Motley Fool Money: "Tariffs, Trump, and Turmoil" Released on April 11, 2025

Hosts: Ron Gross (sitting in for Dylan Lewis), Emily Flippen, Matt Argisinger
Guests: Asit Sharma (interviewer), Martin de los Santos (CFO of MercadoLibre)

1. Opening and Macro Economic Overview

[00:05 - 00:54]
Ron Gross kicks off the episode by introducing the theme: tariffs, the Trump administration's policies, and the resulting market turmoil. He emphasizes the recent volatility in the stock market, highlighting significant events such as the Trump administration's 90-day pause on reciprocal tariff policies, which led to the market's biggest one-day gain since 2008.

Notable Quote:

• Ron Gross [00:25]: "Everybody needs money. That's why they call it money."

[00:54 - 03:23]
Emily Flippen provides an initial assessment of the economic landscape. She counters the negative headlines by pointing out that while some economic indicators remain unfavorable, there are signs that concerns around stagflation might be easing. Specifically, she references the Producer Price Index (PPI), the Federal Reserve's favored inflation metric, which showed a nominal month-over-month decline.

Notable Quote:

• Emily Flippen [01:42]: "While we still have a lot of economic data that is not coming out as favorably as I think some investors want... here is something that continues to say it may not be as bad as we expect."

2. Impact of Tariffs on the Market

[03:23 - 04:12]
Ron Gross probes deeper into the market's nervousness, attributing the volatility to genuine concerns over the business impacts of sustained tariffs. Emily expands on this, explaining that the tariffs could affect both manufacturing suppliers and consumer purchasing power, thereby influencing the broader economy.

[04:12 - 06:20]
Matt Argisinger shifts the focus to U.S. consumer sentiment, which has deteriorated to levels worse than during the Great Recession. He advises investors to monitor interest rates closely, especially Treasury yields, as rising rates could have cascading negative effects on various sectors, including housing and small to mid-sized businesses.

Notable Quotes:

• Matt Argisinger [04:12]: "If you're an investor, what you can or should pay attention to, and that is interest rates."
• Emily Flippen [03:54]: Implies that continued tariffs could lead to broader economic troubles if Treasury yields rise significantly.

3. Bank Earnings and Sector Insights

[06:20 - 09:08]
The discussion shifts to the banking sector, where several large banks reported solid first-quarter results. However, the emphasis for investors lies in the guidance provided by these banks' CEOs amidst the tariff-induced uncertainty.

• Jamie Dimon (JP Morgan): Warns of "considerable Turbulence" and mentions that a recession seems "all but unavoidable."
• Charlie Scharf (Wells Fargo): Supports the administration's trade policies but acknowledges the risks, expecting continued volatility in 2025.
• Larry Fink (BlackRock): Surprised by the extent of tariff announcements and suggests the U.S. might already be in a recession.

Notable Quote:

• Larry Fink [08:27]: "I think we're very close, if not in a recession now."

Matt summarizes the banks' outlook, emphasizing the dangers of unresolved tariffs and the potential for rising Treasury yields to further strain the economy.

4. Company-Specific Analyses

Constellation Brands

[09:08 - 11:11]
Ron Gross discusses Constellation Brands' fourth-quarter results, which beat expectations but presented a weak full-year earnings outlook due to tariffs. Emily Flippen analyzes the company's performance, highlighting that tariffs are a minor concern compared to Constellation's robust business turnaround in a struggling beer market. She appreciates the company's focus on core brands like Corona and Modelo and their strategic divestment from underperforming segments.

Notable Quotes:

• Emily Flippen [09:31]: "I actually think tariffs are maybe the least interesting thing happening to Constellation Brands business today."
• Ron Gross [11:11]: "They're selling some of their wine brands, Cooks, Maomi, that that a good move? You like that?"

Delta Airlines

[12:21 - 14:51]
Delta's first-quarter revenue growth stalled, and the company did not reaffirm its full-year guidance, attributing the slowdown to economic uncertainties related to global trade. Matt Argisinger explains that while Delta posted record revenue, the inability to maintain previous growth forecasts raises concerns about future consumer travel demand. However, falling energy prices offer some relief by improving margins.

