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Is American Exceptionalism at Risk? 4/14/25
00:47:29
As the dollar falls and yields climb, we’re asking if this is the beginning of the end of American exceptionalism. Former Treasury Secretary Janet Yelling telling CNBC President Trump’s trade policies are “completely chaotic” after the administration exempted some tech from the newest round of tariffs over the weekend, but then promised there would be different levies on the way. We look at the potential pains and gains, and where investors can ride out the ongoing uncertainty.
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You're listening to the Exchange. Here's today's show.
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B
Scott, thanks so much. Trump's trade turmoil continues. All three major averages briefly turned negative in the last hour after President Trump promised more tariffs are coming. But he also said he's looking to help search certain industries. We'll discuss what he means exactly. Welcome to the Exchange. I'm Wilfer Frost in for Kelly Evans, and here's what's ahead. Completely chaotic. That's how former Treasury Secretary and former Fed chair Janet Yellen described President Trump's trade policies, warning they could lead to a breakdown in the global monetary systems as we know it as concerns ramp about the dollar's reserve currency status. On all of the uncertainty that's going on. We'll get into that, what it means for lawmakers, what it means for the Fed, and what it means for you as investors. Meanwhile, tech leading the way after chips, computers, phones exempted from the latest round of tariffs. Apple shares up more than 2% today, but still down some 9% so far this month. And the president is promising some separate tech tariffs in the near future. We'll have the latest on what you can expect there. But before we get to all of those stories and more, let's get over to for a market check. Don, we're off the highs.
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A
We are well off the highs right now, but we are still green. But I'll put up the range. Just give you an idea of what the kind of intraday action has been so far for the broader S&P 500. We currently sit at 5,384. It's up 21 points, nearly 1/2 of 1% gain. So it's nothing to kind of shake a stick out here. But at the lows of the session, I will say we were down about 5 points on the S&P, but we were up 96 at the highs of the Session for the S and p, we're currently up 22. That's the range. The Dow industrials at 40,003, 56. It's up about again nearly one half of 1%, 145 points to the upside. The tech heavier Nasdaq, the laggard on a very relative basis, just up about 1/4 of 1%, up 37 points to 16,007 62. Now as we take those numbers and put them in context around just how far we've come since that April 2 kind of tariff real tantrum in the marketplace. If you look at the Dow, the S and P and the Nasdaq, the Dow is still down roughly 4% from that April 2, so called Liberation Day. The S&P 500 down a similar percentage amount, roughly 4% and a roughly 4% decline for the Nasdaq overall. So as you watch the trading so far, we are yes, still lower from that, well off the lows that we saw on an intraday level in that tariff tantrum. But it's something to keep a close eye on. The other stock that we want to watch right now is what's happening with Apple. For the time being, the moves have been enough to at least one point today push it back above the $3 trillion market cap mark. Remember, Apple was the biggest market cap decliner during that April 2nd to the lows kind of move that we've seen here. Bouncing back a little bit right now, up two and a half percent. But a number of analyst actions kind of ratcheting down some expectations for price movements here on Apple to the upside going forward. We'll see whether that plays out more markedly in any kind of a tech stabilization trade. And then on the interest rate side of things, the 10 year note yield is actually seeing some bit of a bid today, which means that the yields are actually going lower to 4.41%. Bond prices higher for US sovereign debt, those yields going lower. So as we watch what's happening here, remember the trading range we got as high as about roughly kind of 4.6% here, 3.9%, 3.86%. At the lows during that tariff tantrum, we'll see whether or not that movement or that range changes at all. Wilfred, I'll send things back over to you.
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B
A low 4.4%. The stuff of dreams for a Brit. We're in 470 at the moment.
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Gilts and Treasuries. We'll see that dynamic play out.
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B
We will take Dom. Great stuff as always. Thanks so much for that Meanwhile, Fed Governor Christopher Wallace spe on the economy right now. Steve Liesman as ever, has the headlines of what he is going to say, what he is saying and what he might say. Yeah.
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E
The Fed governor Chris Waller says he is looking at two scenarios for tariffs, a large one, a small one. But he sees rate cuts under both scenarios. One scenario he said he was modeling or thinking about is one where these big tariffs stay and the average tariff in the US remains 25% and other ones where there's negotiations and they go down to a still high 10%. He sees tariff inflation effect mostly as temporary in both scenarios. Now let's talk about his large tariff scenario with large tariffs. He says I would expect the US Economy to slow significantly, even talks a lot about a recession. If the tariffs threaten a recession, I would expect to favor cutting the FOMC's policy rates sooner than he otherwise had expected to. They'll reduce spending, deter business investment and of course raise unemployment. When unemployment rises, he warns, quote, it often rises significantly. Inflation could hit 5% in this large tariff scenario on an annualized basis. Unemployment also could be around 5%. Recession risks, he said, though, would outweigh inflation risk. He's a little different from some of his colleagues on the fomc, even the Fed chair on this and is thinking that he he would focus on recession risks here. Now, the smaller tariff scenario in that scenario, the rate cuts could come on the table in the Latter half of 2025 again because he sees this tariff inflation passing through. Peak inflation would be around 3% on an annualized basis and even small in the small tariff scenario, though it would have a negative effect on growth and employment. He supports limited monetary policy response in that scenario, but still rate cuts, new tariff policies, he said, are quote, one of the biggest shocks to affect the U.S. economy in many decades. And we'll just one more thing. We had our CNBC NRF retail monitor this morning. A decent rebound from two lousy months shows the consumer not necessarily giving up spending despite that strong decline in sentiment. The big decline in sentiment happened in April. These are March number 06 on our headline number. Retails and restaurants, takeout restaurants still 04. Not gangbusters, but a decent rebound while we wait to see what the longer effect of these tariffs will be on consumer spending. Wolf?
