WEBVTT - Stocks Slide as Trump’s Tariff Reprieve Proves Fleeting 0:00:02.720 --> 0:00:10.560 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.560 --> 0:00:14.560 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.600 --> 0:00:17.840 Eastern on Apple, Cocklay and Android Auto with the Bloomberg 0:00:17.920 --> 0:00:21.040 Business App. Listen on demand wherever you get your podcasts, 0:00:21.320 --> 0:00:23.240 or watch us live on YouTube. 0:00:23.880 --> 0:00:26.880 Let's get to Dana Diorio, a co chief investment officer 0:00:26.920 --> 0:00:29.960 at Investment, joining us from Hartford, Connecticut. 0:00:30.320 --> 0:00:31.440 Okay, so what do you do? 0:00:31.680 --> 0:00:34.760 It's been a crazy twenty four hours within the market. 0:00:35.159 --> 0:00:35.960 How do you position? 0:00:38.080 --> 0:00:39.480 Yeah, that's that's the big question. 0:00:39.560 --> 0:00:42.880 It's so funny because so actually I met our conference 0:00:42.960 --> 0:00:45.720 in Las Vegas, our Investment Elevate conference, and I was 0:00:45.760 --> 0:00:48.519 just on stage yesterday literally as the pause was happening 0:00:48.880 --> 0:00:52.519 telling everyone to stay the course. It was the timing was, 0:00:52.720 --> 0:00:55.200 you know, madness and kind of showing what had happened 0:00:55.200 --> 0:00:57.960 on Monday when we had you know, this false report 0:00:58.040 --> 0:01:01.440 of a reprieve and stop, you know, skyrocket and only 0:01:01.480 --> 0:01:03.760 to come back down. And when you're a financial advisor 0:01:03.800 --> 0:01:06.839 trying to trade on this, it's absolutely impossible, of course, 0:01:07.200 --> 0:01:10.840 and so you know, the messaging then and now is 0:01:11.200 --> 0:01:13.240 you know, kind of you've got to stay put I mean, 0:01:13.319 --> 0:01:15.640 certainly if you have clients who are not diversified and 0:01:15.640 --> 0:01:18.160 they're super concentrated, or you know, a lot of people 0:01:18.240 --> 0:01:20.880 let their equity positions get a little bit big in 0:01:20.880 --> 0:01:25.120 this hopes of a pro growth, pro you know, corporate 0:01:25.720 --> 0:01:30.440 corporate uh type of policy from the administration. That's obviously 0:01:30.480 --> 0:01:34.039 all you know, kind of been obliterated and now we're 0:01:34.080 --> 0:01:36.240 looking at a picture that's very different. And so you 0:01:36.319 --> 0:01:38.280 had people who are high in equities, if you're if 0:01:38.319 --> 0:01:40.640 you're too high inequities, you know, take them off the 0:01:40.640 --> 0:01:44.520 table for sure. But you know, you really these are 0:01:44.560 --> 0:01:46.920 the times that you that you need to ultimately stay 0:01:46.959 --> 0:01:49.320 the course and wait it out, or you turn the 0:01:49.320 --> 0:01:51.520 paper losses into a real loss. 0:01:52.120 --> 0:01:55.000 Conference in Vegas. Nobody is conferences in like Sheboygan. They're 0:01:55.000 --> 0:01:58.279 always in Vegas or Miami, Scottsdale, Danis. 0:01:58.760 --> 0:02:00.760 I mean, they know what they're doing data. So what 0:02:00.880 --> 0:02:01.720 about earnings here? 0:02:01.760 --> 0:02:04.320 I think, you know, I have not seen earning assesstments 0:02:04.440 --> 0:02:06.840 really come down that much. But I've got companies left 0:02:06.880 --> 0:02:09.240 and right pulling their guidance and all that kind of stuff. 0:02:09.280 --> 0:02:12.200 How much earnings how much earnings risk is out there? 0:02:12.240 --> 0:02:12.600 Do you think? 0:02:13.480 --> 0:02:15.600 Yeah, I mean, your last speaker said it, right. I mean, 0:02:16.520 --> 0:02:18.280 what's going to be crazy right now is you're going 0:02:18.320 --> 0:02:20.320 to have the first quarter earnings come out, You're going 0:02:20.400 --> 0:02:24.080 to have you know, March economic reports come out, and 0:02:24.160 --> 0:02:25.720 of course all of these are going to paint this 0:02:26.200 --> 0:02:28.640 incredibly rosy picture that's not reality anymore. 