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Trump Tariffs Tank Stocks 4/3/25
00:55:54
Scott Wapner and the Investment Committee discuss the Trump tariff sell-off after a much worse than expected outcome. Plus, Josh Brown is buying a stock amidst the sea of red in the market, he breaks down why. And later, Altimeter Capital’s Founder and CEO Brad Gerstner joins us to discuss Tariffs and how he’s thinking about some of his current positions in the market. Investment Committee Disclosures
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Bank of America
As America's leading business lender, bank of.
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Scott Wapner
America is on your corner and in your corner.
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Bank of America
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Scott Wapner
All rights reserved.
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Ben Rizzuto
Hello.
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Scott Wapner
I'm Ben Rizzuto, wealth strategist at Janus Henderson Investors.
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Ben Rizzuto
Is a brighter future possible? At Janus Henderson, we think it is.
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Scott Wapner
We've worked to help clients achieve superior.
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Ben Rizzuto
Financial outcomes and fulfill our purpose of investing in a brighter future together. We never forget that this means our thinking and our investments are helping to.
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Scott Wapner
Shape millions of futures. At Janice Henderson, we're committed to helping.
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Ben Rizzuto
You invest in a brighter future. To learn more, go to Janice Henderson.com.
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Scott Wapner
I'm Scott Wapner, and you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. Okay, Carl, thank you very much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, Trump's tariff sell off stocks, as you know by now, of course, deeply red after a much worse than expected outcome yesterday. So we'll ask the investment committee what to do now. We'll also be joined in just a little bit by Altimeter's Brad Gerstner to find out how he is positioning through all of this, especially with tech getting slammed today. Joining me for the hour, Josh Brown, Jenny Harrington and Joe Terranova. Let's show you the latest in the markets. We're deeply read, as we say, the S and P down 3.5%. Crude's down a lot. Gold, which has been hitting record levels almost every day, is lower as well. The dollar is sinking. Hey, but they got their lower 10 year. We're right around 4% and we're watching all of that. Of course, the NASDAQ's getting crushed, small caps are getting crushed. And Josh, I suppose so much for that clearing event that some had predicted yesterday would bring.
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Josh Brown
Yeah, I was on the show two weeks ago on a Thursday and I said we're basically in a bear market. Statistically. The median stock was there. The index hadn't quite gotten there, but it felt like a bear market. And one of the things I've said maybe a million times since I've been on the show is nothing, ever, nothing good ever happens below the to the 200 day moving average for the S and P where we stand right now. We had this conversation last week. Will will we or Tuesday we have a clearing event when this big bad announcement finally comes out. And it's true, Scott, a lot of these big bad announcements have served as capitulatory buying opportunities, clearing events, whatever you want to call it. What makes this one different is that it's not a market event. Secondarily it is. It's really an event that impacts the real economy, Main street. And one of the things I've been focusing on is the consumer. The consumer is what kept us from having a recession in 2022. What kept us from having a recession in 2018. Because while things were rough, nobody really lost their job and that's not going to be the case this time around, unfortunately. So I still believe what we see on Friday is going to be very consequential with the jobs number. It'll tell us whether or not this tariff stuff already started to impact hiring and firing in the month of March. My concern is that it probably did. And then we're going to get two weeks from now we're going to get all these earnings calls and I'm telling you the forward guidance is almost going to be like a Saturday Night Live skit. There's absolutely nothing most of these companies can say because they don't know enough to have an opinion. So it's a really tough time. It's not a clearing event. And while opportunities are being created by stocks falling, there might be better opportunities later. We are in a downtrend in a bear market and people need to behave accordingly.
- [04:06]
Scott Wapner
Joe, Consumer Discretionary is down more than 5%. It was down 7. Come back just a smidge off the lows. RH. Yeah, just getting crushed. Show RH guys, if you would. It was down 40 plus percent. There it is almost 42. Nike is getting hammered today. Anything remotely sensitive to the countries which got these tariffs put on, they're all hurting. To Josh's point about these capitulatory events, we've all been wondering where is the market after a pullback already heading into a historically pretty good month. Jonathan Krinsky writes a note today from btig. We think this should finally trigger some real capitulation signals which would suggest the end of this move tactically rather than the start of a fresh leg lower. To be clear, we don't think we're done with the correction broadly and continue to view rallies within the context of a larger decline. Thinks today could be a near term inflection point. Because of the ugliness that we are all witnessing on our screens today.
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Joe Terranova
I don't think you have the visibility to share the type of universal conviction surrounding when the timing of a bottom for equities can be. I think that there is too much ahead of us in the upcoming earnings season. In particular, I am highly concerned about the fact that while everyone's talking about the potential for an economic recession, how about the potential for an earnings recession? That's a real potential possibility.
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Scott Wapner
So what, oh my gosh, you know, if you, if you're talking like that, you know, on January 1st. First. Okay, I'm going to set you up to keep cooking over there. On January 1st, earnings expectations were expected to be up 12.2%. Today they're at 8. Now you're talking about a potential earnings recession. Well, the negative earnings growth.
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Joe Terranova
So the impact, the impact and everyone's, everyone's going to say, oh that's crazy. Earnings are going to be resilient. I think it's important to say you don't know and I don't think anyone knows right now what the global effect is going to be on prices and where the effect of pricing is ultimately going to land. Let's keep in mind something, okay, first of all, there's going to be a sensitivity for corporations ability to pass through the cost of goods rising to the consumer. The consumer is now already feeling the negative impact of the wealth effect being damaged dramatically $3 trillion today. So do we really think there's going to be resiliency on the part of the consumer to say okay, we're going to keep buying, we're going to keep buying, we're going to keep flying around the world. It's just not going to happen. And ultimately I think what everyone continues to say is well, this is going to be a real inflationary outcome.
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Ben Rizzuto
I think at the end of the.
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Joe Terranova
Day this ends up being massively deflationary and really, really damages demand for you.
