Trump vs. Powell and Valuation vs. Domination 4/21/25

Summary

Podcast Summary: The Exchange — Trump vs. Powell and Valuation vs. Domination

Podcast: The Exchange (CNBC)
Host: Kelly Evans
Air Date: April 21, 2025
Episode Focus: A volatile trading day amid sharp market sell-offs, presidential attacks on the Fed, sector performance, active vs. passive investing, and the outlook for tech, consumer, and financial stocks.

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Episode Overview

On a day marked by a sharp sell-off in equity markets and continued pressure on major tech names, host Kelly Evans and guests delve into the twin market drivers: persistent uncertainty around Federal Reserve leadership (amidst President Trump’s public attacks on Chair Jay Powell), and questions about stock valuation vs. future growth (especially among former market leaders like the “Mag 7”). The conversation covers historical context, implications for investors, notable company updates, and specific sector calls, with a noted emphasis on navigating transitions in macroeconomics, geopolitics, and technology.

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Major Discussion Themes & Segments

1. Market Turmoil and the “Mag 7” Sell-off

• Timestamps: 01:01 – 11:38

• Key Points:

  • The Dow drops nearly 1100 points; Tesla, Nvidia, Apple, and Alphabet are among the hardest hit.
  • The U.S. dollar hits a three-year low, gold sets another record, and bond yields rise.
  • Kelly Evans interviews Chris Davis (Davis Advisors, Berkshire Hathaway Director) about the disparity within the “Mag 7” group, the need for selective investing, and market psychology.

• Notable Quotes:

  • “It’s a crazy thing to even use these terms like Mag 7… investors should focus on resiliency, durability, valuation, and the underlying business model.”
    — Chris Davis [02:41]
  • “Investing is the art of the specific… There are enormous dispersions in business models, valuations, durability, prospects. So selectivity is exactly the word of the day.”
    — Chris Davis [03:39]

• Insights:

  • Davis cautions against the blanket categorization of tech leaders, emphasizes research over indexing, and notes that a combination of economic “transitions”—normalizing interest rates, de-globalization, and the advent of AI—require increased diligence.
  • Stresses that selectivity and active management may outperform broad indexing going forward as market leadership splinters.
  • Davis provides a historical framework, comparing the current moment to the transition periods of the early 2000s and 1970s, warning of complacency in high expectations for tech margins and growth.
  • On cash reserves and T-bills: Davis urges investors to avoid market timing, warning about long-term purchasing power losses from sitting in cash. “Since the year 2000 to today, the purchasing power of a dollar is down in half. So sitting on the sidelines is not a safe place to be.” [10:06]

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2. Trump’s Attacks on Fed Chair Powell and Market Impact

• Timestamps: 11:39 – 25:38

• Key Points:

  • President Trump publicly criticizes Fed Chair Powell, calls for lower rates, accuses Powell of acting politically, and floats Powell’s potential removal—comments that further shake market confidence.
  • Steve Liesman (CNBC) and Larry Lindsey (The Lindsey Group, former Fed governor) join to discuss the legality, precedent, and market risk of removing a Fed Chair.
  • Concerns voiced about risks to Fed independence and the negative message to global markets.
  • Debate on whether the threat is real or media “overhyping,” with Lindsey predicting Powell will remain through his term but acknowledging that “no event is truly zero probability.”

• Notable Quotes:

  • “Somebody needs to turn to the camera and tell the president to stop. He is messing with the foundation of this country…the economy…America’s place in the global financial system.”
    — Steve Liesman [12:40]
  • “I don’t think the President is going to fire Jay Powell. I think Jay will be there if he wants to be, until next May.”
    — Larry Lindsey [15:36]
  • “Market action Monday morning sends a clear signal: risk to Fed independence is negative for all major U.S. asset classes and provides a partial foretaste of what might come if President Trump were to actually try to fire Powell.”
    — Quoting Krishna Guha, via Steve Liesman [17:16]

• Memorable Moments:

  • Lindsey cracks a facetious hypothetical about firing Powell “for cause” [16:07], poking at the legal gray area.
  • A live on-air bet (gentleman’s bet of dinner vs. $100) about Powell’s term is proposed, exemplifying both the tension and uncertainty. [20:04]

• Insights:

  • The segment underlines investor anxiety about politicization of the Fed and possible policy volatility.
  • Legal experts largely agree the President cannot remove Powell for monetary policy reasons; market risk centers on the uncertainty and signals, not immediate action.

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3. Wall Street Analysis: Disney, Spotify, and Market Positioning

• Timestamps: 28:27 – 33:11

• Key Points:

  • Peter Sapino (Wolf Research) discusses his latest upgrades of Disney (on valuation) and Spotify (on “domination” within music streaming).
  • Disney seen as “pricing in” worst-case scenarios; its streaming business and cruise lines provide upside for the post-recession environment.
  • Sapino frames Spotify (and Netflix) as essential consumer “utilities” with defensible, sticky revenues, less vulnerable to cancellation even in downturns.

• Notable Quotes:

  • “Disney is one of the stocks that’s pricing in a very high probability of a recession…We think that downside is already priced in.”
    — Peter Sapino [30:09]
  • “Spotify is the last thing a consumer is going to cut.”
    — Peter Sapino [30:55]

• Sector Insights:

  • Distinguishes between cyclical exposure: theme parks (expected recovery post-cycle) vs. traditional TV advertising (continued secular decline).
  • Notes defensive flow into telecoms and the robust, independent outlook for pure-play streaming names.

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4. Tech Sector and AI Trade: Is Growth Durable?

