Where's all of this going?

BESSER: Yes, I mean, when I think about why vaccination is important, I think about it as important for preventing severe infection, hospitalization and death.

I don't think about it in terms of preventing cold-like symptoms. And so, yes, you may be able to reduce the amount of person-to-person transmission with another dose -- we will see what the Israeli data show -- but the good news, Neil, is that people who are fully vaccinated against COVID are at dramatically reduced risk for hospitalization and death from the Omicron variant.

So people who are eligible for boosters, for that third dose, I think that's a good thing. People who haven't been vaccinated at all, as you and I have talked, getting that primary series can greatly reduce the risk of hospitalization and death.

But I think that it's going to be a pretty hard sell to be thinking about a fourth dose for something like Omicron, when we're seeing such great protection against severe illness.

CAVUTO: I hear you.

Dr. Besser, great catching up with you, Dr. Richard Besser, always a calming influence on these times, when people go -- they get a little anxious. That's probably understandable.

We talked about people who are getting a little hot under the collar right now. It began, I think, in France, with Emmanuel Macron, who said that he intentionally wanted to piss off the unvaccinated, and now the unvaccinated have gone back to him to say, why don't you piss off?

That's the best French I can do for the time being, but it's getting nasty over there -- after this.

(COMMERCIAL BREAK)

CAVUTO: Sixteen hundred more flight cancellations today. We're way over 10,000 since the beginning of the holiday travel period. Weather isn't helping, but COVID is a big factor.

How bad does it get? Because it keeps getting worse.

(COMMERCIAL BREAK)

CAVUTO: All right, I'm going to try my French again.

Emmanuel Macron of Germany is vowing to piss off the unvaccinated, no access to restaurants, bars, even trying to get a cup of coffee. Germany implementing the same rules. My German is even worse than my French, so I won't even try that.

But, again, it's a message to the unvaccinated: Life is going to be hell for you unless you do get vaccinated.

I do wonder what Dr. Amesh Adalja feels about all of this, the infectious diseases specialist, Johns Hopkins senior scholar kind enough to join us.

Doctor, good to see you. Happy new year.

DR. AMESH ADALJA, INFECTIOUS DISEASES SOCIETY OF AMERICA: Thanks for having me.

CAVUTO: He is definitely -- that is, Emmanuel Macron -- Doctor, trying to get a message to the unvaccinated: You're the source of our problems. We're going to make life difficult for you if you don't get vaccinated.

What do you think of his approach?

ADALJA: Well, it is true that the unvaccinated are the major source of problems when it comes to hospital capacity. I'm going to the hospital right after this interview. And I know I will be taking care of unvaccinated patients in the intensive care unit.

However, I think that some of that rhetoric gets charged, and people get -- they dig their heels in even more.

CAVUTO: Right.

ADALJA: And then they don't get vaccinated. And we continue to have this divisiveness over a really great scientific tool.

And I think that's probably not going to be productive in the end. And I think it's much different when government is issuing those mandates when private -- vs. when private businesses do so.

CAVUTO: Doctor, what do you tell the unvaccinated who look at these recurrences, breakthrough cases, all this other stuff, sometimes several breakthrough cases, and all the shots and boosters, and now Israel moving to a total of four shots, an extra booster, just to be sure, and they say, what the heck? I'm not in.

In fact, it's actually getting them more anti-vaccine than pro?

ADALJA: I tell them that when it comes to prevention of serious disease, hospitalization and death, just getting fully vaccinated, two doses of Pfizer, two doses of Moderna, one or two doses of J&J, that's all I'm asking them to do, because that protects them from getting severe disease.

It protects them from needing hospitalizations and crushing their community hospitals. I think we have to work with people. And I think thinking about boosters and endless boosters is not going to get those people who haven't even gotten one dose to get -- to move the needle into their arm.

But we have to really recognize that that's what's holding us back, the fact that our hospitals are still under stress. And I think that, if you tell people that, I think maybe that helps them understand. It's their own community hospital that they're destroying. It's their own health -- the health care workers that they see in the grocery store that are getting burned down and quitting.

And maybe that will help them, but it...