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Scott Wapner
Look at what yields are doing Jenny, on that point. Do you have to take your base case, your base case at this point to recession or close to it? Firms have been cutting their growth outlooks almost every day over the last couple of weeks. Piper Sandler they do today as well. Q2 real GDP estimate, they were at zero. They take it a touch lower to minus 1%. So you know, that's kind of where we are. Some suggesting that earnings estimates are going to need, are going to need to be significant, significantly revised downward from here and we can talk about the multiple and all that and levels in a moment. But base case, recession. Close to it.
- [07:56]
Jenny Harrington
Okay, let's say close to it. And then the question becomes the common question about recessions, which is how deep and how long. And that's where you really get to the meat of it. And this goes to exactly what Joe said, which is we do not have enough information right now to speak with conviction about any of this. So. So Goldman, for example, put out some really useful data this morning and they said, okay, if there is an 18% effective tariff, and I think we know it's 24 or something, that would bring earnings to 20. Sorry, to 48 to 250. That shows about flat. Right, Flat. So it's not quite recession, but let's say we're at 248 on earnings. What multiple are you going to pay? Are you going to pay 18 times? That would put you at a. That would put you at a market of 4,500.
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Scott Wapner
Let me give you some other numbers while you're at it and I'll give it back to you to continue cooking as well. So Goldman was at 280. Okay. For next year, they've come down to 269. Sixteen times. That mean depending on what the economy does, you go into a recession, is 16 times reasonable? Maybe that's 4,304. 269, 16 times, that's 4,304. If you say, well, we can do a little bit better than that. We could do 18 times. If it's 269, that's 4840. 42, 48, 42. If you want to be presumptuous and say, hey, we can do 20 times, guys, even if earnings estimates continue to come down and the number is $269 and you want to go 20 times, that's 5,380. That's still below where we are today.
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Jenny Harrington
Right down.
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Scott Wapner
And that's a name, maybe what some would say best case scenario under these conditions.
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Jenny Harrington
Right. So what do you do? Right? What do you do?
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Scott Wapner
You tell me. All right, well, you buy all dividend stocks. I mean, Staple by Joe's been buying the TLT 3, 4 different times over the last week.
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Jenny Harrington
Okay, so here's what I think you do. I think you keep perspective. Josh said, let's assume that we're, you know, that we're in this rotten environment. You must behave for that environment. So you behave well. You focus on the long term and you look through it. And, and I think Actually, most people's portfolios are already positioned for this. So when we think about last year, as we're wrapping up last year, I was really upset because I kept getting calls and kept getting pushed on. Like I missed out. You know, I had a terrible year. I didn't keep up with the market. I wasn't up to 20, 26%. Why? Because they were in strategies like what holds manages, where they're balanced, right? Where there are some bonds, where there are some international stocks, where there are some small cap. So last year's pain with respect to relative underperformance is this year's gain with, with respect to relative out.
- [10:22]
Scott Wapner
I don't think so. I do not think that most portfolios, with all due respect, are positioned for what we got yesterday. I do not.
- [10:31]
Jenny Harrington
I think they are.
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Scott Wapner
I do. And I look at someone, well, I look at someone like Josh who, who I know is rethinking the way he's thinking about portfolio, portfolio mix.
- [10:41]
Jenny Harrington
Okay, but if you go on their company's website, like, the first thing you see is like, do you want this mix of equities and bonds? Do you want that mix of equities and bonds? Right. No, I thought I saw that, that.
- [10:50]
Joe Terranova
Like you can choose a picture of Josh.
- [10:52]
Josh Brown
There's no portfolio information on my website that's not compliant.
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Jenny Harrington
Sorry. And it said like, choose whichever thing.
- [10:59]
Josh Brown
Since everyone's dying to know on, on Monday night, we. So we have a tactical strategy called Goaltender. I've spoken about it before. It's proprietary, it's in house. On Monday night, we have 4,000 client households. On Monday night, we put out a letter to all of our households and we inform them that for the first time in 17 months, goaltender is making a tactical shift, going from 100% US large cap equity, which had been its positioning since October of 2023, to 60% T bills and 40% US large cap equity. That's just the tactical strategy. We use that strategy so that our core models don't have to change. In our core models, we own international. Yes, we have tech, but also we have utilities. Yes, we have. So. So it's behavioral. It's like, look, we're not messing with people's 30 year time horizon investments, but you must have an emotional release valve in an asset allocation so that when clients say, well, now we're in a statistical correction, looks like it's about to turn into a bear market, you're doing nothing. You can white knuckle $1 million portfolio through a bear market, no problem. I've Done it. It's really hard to white knuckle a $10 million household through and do absolutely nothing. So we believe in this mix of long term strategic asset allocation to Jenny's point point and being diversified and not being upset that you don't have 100 of your assets in eight stocks. Okay, we believe in that. We also believe in a statistical bear market, you behave differently when you're in a statistical downtrend. You are not doing the same things that you're doing in a market like what we had experienced from October 23rd all the way through Monday night. So this is, I think, a critical piece of what wealth management is. It's acknowledging the long term returns and the reason why you take risk, but pairing that with the realities of investor psychology and market behavior.
- [13:00]
Scott Wapner
To go to go a step further on your idea that many portfolios were positioned for this. Portfolios were positioned for easier tariffs than we got last night. Portfolios were positioned for, oh, this is all just a negotiation play. I think that's undeniable. What if you don't get the negotiation that you think or thought was more than likely going to happen? The White House today are Megan Casella saying tariffs non negotiable, they're permanent.
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Josh Brown
The market knows that's not true.
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Jenny Harrington
Right. Otherwise the market down, we would be down 30%.
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Scott Wapner
But the people who even think that they're negotiable, are they negotiable off the highest levels? Sure. Are you going to end up with a blanket of 10% across the board? Probably. Are they going to zero? I can't see any scenario in which all of a sudden tariffs are going to zero. Why? Because. Because the president's been fixated on tariffs and trade for decades.
- [14:02]
Josh Brown
We had.
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Scott Wapner
You don't believe me? Listen, watch.
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Josh Brown
I believe it's very important that you have free trade. But we don't have free trade right now. If I were in a position, this country, believe me, would not be ripped off like it is.
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Ben Rizzuto
We let Japan come in and dump everything right into our markets and everything.
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Josh Brown
It's not free trade. The most beautiful word in the dictionary is the word tariff.
