Podcast Summary:

Excess Returns – "The Colossal Mistake | Richard Bernstein on the Risks of Tariffs and Passive Investing"
Date: April 13, 2025
Hosts: Jack Forehand, Justin Carbonneau, Matt Zigler
Guest: Richard Bernstein, CEO & CIO, Richard Bernstein Advisors

Overview

In this episode, hosts Matt Zigler and Justin Carbonneau sit down with Richard Bernstein to dissect the current investing landscape, focusing on the profound risks of tariffs, inflation, deglobalization, and the pitfalls of passive and momentum investing. Bernstein issues a series of candid warnings about today’s market leadership, overconcentration in growth stocks, and the often misunderstood threats posed by tariffs and high national debt. The conversation moves fluidly between macroeconomic dynamics and actionable advice for investors, with Bernstein’s trademark humor and bluntness.

Key Discussion Points & Insights

1. Market Parallels to the Financial Crisis

[01:00-02:55]

Bernstein clarifies that while today’s risks differ structurally from 2008’s financial crisis, the current environment represents “probably the biggest tax maybe in history in the United States” on consumers due to tariffs.
Given the US's consumer-driven economy, this "tax" is driving today’s heightened market volatility.

Quote:
"This is really what we're feeling right now is probably the biggest tax maybe in history in the United States history...on the consumer, certainly that we've seen in our professional careers."
— Richard Bernstein [01:38]

2. Concerns About Market Breadth & Momentum Investing

[03:19-06:24]

Bernstein critiques momentum investing, likening its risks to “Wile E. Coyote running off a cliff”—success depends on knowing when to get out, not just what to buy.
He highlights how 2024's market was the narrowest since the Great Depression, dominated by a handful of growth names (the "Magnificent Seven"), and draws parallels to distress-era markets, despite no depression.
Warns that relying on passive growth index funds today is a “colossal mistake” due to extreme concentration.

Quotes:
"If you're investing in an index fund or you're investing in a growth index fund, I think you're making a colossal mistake."
— Richard Bernstein [03:19]

"2024 stock market was the most narrow stock market we had seen since the Great Depression."
— Richard Bernstein [03:19]

3. Tariffs, Inflation, and Deglobalization

[07:11-11:37]

Bernstein supports the goal of American reindustrialization but calls the current tariff approach “about the most ham handed way we could possibly have designed.”
He argues deglobalization and tariffs are inherently inflationary because they reduce competition, which puts upward pressure on prices. The US lacks the capacity to substitute most imported goods (e.g., textiles), leaving consumers little choice but to pay higher prices.
Suggests the Fed’s 2% inflation target is outdated, forecasting a secular norm closer to 3-4%.

Quotes:
“Tariffs are inherently inflationary on top of the secular deglobalization, which is inflationary too.”
— Richard Bernstein [09:09]

"There's plenty of better ways to achieve this goal without hurting the US consumer and placing this massive tax on the US consumer."
— Richard Bernstein [07:11]

4. A Smarter Path to Reindustrialization

[12:06-14:04]

Rather than tariffs, Bernstein advocates for creating incentives that reward firms for investing domestically, such as permanent tax advantages for US-based manufacturing projects.
Criticizes past blanket tax cuts (e.g., Apple using US tax cuts to build plants overseas) as misaligned with national goals.

5. Uncertainty and Risk Premiums in Today’s Market

[14:46-18:17]

Bernstein reflects on the unusual levels of uncertainty, coining the phrase: “unprecedented use of the word uncertainty.”
The market’s risk premium is rising, as reflected in compressed valuations despite decent earnings. Bernstein’s firm is seeking investments with more “certainty” (quality balance sheets, dividends, gold) while reducing exposure to credit and speculative tech.

Quote:
“My joke used to be we were seeing unprecedented use of the word unprecedented. Now we're seeing unprecedented use of the word uncertainty.”
— Richard Bernstein [14:46]

6. Tariffs’ Impact on Profits and Stock Selection

[19:49-21:02]

Bernstein expects US corporate profits to “peak out” around summer but notes that tariffs add significant uncertainty and probably won’t strengthen the profit cycle.
Calls for a shift from cyclical to higher quality, defensive sectors in portfolios.
Widening valuation spreads are not yet at extremes that would favor aggressive stock picking.

