Masters in Business – Getting Earnings Right with Deutsche Bank's Binky Chadha

Podcast Host: Barry Ritholtz (Bloomberg)
Guest: Binky Chadha, Chief US Equity & Global Strategist, Head of Asset Allocation at Deutsche Bank Securities
Date: November 14, 2025

Episode Overview

In this episode, Barry Ritholtz interviews Binky Chadha, a veteran economist and strategist who leads Deutsche Bank’s US equity and global strategy. Their in-depth conversation ranges from Chadha's formative years at the IMF to the complexities of the present cycle in the US and global equities, the significance of earnings forecasts, market risks, and how both quantitative frameworks and global macro perspectives guide his outlook. With first-hand takes on policy, market sentiment, and cycles, Chadha details why getting earnings right is essential in market strategizing—making this episode indispensable for investors, analysts, or anyone keen on understanding the interplay between macro trends and markets.

Career Path and Influences

Early Academic and IMF Career (02:16–09:23)

• Educational Background: Studied mathematics, computer science, and earned a PhD in economics from Columbia.
  • “The career plan was to get a PhD in economics and study development economics and alleviate poverty and help the world. I went to graduate school. And graduate school kind of wrings that out of you.” – Chadha (02:35)
• IMF Experience: 17 years at the IMF, working from research to country-specific roles, including Bulgaria and Singapore.
• Singapore’s Growth Case Study:
  • Noted for high wage policy leading to high-value manufacturing boom in 1979.
    “It was wildly successful in…turning the economy into…a much higher value added growth part.” – Chadha (06:25)
• Transition to Deutsche Bank (2004):
  • Brought macro, FX, and global perspectives shaped at the IMF, valued for his ability to see "the bigger picture.”
  • "My participation in Bulgaria... and Singapore... those experiences are things that inform you about the bigger picture and forces that are ongoing." (07:30)

Key Discussion Points & Insights

The Current Economic Cycle: Unusual, Resilient, and Uplifting

(12:13, 15:21, 18:03–24:53, 32:15–36:38)

• Peculiarity of the Cycle:
  • Present US cycle is “very, very peculiar,” marked by full employment (≈4% unemployment) and strong GDP growth (>3%), which is rare—6% of post-WWII time, mostly in the 1960s and late 1990s.
    • “When you have a job but growth is strong, risk appetite is going to be high. That’s kind of almost exactly where we are.” – Chadha (13:35)
• Impact of Fiscal Stimulus:
  • The pandemic and financial crisis strengthened corporate and household balance sheets, underpinning current resilience.
    • “This resilience is partly a blessing of the two large shocks that we...already had…” – Chadha (16:38)
• Housing’s Diminished Role:
  • Housing’s share of GDP has plummeted from 6–8% (1970s) to ~2% today.
  • Most economic cyclicality now comes from areas like consumer durables and corporate capex, while housing contributes less.
    • “2/3 of the US economy is actually stable growth economy... cyclical parts basically... when it gets going it’s very powerful.” – Chadha (19:46)
  • Tech/AI investments are excluded from cyclical “soft” capex right now.

What Drives Equity Markets? Getting Earnings Right

(28:49–32:15, 53:33–58:01)

• Frameworks:
  • Chadha’s team develops “non-overlapping frameworks” for different equity groups, combining quantitative and qualitative methods.
    • “If you could get earnings right… you will know what the markets are going to do.” – Chadha (29:26)
  • Mega cap tech stocks (including Visa/MasterCard) are separated from the rest and analyzed using both trend/cycle and idiosyncratic drivers like the USD and sector-specific measures.
• Earnings & ISM Manufacturing:
  • Pre-pandemic, ISM Manufacturing explained S&P 500 earnings well. Recently, only “everyone else” (non-mega-cap) remains aligned with ISM; tech/mega-cap has diverged—yet the anticipation is for “everyone else” to catch up.
    • “Mega cap growth in tech…90% of S&P 500 earnings growth has come from there. [We believe] everyone else is going to recover.” – Chadha (32:15)
  • Manufacturing funk and energy sector drag are passing hangs from pandemic, energy prices, and idiosyncrasies like auto tariffs.

Market Positioning and Sentiment (45:34–48:13)

• Limited Buy-In: Despite strong fundamental data, Chadha notes caution among human/discretionary investors; systematic (quant/trend-following) strategies are driving much of the equity overweight.
  • “There’s been very limited buy in, I would say, from discretionary investors who are actually sitting at neutral.” – Chadha (47:00)
• Systematic Strategies: Volatility-controlled, CTA, and risk-parity flows have led sharp recoveries post-volatility events (like the “Liberation Day” collapse/August tariffs).
• Money Market “Red Herring:”
  • The $7 trillion in money markets is primarily a shift from bank deposits—not excess risk capital likely to flow directly to equities.