0:02:28.680 --> 0:02:28.840 Right. 0:02:28.880 --> 0:02:30.040 In fact, they'll. 0:02:29.840 --> 0:02:33.079 Probably be rosier even than they normally would have because 0:02:33.320 --> 0:02:37.440 you have folks, you know, pulling forward consumption, pulling forward demand, 0:02:37.680 --> 0:02:39.880 and so things will look great and you'll have this 0:02:40.000 --> 0:02:42.440 series of reports and earn and this earning season is 0:02:42.480 --> 0:02:44.520 going to be part of that, and so paying attention 0:02:44.560 --> 0:02:46.680 to that, of course, it gives you no information. 0:02:46.800 --> 0:02:48.200 It's really what is the guidance? 0:02:48.440 --> 0:02:51.080 And if you're a corporate planner, I'm not sure you 0:02:51.120 --> 0:02:54.640 can give great guidance, right, I mean the volatility of 0:02:54.919 --> 0:02:57.760 you know, just what you have to potentially plan for 0:02:57.800 --> 0:03:00.240 in the short run. And then you know, if you're 0:03:00.280 --> 0:03:02.320 you know, the idea. Some of the idea here, of course, 0:03:02.400 --> 0:03:04.480 is hey, look let's bring you know, some of the 0:03:04.480 --> 0:03:08.200 manufacturing back to the States. Let's let's you know, kind 0:03:08.200 --> 0:03:11.640 of encourage people to have capex here. But how do 0:03:11.680 --> 0:03:14.320 you do a long term plan. I mean, it takes years, 0:03:14.520 --> 0:03:16.119 right to bring this stuff here? 0:03:16.240 --> 0:03:17.840 Yeah, how do you? 0:03:18.040 --> 0:03:20.560 How do you plan around that? So I think Guidance 0:03:20.639 --> 0:03:25.119 is going to be probably overly I'll almost say might 0:03:25.280 --> 0:03:28.560 likely be overly pessimistic, because nobody really knows what they're 0:03:28.639 --> 0:03:29.200 dealing with. 0:03:29.400 --> 0:03:32.640 Which to that point, Delta yesterday with Drew Guidance, stock 0:03:32.720 --> 0:03:35.320 pop Today CarMax does something similar, I mean, and pulled 0:03:35.320 --> 0:03:38.080 back its financial goals because of the volatility. But same thing, 0:03:38.240 --> 0:03:40.720 and that stacks down twenty percent. So where are we 0:03:40.800 --> 0:03:41.640 in valuations? 0:03:42.800 --> 0:03:45.440 Yeah, well, I mean, obviously we started the year very high. 0:03:45.480 --> 0:03:49.240 We've shaved a good piece of that, you know, but 0:03:49.320 --> 0:03:51.560 that was part of the problem, right. We came into 0:03:51.600 --> 0:03:54.600 the air with that expectation of a goal market with 0:03:54.720 --> 0:03:58.440 high valuations as a start, not not everywhere, but certainly 0:03:58.880 --> 0:04:02.680 as an index, right, market cap weighted basis, valuations were high, 0:04:02.760 --> 0:04:05.760 and so you know, when you come in with high valuations, 0:04:06.040 --> 0:04:08.960 really everything has to go well. And if you have 0:04:09.040 --> 0:04:12.560 this exogenous shock, you know, and everybody knew tariffs are coming, 0:04:12.600 --> 0:04:16.200 it's not as though you know, this was entirely unexpected, 0:04:16.240 --> 0:04:18.800 and that's why you have that pull forward of consumption 0:04:19.200 --> 0:04:22.640 but the magnitude, right, the breadth of it, how quickly 0:04:22.680 --> 0:04:26.120 it all was was intended to come to pass, that 0:04:26.160 --> 0:04:29.040 did catch everybody off card and you know, kind of 0:04:29.080 --> 0:04:32.760 wiped out that picture that rationalized those higher valuations that 0:04:32.760 --> 0:04:33.600 we were sitting with. 0:04:33.880 --> 0:04:35.839 Dana, Thank you so much for joining us. Always appreciate 0:04:35.839 --> 0:04:36.920 getting a few minutes of your time. 0:04:37.000 --> 0:04:37.600 Dany de Aoria. 0:04:37.920 --> 0:04:41.880 She is co chief investment officer at invest Net, joining 0:04:41.960 --> 0:04:43.560 us from Hartford, Connecticut. 