Co-Host or Analyst (2:11)

You know, I'm curious about your view on this. That as it does not relate to markets, it sounded like you were saying that we've entered a new paradigm, at least with the decisions that this administration is making. I'm wondering how you're looking at that. We understand that what the President wants to achieve with tariffs. I would not say I understand what he wants to achieve right now. Yet with Iran, we're still waiting to hear exactly what the US Wants to achieve there. But, but how do you view this? Not necessarily with regard to markets.

John Rogers (2:38)

Well, what I worry about is that Iran does something that's extraordinarily painful for America or another part of the world as they fight back and feel like they have to defend their honor. They'll just do something that will be, we'll all have a hard, hard time living with over the long run. So we all saw what happened when the World Trade center collapsed and all the trauma and drama and extraordinary heartbreak from that situation. And you just hope that nothing like that happens again ever in the United States or in our friendly countries.

Interviewer (Bloomberg Host) (3:14)

Got to say, I went right there after this happened and that's what I thought about retaliation. Any of us who were here in New York during 911 remember it like it was yesterday. And it does make me a little scared and I'm not an alarmist, but it did make me think, okay, what's the retaliation of all of this? We're going to set that aside.

Co-Host or Analyst (3:33)

I can, I can, we can shift back to markets, Carol. We can ship back to markets.

Interviewer (Bloomberg Host) (3:36)

I want to go back to something you said actually in January and I was doing some read in on this and you said the US Will likely slide into a small recession at the

Bloomberg Narrator (3:43)

end of the year.

Interviewer (Bloomberg Host) (3:44)

Stock market will drop as average income consumers struggle with high living costs. And this was I think at the Executive Club of Chicago's annual Outlook event. And you talked about the dow maybe declining 15 to 20% this year. But it, and it also got into this dichotomy which I think really increasingly, I know it bothers us wealthy consumers doing okay. So many other consumers are not. So talk to me about that. Do you still feel this way that maybe we see some kind of small recession?

John Rogers (4:13)

I still do. I've never seen anything quite like it. I know a lot of people have been talking about this, but where you're right when people are still going and spending money on cruise ships or going to Las Vegas for experiences doing things that are really the wealthy people can do right, but the average American is really, really struggling. You know, I go to McDonald's pretty much every day and you see how much it costs to, you know, buy your, your drink and your French fries and what happens. And you realize that ordinary Americans are having a hard time covering the cost of just day to day life in America. I think it's a real challenge for our economy, a real challenge for certain industries.

Co-Host or Analyst (4:51)

It's the case of the so called K shaped economy is something that we talk about a lot and we think about a lot. Are there policy proposals or are there policies that the US Government could enact that would make the gap between the very wealthy and the poor or that would bring it, bring back the middle class? I think is something that we talk about a lot too. Is it something that you think the free market can solve? How do we get out of this?

John Rogers (5:14)

I think the free market will solve it. America always goes to extremes and things ultimately get back to, back to normal. Warren Buffett says, you know, our capitalist democracy is the best system ever invented. And so we'll ultimately put the right people in place. Governments will shift and change and people will be able to get to a place that I think will bring back a better, better life for folks from middle America. And I think that's really, really important. I think keeping interest rates reasonable, keeping inflation low is really, really important. Creating the other tax policies that are fair and equitable. So I think we'll get there. It takes a while, but we'll be on our way back. And I think we're in that process now.

Co-Host or Analyst (5:55)

So you're optimistic?

John Rogers (5:56)

I'm optimistic that we will create the wealth gap in our country will start to diminish over time.

Interviewer (Bloomberg Host) (6:02)

So when I look at, I want to talk a bit about the investment environment we saw broadening out, certainly in terms of where investors were placing some bets here. Where do you see some mispricing within the market? Where you think that that presents some opportunities for investors?