CAVUTO: All right, I'm very, very sorry for that, Doctor. We lost you here.

But, again, to that point, we are going to be exploring here exactly the guidance that we're getting out of various government officials, including the CDC, some even at the FDA, that seem to be going at cross-purposes. For now, the recommendation is that you do get vaccinated, and they're hoping some of these latest developments will prompt just that.

But we're a long way from that. A lot of people are talking about herd immunity and that we're just at that level, and this is the final throes of it. We shall see.

In the meantime, getting a gauge right now about what is going on, well, with the economy and that of Donald Trump.

The economy looked pretty good under him. And Kevin Hassett, who was his chief economic adviser, seemed to signal in an interview with me on FOX Business, which, if you don't get, you should demand, and if you still don't get it, I'm going to replay what he thought of Donald Trump running for president again and what role he might play -- after this.

(COMMERCIAL BREAK)

CAVUTO: All right, there's been a lot of conjecture back and forth as to whether Donald Trump will run for the White House again. A lot of people give you different signals.

But his former top economic adviser had an interesting comment on FOX Business when he was chatting with me about just the possibility of his old boss running again. Take a look.

(BEGIN VIDEO CLIP)

CAVUTO: Your old boss Donald Trump has contemplated that maybe -- or preparing an announcement he thinks that people will be very glad to hear, potentially running for president again.

We don't know what that decision will be. But if he does decide to run, would you be an economic adviser for his campaign?

KEVIN HASSETT, FORMER CHAIRMAN, COUNCIL OF ECONOMIC ADVISERS: Well, I don't know if he would ask me. I did have a small dinner with him down at Mar-a-Lago a few months ago.

The -- him running again didn't come up.

CAVUTO: Really?

HASSETT: But the thing I can say is that he's lost a lot of weight. He looks really fit. He's in a great mood. He's got a lot of ideas of how to fix the country.

And maybe he's going to find a friend that he wants to support in the presidential cycle. I'm not sure. He hasn't talked to me about that. But I absolutely 100 percent would support him and help him if he asks.

(END VIDEO CLIP)

CAVUTO: All right, so count him as suiting up, Kevin Hassett, his former top economic adviser, if Donald Trump were to run again.

Burt Folsom is here, the Hillsdale College distinguished fellow, bestselling writer and historian.

Burt, first off on that and the fact that Hassett would sign up to at least being an adviser, economic adviser to the campaign. What do you make of that?

BURT FOLSOM, HILLSDALE COLLEGE FELLOW: Well, I think that it suggests that President Trump may actually run again for president.

It's too early to tell. But he certainly had a successful presidency on the economic side, in that his corporate tax cut from 35 to 21 percent, did stimulate a lot of entrepreneurship and economic development. And we had a lot of people go off food stamps. We had a lot of jobs that were created.

So, in many ways, it was a successful presidency.

CAVUTO: You know, we're a year in almost to the Biden presidency. His poll numbers look pretty bad, in fact, his approval level at an all-time low.

Now, you have always reminded me that, oftentimes, where a president stands going into his second year doesn't necessarily jibe with where he will be a few years later. But what do you make of where he is now?

FOLSOM: Well, that's a good point.

President Clinton started at the end of two years, lost 50-some seats in the midterm elections, House seats.

CAVUTO: Right.

FOLSOM: He was doing very poorly. He had a tax hike. And he had a failed health care plan.

But then he reversed course. He began cutting taxes. And he had the welfare reform that took a lot of people off welfare, and we had budget surpluses. And so the poor start ended at a strong finish.

It looks like the reverse is happening here. We have a poor start by President Biden. And, of course, people are hitting him for poor leadership. But the economic policies that he's put in place are not likely to succeed. They're not likely to make people's lives better. The oil prices are high. The inflation is persistent.

And those kinds of policies, he's not making any effort to curtail very much. So I suspect that we will have continued problems for President Biden as he proceeds in his presidency.

CAVUTO: Do you think he will face a party challenge?

FOLSOM: I think it's likely that he will on the left.

Remember, President Carter was in this position. He started...

CAVUTO: Right.

