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Do you know how to prepare for a market sell off? · The Financial Exchange Show

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Speaker 1: Zada and Mike Armstrong.
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Speaker 2: Chuck, Mike and Tucker with you, kicking off the second
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Speaker 2: hour of our show, and stocks are continuing.
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Speaker 3: To slide further as we go through the morning.
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Speaker 2: The Dow is now off fifteen hundred and sixty nine
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Speaker 2: points three point seven percent. The S and P is
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Speaker 2: down two hundred and fifty points or four point four percent,
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Speaker 2: in the Nasdaq is off a thousand points, now five
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Speaker 2: point six eight percent down. Despite this, I know this
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Speaker 2: is gonna sound weird, Mike, but this is still kind
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Speaker 2: of orderly, Like in what I mean by this is
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Speaker 2: it's not just indiscriminate selling everywhere. We actually still have
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Speaker 2: about ninety five stocks in the S and P five
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Speaker 2: hundred that are up, uh, and that's kind of remarkable
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Speaker 2: on a day like this.
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Speaker 3: It's also remarkable.
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Speaker 2: That the Vicks Wall Street's fear gauge is how it's
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Speaker 2: referred to, hasn't spiked as much as you you would
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Speaker 2: think you would on a day like this where you've
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Speaker 2: got this kind of movement. To put this in perspective,
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Speaker 2: like you go back to twenty twenty and some of
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Speaker 2: the stuff that we saw then as far as the
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Speaker 2: market moves during the initial outbreak of COVID nineteen, and
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Speaker 2: you had volatility on the VIX pushing much much higher
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Speaker 2: in terms of you know, kind of where it was
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Speaker 2: being priced at that point in time, and you're just
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Speaker 2: not seeing that here, which is kind of remarkable to me.
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Speaker 2: I'm not saying that you would expect to see you know,
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Speaker 2: VIX at seventy five, like it got to back during then.
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Speaker 2: I think it actually cleared eighty for a little bit,
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Speaker 2: but the fact that you're not seeing it up in
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Speaker 2: the forties or you know, even like mid thirties to
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Speaker 2: low forties is kind of remarkable, and it suggests that
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Speaker 2: there still isn't you know, there's elevated fear, but it's
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Speaker 2: not really much beyond what you know, beyond kind of
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Speaker 2: like normal fear in a market like this. It's there's
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Speaker 2: nothing suggesting that there's any kind of disproportionate fear response,
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Speaker 2: and that's usually kind of what drives these things at
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Speaker 2: some point. I mean, even you look at you know,
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Speaker 2: twenty twenty two, when we got some of the selling
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Speaker 2: climaxes there, the VIX was getting to thirty five and change,
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Speaker 2: when we had the blow up of the yen carry
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Speaker 2: trade last year you were getting above thirty five and you're.
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Speaker 3: Just not seeing it here. So this is kind of
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Speaker 3: I know, it's weird.
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Speaker 2: For me to say it's like an orderly four percent
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Speaker 2: down day because that doesn't really make sense, and it
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Speaker 2: sure doesn't feel like that to people where if you're
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Speaker 2: looking at like some of the individual names and you're like,
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Speaker 2: oh gee, like that's pretty ugly. But I know it's
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Speaker 2: weird to say this, but it feels like this could
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Speaker 2: be a lot worse actually in markets.
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Speaker 4: Yeah, I do agree with you, Chack. We haven't hit
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Speaker 4: any circuit breakers for the markets as a whole. Those
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Speaker 4: don't occur till the seven ish, when seven and a
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Speaker 4: half percent on the S and P, so we haven't
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Speaker 4: hit any of those. To be fair, though, we also
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Speaker 4: haven't seen any companies carted off the field, right. You
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Speaker 4: haven't had those announcements this morning of we are shutting
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Speaker 4: down this, we are giving a bankruptcy warning. Those are
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Speaker 4: the types of things that you were seeing in March
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Speaker 4: of twenty twenty that you are not seeing right now.
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Speaker 4: Good news, it's not happened yet. Bad news would be
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Speaker 4: if you start to get some of those I could
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Speaker 4: see investors getting a bit more spooked if you start
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Speaker 4: seeing yeah, you know hedge fund or private equity or
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Speaker 4: or publicly traded companies coming out and saying, hey, you
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Speaker 4: know these new moves make us do this to our
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Speaker 4: profit warning. So here is our updated forecast, and we
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Speaker 4: are giving a going concern warning based on all this
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Speaker 4: big thing.
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Speaker 2: If you missed it yesterday and again, feels like it
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Speaker 2: will be kind of hard to have missed it and
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Speaker 2: be a listener of our show.
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Speaker 3: But in the event that you didn't hear, you fit
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Speaker 3: into that narrow there's a pard of ven diagram.
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Speaker 2: There's a venn diagram of people who listened to the
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Speaker 2: Financial Exchange and people who don't know that tariffs were
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Speaker 2: raised yesterday, and there's three of you in that group.
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Speaker 2: But to those three people, Trump administration raised global ten
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Speaker 2: percent tariffs that are set to take effect on Saturday,
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Speaker 2: April fifth. They also for fifty seven additional countries had
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Speaker 2: higher tariffs anywhere from eleven to fifty percent that are
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Speaker 2: going to go into effect on April ninth. The fact
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Speaker 2: that there's a delta of four days. There a difference
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Speaker 2: in four days suggests that they're going to try to
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Speaker 2: negotiate a good number of those during that time. So
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Speaker 2: I think part of that might be what the market
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Speaker 2: is looking at here. But you don't know like which
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Speaker 2: ones are going to be negotiated, you don't know exactly how,
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Speaker 2: and so it's basically it's kind of that leap of
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Speaker 2: faith of hey, you know, hope a lot of these
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Speaker 2: end up being negotiated, because look, if these all stay
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Speaker 2: in place at these rates, according to data from the
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Speaker 2: Budget Lab at Yale, this will raise the average tariff
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Speaker 2: rate on all imports to the US to twenty two
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Speaker 2: and a half percent, which would be the highest since
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Speaker 2: nineteen oh nine of this before. There's no one alive
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Speaker 2: who's experienced this level of tariffs on US imports. No, absolutely,
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Speaker 2: I'm sure there's okay, there might be a few people
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Speaker 2: alive who have.