7. Tariffs, Treasury Yields & US Debt

[21:37-28:02]

Explains the political and economic importance of managing 10-year Treasury yields, particularly their effect on housing (a high-multiplier sector) and the risk posed by foreign holders of US debt (“puking Treasuries” as a retaliation for tariffs).
US’s high debt-to-GDP ratio (approx. 120%) is worrisome, but instead of a sudden collapse, the penalty is a “slow bleed” of higher risk premiums, already visible since the 2011 downgrade of US Treasuries.

Quote:
"The biggest threat you could offer the United States back is not I'm going to tariff you, it's that I'm going to puke your Treasuries."
— Richard Bernstein [21:37]

8. The Fed: A Lagging, Not Leading Indicator

[29:03-33:11]

Bernstein observes investors’ obsession with the Fed, a lagging indicator, arguing that actual economic turning points often come ahead of the Fed’s reaction.
As deglobalization shifts inflation trends upward, the Fed’s job becomes much harder—they can no longer “save the day” without risking further inflation.

9. Recession Outlook and Fiscal Policy

[34:43-37:33]

Bernstein remains skeptical about forecasts of a “looming recession,” noting that consensus forecasts never spot recessions accurately.
The combination of simultaneous fiscal cutbacks and new tariffs could yield “the most restrictive fiscal policy in our lifetimes,” significantly hampering growth if not outright causing recession.

10. Overseas Opportunities and Diversification

[37:46-42:54]

Urges investors to look beyond the US tech sector, pointing out the relative undervaluation and similar performance of world equities ex-tech.
The narrow dominance of large-cap US tech means diversifying globally can open up significant opportunities.
Bernstein criticizes the recent, record-high risk appetite (beta) among private portfolios and stresses true diversification as both a risk reduction tool and an opportunity generator.

Quote:
“Diversification is not only a risk reduction tool... it actually opens the portfolio to incredible opportunities.”
— Richard Bernstein [41:27]

11. Gold as a Hedge and Crypto Skepticism

[42:54-48:35]

Supports the use of gold as a consistent hedge against uncertainty and volatility but rejects gold-bug extremism.
Bernstein classifies crypto (esp. Bitcoin) as the first true global financial bubble, driven by speculation and global liquidity rather than fundamentals. He criticizes crypto-advocates’ lack of understanding of banking/economic history and warns about unrealistic valuation assumptions.

Quotes:
"Gold has been and apparently continues to be a good hedge against uncertainty."
— Richard Bernstein [43:28]

"I think crypto is the first true global financial bubble that we have seen."
— Richard Bernstein [45:18]

12. The Passive Investing Debate

[48:58-51:26]

Pays respect to Jack Bogle while pointing out the flaw in simply “buying an index”—timing and index selection matter.
Argues the issue is not that passive funds create narrow markets, but that passive investors are now overexposed to a handful of overvalued growth stocks.
Advocates for exploring alternative index strategies (equal-weighted, non-US, value-focused).

13. Timeless Investing Lessons

[51:44-53:52]

Bernstein emphasizes simplicity: avoid the temptation of hot trends, stick to diversification and compounding dividends, and resist siren songs. Speculative plays are fine for a small portion, but wealth-building is “keep to the straight and narrow.”

Quote:
"Building wealth is not difficult. It's actually very easy. So why don't people do it? And the answer is that there's always a siren song of something new, better, sexier, something."
— Richard Bernstein [51:57]

Notable Quotes and Moments

“My joke used to be we were seeing unprecedented use of the word unprecedented. Now we're seeing unprecedented use of the word uncertainty.” [14:46]
“The biggest threat you could offer the United States back is not I'm going to tariff you, it's that I'm going to puke your Treasuries.” [21:37]
"If you're investing in an index fund or you're investing in a growth index fund, I think you're making a colossal mistake." [03:19]
“Diversification is not only a risk reduction tool... it actually opens the portfolio to incredible opportunities.” [41:27]
"Fear is like fire. If you learn to control it, it can cook for you, it can heat your house. And if you can't control it, it'll burn everything around you and destroy you. Which is the bull case for gold." [43:03–43:19]
“I think crypto is the first true global financial bubble that we have seen.” [45:18]
"Building wealth is not difficult. It's actually very easy.... but there's always a siren song of something new, better, sexier, something.” [51:57]