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B
Yeah, I guess, I guess the April numbers are going to be the really interesting ones. And consumer confidence, the forward looking confidence doesn't give us the highest hopes that Steve stick around because we're going to get into this in more detail in Just a moment. But first, want to get an update from Washington because of course, President Trump has promised both more tariffs and more help for certain industries in a bilateral meeting he was just holding with the president of El Salvador. That's on the heels of another roller coaster weekends in terms of headlines on this, this topic in particular, let's get to Megan Casella who's at the White House with more on the very latest for us. Hey, Megan.
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Hey, Wilf. So exemptions are the name of the game today here at the White House. Just in the last hour, the president sent American auto stocks jumping on speculation that they may soon see exemption from that 25% auto tariff. Take a listen.
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C
I'm looking at something to help some of the car companies where they're switching to parts that were made in Canada, Mexico and other places. And they need a little bit of time because they're going to make them here, but they need a little bit of time. So I'm talking about things like that.
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F
So optimism for further exemptions is high today. After that move over the weekend, a handful of exemptions that came in spite of weeks of warnings were from the White House that there would be no relief for any companies or any specific items. But now smartphones, computers, some TVs, other sort of consumer technology goods are no longer subject at least to the 125% so called reciprocal tariff on imports from China. They are, though, still subject to the 20% fentanyl tariff imposed earlier this term. But the White House is emphasizing, Wilf, that relief could be short lived. They say they will soon, perhaps very soon, perhaps today, be launching investigations to determine whether imports of semiconductors as well as pharmaceuticals threaten national security. And a White House official told me earlier today that while smartphones and computers won't be subject to their own investigation, they could face tariffs after the semiconductors investigation because they are downstream users of chips. So they could broaden that investigation to include any items that include semiconductors as well.
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B
Wolf, Meghan, what's, what's the kind of latest on why we start getting these different headlines from, from the president over the weekend or his, his team? Is it because different members of the team are getting more airtime with him, influencing him more? Is it just the president changing his mind on these things?
- [09:14]
F
It's really the president leading this tariff policy, though, of course, different advisers have different influence at different times. The reason for why we saw exemptions this weekend at this exact moment depends on who you speak to. The White House has really been going to great lengths over the last 48 hours or so to emphasize that this is not a shift in policy, that the only reason there are exemptions now is because all of the items that got exemptions now will later be subject to different tariffs. So they say pretty much everything will ultimately have a tariff attached. I will say, though, that there were some goods that were always exempt from these reciprocal tariffs from the start. It was semiconductors was one, pharmaceuticals, copper and lumber were the other big ones, as well as some energy, some critical minerals and, and phones and computers, you'll notice, were not on that list. If they had always meant to be exempted, they are subject to additional investigations. They would have gotten exemptions from the beginning. To me and from folks I've talked to, that seems to be a reflection of consumer impact and of market impact of these tariffs, that they looked at this and said we need to carve out maybe a few things that we really can't get from anywhere other than China.
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B
Megan, great stuff as always. Thanks so much for that. Well, the chaos surrounding tariffs hitting both bonds and the dollar over the course of the last few weeks, Yields surged nearly 50 basis points while the dollar fell broadly, moves that Larry Summers likened to those usually seen in a Third World country. That also had Janet Yellen concerned. Here's what she had to say on Squawk Box this morning.
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I don't think we are seeing dysfunction.
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In the sense of liquidity completely drying.
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Up in the markets, but a pattern suggestive of a loss of confidence in U.S. economic policy and the safety of bedrock financial assets is really very worrisome.
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B
Well, she's not the only one who's concerned. Hedge fund titan Ray Dalio saying that the bond market turmoil could be a more severe shock to the monetary system than the great financial crisis. Joining us to discuss all of this, Barry Knapp, director of research at Ironsides Macroeconomics, Stephen Davis, senior fellow at the Hoover Institution, and Steve Liesman is still with us as well, I'm delighted to say. A very good afternoon to all of you. Steven, I wanted to come to you first because all of this has created a lot of uncertainty. We think a lot of that uncertainty has been revealed by the markets and they've now bounced. But you've got a chart for us that kind of shows the scale of the uncertainty in financial markets compared to past crises, some of which we just mentioned there.
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That's right.
