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US Stocks Slump as Trump’s Threat to Fire Powell Adds Pressure · Bloomberg Intelligence

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  Speaker 2: So pressure seems to be building on FED Chairman Jpal
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  Speaker 2: from the White House. President Trump out on social media
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  Speaker 2: this morning urging the Fed to lower interest rates and
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  Speaker 2: challenging FED Chairman Jpal personally on a personal level as well.
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  Speaker 2: It seems like Tom Oor, like Bloomberg Economics Chief Economists, Hey, Tom,
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  Speaker 2: how concerns should the marketplace be about President Trump and
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  Speaker 2: the political pressure he is applying to the Fed into
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  Speaker 2: the FED Chairman.
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  Speaker 3: Well, I think there's a couple of reasons to be
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  Speaker 3: concerned about it, Paul. The first reason is that we
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  Speaker 3: have central bank independence for a reason.
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  Speaker 4: Right.
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  Speaker 3: The experience from the nineteen sixties the nineteen seventies, when
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  Speaker 3: monetary policy was dominated by the concerns of the executive branch,
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  Speaker 3: was that well, that was a big contributing factor to
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  Speaker 3: inflation running much too high for much too long. So
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  Speaker 3: if you're in the bond market, if you're in the
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  Speaker 3: FX market, if you're in the equity market, that's clearly
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  Speaker 3: a big source of concern. The second, of course, is
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  Speaker 3: the signs that we're seeing from the administration, and I
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  Speaker 3: think we can think about that on two lines. The
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  Speaker 3: first is legal moves that you probably wouldn't pay too
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  Speaker 3: much attention to if you weren't an expert, but legal
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  Speaker 3: moves which chip away at the basis for FED independence,
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  Speaker 3: asserting a presidential right to fire the heads of other
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  Speaker 3: independent agencies, and legal skulls say, well, what's really going
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  Speaker 3: on there is that the Trump administration are laying the
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  Speaker 3: groundwork for a potential move against Chair Powell. And of
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  Speaker 3: course we don't need to go further than Trump's truth
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  Speaker 3: social account to see the president's animus right, a clear
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  Speaker 3: view that the FED is taking the wrong path and pals,
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  Speaker 3: to quote Trump, Trump's termination can't come soon enough.
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  Speaker 4: Okay, So to that point, let's just game theory this
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  Speaker 4: app for a second. What would happen if the FED
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  Speaker 4: cut rates?
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  Speaker 3: So I think the concern is that inflation is still
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  Speaker 3: considerably above the Fed's two percent target. So if the
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  Speaker 3: FED moved to cut interest rates at this point, I
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  Speaker 3: think the markets might reasonably conclude that it was doing
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  Speaker 3: so on the basis of political pressure rather than economic logic,
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  Speaker 3: and that will be a step to chipping away the
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  Speaker 3: Fed's credibility as an inflation fighter.
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  Speaker 5: And is that hard one?
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  Speaker 3: Credibility stretching back from Volka, through green Span, through Banankey,
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  Speaker 3: through Yellen, and now with Powell, which is key to
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  Speaker 3: keeping inflation expectations under control.
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  Speaker 2: Tom, So what's your concern here?
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  Speaker 5: I guess about the dollar?
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  Speaker 2: Here we seem just pronounced selling of the dollar down
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  Speaker 2: about the Bloomberg Dollar Index is down about eight percent
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  Speaker 2: from its recent hights.
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  Speaker 5: What does that tell you? So?
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  Speaker 3: It is interesting, Paul. The economic textbooks tell us when
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  Speaker 3: a country imposes tariffs, its currency should appreciate. But here
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  Speaker 3: we have the US imposing sweeping tariffs against all of
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  Speaker 3: its major trade partners and its currency is depreciating.
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  Speaker 5: So what's going on?
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  Speaker 6: Well?