Timestamps for Key Segments

[01:00] – Comparing today’s risk to 2008
[03:19] – The "colossal mistake" of index/growth investing now
[07:11] – Evaluating tariffs and reindustrialization
[09:09] – Tariffs, deglobalization, and inflation
[14:46] – Forecasting & unprecedented uncertainty
[19:49] – Tariffs’ effect on profits and investment approach
[21:37] – Tariffs, Treasury yields, and foreign retaliation
[24:11] – The debt problem and the slow bleed of higher rates
[29:03] – The Fed is a lagging indicator
[34:56] – Recession risk and highly restrictive fiscal policy
[37:46] – Value in non-US equities, overlooked by US-centric investors
[41:27] – The opportunity power of diversification
[43:28] – Gold as an uncertainty hedge
[45:18] – Bernstein’s withering critique of crypto
[48:58] – Passive investing isn’t inherently bad, but beware current concentrations
[51:57] – Bernstein’s core lesson: Simple, disciplined wealth-building wins

Takeaways

Today’s market is unprecedently narrow; passive growth investing is risky due to overconcentration in a few stocks.
Tariffs and deglobalization are driving inflation and may have unintended negative consequences for consumers and the US economy.
High uncertainty and risk premiums punish even quality assets, shifting the smart allocation to certainty, quality, and diversified global exposure.
Gold remains a useful (non-speculative) volatility hedge; crypto, by contrast, is viewed as a speculative global bubble.
Investors should focus on disciplined wealth-building strategies, resist speculative hype, and understand the limitations of narratives and lagging indicators such as the Fed.

Bernstein's characteristic candor and experience shine throughout—a must-listen for investors seeking clarity amidst the noise of today's market.

Podcast Summary:

Overview

Key Discussion Points & Insights

1. Market Parallels to the Financial Crisis

[01:00-02:55]

Bernstein clarifies that while today’s risks differ structurally from 2008’s financial crisis, the current environment represents “probably the biggest tax maybe in history in the United States” on consumers due to tariffs.
Given the US's consumer-driven economy, this "tax" is driving today’s heightened market volatility.

2. Concerns About Market Breadth & Momentum Investing

[03:19-06:24]

Bernstein critiques momentum investing, likening its risks to “Wile E. Coyote running off a cliff”—success depends on knowing when to get out, not just what to buy.
He highlights how 2024's market was the narrowest since the Great Depression, dominated by a handful of growth names (the "Magnificent Seven"), and draws parallels to distress-era markets, despite no depression.
Warns that relying on passive growth index funds today is a “colossal mistake” due to extreme concentration.

Quotes:
"If you're investing in an index fund or you're investing in a growth index fund, I think you're making a colossal mistake."
— Richard Bernstein [03:19]

"2024 stock market was the most narrow stock market we had seen since the Great Depression."
— Richard Bernstein [03:19]

3. Tariffs, Inflation, and Deglobalization

[07:11-11:37]

Bernstein supports the goal of American reindustrialization but calls the current tariff approach “about the most ham handed way we could possibly have designed.”
He argues deglobalization and tariffs are inherently inflationary because they reduce competition, which puts upward pressure on prices. The US lacks the capacity to substitute most imported goods (e.g., textiles), leaving consumers little choice but to pay higher prices.
Suggests the Fed’s 2% inflation target is outdated, forecasting a secular norm closer to 3-4%.

Quotes:
“Tariffs are inherently inflationary on top of the secular deglobalization, which is inflationary too.”
— Richard Bernstein [09:09]

"There's plenty of better ways to achieve this goal without hurting the US consumer and placing this massive tax on the US consumer."
— Richard Bernstein [07:11]

4. A Smarter Path to Reindustrialization

[12:06-14:04]

Rather than tariffs, Bernstein advocates for creating incentives that reward firms for investing domestically, such as permanent tax advantages for US-based manufacturing projects.
Criticizes past blanket tax cuts (e.g., Apple using US tax cuts to build plants overseas) as misaligned with national goals.

