Why another stock market hurricane lurks

Summary

Highlights

• Tesla's stock is down over 30% during Trump's presidency due to poor sales and public sentiment. 📉
• Global investors are growing skeptical of US assets, fearing political and economic instability. 🏛️
• Experts warn of increasing tariffs pressing consumer prices and dampening economic growth. 📊
• The US bond market might suffer more than the stock market due to reduced foreign investment and rising yields. 💸
• There is a significant risk of a looming economic slump described as a 'slow hurricane' on the horizon. 🌧️

Key Takeaways

• Global investors are becoming wary of the US, fearing instability and erratic policies. 🌍
• Tesla struggles despite its close ties to the presidency, losing 30% in stock value. 🚗
• Tariffs are hiking prices, affecting consumer goods and investor trusts. 📈
• A potential 'slow hurricane' is threatening the US economy, feeling the blow on bonds more than stocks. 🌪️
• Retail investors keep buying the dip despite looming risks—a strategy experts caution against. 🤔

Overview

Chapters

• 00:00 - 01:00: Introduction and Stock of the Day - Tesla The podcast episode 'Introduction and Stock of the Day - Tesla' hosted by Yahoo Finance executive editor Brian Sazy, highlights investment insights with a focus on Tesla as the stock of the day. The discussion is tied to Trump's 100-day mark on April 29th, reflecting on its implications on the stock market. This ongoing focus on Tesla has been featured consistently in previous episodes, reinforcing its relevance and significance in the investment landscape.
• 01:00 - 03:00: IMF Meetings Insights with Rebecca Patterson The chapter focuses on the unexpected performance of Tesla shares during the first 100 days of the Trump presidency. Despite Elon Musk's close proximity to President Trump, Tesla's stock is down over 30%. This decline is attributed to pressure in sales and profits. Notably, a new Associated Press poll on Musk has been highlighted, driving the attention of the speaker who selected Tesla as the stock of the day.
• 03:00 - 05:00: US Stock and Bond Market Concerns The chapter discusses current concerns in the US stock and bond markets, including a decline in favorability towards Elon Musk from 41% to 33%. This sentiment is linked to perceptions of Musk's influence in government. The transcript suggests this decline may be influencing Tesla's sales negatively. The chapter introduces Rebecca Patterson, former CIO of Bridgewater, as a featured guest to provide further insights.
• 05:00 - 08:00: US Tariffs and Their Impact The chapter discusses the semi-annual meetings held by the International Monetary Fund (IMF) and World Bank in Washington, DC, which take place every April and October. These meetings act as a networking event for macroeconomic experts, where policymakers from around the globe come together to discuss various issues. In addition to the main meetings, numerous side meetings occur, allowing attendees to quickly gauge the global economic landscape.
• 08:00 - 10:00: Trust Issues with US Institutions This chapter discusses a key takeaway from a global investor meeting, focusing on non-US investors such as those managing pension and sovereign wealth funds. The discussion highlights the efficiency and insight provided by the event, especially regarding the perception and strategies of large institutional investors worldwide.
• 10:00 - 16:00: Retail Investors vs. Institutional Strategies The chapter "Retail Investors vs. Institutional Strategies" explores the current attitudes and actions of investors in context of recent U.S events. It discusses the surprise rallies in the stock market despite expectations, likely connected to the 90-day pause on tariffs referred to as Liberation Day, and President Trump's easing of pressure on the Federal Reserve, which have collectively created a more optimistic environment for investors.
• 16:00 - 18:00: Federal Reserve's Role and Market Uncertainty The chapter discusses the role of the Federal Reserve and how its policies can impact market uncertainty. There is an expectation, dubbed the 'Trump put', that the administration might intervene to avoid a recession or a bear market. This expectation is partially driving market purchases. However, the chapter cautions that despite positive news like potential deals, the worst might not yet be over, affecting both equity and bond investors, particularly as yields on the 10-year note decline.
• 18:00 - 19:30: Gold as a Safe Haven Asset The chapter discusses the potential impact of upcoming tariffs on small parcels, particularly the 'dimminimous tariff' which affects items valued at $800 or less entering the country. The narrator suggests that while immediate action may not be necessary, it could be wise to adjust one's investment strategy in the coming weeks. The example of the narrator’s daughter’s impulsive purchases on Amazon highlights the relevance of these tariffs to everyday consumer behavior.
• 19:30 - 20:00: Conclusion and Podcast Outro This chapter concludes with a discussion on potential price increases anticipated to be as high as 120-130% starting next week, due to the persistent 10% tariff and large Chinese tariffs still in effect. Despite any potential deals that could be struck, these tariffs continue to burden the consumer. Concerns are expressed that this situation will put pressure on consumers. The chapter circles back to discuss worries regarding the International Monetary Fund (IMF).