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  Speaker 3: I think there's a few potential contributing factors. The first
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  Speaker 3: is that, well, the President himself has told us that
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  Speaker 3: he favors a weeker dollar to support competitiveness. Don't fight
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  Speaker 3: the Fed on interest rates, maybe don't fight the president
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  Speaker 3: on the exchange rate. The second is that by imposing
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  Speaker 3: all of these tariffs, the US is effectively saying it's
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  Speaker 3: going to play a smaller part in the global trade
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  Speaker 3: system going forward. And if the US is going to
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  Speaker 3: play a smaller part in the global trade system, well
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  Speaker 3: maybe other countries companies in other countries don't need to
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  Speaker 3: hold so many dollars. And then the third, and perhaps
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  Speaker 3: this is the most troubling, is well, confidence in a
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  Speaker 3: currency is underpinned in fundamental way by confidence in its
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  Speaker 3: growth prospects and confidence in its institutions. We really can't
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  Speaker 3: draw too many conclusions from just a few weeks of
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  Speaker 3: dollar decline, but certainly the contrast between what the textbooks
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  Speaker 3: say tariffs mean a higher dollar and what's actually happening.
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  Speaker 3: Tariffs combined with a weaker dollar do suggest that perhaps
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  Speaker 3: the markets are starting to have a little bit of
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  Speaker 3: concern about US longer term grief prospects and potentially about
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  Speaker 3: US institutions.
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  Speaker 4: So tom to that point, when you know, we talked
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  Speaker 4: about what happens if you know how it does cut raids,
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  Speaker 4: I mean, that's a very emergent marketing thing to kind
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  Speaker 4: of do. Right, then you have high inflation, can you
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  Speaker 4: grow your way out of it? You mentioned the dollar
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  Speaker 4: and the question marks around the dollar not following rates higher.
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  Speaker 4: For example, you worked in Beijing for many, many, many
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  Speaker 4: many years. Is it fair to say that the US
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  Speaker 4: is trading like an emerging market?
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  Speaker 2: So?
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  Speaker 3: I think that's a I mean, I certainly appreciate the analogy, Alex,
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  Speaker 3: and I think some of the dynamics are sort of
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  Speaker 3: pointing in a in a kind of similar similar direction.
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  Speaker 3: But I think we need to think about magnitudes as
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  Speaker 3: here as well, right, And we also need to think
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  Speaker 3: about the credibility that the US has built up over
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  Speaker 3: not just years, but decades. Right, So do some of
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  Speaker 3: the dynamics here have a kind of echo of things
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  Speaker 3: that we've seen in emerging markets over the years.
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  Speaker 1: Yes?
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  Speaker 3: Are we in the type of extreme situation in the
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  Speaker 3: United States that we've seen in for example, Turkey in
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  Speaker 3: recent years. No, We're still quite some considerable distance from
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  Speaker 3: that extremity.
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  Speaker 5: All right, Tom, thanks so much.
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  Speaker 2: I always appreciate getting a few minutes of your time.
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  Speaker 2: Tom or like he's a chief economist for Bloomberg Economics
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  Speaker 2: is based down there in Washington and DC.
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  Speaker 4: Within the markets, taking a look at an SMP off
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  Speaker 4: by two percent, nasdag op by two point six percent.
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  Speaker 4: We're picking up that steam to the downside volume though
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  Speaker 4: pretty light. Europe was closed. Most of Europe was closed
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  Speaker 4: for Easter Monday. Phil Orlando as chief equity market Strategists
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  Speaker 4: and head of Client portfolio Management at Federate at Hermes
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  Speaker 4: and he joins US. Now, Phil, do you buy these dips?