Global Outlook: US vs. Europe & Asia (40:17–45:06)

• US’s Exceptionalism Relative, Not Absolute:
  • US has maintained a 2.5% GDP trend—remarkably steady—and resumed pre-pandemic norms, unlike Europe/rest of world, which remain under trend largely due to the Ukraine war shock and weaker policy responses.
• Europe Opportunity:
  • Chadha is newly bullish on European equities, based more on potential growth and positioning than on realized fundamentals—“very early days” in a longer European recovery cycle.
    • “So we are actually, from a positioning point of view, we overweight the US... but we're also overweight Europe.” (43:31)

Tariffs, Policy, and Their Surprising (Limited) Impact

(48:13–59:40)

• Tariffs as Macro Risk:
  • 2025’s sudden 100% US tariffs (April 2) shocked markets but, as before (the “Trump collar”), were quickly walked back; markets now price in such reversals.
  • Actual impact has been less than headline would suggest—growth and earnings are unfazed; effective tariff rates are 10–15% (not 100%), with rampant exemptions.
    • “Tariffs or a new tax... is impossible to refute. And I'm not refuting it, but...there’s like no evidence of that because other things are basically dominating.” – Chadha (54:41)
  • Inflationary effect is visible but so far contained: about half the expected direct impact has been realized (≈1–1.25% higher core goods CPI so far).
• Outlook on Rate Cuts:
  • Chadha downplays rate cuts as key, focusing on earnings—expects no significant interest rate decline, with 10-year yields remaining near 4.5%.

Labor Market, Productivity, AI, and Market Structure

(62:43–66:49, 66:49–74:36)

• Labor Market:
  • US remains at full employment; small population declines may boost productivity stats.
  • “If you’re not changing the GDP numbers and you just raise the level of productivity... it’s not as much of a negative as it looks at first blush.” – Chadha (63:56)
• Productivity Trends:
  • True productivity booms typically require tight labor markets; recent data show cyclical productivity spikes post-pandemic, similar to historic 1960s/‘90s surges.
• AI/Market Froth:
  • Speculation is visible in areas like AI and crypto but remains contained—retail participation is up, but historically modest.
    • “We do see signs basically of rampant speculation, but...so far it’s only in…relatively well defined pockets.” – Chadha (66:55)
• Market Concentration (“Magnificent Seven”):
  • Concentration in mega-caps reflects their earnings contribution: “They’re responsible right now for about 40% of S&P 500 earnings.”
  • “Why shouldn’t they be 40% of the market cap?” – Barry (69:44)

Risks, Opportunities, and the Duty to Be Constructive

(72:17–74:48)

• Risks:

  • Tariffs and protectionist/immigration policies are currently modest threats, with manageable inflation/growth pressures.
  • Upside risks are now more concerning than downside: significant pent-up demand and the possibility of a “melt up.”
    • “It is my duty to simply point out that right now I’m much more concerned about upside risks than downside risks.” – Chadha (73:35)

• What’s Overlooked:

  • The rarity and dynamism of the current combo—3% GDP growth with 4% unemployment (only 5–6% of the time since WWII).
  • Constant media noise is obscuring what is, underneath, a robust and fundamentally sound US economy.

Notable Quotes & Memorable Segments

On Market Cycles:

“We've had... essentially full employment in the labor market. And what is at odds with the traditional cycle is that when unemployment is low, you're typically at the end of the cycle and growth tends to be low. But for the last two to three years, what we've had is 4% unemployment. But GDP growth, especially underlying GDP growth ranked pretty steady at 3%, showing some signs of going even higher.”
— Binky Chadha (12:13)

On Getting Earnings Right:

“If you could get earnings, right... you will know what the markets are going to do.”
— Binky Chadha (29:26)

On Negativity as a Positive Force:

“So that negativity is a positive force for now, our economists... have a 2.8% GDP growth number for the third quarter. That's, you know, the highest numbers I've ever seen.”
— Binky Chadha (56:16)

On Tariffs:

"If you thought through the impact of the announced tariffs, you were to come to a very, very negative conclusion. And that's what we did. ...We have since basically raised both our earnings numbers and our target."
— Binky Chadha (53:33–54:41)

On Today’s Biggest Risk:

“I would argue that it is my duty to simply point out that right now I'm much more concerned about upside risks than downside risks.”
— Binky Chadha (73:35)

Timestamps for Key Segments

• [02:00–08:17] — Chadha’s background, education, IMF career
• [12:13–14:38] — The current economic cycle’s rare combination of low unemployment and strong growth
• [18:03–21:29] — The diminished role of housing in economic cycles today
• [29:00–32:15] — Deutsche Bank’s equity strategy frameworks & earnings forecasting
• [40:17–45:06] — US vs. global economic growth, bullish call on Europe
• [48:13–50:52] — Positioning: systematic vs. discretionary investor flows; the money market fund debate
• [53:33–58:01] — The practical impact of tariffs on growth, earnings, and inflation
• [62:43–66:49] — Labor market strength, productivity, and AI/market speculation
• [72:17–74:48] — Reassessment of macro risks; “upside risk” vs. “downside risk”
• [75:10–78:21] — Mentors, advice for young professionals, what matters in investing

Rapid-Fire Personal Insights

• Mentor: Michael Dooley (IMF, ex-Fed), taught Chadha to “think critically…and communicate things in a very simple way.” [75:10]
• Fiction Reader: Currently reading Isabel Allende’s A Long Petal by the Sea [75:50]
• Bollywood Fan: Recommends Tandav (Prime Video)—political thriller, banned after season one [76:21]
• Best Career Advice: “Go with where your interests are. The ability will come.” [77:11]
• Most valuable lesson: Ignore everything except the economy; for S&P 500, “it’s about earnings. Period.” [77:54]

Conclusion

Binky Chadha’s perspective offers deep clarity on the current cycle’s uniqueness, the critical role of earnings forecasting, and how policy and positioning shape the S&P 500. Despite headline risks—tariffs, AI speculation, elections—core economic and market metrics remain robust, positioning US and even European equities for potential upside surprises. The fundamental message: focus on earnings and economic flows; tune out the noise.