0:04:43.120 --> 0:04:46.080 Via that zoom thing here Vegas, remember, oh Vegas, that's right? 0:04:46.160 --> 0:04:47.280 Time? Is Ava for you? 0:04:47.400 --> 0:04:50.360 Exactly? Oh a Vegas. There we go. 0:04:52.240 --> 0:04:55.960 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:04:56.040 --> 0:04:59.080 weekdays at ten am Eastern on Apple, Cocklay and Android 0:04:59.120 --> 0:05:02.440 Auto with the Work Business Up. Listen on demand wherever 0:05:02.480 --> 0:05:05.600 you get your podcasts, or watch us live on YouTube. 0:05:06.320 --> 0:05:11.560 Michael McKee, Bloomberg International Economics and Policy Correspondent, joins us. Now, So, Mike, 0:05:11.640 --> 0:05:14.279 it was interesting with the CPI. Bloomberg Economics had a 0:05:14.320 --> 0:05:17.080 note out that said this wasn't about falling prices necessarily, 0:05:17.080 --> 0:05:20.280 but it was more about falling demand in travel, leisure 0:05:20.360 --> 0:05:22.640 and apparel and furniture sales and stuff like that. 0:05:22.880 --> 0:05:23.960 Walk me through the details. 0:05:24.160 --> 0:05:26.920 Well, the biggest drop was in gasoline prices, which is 0:05:26.960 --> 0:05:32.720 sort of a combination of anticipated falling demand by the 0:05:32.800 --> 0:05:35.039 gasoline producers and refiners, etc. 0:05:36.400 --> 0:05:38.600 Given the impending tariffs. 0:05:39.080 --> 0:05:42.800 And then we also saw some declines as you mentioned, 0:05:42.839 --> 0:05:47.200 in travel prices, and that was definitely terriff related, But 0:05:47.400 --> 0:05:50.599 the rest of it was sort of mixed news. Food 0:05:50.640 --> 0:05:55.040 prices were up by food at home, grocery store prices 0:05:55.040 --> 0:05:57.400 were up by half a percent of fairly large gain 0:05:57.960 --> 0:06:01.000 than two months in a row where food prices are up, 0:06:01.360 --> 0:06:04.480 and we saw apparel prices rise, but is that just 0:06:04.560 --> 0:06:11.080 a natural move or was that also an anticipation of tariffs. 0:06:11.760 --> 0:06:14.400 Furniture prices we get Furnit love furniture from China, those 0:06:14.440 --> 0:06:15.200 were also up. 0:06:15.279 --> 0:06:15.880 So the. 0:06:17.600 --> 0:06:21.040 Report is kind of a mixed news thing, except that 0:06:21.160 --> 0:06:23.720 the overall good news as it went down. And if 0:06:23.760 --> 0:06:27.120 you were not going to have tariffs, if none of 0:06:27.120 --> 0:06:29.480 this had happened, it would be exactly what the Fed 0:06:29.720 --> 0:06:30.920 would love to see. 0:06:30.920 --> 0:06:35.200 Right, So, when do we expect to see any inflation 0:06:35.320 --> 0:06:38.400 impact in these CPI numbers and the other the pc deflator. 0:06:38.400 --> 0:06:40.160 When do we expect if there's going to be any 0:06:40.200 --> 0:06:42.320 inflation impact. When do we expect to see that. 0:06:43.279 --> 0:06:44.440 It's a little hard to say. 0:06:44.800 --> 0:06:51.760 Probably probably maybe could be hedged enough here next month, 0:06:53.000 --> 0:06:56.279 this month's data when it comes out next month, because 0:06:56.320 --> 0:06:59.400 it could reflect tariffs that the President has already put on, 0:07:00.480 --> 0:07:02.839 But it's probably going to take a couple of months. 0:07:02.839 --> 0:07:05.479 Maybe we get something in the May numbers. 0:07:05.520 --> 0:07:08.880 First of all, companies have to figure out whether their 0:07:08.920 --> 0:07:10.200 products are tarra affed or not. 0:07:10.400 --> 0:07:11.920 That seems to be bouncing around. 