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H
If you want to put it in perspective, current levels of US Economic policy uncertainty are running around the peak levels that we saw in the pandemic. If you focus on trade policy specifically, it's completely off the charts unlike anything we've ever seen in the United States. So I think it's pretty clear that's what's driving the anxiety and the chaos, the term you used in the market. I'm very much on the same page as Janet Yellen and Larry Summers. The thing I would add is that economic uncertainty normally triggers a flight to safety effect that pushes the US Dollar up and the treasury yields down. Instead. We've been seeing the opposite recently and I do think that reflects a loss of confidence in the capacity of the United States for sensible policymaking, hence the reference to kind of third world policymaking. That is very worrisome if it continues. In my mind, it is actually more worrisome than the direct effects of the tariff itself that you referred to in your remarks about Governor Waller. So yeah, this is a very serious issue. And the problem is is that tariffs and economic policymaking are subject to the reckless decision making and the whims of one man.
- [13:11]
B
Barry, in terms of what we might see from here, clearly policy has changed in the last 10 days or so from the White House pivoted based on whatever it might be that changes minds. The bond market, clearly one of those factors. What about the Federal Reserve? Do you think they are going to react or they are willing to react if things get worse again from here?
- [13:34]
C
Yeah, absolutely. I think Chris Waller is a pretty good benchmark for, for all of this. I do think the Fed will be easing policy fairly aggressively. I mean, we could look at last week's inflation data and the cyclical components, which is really what led to a softer than expected CPI or pie. This really, the markets have been telling us for months that this is more likely to be a negative growth shock than it is an inflation shock. I think the really important point here, wealth though is as we think forward and what really occurred last week is, and this is something I've been cautioning about for the better part of two years, but in particular recently, is that the trade policy could derail the most important policy objective for investors, which is to get government spending on a glide path back to its 50 year median, which is 20 and a half percent of GDP. If we don't stabilize the debt, we will, you know, all, all of this other stuff will just be, you know, irrelevant. We could have a broader crisis. And that's, I think, a lot of what last week was about. And so there was a bunch of things that happened last week that kind of, you know, slipped underneath the radar. So to Speak first is a technical measure blowing out of swap spreads, which is all about concerns about supply in the treasury market. We had the treasury and CBO report that we're running. We've run a $1.3 trillion deficit for the first six months. And the House signed off on the Senate budget resolution that doesn't require any spending cuts. Now they assert that they're going to do it, but the administration seems determined to try and partially tax their way out of our big deficit problem. And that never works because it'll slow growth and the budget deficit if he does indeed drive us into recession. With this confidence shock that Professor Davis is talking about. The budget deficit blows out from 7% to 10% as sort of a standard expectation of what would happen here. So for me, that's the real issue is is this trade agenda derailing the more important, you know, getting our fiscal house in order. I called my note this week was titled Made in America and I'm not talking about products. I'm talking about 36 trillion of debt. We have to stabilize that or none of this will work.
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B
Steve, do you get the feeling that if inflation is sticky, then the Fed will, will sit on its hands or are they much closer, were they much closer last week to doing some kind of emergency measures if necessary? That's the Steve Liesman. Sorry, guys.
- [16:18]
E
Yeah, just real quickly, to Barry's point, I don't think you can stabilize the debt if you're going to create a recession. And I think you would agree with that. It seems like something that would end up dramatically reducing economic growth, would also dramatically reduce receipts to the federal treasury as well as requiring significant outlays in terms of unemployment benefits and other, other issues. But I don't think that Waller is speaking for the majority here, to put it in Supreme Court terms. He's saying that he's going to look through, he expects to look through the tariff inflation, be it large tariffs or small tariffs, and can cut rates as a result. That's not what I hear precisely Powell saying. I think he's saying he's going to wait and wait to see what happens over time before he does anything and that he may end up waiting a while before he does anything because of the concern that first order tariff inflation becomes second order tariff becomes second order inflation and spreads more broadly in the economy. I think it's going to take the Fed some time to figure this out and that what they would prefer to do, Wilf, is to address any tariff issues, such as they are, through liquidity means when it comes to market functioning before they get around to addressing the economic concerns.
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B
Stephen, I wanted to come to you about the other thing, of course, on the Fed's mind, which will be employment and what your take is on the likelihood, the possibility, not that we see it tick up or alter around the edges, but that we see quite a drastic pickup in unemployment.
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H
It's possible. It typically takes a few months before big layoffs kick in following some major negative shocks. A lot still depends on how the tariff policy evolves going forward, whether we settle at high or low rates, whether we resolve the ongoing uncertainties about what tariff policy will do. I'm afraid that we're going to be stuck for at least the rest of President Trump's term with constant fears that tariffs will be levied for fentanyl for this, that or the other thing, on and on, and that there'll be a constant drag on the economy from that, from that source. So I don't know how things play out in terms of the Fed's response. I hear what Governor Waller is saying, but I also think that several members of the FOMC are less inclined to look through the inflationary effects of a tariff hike because of the experience we went through in 2021 and 2022, where they missed the boat to some extent, and because many people think that the psychology around inflation expectations is different now than it was before we went through the inflation surge experience in 2021 and 22 that is now fresh in many people's minds in a way that it wasn't for the preceding two or three decades.
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B
Barry, last word to you. I want to ask about the bond market volatility and just the yield levels that we've seen. Do you think the worst is behind us for the bond market, or are we going to have another little mini scare or big scare?