John Rogers (6:17)

Well, I think right now the financial services companies are what I think have gotten to be extremely cheap. They've gotten, you know, very, very worrisome about what's happening with private credit. As we all know what you guys are reporting on and talking about all the time. But I think it's overdone. I saw David Rubenstein speak last week. He was interviewed by our chairman, Charlie Bobrinskoy. You know, in his optimism around about Carlyle, I thought was was striking. And I think they've gotten sort of a hit with what's happened in private credit everywhere. Even though they have a small exposure to private credit, there's also been this huge concern around private equity that people won't come back, that it's going to be harder and harder to raise funds. I think as interest rates get lower, companies that have the kind of brand that Carlyle has will be able to do extremely, extremely well, and then secondarily, a company like Lazard, you know, one of the world's best investment banking firms, Peter Orszag has done a great job in getting that company on track. It's moving in the right direction and being one of the best investment bankers, they're going to benefit from all the deals they're going to have happen in this deregulated environment. It's a, it's a really a great opportunity for companies to buy, merge, do things that are right for shareholders.

Interviewer (Bloomberg Host) (7:24)

It's really kind of refreshing. I haven't heard you say I. Where does that fit in?

Co-Host or Analyst (7:31)

Is that a. It's not a value, right.

Bloomberg Narrator (7:35)

Where.

Interviewer (Bloomberg Host) (7:35)

How does that factor in? Like, Because I do think the trade has evolved over the last two, three years in terms of where investors want to place their bets. And now we're talking a lot more about inference and agentic AI and kind of where that's going. But I think we still don't know a lot.

John Rogers (7:52)

We still don't. And we're working really, really hard on it. At Ariel, we're using some of the top academic minds at the University of Chicago to help guide us as we think through which industries will be the most disrupted, which ones will not be disrupted, and where the. Maybe the fear is overdone. So, like for us, and one of our favorite stocks is Jones Lang LaSalle JLL, you know, real estate brokerage is still an important business. It's a complicated business. If you're a CEO trying to move hundreds of people from one office tower to another, one campus to another, you need a great broker who can help you see and have the insights that are there. So I think AI helps to make them more efficient and more effective. And AI is not going to replace that real estate broker the way some people are afraid of.

Co-Host or Analyst (8:36)

So much of the concentration, literally, and when it comes to coverage of the market has been mega cap tech names. And I'm wondering if it's possible, in your view. I think I know what you're going to say, but if it's possible, in your view, to outperform mega cap tech or the S&P 500 by excluding those from a portfolio, by finding those value names?

John Rogers (9:01)

Well, I think so. I've been very public. I think the large cap growth stocks have gotten way, way, way too expensive. Everyone's fallen in love with that trade for quite a long time. But I've seen this happen time and time again in my 43 years at Ariel, but also saw it throughout history. The Nifty 50s, during the 70s, the Nifty 50 stocks. You saw it during what happened in the go go twenties. People just fall in love with the sacrifice sector and think it's just going to go up and up forever. And the small stocks get neglected, they get misunderstood, they're not as well followed. And so opportunities gets created because everyone's fallen in love with this hot, shiny, shiny dollar out there.

Co-Host or Analyst (9:39)

And you think that's happening right now?

John Rogers (9:41)

I really, really do. Up until most recently, I mean, I've seen the palantirs of the world and others have finally started to have some of their comeuppance. Reminds me of what happened during the turn of the century when the Internet bubble finally became burst. So you start to see some signs that the world is coming back to rationality and people are realizing some opportunities in their smaller names.

Interviewer (Bloomberg Host) (10:00)

When it comes to the investment environment, are you anticipating that investors need to be thinking about it's going to be a higher rate environment going forward. And so you've got to think about that and what it means in terms of valuations.

John Rogers (10:11)

Well, I think I'm more optimistic about rates. I think they'll go lower. Go lower. I really do. I think that, that the new Fed chairman is clearly someone who's going to want to make the President happy. He's going to do everything he can to bend the will of the Federal Reserve.

Interviewer (Bloomberg Host) (10:27)

Doesn't that make you nervous though? If it's not fundamentally based long term,

John Rogers (10:32)

it makes me nervous.