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  Speaker 6: First of all, Alex, Happy Easter Monday to you. No,
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  Speaker 6: we remember that last week, Eastern Passover week, the markets
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  Speaker 6: were closed on Friday. You had a lot of market
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  Speaker 6: participants with their kids off from school, taking you know,
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  Speaker 6: extended vacations and the like, and we had a we
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  Speaker 6: had a bounce to the upside in the stock market
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  Speaker 6: once President Trump I guess backed away from the hardline
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  Speaker 6: tariff news and instituted sort of a ninety day cooling
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  Speaker 6: off period. We were expecting that as as market participants
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  Speaker 6: you know, filtered back into the market this week, we
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  Speaker 6: could see a retest on the equity market. You know,
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  Speaker 6: that would suggest taking the market back down to that
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  Speaker 6: you know, forty eight thirty five level we saw a
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  Speaker 6: couple of weeks ago on the bond market benchmark tens
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  Speaker 6: perhaps yields, you know, backing up into that four and
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  Speaker 6: a half percent neighborhood. So again, now that you've got
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  Speaker 6: the players back in their seats, I think you've got
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  Speaker 6: to sort of let this play out and see where
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  Speaker 6: the where the support levels technically speaking, uh, play out,
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  Speaker 6: and if there's any any policy news that comes out
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  Speaker 6: of Washington. We saw the Federal Reserve last week basically
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  Speaker 6: tell us that there's no Fed put. They're not in
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  Speaker 6: any hurry to change policy. Uh, They're going to be
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  Speaker 6: very patient and wait to see if there's a confluence
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  Speaker 6: of the solid hard data and the sloppy soft data.
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  Speaker 7: Uh.
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  Speaker 6: So that would suggest to us that we're not going
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  Speaker 6: to see anything out of the Fed before the June
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  Speaker 6: meeting at the earliest. I think we've got the luxury
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  Speaker 6: of time here and just you know, be patient and
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  Speaker 6: not try to chase this.
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  Speaker 2: Phil One could argue the weakness in the equity markets
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  Speaker 2: in the US dollar is a reflection of the economic
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  Speaker 2: uncertainty caused in large part by the tariff discussions and
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  Speaker 2: the tariff news. Is there any reason to think that
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  Speaker 2: that narrative changes in the next six to twelve months.
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  Speaker 2: Tariff seem to be the tool of choice here for
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  Speaker 2: this administration.
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  Speaker 6: Well, I agree with your point on the currency, you know,
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  Speaker 6: a dollar euro for example, which was you know, right
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  Speaker 6: around par or so beginning of the year. We're sitting
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  Speaker 6: at what about one point fifteen now, so you've had
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  Speaker 6: you've had a pretty significant move and a short amount
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  Speaker 6: of time. Treasury yields, you know, went from you know,
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  Speaker 6: four and a half percent, we were down at three
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  Speaker 6: eighty or so within the last month or two. Stock
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  Speaker 6: prices were up at all time record highs in the
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  Speaker 6: middle of February. So you've had a lot of volatility
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  Speaker 6: in a relatively short amount of time, and all of
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  Speaker 6: it relates to the uncertainty on tariffs. Now, just look
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  Speaker 6: at at at you know, the earning season. You know,
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  Speaker 6: we're only ten percent of the way through the earning season,
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  Speaker 6: but revenues and profits have been better than expected. Yet
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  Speaker 6: yet when managements are going through, you know, their their assessment, uh,
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  Speaker 6: the guidance has been very conservative. You know in some
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  Speaker 6: companies giving us two sets of guidance. Well, yeah, maybe
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  Speaker 6: we have growth, maybe we have a recession. This is
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  Speaker 6: what we see. So there's just there's no visibility at
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  Speaker 6: all because we have no visibility in terms of what
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  Speaker 6: the tariff policies of the administration will be. So how
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  Speaker 6: can companies or investors ply and not knowing what the
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  Speaker 6: rules of the road are?
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  Speaker 4: Totally right, So when you take a look at earning season,
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  Speaker 4: what will constitute a earning season? Like a solid first
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  Speaker 4: quarter and honesty about the rest of the year.