Why another stock market hurricane lurks Transcription

• 00:00 - 00:30 Welcome to a new episode of Opening Bid. I'm Yahoo Finance executive editor Brian Sazy. Like I always say, this the podcast that will make you a smarter investor. Period. All right, let's get a minute on that shot clock. And uh stock of the day is Tesla. I think it's been my last four stocks of the day uh for the podcast with good reason. Uh this one is actually tied to Trump's uh 100 day mark, which will be on April 29th. Now coming into the Trump presidency,
• 00:30 - 01:00 you would think Tesla would have done well. Stock would have been on fire. That hasn't been the case. Through the first 100 days of the Trump presidency, shares of uh Tesla look poised to be down more than 30% despite Elon Musk having that close proximity to the president. Of course, Tesla's first quarter results. Uh pressure uh in terms of sales, pressure in terms of profits, outlook now good. I know Musk is coming back, but still stock down more than 30%. And what really caught my attention here and why I'm calling uh why I'm making Tesla the stock of the day today, new AP poll uh on Musk, it found just
• 01:00 - 01:30 33% of US adults have a favorable view of Musk. That's down from 41% in dece in December. 2thirds of those pled say they have too they have uh just given Musk too much influence in government. Put that together, you really start to understand why Tesla sales have come under pressure. All right, enough of Tesla here. I know you hear me talk about all the time. Let's bring in our featured guest uh for today, former Bridgewater CIO Rebecca Patterson. Rebecca, always nice to see you. Great to see you, too. It's been a while. I know you're right back from the IMF
• 01:30 - 02:00 meetings in DC. What was your I guess what are those meetings like first of all for you and then what are some of the things you you found on the ground uh this year? Sure. So, the International Monetary Fund and World Bank gather twice a year every year, April and October. And basically, it's speed dating for macro people like me. you know, you have policy makers from all over the world who come together for meetings and then there's lots of other meetings on the sidelines and so you can really get a quick read on almost every
• 02:00 - 02:30 economy in the world within four days. So, it's very very efficient and you get a lot of good takeaways and there's other investors and researchers there like me. So, you also can share notes with them and see how they're thinking about things. So, that's what it is. In terms of my takeaway, the biggest one to me was a read on the non US investor, the global investor right now, and I'm talking about large institutional investors, people who run large pension funds, sovereign wealth funds, etc. And
• 02:30 - 03:00 they're rethinking the United States. To me, that was a big big deal. I thought I thought stocks have rallied back. Mhm. So that surprise that surprises me a bit to hear a little bit. Um so you know since since we got the pause on Liberation Day, the 90-day pause and then we also had President Trump pulling back a little bit from his attacks on the Federal Reserve, which thank goodness. I think both of those things have given a bit of a sense of
• 03:00 - 03:30 hope that there is a Trump put that if things get bad, the president and the administration will back off because they don't want to see their policies cause a US recession or or a bare market. Uh I think that's leading to some buying and the idea that we might get all these deals in 90 days is leading to some buying. But I don't think we're through the worst of it. That's that's probably my big point here that if you are an equity investor or especially a bond investor with yields coming back down on the 10-year in the
• 03:30 - 04:00 last few days, this is an opportunity to lighten up a little bit. In my opinion, I don't think you need to do it today, but in the coming weeks or so because we are going to see the tariffs bite just this week on May 2nd, this thing called the dimminimous tariff. That's on the little tiny parcels, the $800 or less parcels that come through the border. All that stuff my teenage daughter will buy on Amazon.com and I think, "Why do you need this? What is it even?" Those
• 04:00 - 04:30 things the prices are going to go up in some cases 120 130% um starting next week. Now, there's some inventory pulled forward, so it might not come all on day one, but we're going to see that rolling out. The 10% tariff still in place, big Chinese tariffs. there's there's a lot that isn't going away regardless of what happens with any deal making. That's going to be attacks on the consumer. So, I think that's going to pressure us. But but kind of circling back to the IMF, the thing there that I'm worried about is and it's
• 04:30 - 05:00 not just the trade war. It's the worries about US institutions like the Federal Reserve. It's worries about the US as a reliable partner on things like NATO, on things like Greenland, Panama, Canada as a 51st state. Even if it was said in justest, it's not being taken that way. It's being taken seriously. And so we're seeing a lot of global investors saying, "What else could happen? Could there be a tax on capital flows?" So the international community, investment