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Speaker 3: They're not listening to our show.
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Speaker 1: It's not nice.
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Speaker 2: It might be honestly, like, you're one hundred and seventeen
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Speaker 2: years old, do something better than listening to us.
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Speaker 3: Oh that's not nice. It's not nice to us.
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Speaker 4: The equity markets, as we mentioned, are in sell off mode.
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Speaker 4: S and P five hundred now trading at levels last
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Speaker 4: seen in September of twenty twenty four brings us to
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Speaker 4: about an eleven and a half percent sell off from
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Speaker 4: those all time highs NASDAK I haven't calculated, but is
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Speaker 4: substantially worse on that, And some specific commentary from Scott Bessant,
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Speaker 4: Treasury Secretary yesterday that I found surprising, calling out the
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Speaker 4: mag seven in particular MAG seven stocks being those big,
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Speaker 4: high flying tech stocks that really contributed to most market
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Speaker 4: growth that we saw over the last few years.
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Speaker 2: And again, I don't remember the last time I heard
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Speaker 2: a Treasury secretary talk about a specific stock ever. Yeah,
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Speaker 2: either other than okay, it's two thousand and eight and
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Speaker 2: four GM and Chrysler are blowing up. Yeah, hey we
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Speaker 2: got to bail these ones out, or hey we've got
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Speaker 2: to bail out you know, City Group, or we've got
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Speaker 2: to you know, do something someone you know, help me
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Speaker 2: sell countrywide to Bank of America, you know, like, other
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Speaker 2: than that, I've have you ever heard of Treasury secretary
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Speaker 2: try to talk down a specific group of stocks before.
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Speaker 4: Now that's that's there's been a few firsts, and that's
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Speaker 4: another one of them speaking.
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Speaker 3: I know.
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Speaker 2: We're also going to talk about tomorrow's jobs report, because ha,
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Speaker 2: we got a jobs report tomorrow, but I also before
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Speaker 2: we do that.
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Speaker 3: So there's two different pieces.
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Speaker 2: That I think are you know, important here in terms
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Speaker 2: of the potential downside for equities. The first is just
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Speaker 2: the macro picture, like, hey, how does this affect overall growth?
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Speaker 2: How does this affect you know, spending, habits and this
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Speaker 2: and that like that. That's I think that the first
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Speaker 2: place that people look. The other place that I like
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Speaker 2: think is an underappreciated issue is what this does to
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Speaker 2: corporate margins and how you can project where they're going
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Speaker 2: to be. I'm going to pick on Apple right now,
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Speaker 2: just because they're down almost nine percent and it seems
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Speaker 2: like the market's picking on Apple, So I'm just.
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Speaker 3: Gonna pile in.
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Speaker 2: If you are Apple and you do most of your
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Speaker 2: manufacturing in China.
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Speaker 3: What are your margins going to be the next few quarters?
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Speaker 4: I don't know, if they face fifty six percent tariffs
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Speaker 4: or whatever the calculation comes to, it's gonna be pretty rough.
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Speaker 3: Now.
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Speaker 2: Obviously, Tim Cook, I'm sure is trying to you know,
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Speaker 2: figure out some carve out for Apple products and this
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Speaker 2: and that.
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Speaker 3: But let's say that.
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Speaker 2: You are an analyst who's covering Apple, or you're an
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Speaker 2: analyst who's covering Nike, You're covering Deer, whoever you might be,
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Speaker 2: you know, covering How the heck do you build your
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Speaker 2: models for what those corporate margins are going to be.
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Speaker 4: It's a pretty wide and thereby useless range, I think,
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Speaker 4: is the answer.
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Speaker 2: And so the only thing that you can do then
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Speaker 2: is you have to project. Is there any chance as
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Speaker 2: a result of this, corporate margins expand in the next
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Speaker 2: couple quarters, Like in the aggregate, yep. So if margins aftercare,
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Speaker 2: there could be again, there could be more jobs in
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Speaker 2: the US, there could be higher wages for workers. Sure,
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Speaker 2: but there's almost no path for margin expand margin expansion
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Speaker 2: for companies in the next two quarters because even if
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Speaker 2: you want to, like let's let's say you are a
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Speaker 2: company that says, yep, I'm gonna expand my US operations,
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Speaker 2: it's gonna cost you more money to do so in
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Speaker 2: the short term, right, And so if this is the case,
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Speaker 2: you know, right now it feels like people are just
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Speaker 2: looking at the macro side of things. What is this
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Speaker 2: due to corporate earnings for the next couple of quarters,
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Speaker 2: And it's again we've talked about some of these are
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Speaker 2: gonna come off the board, like the expectation that I
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Speaker 2: think almost everyone has. Hey, not all of these are
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Speaker 2: gonna be in place when April ninth rolls around, but
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Speaker 2: you don't know which ones, And it's not like they're
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Speaker 2: all gonna come off the board. Like, do you think
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Speaker 2: you're gonna get fifty seven different bilateral trade agreements signed.
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Speaker 3: In a week? No, it seems unlikely. I don't. I
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Speaker 3: couldn't even do one. But again, I'm not being out.
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Speaker 3: I wouldn't be surprised by a dozen.