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Ben Rizzuto
Tariffs give our country protection against those that would do us economic harm.
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Scott Wapner
Point being, it's, it's an ideological view. So what if that view is not going to be moved off of like investors thought?
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Joe Terranova
Well, and that's where it's important to understand that you have zero visibility. Let me share why the tariffs are very important to this administration in terms of actually paying for some of what this tax bill extension is going to be. And I don't think we know just yet what that tax bill is ultimately going to look like. So I think the President is probably sitting with his team right now saying okay, we're going to need some, we're going to need some capital from these tariffs. We're just not sure how much. And that's where I don't think you have any conviction or understanding. Yes, there's a negotiation element to that. I absolutely agree. But to what degree? I think anyone's guessing agree, but I.
- [15:21]
Jenny Harrington
Think that we can probably say that with respect to tariffs today may at least the US Delivered tariffs, this is probably the worst it's going to get. Right. He's not going to then go and say, okay, Vietnam, we're going from 67% to 100%.
- [15:35]
Ben Rizzuto
Sure.
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Josh Brown
But yes, but what, what are the other countries today?
- [15:40]
Scott Wapner
Fitch today says many countries are likely to end up in recession. JP Morgan says the large tariff shock threatens the US and global recession. By the way, the Fed's vice chair Jefferson speaks in 15 minutes. Steve Liesman's going to join us at the bottom of the hour with what we are learning from really important commentary now from a very important person within the hierarchy of the Fed. So we'll bring you that. I just want to remind you of that. Let's talk about some more individual names if we could guys, because Apple, have you seen it? Show it please. It's a disaster today. You could say, you know, so much for Tim Cook trying to make nice at the White House because that stock is not making him feel good today. By the way, Morgan Stanley's Eric Woodring will be on with me today on Closing Bell. So I'm looking forward to that.
- [16:29]
Josh Brown
The White House might be the least of Apple's problem. Beijing might be a worse problem.
- [16:32]
Scott Wapner
Rosenblatt's Barton Crockett says, yikes. Trump tariffs could blow up Apple. Will that change? Steve Kovach talks about what's happening in China to your, to your point, 54% tariff, that's the problem. You talk about the alternative manufacturing centers, India, etc. Those also get high tariffs. In other words, there's nowhere to run, there's nowhere to hide. Get ready to pay for your fifteen hundred dollar iPhone. Dan Ives, worse than the worst case. He says China, Taiwan tariffs are baffling for tech guys. What do we do with this? These stocks are already down a lot.
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Jenny Harrington
Well I disagree.
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Scott Wapner
We do.
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Brad Gerstner
Yeah.
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Jenny Harrington
I disagree that there's nowhere to hide and that's what I think is interesting about this environment. And if you have to say to me, like, what do you do from a port? From like a specific stock portfolio level? Before I was talking about the asset allocated portfolio I bought by Wal mart.
- [17:20]
Josh Brown
No, no.
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Joe Terranova
McDonald's, Costco.
- [17:22]
Scott Wapner
No.
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Josh Brown
But you know, Netflix, which is a consumer staple, it's about to go green.
- [17:26]
Jenny Harrington
Okay, but here's one of my.
- [17:27]
Josh Brown
Plenty of things there.
- [17:28]
Scott Wapner
Let's kick that for a bit.
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Jenny Harrington
Okay? ConAgra, for example, just reported earnings this morning. They were actually really good. There's. They get 91% of their revenues from inside the U.S. they import nothing. Right. People are still eating. It's low cost. It's got a ten times multiple, a five and a half percent dividend yield. You can buy that. So I think what you do in this, in this area is like, you get ready to be opportunistic. You don't reposition your whole portfolio, but you get ready, you get ready for fallouts. Because you know what? We all know, we all know that the best investments we've ever made in our lives came at points of maximum distress. The best investments I made were during the GFC and the pandemic.
- [18:04]
Scott Wapner
I said the other day, in this program, the hardest decisions that you guys have to make is buying through the harshest of pain and fog. The problem is I have a lot of people on the show over the last week or so saying, I'm a buyer. I'm a buyer. I know there's fog, but I'm a buyer.
- [18:18]
Josh Brown
Can we do some charts real quick? Can we put up Berkshire Hathaway? This is a trillion dollar market cap. It's as big as the Mag 7 names. There's a ton of investment capital in here. It's an S and P name. It's the largest weight in the xlf. It's one of the biggest publicly traded companies in the world. Huge exposure to the US Economy. Obviously, stock is basically flat. It could go green. Let's do Netflix is a really important one. This is part of the Great eight or what? Like it's an extension of mag. Mag seven massive market cap. It's in every index, growth index, tech index, Consumer discretionary index, Media, telecom index. The stock is green right now because the market is correctly sorting out, right, that there are certain companies that do not have to go hat in hand to the White House to get a carve out. Certain companies that do not live or die based on where the 10 year is or what China does next or how the Canadians feel and they're buying those stocks. Here's what's up today. American Waterworks Utility, Philip Morris International, CME Group, which thrives on, on interest rate volatility. That's how they make their money. Some names off, off, off my best stocks in the market list that are green. They don't care. Trade Web Markets tw this is a data provider to hedge funds and trading firms. Church and White, which is baking soda and condoms. For some reason there are all sorts of names that are green today because the market, it's not chaotic. It seems chaotic, but beneath the surface, to Jenny's point, people are making rational decisions and there are places to hide and hide they are.
- [19:57]
Joe Terranova
So if we could. Let's get a chart of Allstate. Let's get a chart of Chubb. We've been talking on the show for months about for big pricing power that insurance companies have. So look, on a day like today when the market's down 4% percent, of course after today you want to say, yeah, I bought something that, that's, that's the universal line that you'll always hear from Wall Street. It doesn't mean that the market can continue to decline. And I said before, I don't think you could have very strong conviction on the direction of the equity markets at all where we are right now. So I'll let my ETF do the work. Of course it's going to be down today. It's long only 100% 0 cash. A day like today, it's going down. What am I doing personal? Personally, though? Personally, I'm buying the tlt. I'm buying bonds because I think that's the right environment. And what I see going forward is consumer confidence collapsing and economic conditions.