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C
I think we've got a little reprieve this week with Congress on recess. But when they come back, if it is clear that they believe that they can tax their way out of this, the tariff receipts will be sufficient and they don't cut spending. This is the fourth major warning sign we've had since 2021. The first came in 1Q21, when we got that one unexpected $1.9 trillion stimulus package. The second came in 3Q23, when Treasury Secretary Yellen announced she was going to try and sell 500 billion more of notes and bonds than the market thought. We got another one in the fourth quarter this year after the election. And then the shock last Week. The bond market is in a very precarious spot and if they are unwilling to cut spending, there is no reason why tens won't go straight through 5%. And we will have another leg to this bond market telling us we've reached our fiscal limit or are approaching it at least. And so yeah, no, I would not, I would not declare the bond market, you know, an all clear by any means.
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B
Barry, Steven, Steve, a pleasure to see you all. Very good afternoon to you. Speak again soon. Well, bank earnings are rolling on Goldman Sachs beating on the top and the bottom line. And what's been a strong season for the group so far. Leslie Picker is at the stock exchange for us with the breakdown on what was a real standout equity performance for Goldman.
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D
Yeah, it certainly was. Well, don't you miss this?
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B
I do. I'm a little bit jealous.
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D
Maybe we came back at the right time. I'm glad we could talk about it. Goldman shares currently up about 2% and as you mentioned that the equities unit really pulling its weight in the quarter reporting a record of more than $4 billion thanks to trading in that asset class which saw outsized volatility in the first three months of the the year. But the price swings and economic uncertainty stemming from that ongoing trade war have caused clients to take a pause. According to Goldman's chairman and CEO David.
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Solomon, the prospect of a recession has.
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Increased with growing indications that economic activity is slowing down around the world.
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Our clients, including corporate CEOs and institutional investors, are concerned by the significant near.
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Term and longer term uncertainty that has.
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Constrained their ability to make important decisions.
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This uncertainty around the path forward and.
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Fears over the potentially escalating effects of.
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A trade war have created material risks.
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For the US global economy.
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D
Investment banking fees were 8% lower in the quarter, led to the downside by declines in M and A activity. Wilf, it's kind of the same refrain that we have heard among the five banks that are four big banks that have reported so far this idea that equities trading really holding up its end of the bargain during the quarter but really offset by some muted activity in dealmaking.
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B
The other thing that jumps out always with these quarterly earnings is we get a snapshot from people like David Solomon, from people like Jamie Dimon and Brian Moynihan and the rest of the team on what they think about what's going on in the world. We've seen provisions tick up a bit, but nothing too meaningful. And the other sort of snapshot I have, if you go back, not even to the pandemic or real scares like that. But just that October 22nd market low, you know, Goldman's at what, 500 today? It was at 300 then, you know, JPM is over 200 bucks. Still, it got down to 1 to 5. It's not suggesting that there's a fear of serious financial market contagion from all that's going on. And I don't think we've heard that that level of fear from the CEOs either.
- [23:05]
D
No, I think you're right. The CEOs have been pretty measured. They have noted, of course, the, you know the headlines and they have called for some kind of quick resolution. We've heard that from Jamie Dimon. We heard similar echoes of that today as well. Just this idea that the quicker we come to some sort of a trade agreement and some clarity for clients, the better it will be for the economy as a whole. There have been some fears about the prospects of a recession that those the likelihood of a recession has been rising, but you don't get the sense especially, you know, you could look at credit default swaps, you can look at all sorts of things that there's real historic financial stress at this point in time. But as we've seen, the market is so volatile, anything can, anything can happen.
- [23:47]
B
So who we got left, Lizzie?
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D
We have bank of America and Citi, which is, you know, you bring up the point about provisions, it'll be interesting to see what they do. We did see the, the reserves tick higher for JP Morgan last week and they specifically cited some of the macro uncertainty as a rationale for doing that. Wells, it was kind of the opposite side of the story there. So I'm curious to see what bank of America and Citi does. But analysts haven't really been increasing their provision costs, although they would be the first to tell you that the environment's changing so quickly that they just really can't publish and keep up.
- [24:21]
B
Morgan Stanley always used to be lost, but I guess Ted was going sooner.
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D
And James, I don't know if spring break had something to do with that, but I thought the same thing this quarter.
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B
It was just a one with. It's not a long term transition.
- [24:33]
D
No, no, no, you really haven't missed that much.
- [24:35]
B
Okay, there we go. Leslie, great stuff. Thanks so much. We'll see you tomorrow for a bit of bank of America and Citi action as well. Just a quick check on the markets before we go to break. We're off those highs as mentioned throughout, but gaining again a little bit up. More like 0.6, 0.7% again for the S&P 500. So to come. Apple getting a major tariff exemption over the weekend. The fallout for Silicon Valley and the rest of the tech landscape Next with Dan Ives plus oil under pressure as OPEC slashes its demand forecast just days after a surprise production increase. RBC's Elima Croft will join us with what she's watching. The exchange back office. Being diagnosed with a blood cancer like leukemia, lymphoma or myeloma makes people want more time to do the things they love. That means more time to be movie buffs, jazz collectors, teammates and grandparents. We are Blood Cancer United. Since our founding in 1949, we've been the world's leading organization focused solely on blood cancer research, support and advocacy. We do the most for more people with blood cancer so people with blood cancer can do more of whatever they want. Blood Cancer United. Join us and donate today@bloodcancerunited.org are you.