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Speaker 4: Like to be clear, if you missed the first part
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Speaker 4: of our show today, the larger tariffs on fifty seven
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Speaker 4: countries do not go into effect until the ninth.
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Speaker 3: It is the ninth of April, six days from now.
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Speaker 3: It is my expectation.
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Speaker 4: It sounds like Chuck's expectation that there are going to
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Speaker 4: be a slew of announcements on these tariffs of countries
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Speaker 4: who were either already negotiating with the Trump administration behind
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Speaker 4: closed doors, and those new negotiations get announced and therefore
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Speaker 4: tariffs come down from these headline rates or new negotiations
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Speaker 4: that happen over the course of the next week or
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Speaker 4: so and get announced. In either case, I expect them
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Speaker 4: to come lower. But boy, is it really important to
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Speaker 4: figure out how much lower over the next six days,
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Speaker 4: because if it's not substantial, there are some real shadows
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Speaker 4: hovering over the economy.
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Speaker 3: Let's take a quick break here.
10:50
Speaker 2: When we come back, we'll do a little bit of
10:52
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10:56
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Speaker 2: Taking a look at markets, Dows still off fourteen hundred
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Speaker 2: and forty two points, SMP down two thirty two, Nasdaq
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Speaker 2: down nine thirty four, so about a three and a
12:15
Speaker 2: half to five and a half percent drop across the
12:17
Speaker 2: major indices. Russell two thousand also down about six and
12:20
Speaker 2: a half percent, So it is it's it's pretty gross
12:23
Speaker 2: out there. Ten year treasury, big move down in yields.
12:26
Speaker 2: Uh You might say, okay, what's the what's the tenure
12:29
Speaker 2: telling us here? It's basically saying, hey, if these policies
12:33
Speaker 2: are enacted, it's going to slow growth to the point
12:35
Speaker 2: where we expect the next ten years to be a
12:38
Speaker 2: lower growth environment than previously anticipated. And so you've got
12:43
Speaker 2: rates coming down on that front to four point two
12:46
Speaker 2: nine percent, down sixteen basis points. Oil we mentioned OPEC
12:51
Speaker 2: plus is accelerating their plans for more production. Uh so
12:55
Speaker 2: Oil West text Intermediate down five dollars and forty seven
12:58
Speaker 2: cents a barrel to sixty six twenty four. If you're
13:01
Speaker 2: seeing seven percent daily swings in pricing, that's not really
13:06
Speaker 2: the environment that US producers want to say, Hey, let's
13:08
Speaker 2: try to drill a little bit more. They get nervous,
13:10
Speaker 2: you know when they see these kinds of things. And
13:13
Speaker 2: you've got Gold down twenty five dollars ounce, which sounds
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Speaker 2: like a big chunk, but it was actually down eighty
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Speaker 2: earlier in the day, so Gold having a little bit
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Speaker 2: of an intra day rally, but still down overall here.
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Speaker 2: So again, you got a pretty big sell off going on.
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Speaker 2: Where is it concentrated. Take a look at the worst
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Speaker 2: performers in the S and P five hundred on a
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Speaker 2: percentage basis. I'm sorry if you are anything related to
13:37
Speaker 2: apparel or technology products hardware, yes.
13:41
Speaker 3: You are getting absolutely crushed.
13:43
Speaker 2: Ralph Lauren down seventeen percent, Decker's down sixteen percent, Best
13:47
Speaker 2: Buy down fifteen percent.
13:49
Speaker 4: Guard Gay down sixteen and a half. A local employer
13:51
Speaker 4: around here, Dell Technologies employs about five thousand Massachusetts people,
13:56
Speaker 4: down sixteen percent in early trading.
13:58
Speaker 2: Has Bro down fourteen percent. You've got let's see who
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Speaker 2: else is notable? Bath and body Works down thirteen percent,
14:07
Speaker 2: Micron Technology down twelve, Nike down twelve, Capital One down twelve.
14:13
Speaker 2: You might be saying, hey, how's Capital one fit in?
14:15
Speaker 2: They're like, they're the first, you know, financial in this group.
14:17
Speaker 2: Capital One serves the low income customer predominantly. They are
14:22
Speaker 2: a credit card company that really focuses on those entry
14:25
Speaker 2: level credit cards for people that don't have you know,
14:28
Speaker 2: the strongest credit. Those are gonna be people that have
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Speaker 2: the biggest disruptions based on the projected price increases of
14:36
Speaker 2: goods and things that they buy. So that's why you've
14:39
Speaker 2: got them as kind of the financial that's leading the
14:42
Speaker 2: way down.
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Speaker 4: Interesting one to meet, Chuck. Walmart typically seen as a
14:45
Speaker 4: defensive stock, which I can understand, but obviously massive importer
14:50
Speaker 4: of goods from China, only down about one and a
14:52
Speaker 4: half percent in early trading. I suppose there's also the
14:55
Speaker 4: grocery side of that business which is not as affected
14:57
Speaker 4: by yesterday's announcements, but smaller sell off than I might
15:01
Speaker 4: have anticipated from Walmart so far this morning.
15:04
Speaker 2: Who's up today? Coke, PEPSI both up about three percent.