0:07:12.320 --> 0:07:15.080 And then it's a question of how many how much 0:07:15.080 --> 0:07:17.520 stuff people have an inventory they can sell that they 0:07:17.640 --> 0:07:22.440 bought at the lower prices, how soon inventory actually docks 0:07:23.400 --> 0:07:26.880 at a port, and is the tariffs are applied. So 0:07:26.960 --> 0:07:29.440 it's kind of hard to say exactly when we're going 0:07:29.520 --> 0:07:32.480 to see this, but it would be coming. And given 0:07:32.520 --> 0:07:35.640 the fact that we still have ten percent tariffs on 0:07:35.720 --> 0:07:38.640 everybody and now these huge shafts in China, you will 0:07:38.680 --> 0:07:39.040 see it. 0:07:40.240 --> 0:07:44.280 When is the biggest what are you looking at next 0:07:44.320 --> 0:07:46.280 in terms of the biggest indicator? Is it going to 0:07:46.280 --> 0:07:48.480 be inflation expectations? Like is that going to be the 0:07:48.480 --> 0:07:50.840 thing that's going to sort of give us that kind 0:07:50.840 --> 0:07:51.320 of insight? 0:07:51.680 --> 0:07:52.800 Yeah, because that's tomorrow. 0:07:52.840 --> 0:07:55.800 So I'm pitching ahead to all the appearances I will 0:07:55.800 --> 0:07:57.679 do with you guys tomorrow. 0:07:57.720 --> 0:08:01.280 Well, John Ticker's in charge tomorrow, sol you on the show, 0:08:01.920 --> 0:08:03.720 but University of Michigan tomorrow. 0:08:04.400 --> 0:08:08.600 The FED has sort of downplayed the long term inflation 0:08:08.720 --> 0:08:13.760 expectations number is suggesting that it doesn't quite reflect reality 0:08:14.320 --> 0:08:16.720 in the history of the Michigan numbers. But they do 0:08:16.840 --> 0:08:19.840 worry about the short term and that has gone up significantly, 0:08:20.320 --> 0:08:25.600 and they have said, and Jay Pole said that we 0:08:25.640 --> 0:08:29.480 are obligated to keep prices down and we are very 0:08:29.520 --> 0:08:34.280 worried about the short term inflation expectations should they become unanchored. 0:08:34.640 --> 0:08:36.800 So that'll be somewhat big news tomorrow. 0:08:36.880 --> 0:08:37.520 But I think. 0:08:39.440 --> 0:08:43.480 We're redefining what big news in economic data brings here 0:08:43.559 --> 0:08:46.280 because everybody's once we get to the point that you 0:08:46.320 --> 0:08:48.440 asked about, when does this hit. Once we get to 0:08:48.480 --> 0:08:50.800 that point, then markets are going to react to every 0:08:50.840 --> 0:08:54.000 little data bit. But anything that is up to this point, 0:08:54.320 --> 0:08:58.160 people are gonna say old news PPI tomorrow. 0:08:58.240 --> 0:09:01.880 How do we interpet PPI versus well, PBI is. 0:09:02.840 --> 0:09:06.000 The easy difference to know is that CPI is what 0:09:06.440 --> 0:09:10.000 you pay to buy things and PPI is what companies 0:09:10.200 --> 0:09:14.800 charge to sell things. And we may see some of 0:09:14.840 --> 0:09:17.680 the China impact in the PPI because we saw those 0:09:17.720 --> 0:09:22.280 big inventory builds in terms of industrial supplies and things 0:09:22.320 --> 0:09:24.120 like that in the past couple of months. 0:09:24.160 --> 0:09:27.880 And so if you were a Chinese company. 0:09:27.559 --> 0:09:29.960 Or from anywhere else in the world selling to the 0:09:30.040 --> 0:09:33.559 United States and there was this rapid rise in demand, 0:09:33.880 --> 0:09:34.920 you might raise prices. 0:09:34.960 --> 0:09:37.800 So we could look for some of that tomorrow. 0:09:38.160 --> 0:09:41.400 But so far producer prices have been much better behaved 0:09:41.440 --> 0:09:46.560 than consumer prices. So overall, it hopefully is a continuation 0:09:46.640 --> 0:09:48.160 of the good news that no longer matters. 0:09:48.240 --> 0:09:50.000 Can you clear something up for me? This is the 0:09:50.080 --> 0:09:54.880 stupid question for me from the peanut gallery. A guy 0:09:55.000 --> 0:09:57.959 picking up stuff at the port. That's the person who's 0:09:58.000 --> 0:10:01.479 going to pay for the town. It's not the exporter 0:10:01.760 --> 0:10:04.200 often whatever it's trying to the exporter. This is a 0:10:04.240 --> 0:10:07.360 guy in Newport Elizabeth, Ork, New Jersey. 