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- [26:31]
B
Welcome back. Well, tech investors cheering the weekend's tariff exemptions. Shares of Apple higher today, up more than 17% since Trump announced that 90 day pause last week. Steve Kovac joins us now with what's next next for the tech giant. Well, Steve, that's a, that's a pretty tough question to put to you.
- [26:48]
A
Right, right. What's, what is next indeed. So let me tell you where we're at right now. So, well, if those Liberation Day tariff exemptions that we got on Friday night, that turned out to be a huge relief for Apple, we're seeing that reflected in the shares. And keybake analysts really put it well this morning, calling it the best case scenario we can think of, it's hard to disagree with that one. But those so called fentanyl tariffs on China, the 20% tariffs, those are still in effect Meantime, other analysts are looking at a potential slowdown in the macro economy as a headwind for Apple. But look, this gives Apple all of the options it had before to mitigate the tariff impact. That means things like diverting production to India, India and Vietnam. With those 10% tariffs now gone, they can also raise prices more modestly than it would have to protect their margins. That. But as far as things like building iPhones here in the United States, Wolf, that's really out of the conversation now. The White House gave up its leverage with this exemption on that front. And meantime, estimates are all over the place of what an iPhone would cost in the scenario of building in the United States. So we can't even really think about that. Bank of America was saying last week it cost about 90% more for a made in the USA iPhone. For now at least, though, President Trump said no one is going to be off the hook. That may include Apple, though. He gave some comments in the White House earlier today, giving some more wiggle room there. But the market is looking at this right now as an exemption that signaled Trump may not follow through with all of his tariff threats there.
- [28:16]
B
Well, Steve, great stuff as always. Thanks so much for that. Well, my next guest both say investors should ignore the short term noise and focus on the long term opportunity. Joining us from Boca Capital Partners is Kim Forrest. And here with me on set is Dan Ives of Wedbush. Great to have you both with me. Good to see you. Dan, I'm going to start with you, which is even if we get the best case scenario from here, if we get every single tariff removed and even some free trade deals that improve terms from where they were before, is Apple today worth less than it was three months ago because of the uncertainty that's arisen?
- [28:47]
I
Yeah, I mean, you've already, I believe even in a best case numbers come down 5%, maybe even 7% in a best case because of the uncertainty, because of the supply chain, you know, they're not going to obviously give guidance along with the rest of tech. And look, I think the biggest thing here is supply chain. You can't just flip it on, flip it off. And I think the reality here is we took a step back from the cliff this weekend. That's our view in terms of its best case relative to a bad situation. But for Apple, hearts and lungs of their supply chain are in Asia and they can move some to India. But the reality for them is that they are sort of on a, you know, we'll call it, they're in a boat middle of the ocean flipped over, no life raft. And the reality is to get back to shore it's going to take time. White House gave them time like Steve talked about but they will ultimately clock will strike midnight. At some point they're going to have to figure this out.
- [29:41]
B
Kim, you hold Apple. I think I'm right in saying, I mean how have you reacted over the last couple of weeks? Because it's an impossible thing to trade around.
- [29:50]
J
Sure.
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A
Well I don't think you want to trade like you would drive a car if you're crazy, you know, with the 100% on the gas, then 100% on the brakes. But I do think having exposure to Apple is important. It really is the communication device for the developed world pretty much. And so it's not likely to get knocked out of position, you know, unless there's, you know, the thousand dollar phone becomes a $5,000 phone. And by the way people pay for these overtime. Nobody's really, few people are really shelling out 1,000 bucks. You're paying it overtime through your carrier. So that's something to you know, comprehend there. But I think this is a wake up call for all tech companies and all companies in general not to get over committed to one geography. I thought we learned this in Covid, right? Like don't have one supplier but here we are.
- [30:47]
B
So Dan, on the flip side, I mean what about demand for Apple and other products is not just the sort of supply chain and the cost impact but are we going to see either because we have a recession or because consumers confidence falls, lack of demand or even more complexly, are we going to see something like the Tesla Musk effect on companies like Apple. If countries around the world want to buy, you know, buy British, I say well we're still going to have to buy Apple or Samsung phones because we don't make any. But there might be a global effect on demand, particularly in China and we.
- [31:18]
I
Talked about, I mean in China the biggest worry here is is that you get more and more domestic buy domestic Huawei over Apple, a BYD over Tesla and Network. That's when you deal with these third rail issues. These are some of the ripple effects that could happen. But when it comes to demand, look, we've already set in motion a snowball that's going downhill and that's the economy and it's hard. You can't just stop that. I think our whole focus over the last week and I think the weekend White House took some step back from the cliff, you know, however you want to call it in Terms of the exemptions gives them time. But you're still playing with fire here because of the demand issue. But ultimately when it comes to supply chain, the reality is like that's not going to change for years. I mean, it would take Apple in our opinion, cost 30 billion, 10% of the supply chain. Now take three years just to move that.
- [32:09]
B
Kim, is there a big argument to buy domestic stocks right now?