15:07
Speaker 2: You got Southern Company and Duke up a couple percentage
15:11
Speaker 2: points in the utility space. Few healthcare companies United Health
15:15
Speaker 2: and Signa Health Insuran is up a couple percentage points. Again,
15:19
Speaker 2: you know, it's still there's health insurance. They always figure
15:23
Speaker 2: out ways to make money, don't they. You've got T Mobile,
15:27
Speaker 2: Verizon at and T up a couple percent. So people
15:31
Speaker 2: trying to hide in the places that they think are
15:34
Speaker 2: you know, a little bit more recession proof. But overall,
15:37
Speaker 2: just a rough day in markets and the thing that again,
15:43
Speaker 2: I think I'm kind of I'm kind of skewed just
15:47
Speaker 2: by how gnarly March of twenty twenty got, you know,
15:50
Speaker 2: like you look, get what we saw on March sixteenth
15:52
Speaker 2: of twenty twenty, the S and P was down twelve
15:54
Speaker 2: percent almost and so part of me I look at
15:57
Speaker 2: like a four percent down day in the SPM like
15:59
Speaker 2: it's bad, but it's not that bad, you know.
16:01
Speaker 3: I'm colored by that a little bit.
16:02
Speaker 4: Not peak COVID bad, I guess, but that's not really
16:05
Speaker 4: our benchmark.
16:06
Speaker 2: Look, a four percent down day is a meaningful move,
16:09
Speaker 2: and I totally get it if people are a little
16:11
Speaker 2: bit like, hey, I'm kind of freaked out by this,
16:13
Speaker 2: Like I get that.
16:15
Speaker 4: Yeah, I think there's two pieces to this, there's the
16:17
Speaker 4: recession risk, and hey, am I prepared for a downturn
16:20
Speaker 4: in employment if we get one? And then there's the
16:23
Speaker 4: more obvious one, which today is all about market moves
16:26
Speaker 4: and people's four oh one k's and unsure of what
16:29
Speaker 4: comes next. I think big picture. Here's what I always
16:32
Speaker 4: go back to on days like this, Chuck. It's have
16:35
Speaker 4: I thought of the question what am I going to
16:38
Speaker 4: do if markets go through a big downturn like we
16:40
Speaker 4: are seeing right now, like we are in the midst
16:42
Speaker 4: of the s and P's off eleven and a half
16:44
Speaker 4: percent from its all time highs, NASDAK off more than
16:47
Speaker 4: fifteen percent from its all time highs. If you have
16:50
Speaker 4: thought through that process, if you have had those conversations
16:53
Speaker 4: with the person managing your money, of hey, am I
16:57
Speaker 4: prepared for a market sellof of exte re assume that
17:01
Speaker 4: it gets worse before it gets better. And I've had
17:03
Speaker 4: those conversations, either with myself as my own portfolio manager,
17:07
Speaker 4: as a self manager, or with somebody else who's doing
17:09
Speaker 4: it for me. If so, then oftentimes the best thing
17:13
Speaker 4: to do can be nothing. If not, it's time to
17:16
Speaker 4: have those conversations. Am I financially prepared for a market
17:19
Speaker 4: sell off if we get you know, beyond correction to
17:22
Speaker 4: bear market worse, if we go into a recession? Am
17:25
Speaker 4: I prepared for that financially from a personal finance standpoint?
17:28
Speaker 4: Is my portfolio prepared for that? From a portfolio allocation standpoint?
17:33
Speaker 4: Those are the questions to be asking yourself ideally yesterday,
17:36
Speaker 4: but if not yesterday, then today. If you have those questions,
17:39
Speaker 4: if you're not able to answer confidently, yes, I feel
17:41
Speaker 4: prepared for this type of event, give the folks at
17:44
Speaker 4: Armstrong a call eight hundred three nine three four zero
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Speaker 4: zero one. We're stand by to take your call, talk
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Speaker 4: you through it, sit down ideally and answer those questions,
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Speaker 4: or at least raise those questions once again. That number
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Speaker 4: for the Armstrong Advisory Group should you have questions, eight
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Speaker 4: hundred three nine three for zero zero one.
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Speaker 1: any investment decisions. Armstrong make contact you to offer investment
18:15
Speaker 1: advisory services.
18:18
Speaker 4: Let's see we got to support tomorrow, we do get
18:22
Speaker 4: a jobs report tomorrow.
18:23
Speaker 3: Do you wanna go there? Do you want to go
18:24
Speaker 3: Canada and Mexico?
18:24
Speaker 4: Because I think that was one piece that hasn't gotten
18:27
Speaker 4: a lot of mention so far, pretty notably absent and
18:31
Speaker 4: potentially a win for Canada and Mexico at least early
18:33
Speaker 4: on here that there are no additional imposed tariffs on
18:36
Speaker 4: those two countries.
18:38
Speaker 3: Are they still one thing?
18:39
Speaker 2: I haven't seen any clarification on they're still getting the
18:41
Speaker 2: additional ten percent?
18:44
Speaker 3: I do believe they weren't.
18:45
Speaker 2: They weren't mentioned anywhere in here like I let's see,
18:49
Speaker 2: actually no hang on, they were mentioned at the bottom
18:51
Speaker 2: of the executive order here d D. So the stuff
18:58
Speaker 2: that is USMCA qualifying is still exempt from tariffs from
19:03
Speaker 2: even the ten it appears, yep. And everything that isn't
19:07
Speaker 2: is subject to the twenty five percent. And so yeah,
19:11
Speaker 2: it's the stuff from Canada Mexico is just still in
19:13
Speaker 2: place as previously previously indicated.
19:18
Speaker 4: And I have seen at least one announcement from Stalantis
19:21
Speaker 4: of a production freeze at a Canadian auto plant as
19:24
Speaker 4: those tariffs go into place today. Quick break Matthew Gangnon
19:28
Speaker 4: from WGAN and the chief executive officer of the Main
19:31
Speaker 4: Policy Institute. Joining us next to Talk Tariffs.
19:41
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20:06
Speaker 5: Trivia questions today was how many times has Eddie Murphy
20:08
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20:20
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20:24
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20:27
Speaker 4: Joining us now is Matthew Gagnon. He is the host
20:29
Speaker 4: of the morning show on Portland's talk show WGA and
20:33
Speaker 4: talk station WGAN, and is the chief executive of the
20:38
Speaker 4: Main Policy Institute. Matt, thanks for joining us, appreciate it.