0:10:07.559 --> 0:10:10.080 This is the silly thing that the administration keeps pushing 0:10:10.120 --> 0:10:13.600 that what they're talking about is that not that the 0:10:13.679 --> 0:10:17.480 exporter is going to pay anything, but that currencies, the 0:10:17.559 --> 0:10:20.679 dollars should rise and that makes their currency cheaper, and 0:10:20.720 --> 0:10:25.800 so they you know, there's an impact on them in 0:10:25.840 --> 0:10:29.600 that case. And sure, but it's the person, it's the 0:10:29.640 --> 0:10:31.320 company that is bought the stuff. 0:10:31.640 --> 0:10:32.839 So this is the whole story for me. 0:10:32.920 --> 0:10:35.880 Yesterday there was like a back channel one thing that 0:10:35.960 --> 0:10:38.800 he wanted to buy some guy at blooms Oh yeah yeah, 0:10:39.160 --> 0:10:39.720 go back and listen. 0:10:40.000 --> 0:10:42.040 Yeah yeah, it don't even go into the whole different thing. 0:10:42.080 --> 0:10:42.240 Mike. 0:10:42.240 --> 0:10:42.839 Thanks a lot, Mike. 0:10:42.880 --> 0:10:45.240 M keep moving to National Economics and Policy corresponding. 0:10:45.320 --> 0:10:50.160 Joining us now, you're listening to the Bloomberg Intelligence podcast. 0:10:50.520 --> 0:10:53.440 Catch us live weekdays at ten am Eastern on Apple, 0:10:53.480 --> 0:10:56.720 Cocklay and Android Auto with the Bloomberg Business app. Listen 0:10:56.800 --> 0:10:59.800 on demand wherever you get your podcasts, or watch us 0:11:00.040 --> 0:11:00.880 I've on YouTube. 0:11:01.480 --> 0:11:03.800 All right, we're debating in the last hour, like if 0:11:03.880 --> 0:11:08.440 John Tucker is Versace and Michael McKee is Prada, now 0:11:08.440 --> 0:11:11.040 they're going to be uniting. So it's like Mike Tucker 0:11:12.000 --> 0:11:16.200 Prada Versaci thing, all right, track and Boomberg Intelligence luxury 0:11:16.200 --> 0:11:17.680 goods analyst joined us. 0:11:17.720 --> 0:11:17.880 Now. 0:11:17.960 --> 0:11:20.200 It's funny because neither of them are those things. So 0:11:20.240 --> 0:11:21.920 Prada is going to buy Versus a chip for about 0:11:21.920 --> 0:11:24.840 one point three eight billion dollars. Walk us through the 0:11:24.880 --> 0:11:26.200 intricacies of this deal. 0:11:26.960 --> 0:11:27.160 Hi. 0:11:27.920 --> 0:11:31.680 Yeah, So it's been talked about for quite a while 0:11:31.880 --> 0:11:37.119 and we already last night heard maybe that the acquisition 0:11:37.200 --> 0:11:39.520 price would be done by a couple of hundred million. 0:11:40.120 --> 0:11:45.080 The big thing here has been that under Capri, Fasachi 0:11:45.200 --> 0:11:48.880 is not hard enough investment in it over the last year, 0:11:49.320 --> 0:11:54.560 particularly in the field of the Tapestry bid for Capri 0:11:54.679 --> 0:11:57.319 which didn't go ahead and which took a lot of 0:11:57.360 --> 0:12:00.560 the headlines last year and where all brand under the 0:12:00.559 --> 0:12:07.480 Capri banner suffered. We've had chairman John Idel come back 0:12:07.520 --> 0:12:11.680 into the business as CEO for Capri, and with the 0:12:11.760 --> 0:12:16.320 focus really on Michael Corese, which is seventy percent of 0:12:16.360 --> 0:12:19.320 the sales and after a difficult year last year one 0:12:19.400 --> 0:12:23.439 hundred percent of the profitability of the company leading into 0:12:23.480 --> 0:12:27.520 this this year. So it's all about turning around Michael 0:12:27.559 --> 0:12:30.960 cause which has seventy percent of its business in Americas, 0:12:31.960 --> 0:12:36.760 is at accessible price point and where actually we think 0:12:36.800 --> 0:12:40.079 that they'll be much more pressure given the tariff situation 0:12:40.400 --> 0:12:43.840 and the cost of living on all consumers. And also 0:12:43.960 --> 0:12:48.320 in the US if we turn over to the Versace 0:12:48.760 --> 0:12:52.600 acquisition and what's going on there with Prada. Prada has 0:12:52.640 --> 0:12:57.120 been one of the top performing companies. It's really done 