- [20:46]
Scott Wapner
You're going to get your, you're going to get your rate cuts. Yeah, you wanted rate cuts, we got rate cuts.
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Jenny Harrington
But I'll give you another one. So there's Ryman Hospitality Properties, rhp, right. This thing's been on my screen since it was 112 and I had it marked for if it goes below 92 at that point I can start to buy it. So this week I'm like, should I buy it or is the market going to get so ugly that it's going to get worse? I've been dying to buy it all week. I haven't even started today because I think the market could take it a little bit lower. That about $88 a share right now. It's got a five and a half percent yield. It's mixed in with the hotel properties, but it's got totally different dynamics. So I can start to be opportunistic on that. Hopefully I'll do it before you all hear me and run it up. But there are things like that out there that, where you can, where you can be brave. There's another one that I used as my final trade last week. Crown Castle CCI. Right. It is a tower company. It has 100, almost 100% revenues from the U.S. there's no import, export stuff. There's no economic sensitivity. There is a lot out there that can be done.
- [21:45]
Scott Wapner
I mean, you look at the. I'm going to do a little play on words for you here. The, the fact that stocks in many respects are taking an elevator down today.
- [21:55]
Josh Brown
I see where you go.
- [21:57]
Scott Wapner
You see what I did?
- [21:57]
Ben Rizzuto
Ha ha ha.
- [21:58]
Josh Brown
Well, you're the best in the bills, Judge.
- [22:00]
Scott Wapner
Josh is looking to take an elevator up. That's why I bought Otis Worldwide.
- [22:05]
Josh Brown
I did. Otis is green today. I bought it yesterday. I didn't know it would be green today. The chairman and CEO was interviewed in China like a month ago about something totally unrelated. The reporter asked her what was the impact of tariffs in 2018. Are you worried about tariffs this time? She said it cost them $10 million total. Here's why. Otis installs elevators all over the world. People rip their elevators out when there's an economic downturn. And Otis makes 87% of its net income on the service contracts, which, it's not optional. You can't say, oh, well, the economy took a downturn. Let's, let's cancel the service contract on the elevator. This is the type of stock that works in this environment. This is one 50 year old company, literally, that installed 2 million elevators around the world and now they have the contracts to service them. There are names like this. They're not big in the S&P 500. We don't talk about them on TV. They are going up and to the right. Resilient, have nothing to do with tariffs.
- [23:10]
Jenny Harrington
Let's rip off of that for a sec though.
- [23:12]
Josh Brown
Let's riff.
- [23:13]
Jenny Harrington
All year I've been telling people, put money into International and I get pushback. Well, International has been underperforming for so many years. I'm like, yeah, but it's like two and a half, three standard deviations off its norm as it correlates to its U.S. relative valuation. Okay, International's down a point and change today. It's not much money's flowing over there. The weak dollar today is very positive for international stocks. You could hide out in a lot of those for that same reason. Because if they're not crossing the US borders, they're is not tariff exposure.
- [23:41]
Joe Terranova
If we could touch the Mag 7 for a second because the one name of the Mag 7 that I have personally purchased was Amazon. Remember, I'm underweight the Mag 7. So a couple of weeks ago I said I'm buying Amazon at 194. I'm wondering if I bought the wrong Mag 7. I'm thinking to myself, maybe the right Mag 7 to buy is Microsoft. Classic example of first in, first out. Look at where Microsoft is today.
- [24:04]
Scott Wapner
It's a relative outperformer, right? We're down one and a half percent.
- [24:08]
Joe Terranova
If you have to buy one Mag 7 today, which one ultimately are you buying?
- [24:13]
Scott Wapner
I mean, you're buying Nvidia today.
- [24:15]
Josh Brown
Well, that's a question of what type of investor you are. There are investors that say, you know what? I'm looking for the most resilient name. Because when this thing turns that's going to be a leadership stock. There's another mentality which is what's getting hit the hardest? Where can I get the cheapest stock stock or where is like the biggest bounce going to a bolt? I mean so I'm in the first camp, right. I'm not looking for the worst falling knife hoping for, for a 20% bounce which you might get. My, my predilection is to say, well, what are people accumulating and why?
- [24:48]
Scott Wapner
Right.
- [24:49]
Joe Terranova
I think it's Microsoft.
- [24:50]
Josh Brown
Well, you'll jump on a falling that you'll catch.
- [24:51]
Jenny Harrington
No, no, but you know, you know that for all these years in our discipline growth strategy, we've owned one, we've owned Meta. Right? But you know what's been been very, very close in getting closer over the last several weeks, both Google and Amazon. And what's the requirement for the discipline growth strategy? A 5% or better free cash flow yield last week or two weeks ago, Google, whatever that has got to be there already, right? It's always been there, right. That's why we were able to own it. But a couple of weeks ago, Alphabet was at a 3 1/2% free cash flow yield. When the stock gets clocked the way some of these are, we're going to be a lot closer to that five. Ditto with Amazon. We might actually own those.
- [25:23]
Scott Wapner
All right, you'll let us know. It is a perfect, perfect segue to tell you about our next guest after the break. It's a halftime exclusive altimeters Brad Gerstner. We get his reaction to what is happening in these markets, how he's positioning right now, what he's buying if anything, and where we go from here.
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- [27:46]
Scott Wapner
What a day to have our halftime headliner. It's an exclusive interview with Brad Gerstner, the founder and CEO of Altimeter Capital. Back with a us and you know I, I, I so much appreciate you being here. I remember the the depths of some really ugly market times and you always were there for our viewers and I appreciate you being here today.
- [28:08]
Ben Rizzuto
It's good to be here Scott. You know I, I, I'll never forget I think it was March 26, 2020 when we troughed after the start of COVID and Ironically the last 35 days the NASDAQ is down over 10% which is the same as it was down in that period of time. We haven't seen this bad of market reaction out of the NASDAQ since the start of COVID So this is a consequential time. And you know, I always say to you, you know, you show up in the good times, you got to show up when it's tough. And today's a tough day. So happy to jump into it.
- [28:47]
Scott Wapner
What is your reaction to what was obviously much worse than expected?