20:42
Speaker 7: It's always a pleasure, guys.
20:43
Speaker 3: Thanks for inviting me so obvious.
20:46
Speaker 4: If anyone was under a rock for the last twenty
20:49
Speaker 4: four more like seventy two hours, they may have missed it,
20:52
Speaker 4: but tariffs implemented yesterday, probably some negotiations coming over the
20:57
Speaker 4: next six days.
20:59
Speaker 3: Matt, when you are.
21:00
Speaker 4: Thinking about all of this, and let's pone in here
21:03
Speaker 4: on New England or Maine specifically, what are you looking
21:07
Speaker 4: at in regard to these tariffs and the potential impact.
21:10
Speaker 3: More locally here in the New England region.
21:14
Speaker 7: Well, that's an excellent question. I mean, there's a lot
21:17
Speaker 7: of history here obviously in New England, and when you're
21:19
Speaker 7: talking about the manufacturing base, which is what Trump is
21:22
Speaker 7: really targeting with a lot of these tariffs, he's attempting
21:25
Speaker 7: to create an environment where American jobs, American manufacturing in
21:30
Speaker 7: the middle class, et cetera, can grow. This is an
21:33
Speaker 7: area where we've been particularly hit hard. Papermaking in the
21:37
Speaker 7: state of Maine, for instance, was a place that was
21:40
Speaker 7: really where a lot of those jobs existed in the past,
21:42
Speaker 7: and now they're gone. And so when you're looking at
21:46
Speaker 7: the effect of these tariffs for people here, I think
21:48
Speaker 7: that's going to be one measurement, one barometer for them
21:51
Speaker 7: on whether or not they're successful if they stay in place,
21:54
Speaker 7: and if they continue for a while and jobs come back,
21:58
Speaker 7: more manufacturing happens you start to see some of those
22:00
Speaker 7: jobs return, then I think they'll view it as a success. If,
22:04
Speaker 7: on the other hand, they don't, and you see rising prices,
22:07
Speaker 7: you see the stock market in trouble, you see jobs
22:09
Speaker 7: kind of hover or decline, the economy contract or recession,
22:12
Speaker 7: lots of those types of things, you're gonna probably see
22:15
Speaker 7: people turn on them very quickly here. So it's a
22:18
Speaker 7: little bit of a wait and see attitude, which I
22:20
Speaker 7: think you're seeing everywhere in the country right now.
22:22
Speaker 4: Demographics being what they are in New England main being
22:24
Speaker 4: the oldest state in the country, for example, what does
22:27
Speaker 4: the possibility of really bringing jobs back to this region
22:31
Speaker 4: look like? Right you talk about manufacturing in New England,
22:34
Speaker 4: whether it's in Manchester or New Hampshire. I forget the
22:36
Speaker 4: name of the building that goes along the river there
22:39
Speaker 4: for quite a ways that's been shut down as a
22:42
Speaker 4: manufacturing facility for something.
22:44
Speaker 3: Like one hundred years.
22:45
Speaker 4: What does the possibility of manufacturing in New England look
22:48
Speaker 4: like again in your mind?
22:51
Speaker 7: That's a difficult question to answer because I think that
22:55
Speaker 7: a lot of this is very dependent on how the
22:56
Speaker 7: other countries react and what ultimately happens with the with
23:01
Speaker 7: the tariff rates in a variety of different industries. You know,
23:05
Speaker 7: the big one for US in Maine is papermaking and
23:07
Speaker 7: the Canadians, right, So a lot of these conflicts in
23:10
Speaker 7: the early part of the Trump administration have circulated around
23:14
Speaker 7: Canada and Mexico, a little bit of China as well.
23:16
Speaker 7: I know that these tariffs are universal, at least the
23:19
Speaker 7: broad base ten percent one is. I know that the
23:21
Speaker 7: reciprocal tariffs obviously are individualized each country. But Canada has
23:25
Speaker 7: been at the centerpiece of all this, and if that
23:29
Speaker 7: ends up having a trade war start where they're raising
23:33
Speaker 7: tariffs in response to ours and then we do the
23:35
Speaker 7: same to try to continue the game a little bit.
23:37
Speaker 7: To me, I don't really see a lot of opportunity
23:40
Speaker 7: for manufacturing to come back here. Ultimately, what you really
23:43
Speaker 7: would need to have happen is the Canadians to drop
23:45
Speaker 7: theirs and provide a material advantage for producing in the
23:49
Speaker 7: United States. And I'm not sure, especially with the rhetoric
23:52
Speaker 7: that's coming out of the new Prime minister's mouth in Canada,
23:54
Speaker 7: I'm not sure you're likely to see that. So it
23:58
Speaker 7: would be if it does happen, it's going to take
23:59
Speaker 7: a long time. I mean, it's not something that you're
24:01
Speaker 7: going to see major investments by companies in this week,
24:04
Speaker 7: next week, because a lot of them are very nervous
24:07
Speaker 7: and unsure about exactly what the policy will be in
24:11
Speaker 7: the course of the next several weeks and months, So
24:13
Speaker 7: you can't make long term investment decisions like that.
24:15
Speaker 4: Speaking of which, Prime Minister Mark Karney is addressing somebody
24:19
Speaker 4: right now as we speak, holding a press conference, presumably
24:22
Speaker 4: in reaction to yesterday's announcements. So we will cover that
24:25
Speaker 4: later on today or tomorrow. Bigger picture here, Matt, to
24:30
Speaker 4: get a little bit into politics or your read there
24:35
Speaker 4: forget about the White House for a moment. You know,
24:38
Speaker 4: elected representative senators, what are we hearing in terms of
24:41
Speaker 4: reaction there and what's been the mood that you've been
24:44
Speaker 4: able to tell on Capitol Hill from those elected representatives
24:47
Speaker 4: from either side of the aisle.