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  Speaker 6: Like I mean, that's the gist of the piece that
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  Speaker 6: I wrote last week that if you look at the
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  Speaker 6: stuff that we know, the inflation data coming down, consumer
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  Speaker 6: spending strong, the labor market strong, corporate earning season you know,
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  Speaker 6: early days of course, but strong yet Yet the market
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  Speaker 6: is the financial markets are in a kafuffle because the
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  Speaker 6: rearview mirror stuff that I just talked about almost doesn't
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  Speaker 6: matter because we don't know what the next month, three months,
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  Speaker 6: six months, nine months, a year look like because we
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  Speaker 6: don't know what the policies are in place. Now. Is
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  Speaker 6: the administration using the tariff kafuffle if you will, as
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  Speaker 6: a means of drawing trading partners the table and negotiating
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  Speaker 6: better terms, in which case all of this volatility maybe
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  Speaker 6: sort of fades in the longer term picture looks great.
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  Speaker 6: Or are we looking at these massive tariffs odd inf
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  Speaker 6: needum and it has a materially deleterious impact on economic growth, inflation,
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  Speaker 6: financial market performance. You know, you've got two very different
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  Speaker 6: paths there, and we don't know which path to take.
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  Speaker 2: Hey, Phil, thirty seconds left. Does Ben Chairman j Powell
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  Speaker 2: have reason to worry about his job security?
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  Speaker 6: We don't think so. FED independence, in our mind is
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  Speaker 6: absolutely sacrifanct. We think the administration is going to wait
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  Speaker 6: until Powell's term ends in may go in a different direction.
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  Speaker 6: But I think what you're doing is the Trump administration
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  Speaker 6: sort of playing the refs a little bit, trying to
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  Speaker 6: get the FED to recognize play. Numbers are down based
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  Speaker 6: upon where the fund rate is, and the FED does
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  Speaker 6: have room to cut in argue starting in June.
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  Speaker 2: Phil, thank you so much. Appreciate that. A little Lando,
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  Speaker 2: chief equity market strategists and head of client portfolio management
• 13:14
  Speaker 2: at Federated Hermes joining us there talking about the FED.
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  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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• 13:35
  Speaker 2: Obviously, one of the big news stories of the day,
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  Speaker 2: Pope Francis, promoter of more compassionate Church, dies at the
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  Speaker 2: age of eighty eight. The pontiff was praise for is
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  Speaker 2: focus on poverty and human suffering. He was born in
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  Speaker 2: Argentina and it became the first pope from the America's
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  Speaker 2: question is now, where does a Catholic church go from here?
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  Speaker 2: Let's get the latest reporting. Ross Matheson joins us Bloomberg
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  Speaker 2: News Director for the Middle East and Africa. So, Roz,
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  Speaker 2: can you frame up for us kind of how the
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  Speaker 2: process will work. The timeframe for electing a new pope.
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  Speaker 8: Well, it could be quite a lengthy process. I mean historically,
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  Speaker 8: at one point it took years to select a new
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  Speaker 8: pope through this process known as the conclave. But it
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  Speaker 8: can take weeks or even months, and it will be
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  Speaker 8: interesting to see in this case, obviously, because Pope Francis
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  Speaker 8: really pushed the Catholic Church through his leadership in a
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  Speaker 8: more socially liberal direction than his predecessor, and that wasn't
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  Speaker 8: without controversy obviously within the church. So are we going
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  Speaker 8: to see a contest here between the socially liberal wings
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  Speaker 8: of the cardinal group? Are we're going to see a
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  Speaker 8: return to a more conservative, theological, less political even agenda,
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  Speaker 8: And so this conclave is likely to begin, possibly within
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  Speaker 8: about two weeks. Normally it takes about fifteen days after
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  Speaker 8: the news of the pope's path passing or the pope abdicating,
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  Speaker 8: for example, as has also happened previously, and then all
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  Speaker 8: the cardinals gather, but it can only be one hundred
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  Speaker 8: and twenty and right now they're one hundred and thirty five,
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  Speaker 8: so they'll have to work that out, and then they
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  Speaker 8: essentially come together. They put all their electronic devices away,
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  Speaker 8: and they get locked up day after day while they
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  Speaker 8: come and have a series of votes every day to
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  Speaker 8: reduce the group of candidates until they get that white
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  Speaker 8: smoke that we know that signifies that we have a
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  Speaker 8: new pope and that process. At this point, it's hard
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  Speaker 8: to know again how long it could take. Once it begins,
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  Speaker 8: it could be over in a matter of days, but
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  Speaker 8: it has taken weeks or months previously.