• 05:00 - 05:30 community, they don't trust the US. I look I don't want to generalize and say the entire world no longer trusts us. That would be an overstatement. But I think there is a new risk premium on US assets as seen by foreign investors that did not exist before the liberation day maybe before the administration started. And and what that means is that and I'm just using data from the Treasury here uh the most recent one is from late last year. So the Treasury Department
• 05:30 - 06:00 estimates we have about $30 trillion of US equity and bond holdings by foreign investors. So let's say I am the investment committee of a big pension fund in Canada. We meet once a quarter. We're having our next meeting. We're saying gosh, we've been overweight the US for the last few years. So more bullish on the US, right? And now we're going to trim that position maybe by two percentage points incremental. Let's just take a little off the table. Let's do the same with bonds. If you reduce allocations to US stocks and bonds by 4%
• 06:00 - 06:30 total, it's tiny. that if and that happened generally around foreign investors $1.2 trillion dollar would leave US assets. Where does it go? I think it goes back to home countries. It goes to other foreign markets. I think we're already seeing that some of it's going to things like gold. Um so it's going to get dispersed around the world and to different asset classes. I'm more worried about what it means in the US for the bond market than the stock
• 06:30 - 07:00 market because whatever Congress tells us they're doing on the budget. We know that we're going to see more issuance of bonds as we are getting less revenue versus our spending. We're going to have relatively less demand from foreign investors. So, bond yields are going higher. I don't know if we have a so-called Liz trust moment like 2022 in the United Kingdom when UK bond yields spiked but I think we are going to see US Treasury yields especially at the longer end settling at a slightly higher
• 07:00 - 07:30 level. Are you talking 5% on the tenure? I hope not. If we saw 5% or higher I think psychologically that could be pretty damaging for other asset classes stocks credit etc. It was damaging, but it broke 4% to what four? We we touched 5% briefly on the 30-year and and the US 10ear has gotten close a couple times now. So, if we saw the 10-year rising slowly, gradually, it's not as big of a deal, but it's still doing damage. It's
• 07:30 - 08:00 raising your mortgage rate. It's raising your auto loan cost. It's making it more expensive for companies to borrow to grow. All of that acts like a limit on GDP growth and frankly a limit on stock valuations. So this isn't a crisis. This isn't immediate. This is kind of that slow hurricane approaching the coast. You don't know if it's going to hit you directly or on the side, but you know it's going to do damage. You know it's coming. That's what I think we're going to see probably over the next few
• 08:00 - 08:30 months. It's a slow bleed, but it's meaningful and investors shouldn't be overlooking it. So have we so we haven't seen the worst for stocks then? I don't think so. I don't think so. Look, my my hope is that we get enough deals that the rest of the tariffs are disregarded. You know, we kind of say, okay, we got what we needed. We don't need to do this anymore. I don't know how likely that is. And you know, now the fact that the the bullish argument is, oh, we're going to reduce Chinese tariffs to only 60%.
• 08:30 - 09:00 But they're still there and they there there was no 60% two months ago. Exactly, Brian. Right. So, you know, January 1, people thought 60% was crazy. Now, we're saying, "Oh, well, this is normal. This is great news." This is a major tax on the consumer, and we can't forget that. And we're starting to see it in some of the data. We're certainly seeing it from corporations as they talk about their outlooks. I think it's going to feed more and more to the quote unquote hard data, retail sales, payrolls in the coming months. Again,
• 09:00 - 09:30 it's not immediate. It's not a crisis, but it's going to unfold this summer. And that's why I think if the if you got this bounce in stocks, you say, "Thank you very much." And maybe you start taking a little off the table or you move into slightly more defensive sectors like staples. Why isn't it a crisis? Let me give you an example. And it's, you know, we were talking off camerara about Metamucil. I talked to this I talked to last. Yeah. Let me just You brought it up. I brought I brought it up. I brought it up. I talked to the CEO of Proctor and Gamble uh John Mohler
• 09:30 - 10:00 and he said there's an ingredient Metamucil plant that is just grown in India and I asked him why can't you move it from India to the US don't have the climate for it so this one plant is going to be I guess tariffed where it wasn't before prices are going to go up for Metamucil I mean but there's more instances of that it's going to go up for soda we heard that for PepsiCo uh I talked to Whirlpool CEO Mark Bits are appliance prices are going up this sounds like a potential crisis on our hands Well, companies as we know are doing everything they can to limit the