Interviewer (Bloomberg Host) (10:33)

Okay.

John Rogers (10:34)

But I do think in the short to intermediate term, if we keep rates lower, it's always good. Low rates are always positive for the markets. And of course there's some, you know, some things will come back to haunt us because of it. Yeah, but I think that's more longer term. In the short term, I think this will be something that will be a help the market stay where it needs to be and, and be sort of a tailwind for the markets.

Interviewer (Bloomberg Host) (10:56)

It doesn't sound like when we, you know, one of the narratives it felt like we were coming into was, I mean, think about Biden before President Biden, before President Trump won the election. Like the US Was the best place to invest when President Trump came in a year ago, again, like the US Market was the place to invest. And then we were just thinking about the US being an investable. Like that became a narrative.

Co-Host or Analyst (11:21)

And to a certain extent, even though the US Markets did well last year, there was a lot of underperformance compared to global markets for 2025.

Interviewer (Bloomberg Host) (11:28)

Is that, is that something you think a lot about or that we are seeing investors start to diversify, diversify away from the US Market or that's impossible because of how deep and how liquid the US market is.

John Rogers (11:42)

I think it's really, really hard to diversify away from the US markets in any meaningful way. We still have the deepest economic system, the most successful economic system, the best universities in the world. You know, we're the United States of America. And even though there's been all this drama and trauma right now, ultimately people want to come back to the country where you can count on our currency, you can count on our democracy and the regulatory environment that we have. And just all the great success we've had. Wall street to Silicon Valley, I think that America is the best.

Interviewer (Bloomberg Host) (12:18)

So this is just a blip?

John Rogers (12:19)

I think so.

Interviewer (Bloomberg Host) (12:21)

It's just because it's interesting. I think we try to figure out the lasting impact of the last year or so.

Co-Host or Analyst (12:27)

Well, one thing that we're trying to figure out is the impact that immigration or a lack thereof will have on the economy here. If we think about in recent years, Americans not having enough babies and one of the ways that has been supplemented and we've been able to avoid turning into a Japan, for example, is because we have had people come to the United States and increase economic activity that we wouldn't have had had we not had that. And I'm wondering how we have to adjust our expectations for a world that is increasingly, I was going to say isolationist, but we're not necessarily seeing that right now, but one that looks inward, toward itself more than looking outward.

Interviewer (Bloomberg Host) (13:05)

And you only have 30 seconds to solve the world.

Co-Host or Analyst (13:06)

I'm sorry, that was my, that was my bad.

Interviewer (Bloomberg Host) (13:08)

I just think we got lost in this.

John Rogers (13:10)

In this business, the ability to see the future is the most important.

Co-Host or Analyst (13:14)

Yeah.

John Rogers (13:14)

And so if you look out two to three or four years, we will be past this crisis, this isolationism, the challenges that we face one way or another. You're going to have a new president, you're going to have a new government. And I think America will still be in a strong, strong place.

Interviewer (Bloomberg Host) (13:28)

I kind of love this. John, thank you so much. Really appreciate it. John Rogers, of course, founder, chairman and co CEO of Ariel Investments.

Bloomberg Narrator (13:35)

If you follow markets, you know the value of long term thinking. You plan, you diversify, you prepare for volatility. But in life, even the best strategies can't prevent every bad day, a fire, a loss, a disruption that demands immediate attention. When that happens, what matters isn't just what you planned, it's who shows up that's where Cincinnati Insurance comes in. For more than 75 years, they've helped individuals and businesses navigate life's toughest moments with care, expertise and personal attention. Together with independent agents, Cincinnati Insurance focuses on relationships, not transactions. Their approach is grounded in experience, follow through and trust built over time. Bad days happen, and when they do, you deserve an insurance partner who understands risk, respects what you've built and is ready to help you move forward. The Cincinnati Insurance companies Let them make your bad day better. Find an independent agent@cin fin.com.