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  Speaker 4: Wow, there's definitely going to be quite a process. Ros,
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  Speaker 4: do we have a sense of I mean just talking
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  Speaker 4: about politically, can you just give us some broad strokes
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  Speaker 4: as to the time and moment of choosing this next
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  Speaker 4: pope and such a politically divided world.
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  Speaker 8: Well, of course, Pope Francis wasn't shy about wading into that,
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  Speaker 8: into the politics of the world. He often spoke about
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  Speaker 8: the conflicts we've seen with Russia's war in Ukraine, the
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  Speaker 8: conflict between Hamas and Israel in Gaza, talking about the
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  Speaker 8: need to be compassionate.
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  Speaker 5: To have, you know, care.
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  Speaker 8: For those who are poor, who are suffering, and included
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  Speaker 8: migrants in that. So he often talked about the need
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  Speaker 8: to be more compassionate towards migrant which put him a
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  Speaker 8: little bit in the crosshairs of countries including the US
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  Speaker 8: politically und o' Donald Trump. And so he's really kind
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  Speaker 8: of put the Catholic Church in a slightly different direction
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  Speaker 8: there in terms of politics of the day, and we
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  Speaker 8: are arguably in a very.
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  Speaker 5: Polarized moment globally.
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  Speaker 8: You can see the rise of more conservative administrations again
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  Speaker 8: in the US, you can see the rise of the
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  Speaker 8: far right in Europe, in parts of Europe and elsewhere.
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  Speaker 8: And do we see, you know, the selection of the
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  Speaker 8: pope coming into this idea of what kind of world
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  Speaker 8: are we in and what kind of world is the
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  Speaker 8: Catholic Church and its leadership.
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  Speaker 5: Going to represent in that world?
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  Speaker 8: And does the selection of the pope dare I say
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  Speaker 8: become politicized because of it? Always is, probably to some extent,
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  Speaker 8: but does this become even most as a result.
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  Speaker 4: Yeah? Absolutely, all right, Ros, We really appreciate it.
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  Speaker 5: Thank you very much.
• 17:07
  Speaker 4: Raz Mathis and Bloomberg News Director for Europe, the Middle
• 17:10
  Speaker 4: East and Africa.
• 17:13
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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• 17:28
  Speaker 4: As we were discussing earlier, the market continues its downside.
• 17:30
  Speaker 4: You're looking at the NASTAC almost off by three percent.
• 17:32
  Speaker 4: Julie Beale as chief market strategist and portfolio manager at
• 17:36
  Speaker 4: Caine Anderson Rudnick, and she joins us. Now, where is
• 17:39
  Speaker 4: a safe haven right now?
• 17:40
  Speaker 5: Julie, I think for your long term investors.
• 17:44
  Speaker 7: This has good opportunities to be able to scoop up
• 17:46
  Speaker 7: some of those companies that are good quality and will
• 17:49
  Speaker 7: be around for the long term. You just have to
• 17:51
  Speaker 7: be willing to buy those and then forget about them.
• 17:55
  Speaker 7: I think it's a really difficult time right now for
• 17:57
  Speaker 7: long term investors. They want to be able to call
• 17:59
  Speaker 7: the bottom, and it's really not possible.
• 18:01
  Speaker 5: To be able to call the bottom.
• 18:02
  Speaker 7: You really have to be confident in what you own
• 18:05
  Speaker 7: and be able to kind of sit still, not try
• 18:08
  Speaker 7: to make a whole bunch of trades, and just try
• 18:10
  Speaker 7: to own the good quality companies that you think will
• 18:12
  Speaker 7: be there on the other side of this valley.
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  Speaker 2: Julie, I like it in your notes you quote Howard
• 18:17
  Speaker 2: Marx who said last week quote there's no place you
• 18:20
  Speaker 2: can look, there's no analysis you can do to determine
• 18:22
  Speaker 2: where whether today's asset prices are right for the environment ahead.