0:12:57.160 --> 0:12:59.560 ever so well with Proud of the last few years 0:12:59.559 --> 0:13:02.720 and gone to normalized single digit growth. And then it 0:13:02.760 --> 0:13:06.880 has a brand Meo Meu within its portfolio doing ever 0:13:06.960 --> 0:13:09.720 so well. It's number one on the list index for 0:13:10.240 --> 0:13:13.320 luxury brands in terms of brand equity brand heat, with 0:13:13.480 --> 0:13:17.520 Praderate number three, and during the December quarter Versaci dropped 0:13:17.520 --> 0:13:20.720 three places to number fourteen. So we think it shifts 0:13:20.760 --> 0:13:24.920 Forsaci into the right hands into Italian luxury owners who 0:13:24.920 --> 0:13:28.480 can really work well to try to reinvigorate this brand 0:13:28.520 --> 0:13:30.800 and the brand equity behind Fasaci. 0:13:31.080 --> 0:13:33.280 Hey, dab, I'm really interested in evaluation here, being a 0:13:33.280 --> 0:13:35.720 former banker myself. They're selling this thing for one point 0:13:35.760 --> 0:13:40.080 three eight billion US dollars in twenty eighteen, they paid 0:13:40.280 --> 0:13:44.559 two billion dollars for this, so a lot of value destruction. 0:13:44.800 --> 0:13:49.079 Is that a Versace specific issue or does that reflect 0:13:49.160 --> 0:13:52.120 lower valuations in luxury Generally. 0:13:52.640 --> 0:13:58.400 I would say it's both, but it's mostly Versaci specific 0:13:58.480 --> 0:14:01.679 because if we look at the Asarchi then to now 0:14:02.160 --> 0:14:06.040 the fact that it's given double digit declines in organic 0:14:06.120 --> 0:14:08.880 sales growth through the couple of years, where actually the 0:14:08.960 --> 0:14:12.439 market was growing five percent or so, and that one 0:14:12.520 --> 0:14:15.080 point seven, to put it into perspective on an EV, 0:14:15.240 --> 0:14:18.520 would have been against traditionally a market for a very 0:14:18.559 --> 0:14:22.240 solid brand for Sarti with a lot of heritage, running 0:14:22.240 --> 0:14:25.400 from anywhere from three to five times, probably three times 0:14:25.480 --> 0:14:30.000 for Versargi, given it isn't particularly big. Under the what 0:14:30.080 --> 0:14:35.680 was Michael Cause and then became the Capri Group. The 0:14:35.760 --> 0:14:38.160 expectation was that they would run it from one billion 0:14:38.200 --> 0:14:42.400 in sales toward two billion, and that just didn't happen. Yeah, 0:14:42.480 --> 0:14:45.240 So that's partly why. I think also because of the 0:14:45.240 --> 0:14:48.240 state of the market. We started twenty twenty five with 0:14:48.720 --> 0:14:52.800 the luxury market focusing for low to mid single digit growth. 0:14:53.000 --> 0:14:56.000 With everything that's going on, we pull that back towards neutral. 0:14:56.440 --> 0:14:58.440 Hey, deb, thanks for joining us. Aways appreciate getting your 0:14:58.440 --> 0:15:01.360 thoughts there. Deb eight the lead voice on all things luxury. 0:15:01.360 --> 0:15:03.840 She gets luxury goods analysts for Bloomberg Intelligence. She's based 0:15:03.880 --> 0:15:04.320 in London. 0:15:05.960 --> 0:15:09.640 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:15:09.760 --> 0:15:12.840 weekdays at ten am Eastern on Apple, Cocklay and Android 0:15:12.840 --> 0:15:16.160 Auto with the Bloomberg Business app. Listen on demand wherever 0:15:16.200 --> 0:15:19.320 you get your podcasts or watch us live on YouTube. 0:15:19.800 --> 0:15:22.000 All right, here's my Janice story. 0:15:22.040 --> 0:15:24.040 The first time I ever went to a Starbucks, like 0:15:24.080 --> 0:15:26.600 twenty years ago, was waiting to go into a meeting 0:15:26.600 --> 0:15:29.720 of Janis out in Denver, Colorado. I'm not a coffee guy, 0:15:29.760 --> 0:15:31.160 so I had no idea what to order, So I 0:15:31.240 --> 0:15:33.040 just ordered what the person in front of me ordered. 