24:50
Speaker 7: Well, there's been a little mini rebellion in the Republican Party.
24:53
Speaker 7: You have people like Ran Paul out there, obviously, our
24:55
Speaker 7: senator in May and Susan Collins who have been seeking
24:59
Speaker 7: in the Canadian example, to try to take some action there.
25:02
Speaker 7: But you're likely to see additional actions in reaction to
25:06
Speaker 7: what he did yesterday. I think that that is a
25:09
Speaker 7: very small and limited group though at this time. So
25:12
Speaker 7: whether or not that's going to grow at all is
25:14
Speaker 7: anybody's guests. I suppose it is sort of fascinating though
25:17
Speaker 7: from a political history standpoint, if you read your history,
25:20
Speaker 7: this is a return to a very old brand of
25:23
Speaker 7: Republican politics. This is like nineteenth century Republican, early twentieth
25:28
Speaker 7: century Republican, and the Democrats for the better part of
25:31
Speaker 7: the twentieth century were the ones that were in trade
25:33
Speaker 7: protectionism and trying to help labor unions and workers and
25:37
Speaker 7: whatnot for a long time. So this is a bit
25:39
Speaker 7: of a reversal. And it's been interesting to watch a
25:42
Speaker 7: lot of the US Senators that were elected in a
25:44
Speaker 7: different time maybe as free traders, shift and morph along
25:49
Speaker 7: with this populist nationalist movement that's grown in the Republican
25:52
Speaker 7: Party and kind of bend the need to it. I mean,
25:54
Speaker 7: they're all about supporting the president on this, while only
25:58
Speaker 7: a handful of them have defected. So I think the
26:00
Speaker 7: real question, guys, will be as the economic effects of
26:04
Speaker 7: this start to take hold, if you see a recession,
26:07
Speaker 7: if you see rising prices. If you see a lot
26:10
Speaker 7: of the negative things, do those people that are kind
26:13
Speaker 7: of with the president right now in his own party
26:15
Speaker 7: stay there or do they begin to rebel and revolt
26:18
Speaker 7: a little bit. I don't know the answer to that
26:20
Speaker 7: question yet, but I do know that the loyalty that
26:22
Speaker 7: he has right now is pretty strong.
26:24
Speaker 4: Any other big takeaways or surprises that you got from
26:28
Speaker 4: either markets today or yesterday's announcements that just you're not
26:32
Speaker 4: seeing played out there as you expected over the course
26:35
Speaker 4: of today and yesterday after the announcements, this.
26:38
Speaker 7: Is exactly what I expected, honestly. I mean a little
26:41
Speaker 7: bit of it was dependent on what exactly he announced.
26:43
Speaker 7: I know that there was talk of both the universal
26:45
Speaker 7: broad based tariffs as well as the reciprocal tariffs, and he.
26:48
Speaker 3: Did both yep, which is interesting.
26:50
Speaker 7: So the scope of what he did is I suppose
26:52
Speaker 7: mildly surprising. He did campaign on this, but nobody knew
26:56
Speaker 7: what the specifics were really about, exactly what he was
26:58
Speaker 7: going to do, And now we're starting to get its
27:00
Speaker 7: sense of that. The market reaction to it is not
27:02
Speaker 7: at all surprising. That's something that would be one of
27:04
Speaker 7: the most predictable things you could have imagined when you're
27:07
Speaker 7: doing this kind of thing, are there are definite effects
27:10
Speaker 7: that will absolutely happen. Trade will decline, prices will rise.
27:15
Speaker 7: Certainty in a lot of these investments will be a
27:18
Speaker 7: great deal less. And because of that, there's a lot
27:21
Speaker 7: of hesitancy from people that are going to be investing
27:23
Speaker 7: in the market to do so, because they don't really
27:25
Speaker 7: know exactly what to do, and they are a little
27:27
Speaker 7: bit pessimistic now that if they're investing in a company
27:30
Speaker 7: that had access to foreign markets and suddenly they won't,
27:35
Speaker 7: you know, what's that going to mean for their bottom line?
27:37
Speaker 7: I don't know, so I'm not going to invest today.
27:38
Speaker 7: So this is very unsurprising and will likely continue. But
27:42
Speaker 7: long term, the question is how long does it stay,
27:44
Speaker 7: How long do these tariffs stay, and how to markets
27:48
Speaker 7: react when things do change.
27:49
Speaker 4: Matthew Gagnon is the host of Portland's largest talk radio station,
27:54
Speaker 4: The Morning Show on WGA, and is also the chief
27:56
Speaker 4: executive of the Main Policy and joined us today talk
28:01
Speaker 4: about the implementation of new tariffs from the Trump administration.
28:04
Speaker 3: Thank you, Matt, pleasure. Thanks guys.
28:07
Speaker 4: Let's take a quick break. When we come back, we're
28:10
Speaker 4: gonna be doing sac Roulette. My guess is that a
28:12
Speaker 4: lot of the stories are going to be about tariffs.
28:13
Speaker 3: Quick break.
28:14
Speaker 4: We'll be back with that next Here on the Financial Exchange.
28:17
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29:16
Speaker 3: Mike, what do you got for me for stack Roulette?
29:18
Speaker 4: Let's go to jobs We've got a few things going
29:21
Speaker 4: on here. We did get the weekly jobs report this morning.