• 18:26
  Speaker 2: Given that backdrop, I guess it's easy for a lot
• 18:30
  Speaker 2: of people to just kind of still on their hands.
• 18:31
  Speaker 2: Here are you trying to be tactically smart? Here are
• 18:36
  Speaker 2: you sitting on your hands like a lot of folks.
• 18:38
  Speaker 7: Probably, Yeah, I think Howard Marx also says this great
• 18:41
  Speaker 7: thing that I love so much. You know, the old
• 18:43
  Speaker 7: adage of like, don't just sit there, do something. He says,
• 18:46
  Speaker 7: don't just do something, sit there. And I think that
• 18:48
  Speaker 7: is something.
• 18:49
  Speaker 6: That is very totally well.
• 18:52
  Speaker 7: In some case on Saturdays, I'm great at yet. But
• 18:55
  Speaker 7: in many cases, you know, a lot of clients will
• 18:58
  Speaker 7: be asking me, oh my god, what are you doing
• 19:00
  Speaker 7: right now? What's changed in your process? And the answer
• 19:02
  Speaker 7: is actually not very much, very little. Because I have
• 19:05
  Speaker 7: a lot of confidence in the twenty eight or so
• 19:08
  Speaker 7: companies that I own in my portfolio. I know that
• 19:11
  Speaker 7: they can get through difficult times because I have evidence
• 19:13
  Speaker 7: of them being able to manage through difficult things in
• 19:15
  Speaker 7: the past. The great thing about COVID is we really
• 19:18
  Speaker 7: got to look and see how adaptable companies are to
• 19:21
  Speaker 7: really difficult situations. And so when you find those types
• 19:24
  Speaker 7: of unsexy businesses that are kind of the resilient cockroaches,
• 19:29
  Speaker 7: those are the.
• 19:29
  Speaker 5: Ones that you really want to own.
• 19:31
  Speaker 7: And then you have to resist the urge to try
• 19:33
  Speaker 7: to add value by doing a bunch of stuff. No
• 19:35
  Speaker 7: more handwaving, just sit still, own good companies, do the research,
• 19:39
  Speaker 7: and really try not to be a hero.
• 19:41
  Speaker 5: That's not what this time is about. That's why I
• 19:44
  Speaker 5: love Julie. What are my resilient cockroaches? Yes? Bring that on?
• 19:49
  Speaker 5: So really, what are the resilient cockroaches?
• 19:53
  Speaker 7: The resilient I really like the businesses that you know
• 19:56
  Speaker 7: are more data businesses, so a varisk where you know
• 19:59
  Speaker 7: they are the ones taking in information from insurance companies
• 20:03
  Speaker 7: and then selling it back to them.
• 20:04
  Speaker 5: Great business model if you can get it.
• 20:06
  Speaker 7: That's always going to need to exist, and that's not
• 20:09
  Speaker 7: necessarily going to be interrupted by tariffs. You're going to
• 20:12
  Speaker 7: see just a stability and a predictability to the earnings.
• 20:15
  Speaker 5: And that's actually what you kind of want to be
• 20:17
  Speaker 5: looking for right now.
• 20:19
  Speaker 2: So what do you make of the adage or just
• 20:22
  Speaker 2: buy value here? And I hear that a lot, particularly
• 20:25
  Speaker 2: times of uncertainty or stress in the marketplace, really go
• 20:28
  Speaker 2: up the value chain.
• 20:30
  Speaker 5: Do you abscribe to that?
• 20:31
  Speaker 2: And what does kind of quality mean to you?