0:15:33.120 --> 0:15:36.000 There you go, that's my Janis story. Lara Castleton joins 0:15:36.040 --> 0:15:39.840 us US head of Portfolio Construction and Strategy Janis Henderson, 0:15:40.440 --> 0:15:41.320 based in Denver. 0:15:41.840 --> 0:15:42.840 Laura, you sit. 0:15:42.760 --> 0:15:45.560 Back and you think about portfolio. 0:15:45.040 --> 0:15:46.600 Construction and strategy. 0:15:47.320 --> 0:15:50.040 How do you do that with this volatility that we're 0:15:50.040 --> 0:15:51.160 dealing with this year? 0:15:53.080 --> 0:15:54.360 Well, thank you for having me. 0:15:54.400 --> 0:15:56.680 There's a couple more Starbucks that have popped up over 0:15:56.800 --> 0:15:59.640 she said, sure, you were here. Yeah, there's a little 0:15:59.680 --> 0:16:02.400 bit of volatility going on the market, making our conversations 0:16:02.440 --> 0:16:05.760 a lot more in demand. You should say very clearly, 0:16:06.120 --> 0:16:08.880 planning long term is what we need to be focused 0:16:08.880 --> 0:16:13.760 on for our clients. Near term volatility is very extremely difficult. 0:16:13.960 --> 0:16:17.120 Heading into the tariff announcement a couple of weeks ago, 0:16:17.160 --> 0:16:19.320 we were talking to clients about really staying the course, 0:16:19.440 --> 0:16:22.480 not panicking, but being more diversified than what we had 0:16:22.480 --> 0:16:23.560 maybe been in the past. 0:16:24.320 --> 0:16:25.600 What does diversified mean? 0:16:26.000 --> 0:16:27.920 And I know that's a stupid question, but I say that, 0:16:27.960 --> 0:16:28.200 and you. 0:16:28.160 --> 0:16:28.960 Know the thirty year. 0:16:29.000 --> 0:16:31.120 If I on the thirty year for diversification, I just 0:16:31.120 --> 0:16:31.800 got burned. 0:16:33.040 --> 0:16:33.440 Correct. 0:16:33.600 --> 0:16:37.600 So on diversification, what we're talking about in our client consultations, 0:16:37.880 --> 0:16:42.440 it's diversification of that typical sixty forty portfolio, absolutely, but 0:16:42.480 --> 0:16:46.160 then it's also diversification within the sixty and within the 0:16:46.160 --> 0:16:48.920 forty and when we actually survey, so we work with 0:16:49.200 --> 0:16:52.120 We've worked with over twenty five thousand model portfolios over 0:16:52.160 --> 0:16:55.080 sixty five hundred clients globally, and recently came out with 0:16:55.120 --> 0:16:58.160 a piece just kind of isolating the average moderate portfolio 0:16:58.200 --> 0:17:00.880 that we come across. One of the biggest topics of 0:17:00.880 --> 0:17:03.320 conversation we're talking about right now today is actually the 0:17:03.360 --> 0:17:08.760 diversification within the US equity allocation because that concentrations reached 0:17:08.800 --> 0:17:12.840 north of eighty percent of investor portfolios. So it's not 0:17:13.080 --> 0:17:16.240 just across assets, but it's also within Hey. 0:17:16.119 --> 0:17:18.879 Laura, how about international markets? You know in the first quarter, 0:17:19.040 --> 0:17:22.400 the rest of the world's markets really outperformed the US. 0:17:22.440 --> 0:17:24.600 The S and P five hundred and that doesn't happen 0:17:25.400 --> 0:17:28.359 very often. Is that kind of a short term blip 0:17:28.440 --> 0:17:30.760 or is that something that we need to, you know, 0:17:30.800 --> 0:17:32.119 think about longer term. 0:17:32.760 --> 0:17:34.000 That's a very good question. 0:17:34.080 --> 0:17:36.040 It was very interesting to me to actually get some 0:17:36.119 --> 0:17:39.480 incoming calls from clients asking about international because to your point, 0:17:39.840 --> 0:17:43.600 that has never happened before. I do believe with the 0:17:43.640 --> 0:17:46.040 tariff policy that's come in, Obviously we don't know what's 0:17:46.080 --> 0:17:49.040 going to happen long term, but it is signaling a 0:17:49.080 --> 0:17:52.520 structural shift in what we're trying to accomplish longer term. 0:17:52.320 --> 0:17:53.480 With our budget deficits. 