- [32:15]
A
Well, I think I'm a US Bull for the long term for many reasons unless things materially change in Europe and the EU somehow gets less regulatory intensive and by the way, you know, the demographics change, Europe doesn't look like a great place. And I think most American companies have a good amount of business, not just from America, but all around the world, even smaller companies, especially if they're a niche provider. So that's why we are still bulls on America and for the long haul.
- [32:53]
B
Dan, just sum things up with us. What have you done over the last two weeks to your price target for Apple? How close did you get to pulling it all? Where does it stand today?
- [33:01]
I
Yeah, I mean we've cut the target, we've cut estimates. I mean, in my opinion, sort of 250 is what I view as sort of, you know, base case here was 325. But the reality is the reason we haven't downgraded any stock, just lower target, where it's Tesla or Apple, it's cutting numbers. I think Street's going to have to cut more. You're not going to see guidance going to June or September. But then over the long term, it's the COVID playbook. It's you throughout March, June 2020, just like, you know, throughout the next few quarters. But Apple's a name you still want to own long term in terms of franchise value. But look, we're in the twilight zone. And where we are today, it's better than it was Friday. And that's just how we're going to have to play and handhold investors through it.
- [33:41]
B
Great stuff. Well, Kim, Dan, pleasure to see you both as always. Thanks for joining us here on the Exchange. Still to come, Megacap Tech is seeing more volatility, but the startup scene in Silicon Valley is looking surprisingly resilient. The details coming up in today's tech check and as we had to break as a check on markets for you, as you can see, up to the tune of 0.6% or so, about 230 points on the Dow Nasdaq, a little bit less than that, 0.3%. We are off the day's highs, but we're also off the day's lows. We briefly went red on all three of the major averages a few hours ago. 10 year 4.4 we'll be right back. Big game today and no way to watch it. Sling lets you do that with day pass get instant access to live college football starting at just 4.99. One day pass gives you 24 hours of non stop action on ESPN and ESPN too. Want SEC or ACC network too? Just add sports extra for a buck. No contracts, no hassle, just pure unfair filtered game day. Sling lets you do that. Visit sling.com to learn more. Sometimes an identity threat is a ring of professional hackers, and sometimes it's an overworked accountant who forgot to encrypt their connection while sending bank details.
- [34:59]
E
I need a coffee and you need.
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B
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- [35:23]
D
Welcome back to the Exchange. I'm Julia Boorstin with your CNBC News update. In an appearance at the White House with President Trump moments ago, El Salvador's president says he could not return a Maryland man who was mistakenly sent to a notorious prison in his country. That was right after Attorney General Pam Bondi said it was up to El Salvador to return the man. The Supreme Court ruled last week the administration must facilitate his return to the US In South Korea, the country's ousted president Yoon appeared in court today for the start of a criminal trial over charges that he led an insurrection. Prosecutors argued Yoon had no legal standing to declare martial law, which has thrown the country country into political turmoil. Yoon has denied the charges and said the imposition of martial law was necessary. And a jury has been selected to hear the retrial of Sarah Palin's libel suit against the New York Times over an editorial eight years ago. Palin says the 2017 op ed falsely linked her campaign rhetoric to a mass shooting and damaged her reputation and career. The trial comes after an appeals court restored the case last year. The exchange is back right after this.
- [36:39]
B
Welcome back. Tech stocks off their session highs amid continued tariff uncertainty. But while financial markets are wonder if the age of American exceptionalism is over, the tech sector reminds us we may find it in the startup ecosystem. Deirdre Bosa is looking at that for today's tech Jack Hey Dan.
- [36:56]
F
Hey well, great to see you. So a strong case for American exceptionalism. That's right. It may now lie in the startup ecosystem. It has been incredibly resilient, representing a pipeline of innovation that mega caps are increasingly backing and enabling even as they're hit by tariff uncertainty. Now, just in the last few days, ex open air CTO Miramoradi, she's reportedly raising a $2 billion seed round. You heard that right. Seed round at a valuation of 10 billion. EX open Air co founder Ilya Sutskever, he just saw his one year old AI startup valued at more than $32 billion. That's more than double the size of Snap, a few bill behind Robinhood. Now, neither startup has a product yet, but what they do do is signal that in this wave, talent and ambition, they are being priced like proven scale. OpenAI meanwhile, is proof that startups can scale extremely quickly, quickly in this environment, in the age of AI. At a TED event over the weekend, Sam Altman, he let slip that 1 in 10 people globally now use its systems. That would be a huge increase in users. And keep in mind that while these are private startups available only to an exclusive class of investors, public investors, they're not exactly locked out. Big tech is taking equity stakes, they're supplying chips, they're helping to distribute these products. Microsoft with OpenAI, Google and Nvidia with Sets, covers SSI. The list goes on. What this does is it ensures that the biggest breakthroughs, platforms, even profits run through American mega caps and wealth as we've seen reiterated over the last week from the likes of Andy Jassy at Amazon Center Pichai, Google. I spend even in this uncertain environment is being seen as a need to have, not a nice to have. So you could expect them to scale back in other areas first. But air spending for now seems safe and maybe these stakes as well in the startups which creates a cycle, right? We get more site, more startups, more innovation. Mega caps are backing them as maybe a hedge.