• 20:35
  Speaker 7: So? I think that when I think about quality, to me,
• 20:37
  Speaker 7: it is about the durability of the earnings, right, and
• 20:40
  Speaker 7: so the style of it, whether it's growth or value,
• 20:43
  Speaker 7: to me is much less important rather than can I
• 20:46
  Speaker 7: predict how this business is going to perform in a downturn,
• 20:50
  Speaker 7: and how is it going to recover? That's way more
• 20:52
  Speaker 7: important to me, I think when you're thinking about value,
• 20:55
  Speaker 7: and I think why value has been more resilient thus
• 20:57
  Speaker 7: far is that you just do not have this valuevaluation
• 21:00
  Speaker 7: challenge and headwind that you had in growth where you
• 21:03
  Speaker 7: saw so many of these ultra high multiple companies. And remember,
• 21:06
  Speaker 7: high multiples are just a function of like how high
• 21:09
  Speaker 7: are people's expectations, right, And the thing about expectations is
• 21:13
  Speaker 7: your heart just gets broken when you don't meet them.
• 21:15
  Speaker 7: Just ask my parents, right, their heart's broken all the
• 21:18
  Speaker 7: time live. So it's so important to kind of recognize
• 21:23
  Speaker 7: that when you have high multiples, you have high expectations,
• 21:26
  Speaker 7: and if you don't meet them, you're really going to
• 21:28
  Speaker 7: get crushed. Value stocks just don't have that same problem.
• 21:31
  Speaker 7: Their valuations are much more reasonable, and so people feel
• 21:34
  Speaker 7: more confident.
• 21:34
  Speaker 5: That they can own those.
• 21:36
  Speaker 7: The thing is is that there's a lot in value,
• 21:39
  Speaker 7: you know, the traditional value that's very cyclical, and so
• 21:41
  Speaker 7: I wouldn't necessarily say it's a great idea to be
• 21:44
  Speaker 7: buying low multiple, cheap stocks that are cyclical when you
• 21:48
  Speaker 7: feel like there may be economic turbulence ahead.
• 21:51
  Speaker 4: Right, And I guess the question is there's been a
• 21:54
  Speaker 4: big move in value anyway, right, So it's sort of
• 21:57
  Speaker 4: like finding value within value.
• 21:59
  Speaker 7: Yes, yes, I think like we don't love the term value,
• 22:03
  Speaker 7: right because I think for us, what's more important is
• 22:06
  Speaker 7: thinking about if you're thinking about a growth company versus
• 22:09
  Speaker 7: a value company, I think it's better to think about
• 22:11
  Speaker 7: it in terms of its maturity, and so a growth
• 22:13
  Speaker 7: company they can really use their capital that they generate internally,
• 22:18
  Speaker 7: they still have a lot of growth opportunities internally.
• 22:21
  Speaker 5: A value company is better.
• 22:22
  Speaker 7: Served giving that cash back to shareholders because they're in
• 22:25
  Speaker 7: a more mature market and they don't need to invest
• 22:27
  Speaker 7: internally as much. When you separate it from that, then
• 22:30
  Speaker 7: you're not as married to things like Okay, if I'm
• 22:33
  Speaker 7: a value portfolio manager, I need to own a ton
• 22:35
  Speaker 7: of banks, which like no thanks, But you know, like
• 22:38
  Speaker 7: if you're a growth manager, you don't necessarily need to
• 22:41
  Speaker 7: think about yourself as having arbitrary I need things to
• 22:44
  Speaker 7: be growing twenty percent, or I'm not a real growth manager.
• 22:46
  Speaker 7: I don't think you need to be quite as didactic.
• 22:48
  Speaker 7: I think it's more important that you just own good
• 22:51
  Speaker 7: quality all the way through.
• 22:53
  Speaker 2: So how much earnings risk do you think is out
• 22:56
  Speaker 2: there in the marketplace truly, because I've seen estimates come down,
• 22:59
  Speaker 2: but I'm not sure they've commanded enough.
• 23:02
  Speaker 5: How do you think about that?