- [28:54]
Ben Rizzuto
Well, as you know, I've been saying to you since January, I've said on our podcast, the BG2 pod, we've been very negatively positioned, in fact, the most negatively positioned altimeter has ever been positioned over the course of the last 30 days. We started today at 5% net exposure to the market because we were worried that this was going to be a lot bigger than people thought. And we thought the White House was telegraphing that over the course of the last six to eight weeks. I said on Squawk box a few weeks ago, you know, in 2024, the total amount of tariff revenue to the United States was $77 billion. And I said on squawk, if you think that's going to 700 billion, you know, which is McKinley style protectionist style tariffs, you got to get out of the market, right? The market is not pricing that in. If you think, on the other hand, that Trump is more for fair trade, going to make adjustments to trade, that's going to generate 2 to 300 billion in tariff revenue, which would be on the smaller side, then I think the market's pricing that in. And what we got yesterday was even bigger than the highest high end that Peter Navarro and Howard Lutnick had been, you know, conditioning the market to expect. And so I think it was very surprising to market participants, as evidenced by the fact that we have massive gap downs in the market. Today you see stocks down 20, 30, 40%. Today, the NASDAQ's down 5%. And I talked to probably 10 CEOs who are all in the business roundtable. These are CEOs of the largest companies in America overnight. And to a one, they think this is a huge mistake. They think this is too much, that it will have lasting and cascading negative repercussions for the United States and the global economy. And so we're on the verge of hearing earnings calls out of the Fortune, out of, you know, the Fortune 100, out of the S&P 500. And it's very hard for me to think that any of these calls will have an air of optimism about them because whatever you think happened over the course of Q1, and I'm pretty certain that there was slowing in the economy in February and March and that will continue into April with these announcements. But whatever you think has happened in the past, it's very hard for these CEOs to be optimistic or to plan for the future when we're in this fog of war about tariffs. They don't know what to do today. And I think that's, that's a very dangerous place for the economy that was already slowing.
- [31:28]
Scott Wapner
Yeah, I mean, a key question is, you know, what the Fed is making of all of this. Beg your pardon? I'm going to break away for just a minute. I'm going to come back to you in a second. I do have breaking news regarding the Fed. Let's bring in senior economics reporter Steve Liesman as a very important Fed speaker is making some interesting comments. Steve?
- [31:48]
Brad Gerstner
Yeah, the vice chair of the Federal Reserve Board, Jefferson, making the first comments of a Fed official since those monumental tariffs were put in place yesterday. And I'm bringing you these, these remarks, Scott, not because something has changed, but because of how little has changed. He is saying current policy is well positioned to deal with risks and the uncertainties out there. There is no need, he says, to hurry and make further policy adjustments. Tariffs, he says, have consumers and businesses expecting higher inflation in the near term. But what the Fed watches are longer term inflation expectations and he's sort of continuing with the company line that longer term inflation expectations remain stable. The Fed should respond, he says, not to one thing, but to the cumulative effect of policy changes from the administration, pardon me, including tariffs, immigration, tax policy and deregulation, the economy may be constrained. However, he says if all this uncertainty persists or if it worsens, if the economy remains strong, this is important here. If an inflation remains high, the Fed could retain policy restraint. Why is that important? Because he's not talking about policy hikes. At least here at this time. He attaches a higher degree of uncertainty with forecasts than usual. Some signs, he says, that consumer spending may be weakening and inflation moving sideways. We'll leave it there, Scott. But nothing really huge here from Jefferson. On the backside of these tariffs from yesterday, we're obviously going to be waiting and watching and listening very carefully to the Fed chair who's speaking tomorrow.
- [33:19]
Scott Wapner
Yeah, good timing for that of course too, Steve. Thanks. I'll see you throughout the day. No doubt about that. That's our senior economics correspondent, Steve Liesman. We'll go back to Brad Gerstner I mean, so there's commentary like nobody knows to your point about talking to CEOs, biz roundtable policymakers when it comes to monetary policymakers. See, nobody really knows where this road is going to be, nor do investors.
- [33:42]
Ben Rizzuto
Let me, let me just say that that comment, like I love Steve, that commentary out of Jefferson is ridiculous. The guy's looking in the rearview mirror, not through the windshield, to say that this has no effect on economic growth or on pricing in the economy. And the Fed just came out last week and took down their GDP growth forecast by, by nearly 80 basis points. They took up their inflation expectations at the median and they took up their unemployment expectations for the year. You know, I'm doing this live via Zoom. I'm looking at, you know, my flat panel screen that, you know that we're talking on. This flat panel screen is going to go up by 25 to 50% in cost to every single consumer in America that has a flat panel screen. Why? Because we can't make them in America. We don't have any factories in America that actually make these things. And they're all made in places that we just imposed 30% to 70% tariffs on. So to sit there as the Fed and to say we don't know what impact this will have on prices is ridiculous. The Fed will find itself behind the curve just like they were behind the curve in the summer of 2021. So that may be the initial reaction, but I'm certain there, there is some alarm bells going off at the Fed today. And like usual, the 10 year in the market is going to lead the Fed to the right conclusion. You see the 10 year down a lot. Now I've heard this administration and many others say that one of the positive repercussions of these changes is that the cost of the US debt will come down. Remember, for one, for every one basis point change in the 10 year, I think it saves the US debt about $5 billion in interest payments on an annual basis. But there are two reasons by why, why the 10 year can come down. One is because it thinks we're more fiscally responsible, that inflation is under control and therefore we have room to cut rates. The other is because the market is panicked about a recession. And I would argue to you today the reason you're looking at the 10 year at 4.05 is not because it thinks everything's under control and we're more fiscally responsible and, and that we have room on inflation. In fact, we should be more concerned about inflation today. The reason the 10 year is coming down is because every market participant I talk to, every CEO, look at the betting markets today, the risk of recession is exploding. You can't have this type of tariff in place, which was, which is an economic restraint coupled with the economic restraint we're going to have in the budget cuts that are coming out of the reconciliation bill without a major headwind to US GDP growth this year. And so I remain hopeful that this is a step in the direction by this administration of fairer trade. But right now it looks like protectionism.