5. Uncertainty and Risk Premiums in Today’s Market

[14:46-18:17]

Bernstein reflects on the unusual levels of uncertainty, coining the phrase: “unprecedented use of the word uncertainty.”
The market’s risk premium is rising, as reflected in compressed valuations despite decent earnings. Bernstein’s firm is seeking investments with more “certainty” (quality balance sheets, dividends, gold) while reducing exposure to credit and speculative tech.

Quote:
“My joke used to be we were seeing unprecedented use of the word unprecedented. Now we're seeing unprecedented use of the word uncertainty.”
— Richard Bernstein [14:46]

6. Tariffs’ Impact on Profits and Stock Selection

[19:49-21:02]

Bernstein expects US corporate profits to “peak out” around summer but notes that tariffs add significant uncertainty and probably won’t strengthen the profit cycle.
Calls for a shift from cyclical to higher quality, defensive sectors in portfolios.
Widening valuation spreads are not yet at extremes that would favor aggressive stock picking.

7. Tariffs, Treasury Yields & US Debt

[21:37-28:02]

Explains the political and economic importance of managing 10-year Treasury yields, particularly their effect on housing (a high-multiplier sector) and the risk posed by foreign holders of US debt (“puking Treasuries” as a retaliation for tariffs).
US’s high debt-to-GDP ratio (approx. 120%) is worrisome, but instead of a sudden collapse, the penalty is a “slow bleed” of higher risk premiums, already visible since the 2011 downgrade of US Treasuries.

Quote:
"The biggest threat you could offer the United States back is not I'm going to tariff you, it's that I'm going to puke your Treasuries."
— Richard Bernstein [21:37]

8. The Fed: A Lagging, Not Leading Indicator

[29:03-33:11]

Bernstein observes investors’ obsession with the Fed, a lagging indicator, arguing that actual economic turning points often come ahead of the Fed’s reaction.
As deglobalization shifts inflation trends upward, the Fed’s job becomes much harder—they can no longer “save the day” without risking further inflation.

9. Recession Outlook and Fiscal Policy

[34:43-37:33]

Bernstein remains skeptical about forecasts of a “looming recession,” noting that consensus forecasts never spot recessions accurately.
The combination of simultaneous fiscal cutbacks and new tariffs could yield “the most restrictive fiscal policy in our lifetimes,” significantly hampering growth if not outright causing recession.

10. Overseas Opportunities and Diversification

[37:46-42:54]

Urges investors to look beyond the US tech sector, pointing out the relative undervaluation and similar performance of world equities ex-tech.
The narrow dominance of large-cap US tech means diversifying globally can open up significant opportunities.
Bernstein criticizes the recent, record-high risk appetite (beta) among private portfolios and stresses true diversification as both a risk reduction tool and an opportunity generator.

Quote:
“Diversification is not only a risk reduction tool... it actually opens the portfolio to incredible opportunities.”
— Richard Bernstein [41:27]

11. Gold as a Hedge and Crypto Skepticism

[42:54-48:35]

Supports the use of gold as a consistent hedge against uncertainty and volatility but rejects gold-bug extremism.
Bernstein classifies crypto (esp. Bitcoin) as the first true global financial bubble, driven by speculation and global liquidity rather than fundamentals. He criticizes crypto-advocates’ lack of understanding of banking/economic history and warns about unrealistic valuation assumptions.

Quotes:
"Gold has been and apparently continues to be a good hedge against uncertainty."
— Richard Bernstein [43:28]

"I think crypto is the first true global financial bubble that we have seen."
— Richard Bernstein [45:18]

12. The Passive Investing Debate

[48:58-51:26]

Pays respect to Jack Bogle while pointing out the flaw in simply “buying an index”—timing and index selection matter.
Argues the issue is not that passive funds create narrow markets, but that passive investors are now overexposed to a handful of overvalued growth stocks.
Advocates for exploring alternative index strategies (equal-weighted, non-US, value-focused).

13. Timeless Investing Lessons

[51:44-53:52]

Bernstein emphasizes simplicity: avoid the temptation of hot trends, stick to diversification and compounding dividends, and resist siren songs. Speculative plays are fine for a small portion, but wealth-building is “keep to the straight and narrow.”