• 23:03
  Speaker 7: I agree with you. I think that it's look, I
• 23:06
  Speaker 7: don't put a lot of stock into earnings estimates to
• 23:08
  Speaker 7: begin with, right If it were up to me, companies
• 23:11
  Speaker 7: wouldn't issue guidance because I just think it's a crazy
• 23:13
  Speaker 7: exercise when you have this much uncertainty. But what I
• 23:16
  Speaker 7: will say is that I am surprised how much people
• 23:19
  Speaker 7: are kind of paralyzed with their estimates. They're not taking
• 23:22
  Speaker 7: them down, They're not really taking them down very much.
• 23:25
  Speaker 7: And I think that that's just a reflection of what
• 23:27
  Speaker 7: for the first quarter is going to look like in
• 23:29
  Speaker 7: terms of earnings results.
• 23:30
  Speaker 5: I think that you're going to see.
• 23:32
  Speaker 7: I'm worried that you're going to see a lot of
• 23:34
  Speaker 7: companies deciding to suspend their guidance, which I think is
• 23:37
  Speaker 7: fine fundamentally, but I think it will spook investors if
• 23:41
  Speaker 7: they don't have that kind of crutch of knowing.
• 23:43
  Speaker 5: Like what is this business going to earn? I don't
• 23:45
  Speaker 5: think it's that important.
• 23:46
  Speaker 7: I think what's more important is can it continue to
• 23:48
  Speaker 7: earn these good earnings over the long term. But in
• 23:51
  Speaker 7: the near term, people are very dependent on these earnings
• 23:54
  Speaker 7: estimates to kind of guide their decision making, and if
• 23:56
  Speaker 7: they don't have that, I really worry it'll it'll lose
• 23:59
  Speaker 7: the will have a loss of confidence.
• 24:01
  Speaker 4: One thing we do have I did have is capex spend,
• 24:04
  Speaker 4: particularly from the hyper scalers, and I'm wondering if you're
• 24:06
  Speaker 4: expecting any sort of rerating rerating shift on that.
• 24:09
  Speaker 5: At all due to the uncertainty.
• 24:12
  Speaker 7: Yeah, I mean, I really wouldn't be surprised. I think
• 24:14
  Speaker 7: they have a lot of cover to be able to
• 24:16
  Speaker 7: pull back that spending.
• 24:17
  Speaker 2: Now.
• 24:17
  Speaker 7: It's like it's a great excuse for them to be
• 24:19
  Speaker 7: able to say, oh God, things are really wacky and crazy.
• 24:23
  Speaker 7: It's not that we haven't come up with a good
• 24:25
  Speaker 7: earnings economics model around this billions of dollars of CAPEX investment.
• 24:29
  Speaker 5: It's the tariffs.
• 24:30
  Speaker 7: So I think that they have good cover to do that,
• 24:32
  Speaker 7: and I think it would be a positive thing because
• 24:35
  Speaker 7: I think until we have a lot more clarity on
• 24:38
  Speaker 7: how we're going to monetize all of this investment, I
• 24:40
  Speaker 7: think it really gives a lot of investors pause, and
• 24:43
  Speaker 7: I think this is a great opportunity for them to
• 24:45
  Speaker 7: really prove out all of these promises that they've made.
• 24:48
  Speaker 5: For the level of capex.
• 24:50
  Speaker 7: But it's important, right for the broader economic outlook, right,
• 24:53
  Speaker 7: because so much of the capex growth that we've seen
• 24:56
  Speaker 7: in the last two years has really been driven by
• 24:58
  Speaker 7: the hyper scalers. If we don't have that, do we
• 25:00
  Speaker 7: still have a great economy that people want to invest in?
• 25:03
  Speaker 5: It's less clear.
• 25:05
  Speaker 4: One hundred percent. And that was sort of the question
• 25:07
  Speaker 4: mark that you know, is it just the mag seven
• 25:09
  Speaker 4: and everybody else at the end of the day? Are Julie,
• 25:11
  Speaker 4: thanks lot, really great to get your perspective. I love
• 25:12
  Speaker 4: the resilient cockroach. I'm definitely using Matt stealing it. Julie Beale,
• 25:15
  Speaker 4: Chief Market Strategies and portfolio manager at Kane Anderson.
• 25:19
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