- [36:31]
Scott Wapner
And I think part of the issue too that, that everybody's facing here is it is a far cry from what expectations were coming into this year. I remember you and me having a conversation on election night as it became clear that we were going to see a Trump 2.0. And the optimism that abounded about what lie ahead. Economy for the markets, for deal making, just for the general environment. One in which you told me, and I'm going to quote here, GDP incredibly strong. The fastest growing economy in the world, the most innovative economy in the world. Our national advantage has never been greater. We see the 10 year backing up. Why? Because the market is saying, we think the economy is going to grow faster than we thought before. And if Trump gets elected, we think those tax cuts will provide further stimulus. So we're not going to need as many rate cuts. So I think the backdrop looks incredibly constructive. Five months. Five months. We have an entirely different picture. Expectations are being completely reset. I can't imagine you thought that this was going to be the environment.
- [37:42]
Ben Rizzuto
No. And listen, that's why I said on our podcast and I said on Squawk, we took down our exposure at the end of January and early February because it was very clear that Trump 2.0 was also going to include massive new tariffs to try to reset the entire global framework around trade. And I am hopeful, hopeful and remain hopeful that the President is true to his word and really wants fair trade. But fair trade would have our tariff revenue going from 77 billion to 250 billion. It would, it would be bilateral negotiations with our partners, with China, with others, in order to get to the place. And listen, he sent Scott Bessant out and Bessant said, what you're going to hear on, on Liberation Day is the cap. It is not the stop, it is not the ending point. It is the cap. Unfortunately, I think that the way the market and foreign leaders and CEOs are hearing this is as protectionism. And the President and his team needs to get out and reassure everybody. That they're going to have those bilateral negotiations, that we're going to see these tariffs come down and we're going to see them come down both in terms of the countries that we're trying to export into and in terms of the tariffs that we're going to impose on others. You know, I still believe that this is a pro growth, pro business, pro investment, lower taxes, less regulation, a pro M and a at the start of an AI supercycle. The backdrop here is excellent. This is a self inflicted wound. This is an own goal and it will only prove to be a masterstroke if we're looking back six months from now and we've achieved a global lowering of tariff tariffs. And that can be measured by what our tariff revenues go to. If we're looking at this, you know, six to nine months from now, we're saying we're going to charge $1 trillion in tariff revenue. It's almost impossible for me to see how we avert a recession. And so the first 10 to 15% down in the market, remember Scott, the NASDAQ's down 13% year to date. I would say that's all just the uncertainty caused by what might happen. The next 10 to 15% down, which the President is in full control over, is whether or not we enter a recession. Right. And so we're now careening down in the markets. The markets are starting to forecast a recession. But if you believe that the President's going to remain on course, that we're not going to have any negotiation, the recession, that tariffs are not going to come down, then I think the market has another 10 to 15% to go because we are going to find ourselves in the teeth of a bad recession. And so, you know, I urge the administration to stick to its, its game plan of fair trade. But fair trade is not what we saw laid out yesterday. I hope this is the cap, I hope we negotiate off of it. And by the way, the reconciliation bill, which includes the tax cuts, the tax extensions and all the other good stuff, right. That is going to be a positive thing, but it's only going to be positive if we don't destabilize the entire global economic framework.
- [40:45]
Scott Wapner
So I know I'm going to ask you one more question before we take a quick break and come back and do some more with you. All this said, and you're very plain in, in the criticism that you have about how this all came out, the severity of it and what the ramifications might be, you're more net long now than you were prior. And you've added to some long positions, including I'm told, in video, which is ugly today and has not traded well at all lately. Why was this the moment to add to that stock?
- [41:20]
Ben Rizzuto
True. The semiconductor index is down 20%. Nvidia, as you know, is down from I think a peak this year at 150. You know, so this stock's down by a third. Remember, we entered today in kind of bomb shelter positioning. We had puts on the, on the Nasdaq, we had tremendous number of shorts. We're sitting in a lot of cash. We only had 50% of our long book even positioned in the market. So we're dramatically outperforming on a day like today. So we're going from the bomb shelter to simply, you know, our safety positioning. And that means adding about 15% of net exposure. And we're adding it in the areas that we believe. We're continuing to see secular growth. And as you know, the growth and the demand for GPUs is off the charts. You hear it from OpenAI, you hear it from Google, you hear it from Elon, you hear from others. I know there's a debate about that, but that's the side of the debate that we're on. And then although we saw these tariffs announced yesterday, we also saw a list of exceptions. And one of the list of exceptions, wise exception, is semiconductors. And I think the reason that semiconductors are being accepted is because for us to charge a tariff on our own chips, right, which are fabricated in Taiwan because they can't be fabricated in the United States, we don't have the fabs yet. Tsmc, who he mentioned in his speech yesterday, has committed to massive investments as a result of the President, President's policy in Arizona to build cutting edge fabs. But right now he gave him an exception because we know if we increase the cost of these chips that we design to our own companies like Metta, like Google, like Microsoft, like Open Air, we're only shooting ourselves, right, because we're in a global race in AI. We can't hamper our ability to win that race. And so I think that was a wise decision to put them on the exception list list. I'm sure he's going to keep an eye on whether or not the fabs are being built in Arizona. But I think we're going to net net end up in a much better place in terms of our global supply chain as a result of these decisions. But that's the reason we're buying Nvidia today. We think the demand is off the charts. You know, we think the negative impact from tariffs is going to be much less than in other areas. But listen, if we end up in the teeth of a recession, then even in video at 18 or 19 times earnings might, you know, might not perform that well. Like we need to avoid a recession in this country. I think it's very bad if we find ourselves in the fall in a recession and we're heading into the midterm elections in 2026. I don't think the president, the administration or Congress want to risk a recession, you know, toward the end of this year.
- [44:03]
Scott Wapner
We'll take a quick break, Brad, if you don't mind. We'll come back with you in a couple minutes. Continue our conversation with Brad Gerstner right after this.
- [44:15]
Contessa Brewer
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- [44:43]
Ben Rizzuto
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- [44:59]
Steve Liesman
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Steve Liesman
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- [45:11]
Jenny Harrington
See full terms@mint mobile.com.