FOLSOM: He had problems with the oil, again, just like President Biden. He had a foreign policy problem with Iran, just as Biden has with Afghanistan.

And Carter finished with very high inflation.

CAVUTO: That's right.

FOLSOM: And he had a challenge for president from Ted Kennedy in his party when he ran for reelection in 1980.

Yes, I would expect Biden to have a challenger from -- probably, though, from the left, if he were to run for reelection.

CAVUTO: Normally, when a president faces an intraparty challenge, he survives that, but he doesn't survive the general election. I'm thinking of Gerald Ford trying to fend off Ronald Reagan in 1976...

FOLSOM: Yes.

CAVUTO: ... and, as you said, in 1980, with Carter trying to deal with Ted Kennedy.

It can be problematic, can't it? They might get by and get -- and hold on to the nomination...

FOLSOM: Yes.

CAVUTO: ... but be damaged goods in the general election, right?

FOLSOM: Very much so.

In fact, you might include George Bush the first with the problem he had from Pat Buchanan in the primary.

CAVUTO: Very good point. That's right.

FOLSOM: So, yes, when you receive a -- because it's hard to unify the party.

And when the party is not unified, it gives momentum to the other party, and it gives other voters to the other party who you think should be voting for you.

CAVUTO: Do you think that, given that tomorrow is in the one-university of the January 6 insurrection, does that revisit all these old issues for Donald Trump, or his loyal base is such that certainly within the Republican Party it's not as much as an issue as it could be in a general election, should he run?

FOLSOM: That's a good question.

I think we need to know more about January 6. There's so much footage that has not been released. We still don't have data on how many FBI agents were involved in stirring up the crowds. These are important questions to answer.

I think we need a full picture on January 6. We do not yet have that full picture.

CAVUTO: All right. But if we have proof that the president at the time was just watching this on TV, and was doing very little to halt it, slow it, deal with it, how does that play out?

FOLSOM: Right.

That, I agree, could be a problem.

CAVUTO: Yes.

FOLSOM: Presidents often have difficulty in how to react when something is going on, and you don't know how the crisis is it -- when it's a one-day sort of crisis, how it's likely to end.

And I agree. That part very well might go negative for President Trump. But I think there's so much that needs to be known. And then that needs to be discussed, that, until that -- the widespread knowledge of January 6 is forthcoming, I don't think that we will be able to assess how it's likely impact the next election.

CAVUTO: Very well said.

Burt, very good seeing you again, Burt Folsom, historian extraordinaire, an uncanny read of history and how it does repeat itself, not oftentimes in the way you think. So don't get too caught up in where we are in the moment.

Also, the CDC might be saying, we're not too keen on cruises, but that hasn't stopped cruise lines from still pushing, well, cruises -- after this.

(COMMERCIAL BREAK)

CAVUTO: All right, the CDC might be saying that cruises are a bad idea, but try telling that to the cruise lines.

I know you know our Ashley Webster, who is right on top of this impactful story, reporting live now from Port Canaveral, Florida, on another hard and tough mission.

Ashley, what's going on? yes.

ASHLEY WEBSTER, FOX BUSINESS CORRESPONDENT: Yes.

(LAUGHTER)

WEBSTER: Good afternoon, Neil.

Yes, 242 cruise ships are scheduled to set sail this month, the month of January, which, by the way, is the highest since the pandemic first began in early 2020, certainly cause for optimism, including the boat behind me. This is Norwegian Gem that docked in here this morning at Port Canaveral. It will leave later this evening on the way to the Caribbean.

Yes, I did ask to go on that trip. No, I cannot.

But I can tell you, as you mentioned, Neil, the CDC putting out a public warning, saying to people, don't get on cruise ships. And you can imagine what the cruise industry felt about that. They felt like they have jumped through every hoop, they have bent backwards to try and make sure all safety protocols are in place.

We had this statement from the Cruise Line Industry Association, in response to the CDC, saying: "A cruise ship provides one of the highest levels of demonstrated mitigation against the virus. We are disappointed and disagree with the CDC's decision to single out the cruise industry."