0:17:53.800 --> 0:17:57.359 To me, that does warrant potentially diversifying away from only 0:17:57.440 --> 0:18:00.320 the US dollar. And so while international market have been 0:18:00.320 --> 0:18:03.600 strong this year, there's a shift in how they're spending abroad, 0:18:03.640 --> 0:18:07.440 they're stimulating their economies, and that warrants having some diversification 0:18:07.640 --> 0:18:10.480 only outside of just only that heavy concentration of the 0:18:10.560 --> 0:18:11.040 US dollar. 0:18:11.840 --> 0:18:15.399 What do you expect in terms of this volatility? Like, clearly, 0:18:15.440 --> 0:18:18.000 diversification is good for all, I mean, the idea is 0:18:18.000 --> 0:18:20.040 that it should be good for all investing climates. 0:18:20.280 --> 0:18:21.240 However, the longer the. 0:18:21.200 --> 0:18:23.960 Volatility goes on, the harder it is for investors to. 0:18:23.920 --> 0:18:26.440 Stomach that absolutely. 0:18:26.520 --> 0:18:29.080 So that's exactly what we're coaching our clients through. 0:18:29.680 --> 0:18:31.160 Is very clearly, even. 0:18:31.000 --> 0:18:32.919 In the past week, if you wanted to make some 0:18:33.000 --> 0:18:35.720 pretty big bets on going into certain areas of the market, 0:18:35.800 --> 0:18:38.640 let's talk even fixed income markets, you could easily get 0:18:38.640 --> 0:18:41.800 whipsod the next day, the next week. And so when 0:18:41.800 --> 0:18:45.400 you're talking about diversification, you need to be spread across 0:18:45.440 --> 0:18:49.440 the yield curve, across sectors within fixed income, across regions, 0:18:49.440 --> 0:18:53.520 within equities, and you should start to see some bounces 0:18:53.520 --> 0:18:55.760 from some of these other areas while other ports of your. 0:18:55.640 --> 0:18:57.439 Portfolio are kind of dipping. 0:18:57.520 --> 0:19:00.480 So we're really talking about staying to it's that long 0:19:00.600 --> 0:19:02.359 term goal. And luckily a lot of the clients that 0:19:02.400 --> 0:19:04.439 we work with are managing money for clients I have 0:19:04.440 --> 0:19:07.360 a long term financial plan. So while they're getting headlines 0:19:07.400 --> 0:19:10.200 every day about the volatility, for the most part, they're 0:19:10.240 --> 0:19:13.359 being able to coach their clients that volatility happens, this 0:19:13.520 --> 0:19:15.680 is not outside of the norm, but on a long 0:19:15.800 --> 0:19:18.320 term basis that you're still well within your reach of 0:19:18.359 --> 0:19:18.879 your goals. 0:19:20.000 --> 0:19:22.359 Laura, are the folks that Jenna Senderson are you guys? 0:19:23.400 --> 0:19:25.320 You know is there a base case of recession or 0:19:25.320 --> 0:19:26.600 maybe we can skirt past it. 0:19:27.920 --> 0:19:31.160 So base case is not recession that obviously has been 0:19:31.240 --> 0:19:34.280 coming up into conversations quite a bit. More so, it's 0:19:34.280 --> 0:19:36.480 not out of the picture this year. And remember before 0:19:36.480 --> 0:19:39.400 the tariff announcements, growth was already slowing. There was already 0:19:39.440 --> 0:19:42.240 that lack of confidence within the economy that could bleed 0:19:42.320 --> 0:19:45.320 into slower growth leading to a recession this year. 0:19:45.600 --> 0:19:46.600 So it's not without the. 0:19:46.600 --> 0:19:49.600 Realm of possibilities, but it's not a base case, and 0:19:49.640 --> 0:19:54.639 it's also not necessarily a doomsday scenario for portfolios. Recessions happen, 0:19:55.000 --> 0:19:57.480 it doesn't necessarily mean it will be the exact recession 0:19:57.520 --> 0:20:00.000 we experienced the past two times, which were quite severe, 0:20:00.400 --> 0:20:02.760 and there are ways to plan around that, namely, be 0:20:02.880 --> 0:20:05.800 high quality within your names, focus on the fundamentals within 0:20:05.840 --> 0:20:07.000