[14:51 - 16:46]
CarMax reported worse-than-expected fourth-quarter results, pulling back its financial goals due to macroeconomic factors. Emily Flippen argues that CarMax's business fundamentals remain strong, with potential long-term benefits from rising used car prices offsetting short-term margin pressures from increased costs due to tariffs.

Notable Quotes:

• Matt Argisinger [03:23]: "I think Emily kind of hinted at this. I mean, if countries like China, Japan, the UK, various members of the EU stop buying our Treasuries..."
• Emily Flippen [16:51]: "CarMax would certainly be up there digging into it this morning... an incredibly strong, profitable company."

RPM International

[16:46 - 19:06]
RPM International's fiscal third-quarter results were weaker than expected, attributed to unfavorable weather conditions and the ongoing impact of tariffs. Matt Argisinger breaks down the challenges faced by RPM, including slow housing markets and high operating leverage, which led to a 3% decline in sales and a 30% drop in pre-tax operating profits. Despite these setbacks, RPM's acquisition of "The Pink Stuff" cleaning product signals strategic growth efforts.

Notable Quote:

• Matt Argisinger [17:39]: "RPM is acquiring the pink stuff... when you need to take risk and make sure that you invest behind the long term growth opportunities."

5. Interview with MercadoLibre CFO, Martin de los Santos

[19:25 - 29:43]
Asit Sharma interviews Martin de los Santos, CFO of MercadoLibre, focusing on the company's resilience and long-term opportunities in the Latin American market. Martin highlights MercadoLibre's adaptability in the face of challenges like hyperinflation and geopolitical instability. He underscores the company's dual focus on e-commerce and fintech, areas with significant growth potential due to the low penetration of online commerce and traditional banking services in the region.

Key Points:

• Resilience Factors: Strong company culture, willingness to reinvest and take calculated risks, and strategic expansions into logistics and mobile platforms.
• Growth Metrics: MercadoLibre boasts 100 million commerce users and 61 million monthly active fintech users. The company emphasizes user engagement and diversified financial products.
• Strategic Investments: Focused on long-term growth rather than short-term profits, ensuring investments align with future opportunities.

Notable Quotes:

• Martin de los Santos [20:21]: "We are riding a secular trend of people moving online... the banks have done a really poor job of including financially most of the population in Latin America."
• Asit Sharma [22:50]: "We don't shy away from investing even if in the short term that might put some pressure on margins because the main thing for us is to make sure that we do capture those opportunities."

6. Final Market Insights and Stock Recommendations

[29:43 - 38:49]
The hosts wrap up the episode by discussing current stock picks and market sentiments:

• Dexcom (Emily Flippen): Positive news as Dexcom received FDA approval for the Dexcom G7 continuous glucose monitor, enhancing their competitive edge. However, potential risks include advancements in weight loss drugs and diabetes cures that could reduce market demand.

  Notable Quote:

  • Emily Flippen [35:07]: "Dexcom did see a little bit of a revival this week because they did get FDA approval for their newest continuous glucose monitor."

• Robinhood Markets (Matt Argisinger): Despite its association with meme stocks, Robinhood's substantial user base among young investors positions it well for long-term growth as these users mature and engage in more sophisticated financial activities.

  Notable Quote:

  • Matt Argisinger [36:42]: "When you have 26 million funded customers... that gives me confidence that it has long term staying power."

Additional Highlights:

• Walmart's Guidance Withdrawal: Emily Flippen interprets Walmart's decision to withdraw its earnings guidance as a potential red flag for the broader economy, suggesting it could lead to a self-fulfilling prophecy of economic slowdown.

  Notable Quote:

  • Emily Flippen [31:17]: "Things will likely get worse before they get better."

7. Closing Remarks and Farewell

[38:50 - End]
In an emotional farewell, Ron Gross announces his retirement after 16 years with Motley Fool Money, expressing gratitude to listeners and colleagues. The team shares well-wishes, ensuring listeners that the show will continue to deliver quality content.

Conclusion

"Tariffs, Trump, and Turmoil" delves deep into the intricate relationship between governmental trade policies and their multifaceted impact on the economy and individual businesses. The hosts and analysts provide comprehensive insights into current market dynamics, offering valuable perspectives for investors navigating these turbulent times. Through detailed company analyses and expert interviews, the episode equips listeners with the knowledge to make informed investment decisions amidst economic uncertainty.