- [45:19]
Ryan Reynolds
Welcome back to Halftime. I'm Contessa Brewer with your CNBC news update. Now the Associated Press is reporting President Trump has moved to fire several members of the National Security Council. Sources tell NBC News far right activists and conspiracy theorist Laura Loomer yesterday in the Oval Office urged President Trump to fire staffers she felt are not loyal to the president's agenda. NSC spokesperson Brian Hughes declined to comment. New York City Mayor Eric Adams announced he will run for reelection in the city as an independent. The move removes him from the Democratic primary just one day after a federal judge dismissed corruption charges against him. Nine Democrats, including former New York Governor Andrew Cuomo, are currently running for the mayor's office and the United States is set to host the Women's World cup in 2031. The president of FIFA told European soccer officials the US submitted the only bid for the tournament, which includes the possibility of other countries in the region joining in the project. The Women's World cup has not been held in the US since 2003. That is the news, Scott. I send it back to you.
- [46:23]
Scott Wapner
All right, Contessa, thanks so much for, for that contestant bureau. We're back with Brad Gerstner. Brad, the last time we were together was out in San Francisco. You made headlines, of course, when you told us exclusively that you had sold Uber and that you had bought Tesla thinking that the game had changed in the big picture. I'm wondering what you think about that now, if your position still exists. Obviously, the tremendous amount of controversy around Elon Musk, his role in the government versus is what he, according to analysts, should be spending more time on that company as the stock has just gotten hammered.
- [46:59]
Ben Rizzuto
Yeah, listen, we weren't big in either of these names. As I said at the time. I think the big news, Scott, was that I was a longtime and large shareholder of Uber. And starting in the spring of last year when we saw full self driving, you know, 12.3, and then by the end of the year 12.0.9, we just knew Autonomy was here. And you know, I have a new Tesla Model S I bought in December. It drives me everywhere. I tweeted about it the other day. I don't touch the steering wheel. I think it's quite extraordinary. In fact, I think Faber tweeted something or said something on air that got tweeted over the weekend about how he experienced it. And so I'm absolutely convinced Robotaxi is coming. It's coming from Waymo, it's coming from Tesla, and it's coming from others around the world and many in China that Uber is partnering with around the world. And I think this does pose a risk fundamentally to the Uber business model. Now listen, Dara Kasha Shah, he's an amazing CEO of that company, is taking the steps necessary to forge the partnerships around the world. They've announced partnerships with several companies in China, you know, and companies outside of China. I just don't have the confidence yet that that is fully come together and is really going to be able to stand up to the full stack solution that Tesla has. We're not big in either name today, right? Tesla has its own challenges with the global.
- [48:24]
Josh Brown
Let me, let me, let me interrupt you because I really want to make sure the viewers get Your take on this? I'm of the opinion that the consumer wants the lowest price and the fastest pickup when they summon any ride hailing situation. If you go on the Tesla app because you're into Tesla or you love Elon Musk or you care about the battery or whatever and it's 13 minutes away, isn't it more likely that you won't do that a second time? You'll start off on an app that has both autonomous and Teslas and everything else, and you'll get the fastest ride for the lower, lowest price. And if you agree with that, would that explain why Tesla is down 35% year to date while Uber is up?
- [49:10]
Ben Rizzuto
Yes, I think that's a, I think it's a very fair point.
- [49:13]
Scott Wapner
Thank you.
- [49:14]
Ben Rizzuto
I think if you look at it, if you look at it in the full arc, we sold our, we sold our uber closer to $80 a share and you know, it bottomed at 60. It's now back, back to 70. Tesla's down a lot. Like I said, you know, like Net Net. I'm happy with the way we manage those positions and I still think we're in a place where we can't really definitively answer the question. We do know that Tesla is going to launch a really great solution. But to your point, Josh, if they don't have speed of pickup in Austin when they launch in June, and if they don't have the lowest price, then there is no market for them. Right. Waymo and Uber are already there. Right. And that's what this game is about. It's about price and it's about convenience. But we've seen Waymo gain tremendous market share in Los Angeles. In San Francisco, the Net promoter scores are even higher than a ride with a human in them. Right. We see parents all over San Francisco that are getting their kids to after school activities in Waymos with no drivers. They actually prefer it to an Uber with a driver. So I believe that autonomy is here. I believe that we're going. You know, the technological challenge of full self driving has been cracked. I think Tesla is in a great position on that, but they have to execute just as you said. Waymo is in a good position on it, but they're still subscale. And the real question around Uber was can they find the partnerships and solutions that allow them to compete with Waymo and with Tesla? And I will tell you, I just met with the company the other day. I have more confidence today that they're moving in that direction. We actually have a small slice of, of Uber in our portfolio today that we've added right over the course of the past few weeks on some of these pullbacks. But again, I just want to say very clearly our position sizes are small. We're heading into what could be a recession that could dwarf all of these debates. And secondarily, I don't think it's clear either way, Josh, you. And I can't say definitively today which model is ultimately going to win. We have to wait and see what happens with Robo Taxi in June and how this unfolds over the course of the year. But, you know, listen, I wouldn't count any of them out today.
- [51:24]
Scott Wapner
A couple more things I want to get to you with before we go. You bought more of Coupang also, which Joe has owned for a long time. So tell, tell Joe why, again, this was a moment and this was the name that you decided to add. And I want to ask you another thing before we go. So let's try and do this in a reasonably short so, so, so, so.
- [51:47]
Ben Rizzuto
If you look at some of our biggest positions today, Tencent, Alibaba, Coupang, Meli, these are non US Companies that have domestic businesses not largely impacted by the tariffs that are benefiting from AI. Right. Their costs go down because now they can do things like code and do customer service leveraging AI. They can better target their products leveraging AI. So we see a lot of the benefits that we saw at Metta over the course of the last two years as a result of their investment in AI. We see these benefits, you know, starting to spread out. And then, of course, in China, we, we had some of our largest positions in China for the first time in five years to start the year because we're more constructive generally on China now. We had huge Chinese tariffs announced yesterday. Again, I urge and I'm constructive about the president's position here. I think he's going to cut a deal with China. I don't think the tariffs that we saw yesterday is where this plane is going to land. If I thought this plane was going to land where at the trillions of dollars in tariffs that I've heard Peter Navarro and, you know, and Howard Lutnick and others talk about, I would not be supportive of landing the plane there. I think every CEO in America supports the president to the extent he wants to make trade more fair. But I would say 100% of those same CEOs get off the Trump train when he says he wants to just impose high structural tariffs and get back to where William McKinley was, you know, and Replace the Internal Revenue Service. I don't think there's support on Capitol Hill for that. There's not a support among CEOs that will land us in a recession. But fair trade, which is what he ran on, that's what everybody supports.