Notable Quotes and Moments

“My joke used to be we were seeing unprecedented use of the word unprecedented. Now we're seeing unprecedented use of the word uncertainty.” [14:46]
“The biggest threat you could offer the United States back is not I'm going to tariff you, it's that I'm going to puke your Treasuries.” [21:37]
"If you're investing in an index fund or you're investing in a growth index fund, I think you're making a colossal mistake." [03:19]
“Diversification is not only a risk reduction tool... it actually opens the portfolio to incredible opportunities.” [41:27]
"Fear is like fire. If you learn to control it, it can cook for you, it can heat your house. And if you can't control it, it'll burn everything around you and destroy you. Which is the bull case for gold." [43:03–43:19]
“I think crypto is the first true global financial bubble that we have seen.” [45:18]
"Building wealth is not difficult. It's actually very easy.... but there's always a siren song of something new, better, sexier, something.” [51:57]

Timestamps for Key Segments

[01:00] – Comparing today’s risk to 2008
[03:19] – The "colossal mistake" of index/growth investing now
[07:11] – Evaluating tariffs and reindustrialization
[09:09] – Tariffs, deglobalization, and inflation
[14:46] – Forecasting & unprecedented uncertainty
[19:49] – Tariffs’ effect on profits and investment approach
[21:37] – Tariffs, Treasury yields, and foreign retaliation
[24:11] – The debt problem and the slow bleed of higher rates
[29:03] – The Fed is a lagging indicator
[34:56] – Recession risk and highly restrictive fiscal policy
[37:46] – Value in non-US equities, overlooked by US-centric investors
[41:27] – The opportunity power of diversification
[43:28] – Gold as an uncertainty hedge
[45:18] – Bernstein’s withering critique of crypto
[48:58] – Passive investing isn’t inherently bad, but beware current concentrations
[51:57] – Bernstein’s core lesson: Simple, disciplined wealth-building wins

Takeaways

Today’s market is unprecedently narrow; passive growth investing is risky due to overconcentration in a few stocks.
Tariffs and deglobalization are driving inflation and may have unintended negative consequences for consumers and the US economy.
High uncertainty and risk premiums punish even quality assets, shifting the smart allocation to certainty, quality, and diversified global exposure.
Gold remains a useful (non-speculative) volatility hedge; crypto, by contrast, is viewed as a speculative global bubble.
Investors should focus on disciplined wealth-building strategies, resist speculative hype, and understand the limitations of narratives and lagging indicators such as the Fed.

Bernstein's characteristic candor and experience shine throughout—a must-listen for investors seeking clarity amidst the noise of today's market.

The Colossal Mistake | Richard Bernstein on the Risks of Tariffs and Passive Investing

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Summary

Podcast Summary:

Overview

Key Discussion Points & Insights

1. Market Parallels to the Financial Crisis

2. Concerns About Market Breadth & Momentum Investing

3. Tariffs, Inflation, and Deglobalization

4. A Smarter Path to Reindustrialization

5. Uncertainty and Risk Premiums in Today’s Market

6. Tariffs’ Impact on Profits and Stock Selection

7. Tariffs, Treasury Yields & US Debt

8. The Fed: A Lagging, Not Leading Indicator

9. Recession Outlook and Fiscal Policy

10. Overseas Opportunities and Diversification

11. Gold as a Hedge and Crypto Skepticism

12. The Passive Investing Debate

13. Timeless Investing Lessons

Notable Quotes and Moments

Timestamps for Key Segments

Takeaways

Summary

Podcast Summary:

Overview

Key Discussion Points & Insights

1. Market Parallels to the Financial Crisis

2. Concerns About Market Breadth & Momentum Investing

3. Tariffs, Inflation, and Deglobalization

4. A Smarter Path to Reindustrialization

5. Uncertainty and Risk Premiums in Today’s Market

6. Tariffs’ Impact on Profits and Stock Selection

7. Tariffs, Treasury Yields & US Debt

8. The Fed: A Lagging, Not Leading Indicator

9. Recession Outlook and Fiscal Policy

10. Overseas Opportunities and Diversification

11. Gold as a Hedge and Crypto Skepticism

12. The Passive Investing Debate

13. Timeless Investing Lessons

Notable Quotes and Moments

Timestamps for Key Segments

Takeaways