I also spoke today with the CEO of the port here, Port Canaveral, Captain John Murray. And I said to him, compare the safety of being on board a ship like that with perhaps another location. Listen to what he said.

(BEGIN VIDEO CLIP)

WEBSTER: They say you're probably more risk in a supermarket than on a cruise ship. Is that an exaggeration?

CAPT. JOHN MURRAY, CEO, CANAVERAL PORT AUTHORITY: No, it's not an exaggeration. Everyone on that ship is vaccinated, both the crew and the passengers. And I think that population doesn't exist in the grocery store.

(END VIDEO CLIP)

WEBSTER: And there you go.

By the way, more than 90 ships under investigation or observation right now for COVID. And just this morning, we found out that a Norwegian cruise ship was canceled, a trip to the Caribbean was canceled in less than 24 hours' notice because of COVID.

So, certainly, it is having an impact. But, Neil, to your point at the very beginning, sales are strong. And if we go by those bookings for the second half of the year, looks like it's going to be a strong year. We just, of course, have to get over this latest hiccup.

CAVUTO: Yes, but people are all in to get all on.

WEBSTER: Yes.

CAVUTO: Thank you very much, my friend. Continue your hard yeoman's work.

WEBSTER: Thank you.

CAVUTO: Ashley Webster in the middle of all of that in beautiful Florida.

In the meantime here, do you ever write a check to someone for $600 or more, you get a check from someone for $600 or more? Well, the IRS is going to know about it. You OK with that?

After this.

(COMMERCIAL BREAK)

CAVUTO: All right, the IRS is in a new game right now, not going after the super rich, but going after payments of as low as $600. So, if someone gives you a check for that amount or you get that amount, the IRS will know about it.

Hillary Vaughn on what this is all about.

Hillary, I thought this wasn't happening, but apparently it is.

HILLARY VAUGHN, FOX NEWS CORRESPONDENT: It is, Neil.

And the idea behind it was to catch tax cheats, but the new rule is not going to put a bullseye on billionaires, but instead small businesses, people that use these third-party payment apps like Zelle, like Venmo to get money from their customers and clients for their goods and services.

The new rule says transactions over 600 bucks paid through these apps for goods and services now have to be reported to the IRS. This hits people like hairstylists, housekeepers, those in the gig economy, small shops at trade shows.

The National Federation of Independent Business telling me in a statement, this rule wasn't really vetted -- quote -- "This requirement, which was added late to the American Rescue Plan Act without debate, is yet another burden that will occur while small businesses are facing numerous challenges, such as rising inflation, work force shortages. Congress should focus on finding ways to help Main Street succeed, instead of saddling them with these confusing requirements."

This only applies to taxable income, not money you may be getting from friends or family through these apps. But some people say that this still exposes people to more IRS intrusion.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: What if I send money through Zelle to my child at school? I'm now going to have to prove that that wasn't payment for some kind of service. With a broad stroke, you can catch up a lot of people doing things that have nothing to do with taxes.

(END VIDEO CLIP)

VAUGHN: So, Neil, technically, this is not a new tax, but people could end up paying more in taxes if they previously didn't report these kinds of transactions and then do next year when they file and find out they should have been paying taxes on it all along -- Neil.

CAVUTO: I don't want to be jaded, Hillary, but this is a very easy way to get a lot of revenue.

I mean, it's undeniable that you can get a lot of money just picking this low-hanging fruit and adding it all up.

VAUGHN: Yes, and it's -- the threshold -- 600 bucks is not a lot.

CAVUTO: Yes.

VAUGHN: It impacts a lot of the little guys and people that are using these apps trying to have their own business. It's an easy way to get people into the economy. But now the IRS is seeing it as kind of a way to make more tax revenue.

CAVUTO: I'm not sending my kid any more money at college. He's on his own.

(LAUGHTER)

CAVUTO: He's on his own, Hillary. All right, thank you very, very much.

That's wild.

Hillary Vaughn following all of that.

We need an accountant to figure this out. We have got a darn good one right now, Dan Geltrude.

Dan, what do you make of this?

DANIEL GELTRUDE, GELTRUDE & COMPANY: I think the bottom line here, Neil, is the bottom line.

