Latest / Markets with Megan: A Quick Financial Markets Update / Impact Report: Liberation Day FACTS and the Reorder of Global Trade | S2 E027 | 04-03-25
Transcript
- 0:00Megan Horneman: Liberation Day has come and gone.
- 0:02Megan Horneman: It's Thursday, April the 3rd, and this is Markets with Megan.
- 0:04Megan Horneman: We're coming to you today with a special impact report to address what we learned from the White House yesterday.
- 0:10Megan Horneman: First of all, let's stick with the facts and then we're going to try and answer some of the questions that we know are on investors' minds today.
- 0:16Megan Horneman: First of all, the facts.
- 0:17Megan Horneman: The tariffs were a bit harsher and broader than most people had anticipated.
- 0:21Megan Horneman: The administration put a 10% across the board tariff on all imports coming into the US.
- 0:27Megan Horneman: They also raised substantially the tariffs in these reciprocal tariffs where if you charge us, we're going to charge you.
- 0:34Megan Horneman: So there was it's a White House complex calculation on how they arrived at that tariff, but again, it's in direct correlation to how they charge us and how they treat our imports.
- 0:45Megan Horneman: No longer is the Trump administration using tariffs as a punishment for fentanyl or immigration.
- 0:51Megan Horneman: Now this is tariffs as a way to reorder global trade, and that's what they're referring this to.
- 0:57Megan Horneman: This is to change the entire global trade landscape.
- 1:01Megan Horneman: Now, this shouldn't come as a massive surprise.
- 1:04Megan Horneman: A bit harsher than most had expected.
- 1:07Megan Horneman: Yeah, that can be a surprise, but Trump has used his first term in office.
- 1:11Megan Horneman: He used tariffs.
- 1:11Megan Horneman: He campaigned on using tariffs and even in the private sector he's been very vocal for decades about the unfair trade practices that have put a disadvantage to US companies.
- 1:23Megan Horneman: What does this mean for economic growth?
- 1:25Megan Horneman: This is a negative for economic growth in the short term.
- 1:28Megan Horneman: We don't think this is going to result in a long term prolonged economic recession, but it does put downside risk to growth this year.
- 1:37Megan Horneman: We also think that it puts upside risk to inflation this year.
- 1:42Megan Horneman: The economic growth that we're seeing in the first quarter has something to do with some of the pulled forward in purchases.
- 1:49Megan Horneman: So when we may see negative growth this year really depends on how much purchases are pulled forward First quarter, maybe some of second quarter, but we do think that impact will be felt in the middle of this year and the third quarter of this year.
- 2:01Megan Horneman: The extent of the damage really depends on the retaliatory tariffs.
- 2:05Megan Horneman: We just don't know that right now and we don't know how long that will go on, how back and forth it will go, but we do have some countries that have said they will come forth with retaliatory tariffs.
- 2:44Megan Horneman: No-transcript.
- 2:47Megan Horneman: This because today's a very volatile day and it can be very painful to watch.
- 2:50Megan Horneman: We saw the Dow open up down over a thousand points this morning, the Nasdaq's down over 4% and global equities around the world have been hit from today on this.
- 3:00Megan Horneman: Bond yields are falling pretty dramatically.
- 3:02Megan Horneman: We have the 10-year treasury yield at about 4%.
- 3:05Megan Horneman: It's the lowest level since October.
- 3:07Megan Horneman: The bond market's telling you they're more concerned about economic growth than they are about inflation.
- 3:12Megan Horneman: We also are starting to see some adjustments to earnings estimates.
- 3:15Megan Horneman: It was very difficult for analysts to even come up with earnings estimates for this year without knowing what the tariffs will be.
- 3:23Megan Horneman: So now that there are baselines, just like the Federal Reserve, we're going to see some adjustments to earnings estimates for this year without knowing what the tariffs will be.
- 3:27Megan Horneman: So now that there are baselines, just like the Federal Reserve, we're going to see some adjustments to earnings estimates for this year.
- 3:30Megan Horneman: We also said coming into this year that the earnings were too high anyway and that had, regardless of tariffs, they were too high anyway.
- 3:39Megan Horneman: So we think this is a readjustment and a resetting of expectations for earnings and valuations.
- 3:45Megan Horneman: Now, what's our view?
- 3:46Megan Horneman: What would we be?
- 3:47Megan Horneman: What were we recommending to do right now?
- 3:49Megan Horneman: First of all, tariffs are here in some form or fashion.
- 3:52Megan Horneman: We still do think this is still a negotiating phase.
- 3:55Megan Horneman: We think there's probably more likelihood of negotiations with some of our bigger allies than China might be a little bit more of a difficult thing to tackle right now, but we are long-awaited term investors and these are the days where these opportunities really arise for those that can withstand short term volatility and focus and are disciplined on their long term investing goals.
- 4:17Megan Horneman: Some of the areas of the market that we like we still like developed international equities.
- 4:23Megan Horneman: They're cheaper now than they were a week ago.
- 4:25Megan Horneman: So if you have cash to put to work, there are pockets that you can look at in the US global equity market.
- 4:33Megan Horneman: So developed international US small and mid-cap stocks also.
- 4:37Megan Horneman: They may be more domesticated in some fashion, so they might be a little bit more insulated.
- 4:42Megan Horneman: Some of this trade rhetoric and you're getting these investments at 10 to 20 percent cheaper than they were a couple weeks ago.
- 4:50Megan Horneman: So this is something.
- 4:51Megan Horneman: We're still looking at these as opportunities for the long run.
- 4:55Megan Horneman: The couple action points we would do if you have been sitting on cash waiting to put it to work, now's your time.
- 5:01Megan Horneman: Put some of that cash to work.
- 5:03Megan Horneman: Also, if you're on a systematic investing plan, it's a great opportunity to maybe pull that forward because, again, we're looking at markets 10 to 20% cheaper than they were.
- 5:12Megan Horneman: We will be looking at putting more of our cash to work.
- 5:16Megan Horneman: We're looking at all of the equity markets right now.
- 5:19Megan Horneman: The bigger part of the market that's being hit right now, the US large-cap growth, still may be a bit expensive for us, but there may be opportunities in large-cap value as well.
- 5:29Megan Horneman: We'll come back and give the recommendations as we see this situation develop.
- 5:35Megan Horneman: And the reason why we're not afraid to go in to the markets when most people are jumping out is because we are still very optimistic on the long run for economic growth here in the US and very optimistic on US businesses.
- 5:47Megan Horneman: We are a very resilient economy and we are good at so many things, but we're also great at adjusting and business owners are extraordinarily smart.
- 5:57Megan Horneman: They'll find ways to adjust businesses to get through this in the long run.
- 6:01Megan Horneman: Now we'll be back regularly in this impact report because, as we mentioned, it's a very fluid situation.
- 6:07Megan Horneman: Things could change very drastically even from the market open to the market close.
- 6:11Megan Horneman: So be patient, remain diligent and also focus on long-term investing goals.
- 6:17Megan Horneman: That's what this is about long-term investment.
- 6:20Megan Horneman: Thank you.