- [38:53]
B
Great stuff as always. Thanks so much. Albeit as we said at the top, the tech sector is a little bit off its highs today. NASDAQ is only up by 0.4%. Still to come, auto stocks popping today after President Trump said he was looking at something to help some of the car companies saying they need a little bit of time to move production to the states. GM shares up about 4% while Ford is up 3%. The exchange will be back. Welcome back to the Exchange. Will oil lower again today, extending a two week losing streak? We've got WTI wallets just, just above 60 bucks, 61 as we speak. OPEC cutting its demand outlook today, citing a global slowdown triggered by US Tariffs. My next guest says that while President Trump is likely happy about the recent price action, US Producers are worried. Halima Croft is here, the global head of commodity strategy at RBC Capital Markets. Halima, great to see you. Is the reason we've seen oil sell off just simply recession fears?
- [39:50]
J
I mean, it's a combination, Wilfred Recession fears. But also you had OPEC make the surprise announcement that they would be bringing forward a production increase in May, tripling the amount of oil that was expected to be on the market from the producer group. So you have a combination of real demand concerns, while at the same time concerns that OPEC might be revising that 2020, 2014 playbook in order to punish certain producers who are not living up to their expectations on production. So I think it's a double whammy for the oil market right now.
- [40:26]
B
Are there going to be more exports, though, of US Energy in the years and decades ahead, particularly as these new trade, trade negotiations take place? Is that something is on the table, do you think?
- [40:36]
J
Well, certainly for President Trump, US LNG exports is a bargaining chip in his negotiations with certain countries that are big LNG importers. And so we're seeing it part of the conversation with Japan, Korea. But what I think is going to be very interesting is how does it shake out with Europe? I mean, European officials, before this real tariff dispute really kicked off, we're talking about importing more US LNG as a potential way to placate the White House. But now, now the question is, do these European companies, do these European governments, are they so keen to take more US lng, or are they thinking about potentially going back to some Russian gas?
- [41:17]
B
I was going to ask exactly that. I mean, we're talking about trade deals for the last couple of weeks. But if there was a peace deal between Russia and Ukraine such that exports are allowed again, what would that do for your price forecast? Presumably, the European averages for oil prices would. Would collapse.
- [41:35]
J
Well, this is a really interesting question. Would Europe start taking Russian energy? And I think we have to separate, Wilfred, gas from oil. The European Union really went forward with pretty significant sanctions on seaborne oil imports. And the question is, what would be the mechanism for vacating that? Would you have certain countries really try to block the lifting of that? Would it be easy to do? GAX was really a decision made by individual member states. And I think that's why you're starting to see conversations starting now, you know, with French companies, German companies, particularly German petrochemical companies, saying we need the cheapest source of energy possible and that is Russian pipeline gas. And so I do think you want to be watching very carefully how gas gets impacted by these trade disputes. Again, are certain European companies thinking that there might be greater security with cheaper Russian pipeline gas than US Gas given the trade disputes?
- [42:35]
B
Just very quickly, Halima, finally, I mean, will this see a narrowing between Henry Hub and European gas prices because based on just domestic prices, there's an opportunity to buy cheap from the US as well. I guess maybe they'd charge a premium if it was exported to Europe.
- [42:49]
J
I mean, again, we really just have to see how this whole thing shakes out well for it. Again, I think LNG is the interesting bargaining chip and we're ending up in a place that I don't think we initially thought we'd be. Again, the thought that we could have Russian gas going into Europe is not really where we thought we'd be at the start of the year.
- [43:08]
B
No. Great stuff as always. Lovely to see you. Halima Croft from RBC the Exchange. Take a quick break. We're going to talk about the US Dollar this welcome back. With the US Dollar heading towards a three year low today as tariff uncertainty continues, my next guest says it's time for investors to turn their attention overseas because let's bring in CNBC contributor Tim Seymour. He's CIO of Seymour Asset Management. Tim, great to see you as always. Hey, Wealth.
- [43:36]
G
Yeah, great to see you.
- [43:37]
B
Been too long.
- [43:38]
G
Been a minute.
- [43:38]
B
It's been a minute. Exactly. So the US Dollar I guess has done quite a lot during those few minutes, but it's done a lot of late. You're bearish on the dollar even from here, even after it's pulled back.
- [43:49]
G
Well, whether this is our Liz Truss moment, Wolf, or whether this is, you know, the Trump administration organizing their own Plaza Accord. For those looking at history books, that's 85 when the US essentially re engineered a new valuation against the dollar with the foreign trading partners. But I think traders look at ranges here on the Dixie and also look at where dollar euro can go. I think, I think euro can probably go to dollar to 120. Excuse me. And it's just fascinating because if you look at what dollar Euro cross was mostly trading on in the last two to three years, maybe five years, it was central bank differentials. Now it's, it's, it's obviously regime change. And so I think technically we've had a big move. It's almost a 10% move from, from late January to the intraday lows on Friday and you know, zigzagging a bit today. But, but obviously the assessing of whether the US is not only looking to change, restructuring the economy in a way that the rest of the world is not comfortable with. But obviously, you know, this comes after years of that US exceptionalism that I think probably was long in the tooth. We could have been talking here a year ago saying that I think at some point we'd run long in that trade.