• 10:00 - 10:30 damage there. We there was a good piece I think um I'm not going to say the paper because I can't remember for sure which it was about companies this morning that are doing everything they can to control costs without layoffs for now. If we cross that Rubicon and it's no longer just trim costs where you can, but gosh, we need to start laying off workers, it can quickly snowball, crisis, recession, whatever you want to call it, right? We'll be going down that road. I don't think we'll see that this Friday in the payroll report. I think
• 10:30 - 11:00 we'll see some moderation in in job creation, but not a cliff fall yet. Um, we're not seeing that from companies yet. But if these things keep building, we're going to hit that tipping point. Again, I think it's probably a few months away, but it's coming. Could it be a crisis? It could. Sure. I mean, look, I think April 2nd to April 8th was a mini crisis. If that had continued, that would have quickly turned into a financial crisis. Now, the Federal Reserve can step in. They can do
• 11:00 - 11:30 financial stability measures like they did around Silicon Valley Bank or the UK did when they had their crisis in 2022. But that's oneoff. that's not going to prevent the economy from slowing and possibly having a recession. Um, so there's they're limited what they can do and our fiscal space is more limited now with a budget deficit around 7% of GDP when growth has been 3% in the last year or so. What are they going to do when when the stuff hits the fan?
• 11:30 - 12:00 They don't have a lot of room. We're about to find out. Hang with us. Uh, Rebecca, we're going to go off for a quick break. We'll be right back. [Music] All right, welcome back to Opening Bid. Having a a fun chat here at the NASDAQ in Times Square with former Bridgewater CIO Rebecca Patterson. You're really your focus on the Fed and and you're right to do so. How important was it that the president for now has backed off on his attacks on Jerome Pel? I think it's incredibly important that he backed off because if you start
• 12:00 - 12:30 questioning the Fed's independence, it's going to push up inflation expectations. that's going to push up bond yields, put more term premium in the bond yield, which makes borrowing costs higher, which acts as a weight on growth. So, I think it's it's incredibly important he backed off. I don't know if we're out of the woods. We have a Fed meeting coming up in about a week and the Fed will probably do nothing because there's no reason to act. And then come the attacks again. Exactly. That's my point. So, then we're going to get more verbal
• 12:30 - 13:00 attacks. Um the pal's term ends next May. It it's seems pretty likely that uh President Trump would like someone else in the seat and that's going to be important too. Who is in the seat? Is it someone who is going to be independent? Is it going to be someone who is trying to say what Trump wants to hear which we hear from certain members of his cabinet? Um so I don't think we're out of the woods on that yet though. Although I I do think it's a big positive or at least removing a negative that he has backed off on this idea that
• 13:00 - 13:30 we're looking at firing him, which is what Kevin has uh reportedly said. Why wouldn't it be the Treasury Secretary potential? He's been taking the seat taking the seat. Possible. Possible. And certainly the markets view him, I believe, as more of an adult in the room, so to speak, than some of the other cabinet members. Certainly he has been um more reflective and more reassuring to investors especially over the last week or so at the IMF meetings. Yeah, when we talked to him uh just before the IMF meetings, you know, I I
• 13:30 - 14:00 was sitting right across from him, Rebecca, I didn't get the sense that there's any deal anytime close on China and that is and I was just sitting there. I'm like, wow. Okay. And then I see markets rallying. I I don't get it. Like I don't get it. Well, you know, one thing that I've been thinking about a lot is to your point, like given everything going on, given this incredible level of uncertainty, why would anyone be buying the dip? I do think it's important to remember that especially since the pandemic, we have seen a resurgence of the retail investor
• 14:00 - 14:30 in the United States. And I don't know the exact breakdown politically between Democrat and Republican among those investors, but I think it's probably fair to say at least half are Republican. Um, and that retail investor, I think, has been more of a dip buyer, so to speak, much more short-term, trading on headlines and and that is a pretty big subcomponent behind the market these days. So, you know, when we get proper data and we can parse this in the coming weeks and months, it
• 14:30 - 15:00 wouldn't surprise me if one of the main supports we're seeing from the mark for the market right now is coming from more Trumpfriendly retail speculative short-term traders that still believe in what the administration is doing. Correct. Correct. And and believe that we're going to get to the other side. Right. So they they think this president is maybe a little chaotic on process, but he's getting to the right goal. It's worked for them before. So hold on for dear life sort of mentality. But