29:24
Speaker 4: It was fine, no big announced, noe big increases in
29:29
Speaker 4: filings for unemployment. However, furloughs in the federal government total
29:34
Speaker 4: two hundred and sixteen thousand, two hundred and fifteen for
29:38
Speaker 4: the month of March, a total of two hundred and
29:40
Speaker 4: seventy five thousand in terms of reductions in the overlall
29:45
Speaker 4: labor force. That is according to data from Challenger Gray
29:48
Speaker 4: and Christmas, who does their own tallies of this. That
29:52
Speaker 4: total that two hundred and seventy five thousand was surpassed
29:56
Speaker 4: only by April and May of twenty twenty, which, if
30:00
Speaker 4: you recall, those were not great days for employment or layoffs.
30:05
Speaker 4: So these appear to be coming. These also appear to
30:08
Speaker 4: have occurred prior to any announcement on tariff, so not
30:11
Speaker 4: teriff related, mostly government job cut related. And we will
30:16
Speaker 4: see if this starts showing up in tomorrow's jobs report,
30:20
Speaker 4: which does measure employment for the month of March, that
30:24
Speaker 4: comes out tomorrow at eight thirty am. Just something I've
30:28
Speaker 4: been thinking about here locally, right, I mean, we in
30:31
Speaker 4: the New England region are not home to big manufacturers,
30:35
Speaker 4: for example, that are likely to benefit in the short
30:37
Speaker 4: term from jobs coming back to the United States instead.
30:40
Speaker 4: Biggest employers in the New England area. You think about
30:43
Speaker 4: companies like Partners Healthcare, Mass General Hospital, Brigham and Women's.
30:47
Speaker 4: Raytheon is a big one as well. But these large
30:50
Speaker 4: employers who are heavily reliant, they all seem to have
30:54
Speaker 4: one thing in common to me. Whether it's Harvard University, UMass,
30:59
Speaker 4: you may, the health systems across New England or even Raytheon,
31:04
Speaker 4: they all rely very heavily on government funding.
31:08
Speaker 3: Yeah.
31:09
Speaker 4: If one of the things that we think is a
31:10
Speaker 4: theme developing over the next couple of years here are
31:14
Speaker 4: dramatic cuts to both government employment and government funded studies
31:19
Speaker 4: government funded research, then New England might fare a lot
31:24
Speaker 4: differently than they have during the last previous recessions, both
31:27
Speaker 4: in terms of employment, real estate, etc.
31:32
Speaker 3: Yeah.
31:32
Speaker 2: I think that's entirely fair and something that we have
31:35
Speaker 2: to be aware of and that how this cycle could
31:39
Speaker 2: be different from prior ones. I want to talk about,
31:43
Speaker 2: you know, with all this hype, we touched on it
31:45
Speaker 2: briefly at the end of yesterday's show, but we've got
31:47
Speaker 2: an April fifth deadline for TikTok to either be sold
31:51
Speaker 2: or shut down. Now, they could obviously extend that. There's
31:53
Speaker 2: already been one extension that the Trump administration is granted.
31:58
Speaker 2: But we've got more bids that have come in. We
32:00
Speaker 2: covered Amazon's briefly at the end of yesterday's show and
32:05
Speaker 2: appleven who I'm sure none of us are you know,
32:08
Speaker 2: really that familiar with because quite honestly, like they didn't
32:13
Speaker 2: really exist as a publicly traded company before. I'm trying
32:18
Speaker 2: to see when they even went public let's see longer
32:23
Speaker 2: than you'd think, twenty twenty one. But they were basically
32:26
Speaker 2: a non factor in markets until the very end of
32:30
Speaker 2: last year. And now they've been the target of short
32:32
Speaker 2: sellers in the last couple of days. But they are
32:34
Speaker 2: trying to potentially buy TikTok as well. But we are
32:39
Speaker 2: getting close to TikTok day yet again. And I got telly.
32:44
Speaker 3: Close, like two days from now. Yeah.
32:45
Speaker 2: The New York Times was I think the first to
32:47
Speaker 2: report on the Amazon one, and they said that, according
32:52
Speaker 2: to people familiar with the deal, TikTok was not interested
32:56
Speaker 2: in the Amazon offer. Now I don't know if that's
33:00
Speaker 2: because of, you know, the price it was at or
33:02
Speaker 2: this or that. But I did think it made a
33:04
Speaker 2: ton of sense for Amazon, as much as I might
33:06
Speaker 2: not like it from a personal perspective. In that, Hey,
33:09
Speaker 2: if you've got a whole bunch of influencers selling stuff
33:12
Speaker 2: on TikTok, and hey, click on this and here's the
33:15
Speaker 2: direct link to buy in the app using your Amazon account. Yeah,
33:18
Speaker 2: golly g Wilkers, that sounds like a pretty good deal
33:20
Speaker 2: for Amazon, even though I find it to be pretty
33:22
Speaker 2: anti competitive in this and that.
33:23
Speaker 3: But neither here nor there, so that was interesting to me.
33:28
Speaker 2: I'm also kind of curious, hey, given the state of
33:33
Speaker 2: playing geopolitics and questions about the state of the economy, like,
33:38
Speaker 2: who really wants to commit to a bid for TikTok
33:41
Speaker 2: right now?
33:43
Speaker 3: Right? Hair question? Yeah, I mean, like, how do you
33:45
Speaker 3: know how much to pay?
33:46
Speaker 4: Probably eliminates a few companies off that list, just in
33:50
Speaker 4: terms of what their future earnings look like. Obviously, Oracle
33:53
Speaker 4: was the front runner here, and it seems like Ellison
33:58
Speaker 4: is that Yeah, Larry Elso, Yeah, Larry Elsen has been
34:00
Speaker 4: trying to push this for quite some time. The latest
34:03
Speaker 4: that I heard was an idea to lease the basically
34:09
Speaker 4: lease the IP from TikTok from byte Dance rather in
34:13
Speaker 4: terms of the algorithms in there, rather than whoever owns this.