- [53:25]
Joe Terranova
Brad, it's Joe. I just want to ask you to address one concern you might have because you think about getting the type of growth you're getting from coupang internationally, it's very difficult to do. This is a company that has, it has its Amazon prime with rocket.
- [53:38]
Josh Brown
Wow.
- [53:38]
Joe Terranova
It has coupon eats. But does it need geographic expansion? I think it's in Taiwan, but I was puzzled by the fact that it stepped into Japan, then said, wait a second. Costs are too high to maintain that growth. Does it have to expand geographically?
- [53:54]
Ben Rizzuto
We don't think so. We think deeper penetration in its core markets and the benefits that are going to flow from AI is enough. But we do think they have optionality on, you know, on global growth. And so we like the market. Obviously, there's been an overhang on that market for domestic political reasons and other things. We have reasons to believe that those will be resolved. We're starting to see some pulse come back to, you know, that market. And so we just have to stay tuned. But we like the fact that they're not dependent upon exporting to the United States. They're not caught in this, you know, this global tariff battle. They're a market leader. And listen, in the age of AI, market leaders are going to see a golden era of margin expansion, just like we've seen at Meta. You can do more with fewer humans. You can better target your products, you can better satisfy your customers. And what we see in AI is just inflecting. So those are the attributes we're looking for. And of course, you have to navigate this, this incredibly challenging economic and tariff backdrop.
- [54:56]
Scott Wapner
I'm glad you frame it sort of the way you do around AI, because there is a good debate right now as, whether. As to whether you can do a lot more with less deep seek. Obviously sort of changed the conversation around that. Which leads me to the core weave IPO of, you know, last week, which was obviously a huge event, which I understand you were a large buyer of in the ipo, Correct?
- [55:21]
Ben Rizzuto
Correct. So, you know, we were investors in the private rounds of core. We've going back a couple of different rounds. We're incredibly impressed by that team. Mike Intertor. You know, there was a lot of, I think, you know, fake news about the company heading into the ipo. You know, a Lot of people said, oh, they're wholly dependent on Microsoft. I mean these, they serve Microsoft, they serve Metta, they serve OpenAI. They just announced a big new deal yesterday, I think with Google, you know, Google buying a bunch of Nvidia GB3 hundreds or two hundreds using Core Weave to stand it up. Core we is a key part of the Stargate initiative down in Denton, Texas. There are key. And Jensen talked about this at gtc, part of his forward engineering strategy to make sure that the next generation of chips do what they say. You know, you can question Morgan Stanley's timing of taking this out Friday ahead of Liberation day Tuesday. It was courageous by the company, it was courageous by Morgan Stanley. We stood by our friends and partners. We were a large buyer in that ipo. And listen, it performed incredibly well of course getting hit today. But I think it went public at 40 and you know, yesterday it was over 60 and so it was a good performing IPO. And I think the future is bright for that company because I think they're going to be the definitive AI cloud that comes out of this, this moment time. Obviously they're going to be challenges from the hyperscalers and others. So it's not get out of jail but here I see it, trading it, it looks like 53 bucks, you know, went public at 40. Imagine an IPO being up over the last three days into the teeth of this Category 5 hurricane. There's some signal in that.
- [57:07]
Scott Wapner
I hear you. I think it's a little unfair though to suggest that, you know, questions about the company's debt and questions about potential depreciation of assets and questions about concentrated relationships is. You use the words fake. I mean those are legit.
- [57:25]
Ben Rizzuto
I knew that was going to get.
- [57:27]
Scott Wapner
Well, I mean, come on.
- [57:28]
Ben Rizzuto
I knew. Poor choice of words. Got, you know, I think there were reasonable questions and good stuff asked about the company. I just saw a lot of stuff that was, shall I say, ill informed in terms of the depreciation schedule, etc. So but listen, the questions I heard you and Faber and others asking on cnbc, I think those are totally fair questions, you know, happy to debate them here. There's a reason we bought it. We've known the company, we do the work as well. I think the concentration question has now been answered. They just. Right, they just added Google as well. They also serve Mistral and Cohere and so many others. And I think on the depreciation schedule I've heard, I've heard a lot of stuff that, you know, because of Jensen's comments at TTC that people are going to throw away their servers after two years. It's utter nonsense. These servers will be used for a couple of years. Okay, you got to go.
- [58:22]
Scott Wapner
I do have to go. We're up at the end here. I can't thank you enough. Thanks for being here. I enjoyed our conversation, as always.
- [58:28]
Ben Rizzuto
It's always great to be. It's always. It's always great to be here. Thanks for having me, Scott.
- [58:32]
Scott Wapner
All right. You bet. Brad gerst. Nasdaq's down 5%. Speaking of tech, you got a final trade? You want yours?
- [58:38]
Jenny Harrington
Cyber health care, almost 7% yield.
- [58:40]
Josh Brown
Kinsale up eight bucks today. What's going on?
- [58:43]
Scott Wapner
All right, well, you highlighted names that we need to pay attention to that are green, so thank you. I'll see you on the closing bell, everybody. The exchanges. Now, you've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.
- [59:02]
Steve Liesman
All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Halftime Report participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com halftimereportdisclaimer amid tariff uncertainty.
- [59:42]
Josh Brown
And downgrades to growth, will the labor market remain steady?
- [59:45]
Ben Rizzuto
What the March jobs report could indicate for the economy and possible future rate cuts. Numbers and ANALYSIS Squawk box tomorrow, 8:30am Eastern, CNBC.