- [45:04]
B
I was reading your notes, Tim, and I like it. Make international great again. As a Brit, I support this call, but really is the innovation going to be there? Is it just an attractive thing to do if the dollar's weakening or a temporary trade or you think it's a long term moment to buy international stocks?
- [45:21]
G
Well, I like the call too and I've been investing globally most of my career. I ran long, short money. I've been running global for a while. I run an international etf ETF I devo today. And, and so the relative capital flows are a powerful dynamic here. But, but then you just get into dynamics with the currency. As you're probably aware, investing internationally, the currency is anywhere from 20 to 50% of your return profile. And if you think the dollar is going to continue to weaken, that's a strong argument. But, but valuations internationally are attractive and that wasn't always enough to do it in the past. But this has been one of the triggers. And if you look at European banks, we're long, we're long Barclays, we're long Santander. These are world class global banks, balance sheets that are fantastic, just as good as the US Money center banks. Higher free cash flow yields and paying higher dividends. So at a time when the GDP differentials between the US and Europe are such that we really haven't been here in a while and I think that's very attractive.
- [46:16]
B
Tim, great stuff. Lovely to see you as always. Tim Seymour there. By the way, Tim will be the Fast Money Live event coming up on June 5th at the NASDAQ where you can talk to him, to Melissa Lee and the other fast Money traders about all of this wild market action. Make sure you have got your tickets for that event coming up as just mentioned, on June 5th. Well, as we leave you here, quick look at the markets which are higher again. The NASDAQ up 0.6% S&P up 0.8% Dow up 0.7%. That does it for the exchange power lunch on the other Side this your break. Welcome back. With the US Dollar heading towards a three year low today as tariff uncertainty continues, my next guest says it's time for investors to turn their attention overseas. Because of that, let's bring in CNBC contributor Tim Seymour. He's CIO of Seymour Asset Management. Tim, great to see you as always, Wolf.
- [47:07]
G
Yeah, great to see you.
- [47:08]
B
Been too long.
- [47:09]
G
Been a minute.
- [47:10]
B
It's been a minute. Exactly. So the US Dollar I guess has done quite a lot during those few minutes, but it's done a lot of late. You're bearish on the dollar even from here, even after it's pulled back.
- [47:21]
G
Well, whether this is our Liz Truss moment, Wolf, or whether this is, you know, the Trump administration organizing their own Plaza Accord, for those looking at history books, that's 85 when the US essentially re engineered a new valuation against the dollar with the foreign trading partners. But I think traders look at ranges here on the Dixie and also look at where a dollar euro can go. I think, I think euro can probably go to dollar to 120. Excuse me. And it's just fascinating because if you look at what dollar euro cross was mostly trading on in the last two to three years, maybe five years, it was central bank differentials. Now it's, it's, it's obviously regime change. And so I think technically we've had a big move, it's almost a 10% move from, from late January to the intraday lows on Friday and you know, zigzagging a bit today. But, but obviously the assessing of whether the US Is not only looking to change, restructuring the economy in a way that the rest of the world is not comfortable with. But obviously this comes after years of that US Exceptionalism that I think probably was long in the tooth. We could have been talking here a year ago saying that I think at some point we'd run long in that trade.
- [48:35]
B
I was reading your notes, Tim, and I like it make international great again. As a Brit, I support this call. But, but really is the innovation going to be there? Is it just an attractive thing to do if the dollar's weakening or a temporary trade or you think it's a long term moment to buy international stocks?
- [48:52]
G
Well, I like the call too. And I've been investing globally most of my career. I ran long short em money. I've been running global for a while. I run an international etf, ETF I devo today. And, and so the relative capital flows are a powerful dynamic here. But, but then you just get into dynamics with the currency as you're probably aware investing internationally, the currency is anywhere from 20 to 50% of your return profile. And if you think the dollar is going to continue to weaken, that's a strong argument. But but valuations internationally are attractive and that wasn't always enough to do it in the past. But this has been one of the triggers. And if you look at European banks were long, long, we're long Barclays, we're long Santander. These are world class global banks, balance sheets that are fantastic, just as good as the US Money center banks, higher free cash flow yields and paying higher dividends. So at a time when the GDP differentials between the US And Europe are such that we really haven't been here in a while and I think that's very attractive.
- [49:48]
B
Tim, great stuff. Lovely to see you as always. Tim Seymour there, by the way. Tim will be the Fast Money Live event coming up on June the fifth at the Nasdaq, which is you can talk to him, to Melissa Lee and the other fast Money traders about all of this wild market action. Make sure you have got your tickets for that event coming up as just mentioned, on June the fifth. Well, as we leave you here, quick look at the markets which are higher again. The NASDAQ up 0.6% S&P of 0.8 Dow up 0.7%. That does it for the Exchange Power Lunch on the other side. This your break.
- [50:24]
F
You've been listening to the Exchange.
- [50:26]
D
Make sure you're subscribed to get each.
- [50:28]
F
Episode every day, same time, same place.
- [50:32]
B
Ahead of the NFL season kickoff. Jerry Jones live and in person with Michael Ozanian on the Cowboys rising valuation state of the NFL and the upcoming.
- [50:41]
A
Season Closing Bell overtime 4 Eastern tomorrow.
- [50:44]
G
And streaming on CNBC.