34:17
Speaker 4: They would own the app, presumably they would own the
34:20
Speaker 4: flow of data in terms of the app users in
34:23
Speaker 4: the United States, but they would not own the actual
34:27
Speaker 4: intellectual property of the algorithm. So, in my mind, if
34:31
Speaker 4: this deal can't be made, right like you're saying here,
34:35
Speaker 4: maybe the US blocks that. But if you're saying here that, hey,
34:38
Speaker 4: we are going to allow China to still own the
34:41
Speaker 4: algorithm and own the intellectual property of that, and we
34:45
Speaker 4: are just going to pay a big old price to
34:47
Speaker 4: keep this stuff here, keep the advertising revenue and everything
34:50
Speaker 4: like that, if that deal can't get approved by the Chinese,
34:54
Speaker 4: then it tells you very one, very clear thing. They
34:57
Speaker 4: have no intention of making a deal because the re
35:00
Speaker 4: and that this exists is to be able to collect
35:02
Speaker 4: data on Americans.
35:04
Speaker 3: Right.
35:04
Speaker 4: I just don't think there's any other interpretation there. If
35:08
Speaker 4: that is the deal they end up getting offered, Hey
35:11
Speaker 4: you can still have the IP, you can still have
35:12
Speaker 4: the algorithm, nobody's going to be able to rip it off,
35:16
Speaker 4: but we get all the data, well, then you know
35:18
Speaker 4: what they want in that case is the data if
35:20
Speaker 4: they can't make that deal work.
35:21
Speaker 3: Yeah, yeah, what else you got for me, Mike?
35:25
Speaker 4: Stagflation keeps getting printed? Is it actually something for us
35:29
Speaker 4: to worry about? So, first of all, what is stagflation?
35:32
Speaker 4: It is the.
35:33
Speaker 2: Coel famously said, I can see the stag but not
35:37
Speaker 2: the flair. I can see I don't. I see the flation,
35:39
Speaker 2: but I'm not seeing the stag.
35:40
Speaker 4: Yes, uh, he was not looking for. What is a stag?
35:44
Speaker 4: A horse with a no, that's a uniqu failed deer.
35:46
Speaker 4: Oh okay, uh uh. So to get stagflation, you need
35:52
Speaker 4: two things occurring at once. You need a recession, a
35:54
Speaker 4: slow down in economic activity, usually paired with higher unemployment.
35:58
Speaker 4: You also need high inflation. We sow it during the
36:01
Speaker 4: nineteen seventies. That was really the only time in modern
36:04
Speaker 4: US history where you have actually experienced stagflation. It's getting
36:08
Speaker 4: reported on more and more here because every time there's
36:10
Speaker 4: an economic slow down or some semblance of inflation, it
36:14
Speaker 4: gets printed on. It was printed on in twenty twenty two,
36:16
Speaker 4: it didn't happen. Do we actually feel there is a
36:19
Speaker 4: long term risk of stagflation right now?
36:21
Speaker 3: Chuck? How do we define long term?
36:25
Speaker 4: I mean, what was the seventies experience five ten years
36:27
Speaker 4: of you know, on again, off again stagflation.
36:30
Speaker 3: So I would say no.
36:31
Speaker 2: And the reason that I say no is based on
36:34
Speaker 2: what we are seeing in terms of inflation swaps in
36:37
Speaker 2: that market, where you're seeing them being bid up significantly
36:42
Speaker 2: in the next one year, but the two to three
36:44
Speaker 2: year inflation swaps are falling. So basically, here's what that
36:47
Speaker 2: market is telling you. It's telling you there's gonna be
36:50
Speaker 2: some higher inflation over the next year or so, but
36:53
Speaker 2: the damage caused by that inflation is going to slow
36:57
Speaker 2: the US economy to the point where you might have
37:00
Speaker 2: a recession. In inflation is not a major concern the
37:03
Speaker 2: next couple of years. Yeah, so you could have the
37:07
Speaker 2: flation and then the stag is kind of what it's saying,
37:11
Speaker 2: but not necessarily to expect them both at once.
37:14
Speaker 3: You might have a short period.
37:15
Speaker 2: I mean, look this, if this year develops the worst
37:18
Speaker 2: way that it could, Yeah, it's it's absolutely possible. It's
37:22
Speaker 2: it's definitely possible. Is it something that is the most likely?
37:28
Speaker 2: Not really, because generally it's really hard for inflation to
37:31
Speaker 2: maintain a hold once any kind of slow down happens.
37:35
Speaker 2: It did happen in the seventies. But even that it
37:39
Speaker 2: was something where inflation was high, but it didn't like
37:41
Speaker 2: stay high the entire time. It varied over the course.
37:44
Speaker 2: You know, it was a double peak that you saw.
37:46
Speaker 2: So it's what I can tell you is that there's
37:51
Speaker 2: if these tariffs all stay in place, there's the potential
37:55
Speaker 2: for some very very negative economic consequences in the form
38:00
Speaker 2: of higher prices and lower growth in the short term.
38:04
Speaker 3: Is it all worth it at the end? I got
38:07
Speaker 3: no idea.
38:08
Speaker 2: I'm trying to see to next Tuesday right now, you know,
38:12
Speaker 2: not what things look like five, six, seven years from now.
38:15
Speaker 2: So we're gonna have to see. We're gonna take a
38:17
Speaker 2: break for the rest of the day. Back at tomorrow.
38:20
Speaker 2: We do have a job's Friday. We'll be talking that
38:21
Speaker 2: and more on tariffs tomorrow.
38:23
Speaker 3: Tune in. We'll see you then