The IRS realizes that there is a lot of money flowing back and forth in small amounts to small businesses that's taxable, and they're not picking it up. So, therefore, the IRS is saying, well, these businesses know they should be paying tax on it, and they're not.

So how are we going to catch them? Well, we're going to lower from what was, Neil, $20,000, plus 200 transactions a year, which would get reported on a 1099-K. Now they're taking it down to $600.

So what's going to happen is the IRS is going to use the matching of this 1099-K to what is appearing on tax returns. And if they don't match up, the IRS is going to send you a tax bill, and small businesses don't like that.

CAVUTO: What about just regular individuals? I mean, these are not especially large transactions. So if you have a lot of them, are they going to be on their own 1099 form? How will that work out?

GELTRUDE: Well, that's where it really becomes the overreach, Neil.

As you made that reference to your kids, right, you're -- I'm sure you're Venmoing them quite a bit of money. So now that's getting reported to the IRS. So if that gets picked up for audit, you have to remember the burden is on the taxpayer to prove that wasn't taxable.

So what does that mean? Everybody now needs to keep records of all these transactions, because an audit will be a nightmare, because the IRS will take the position, that's taxable.

CAVUTO: Right.

GELTRUDE: So now you have to prove it wasn't taxable. It was just to cover my late-night pizza orders.

CAVUTO: Yes.

But I'm curious, how did this get through? I mean, I remember when they were talking about low transactions, but I thought that had just gone nowhere. And then I learned that, no, it's very much alive and well, and will be a key revenue raiser, I have no doubt, for the IRS this year and years forward.

GELTRUDE: Well, this is what was in the American Rescue Plan, Neil, and this relates to those third-party payment apps.

CAVUTO: Right. Right.

GELTRUDE: But now what you're making reference to is whether banks have to report those transactions.

So, that's still yet to come.

CAVUTO: Do they? Do they?

GELTRUDE: Well, that was -- right now, they do not. But that's what's being proposed, I believe, as what was -- what is part of Build Back Better. So there were two different things.

You have the third-party payment apps, and you have the banks, the third- party payment apps went through as part of American rescue. And now the bank transactions is part of Build Back Better.

CAVUTO: It's very clear to me that they are looking at this as a possible way to expand the pool of taxpayers who are going to pay more taxes.

They might say that it's not for that. It's for looking for malfeasance and all of that. But this is a very easy way to do just that. Where could something like this go? I mean, I'm thinking of the Alternative Minimum Tax, which was a way to go after the rich, guys like you, to avoid paying taxes. And then it grew to include what a third to half of all taxpayers today.

GELTRUDE: Well, these things never roll back, Neil.

CAVUTO: Right.

GELTRUDE: Once you start on this path of the IRS, putting things in place to look for more tax dollars, that doesn't undo itself.

In this particular case, though, Neil, I think what's happening and the reason the small businesses are up in arms is because this income is not getting reported. And the IRS realizes that. And they're saying, here's an easy way for us to pick that up, because the 1099-K is supposed to match to the tax return.

If they don't match, meaning your tax return is less than what was reported on the 1099-K by these third-party apps, the IRS knows that there's tax dollars missing. It's that simple. It's an easy catch for the IRS, Neil.

CAVUTO: Just amazing.

All right, thank you, my friend. I think I understand this a little better. And I'm worried about it a lot more. Wait until you see how my son reacts when he realizes no more checks are coming.

Always good seeing you. Thank you very much, Dan Geltrude, on all of that.

All right, for those of you looking in the lower right portion of your screen, you're seeing a big sell-off in the Dow, the first major sell-off of the year, and all because the Federal Reserve has signaled: We are going to raise rates. Have no doubt about.

That, they expected. What they didn't expect was the sentiment building that they're going to raise them a lot faster, maybe a lot more than we thought earlier. And that kind of rained on their parade.

It doesn't necessarily mean it's changed the dynamics here, but, for technology stocks, which generally don't like higher rates, it was a reason to sell and sell, just today. But we will see how it goes tomorrow.

Here's "THE FIVE."

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