• 15:00 - 15:30 institutions are are going the other way. They're going the other way. Absolutely. We are seeing institutions going the other way. Are they cons I imagine they're concerned about the fundamentals of companies. Yeah, absolutely. And and again that retail investor if I'm right now this is a hypothesis. It's not proven. If I'm right that the retail investor is the main support right now um behind the recent rally, they can keep playing that game until they start losing their jobs andor the stagflationary effects of the
• 15:30 - 16:00 tariffs start to affect their purchasing power. Um in which case they have to start pulling back too. And again I think it's coming. It's a question of exact timing and degree, but it's coming and I would say probably in the next month or two. Using all your decades of experience, whether it's Bridgewater or even before then, my wisdom. Yes, your wisdom and analyzing companies and talking to institutions, what would you tell the retail investor that is out there buying the dip? You know, they the Apple Finance is the home of the retail
• 16:00 - 16:30 investor. Every morning, millions of people wake up, they come to us, they have our portfolios on their platform, they're watching videos, they're doing everything on this amazing portal. What do you tell this group that seems still very confident? That's a great question. You know, I I there's nothing wrong with day trading. A lot of people do it for a living and make very good income from it. But if this is money that you're counting on to be your retirement income, your long-term savings, you don't want to try to to time something that's not timeable. President Trump's
• 16:30 - 17:00 posts are not timeable. um how these deals play out or not is not timeable. So, you're basically just gambling and that is not how you how you save for the long term. If you're doing this short term because it's fun, it's entertainment and you you can afford to lose a certain amount of money if things don't go your way, God bless, have a great time. Um, but if this is longer term oriented money, then I would make sure that a good chunk of it is in
• 17:00 - 17:30 something that you're just sitting on, that you're not trying to go up and down and tactically trade. That might be money markets, short-term bonds right now, which are still getting you over 4%. It might be a small allocation to gold, which I remain bullish on as central banks continue to diversify. If you want to stay in the equity markets, maybe you move a little bit more into defensive industries like consumer staples. If you want global diversification, maybe you look for markets that are a little less volatile than the S&P, that are more cheaply
• 17:30 - 18:00 valued. Um, things like the UK right now, I would put in that bucket, it tends to be a more defensive equity market. And it does look like the UK prime minister is having some good progress making deals with President Trump. emerging markets. The one that jumps out to me today, again, this one I would be small on, especially if I'm taking a longer term view, but when I look at who wins from the trade war, no one wins, first of all, but relative winners, one of the countries that's
• 18:00 - 18:30 caught my eye is Brazil. They're getting market share from the United States on things like agriculture. They're getting market share from places like China on things like textiles and shoes. Maybe can they can grow that Metamucil uh plant maybe. Right. That's a great point that I mean I know a lot of older people in Florida who'd be very happy to hear that. We're gonna we're gonna take that off take it offline. Why you know in the last minute we always love to get a hot take um from our guests. So my question to you is this. Why gold?
• 18:30 - 19:00 So gold tends to perform best at the tails. Either a recession crisis or an overheating economy where inflation might become unanchored. Right now we're in the left tail. there is a possible recession crisis and that tends to lead retail investors just normal investors into gold. However, at the same time and what we've seen over the last few years is central banks getting a little more anxious about their their exposures to the United States trying to diversify.
• 19:00 - 19:30 They're looking around the world and saying, "I need something safe and liquid." And gold helps fill that bucket. Um, and so we've seen record buying from central banks, not just for the last year, but for the last three years in a row. Now, China's a big piece of it, but it's certainly not alone. There's a number of central banks. I think that, especially with what we've lived through these hundred days of Trump, is likely to continue. I imagine it's going to be an interesting next 100 days. Rebecca Patterson, uh, always nice to see you. Thank you so much for
• 19:30 - 20:00 joining Opening Bid. Uh, this was a real treat as always. My pleasure. Thanks. All right, and that's it for the latest episode of Opening Bid. Uh, as always, continue to hit us with those amazing ratings on all the podcast platforms and on YouTube. Hit us with those thumbs up. I love all your comments. I read them all. Keep them coming because that's how we continue to make this thing better. We'll talk to you soon.