• Timestamps: 34:39 – 41:10

• Key Points:

  • Deirdre Bosa highlights that “Mag 7” declines coincide with more regulatory threats and hints of slowing data center expansion (possible demand peaks for Amazon, Microsoft).
  • Analyst notes suggest cautiousness even as tech companies outwardly project bullishness on AI and Capex.
  • Roosevelt Bowman (Bernstein Private Wealth) continues the theme, advocating for “broadening out” the AI trade beyond semiconductors to power infrastructure, cooling, and data-centric retailers.
  • Calls for selectivity, looking for businesses with deep data moats and durable models—especially in retail and healthcare, where AI can drive ongoing efficiency.

• Notable Quotes:

  • “It is increasingly getting boxed in. The fundamentals are increasingly at odds with the headlines.”
    — Deirdre Bosa [34:52]
  • “You want to broaden out to power, cooling, skill-boosting stocks.”
    — Roosevelt Bowman [38:10]
  • “I think healthcare is both a dual play—playing into slowing economic growth…and one of those industry buckets of hey, we’ve seen some adoption. Drug discovery certainly has been well reported, but there’s so much that can be done.”
    — Roosevelt Bowman [40:41]

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5. Other Key Segments and Industry Updates

• Automotive & Tariffs:

  • [43:29] Phil LeBeau previews automaker earnings (Tesla, Hyundai) and addresses tariff uncertainties tied to Trump administration policies. Automakers likely to delay major moves pending regulatory clarity.
  • “Investors may not be satisfied because I think what you’re going to hear from executives is, well, we think we’re planning this, but we’re not entirely sure what’s going to happen…” — Phil LeBeau [45:16]

• Municipal Bond Markets:

  • [46:17] Dan Close (Nuveen) discusses underperformance in muni bonds despite solid fundamentals, describing liquidity-driven volatility and opportunities in essential service credits like water/sewer.
  • “We have crossover buyers…because it’s gotten this cheap.” — Dan Close [47:09]

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Notable Quotes (By Segment & Timestamp)

• Chris Davis, on indexing vs. stock picking:
  “Those indexes got very concentrated, very narrow and very richly valued. So I think you’re seeing a move back to active in general…and then within active, this real selectivity.” [03:39]

• Steve Liesman, on Trump’s Fed attacks:
  “He is messing with the foundation of this country…you just cannot and should not normalize it.” [12:40]

• Larry Lindsey, on political pressure and precedent:
  “The thought that a politician, a president, won’t pressure the chairman of the Fed one way or the other, you know, it’s…” [19:22]

• Deirdre Bosa, on big tech AI spending:
  “Every week or so we’re getting some cold water poured on that sort of sentiment that the trade is safe or spending is safe. Maybe it’s not.” [37:33]

• Peter Sapino, on Disney:
  “We think Disney is closer to go time.” [29:02]
  — On Spotify: “Their growth outlook is just so idiosyncratic. They have a 30% share of global music streaming.” [31:02]

• Roosevelt Bowman, on durable AI plays:
  “If you have all that data…you can use machine learning and AI to optimize your sales and distribution process…and you’re not paying anyone for the basis of the model, which is the data.” [39:43]

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Key Takeaways

• Market is entering a new phase: Transitioning from complacency, index-led growth, and high valuations to a more selective, actively-managed, value-driven environment.
• Disaggregation of leaders: Not all “Mag 7” names or sectors are equally durable; invest by fundamentals, not by theme.
• Fed independence at risk: Political noise and the reality of a president threatening the Fed have tangible market consequences, even if actual dismissal is unlikely.
• Post-recession focus: Investors should look beyond the immediate downturn, position in companies with proven recovery track records or disruption-resistant models.
• Sector-specific opportunities: Defensive (telecom, healthcare, utilities) and “essential” (theme parks for recovery, water/sewer in munis) are in focus.
• Technology and AI: Move past the momentum names—find businesses where data and process improvements offer true moats and staying power.

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Timestamps for Key Segments

• Market Overview, “Mag 7” Sell-off, and Active Management: [01:01 – 11:38]
• Trump vs. Powell & Fed Independence Debate: [11:39 – 25:38]
• Disney/Spotify Analyst Upgrades: [28:27 – 33:11]
• Big Tech & AI Outlook: [34:39 – 41:10]
• Automotive Industry/Tariff Impact: [43:29 – 45:52]
• Muni Bonds and Defensive Positioning: [46:17 – 49:01]

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This summary encapsulates the driving themes, investment insights, and high-stakes policy debate that defined the episode, offering both context and actionable perspective for listeners.

Transcript

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[Deirdre Bosa]

Are you ready to get spicy?

[Chris Davis]

These Doritos Golden Sriracha aren't that spicy.

[Kelly Evans]

Sriracha sounds pretty spicy to me.

[Chris Davis]

A little spicy, but also tangy and sweet.

[Kelly Evans]

Maybe it's time to turn up the.

[Larry Lindsey]

Heat or turn it down.

[Kelly Evans]

It's time for something that's not too spicy.

[Chris Davis]

Try Doritos Golden Sriracha, spicy but not too spicy.

[Kelly Evans]

You're listening to the Exchange. Here's today's show. No word on global trade deals, but plenty of tough talk from the president on Fed Chair Jay Powell. Welcome to the Exchange. I'm Kelly Evans. And stocks are continuing to sell off at this hour. The dow down almost 1100 points. Big Tech again seeing some of the biggest declines. Check out today's loss. Losses, I should say Tesla down about 7% now. We're going to hear more from them tomorrow. Nvidia down nearly 6. Apple down more than 3. Alphabet under pressure as well, as is the dollar. Take a look here at some of these interesting moves that we continue to see the dollar falling to its lowest level in more than three years. On another 1% drop today, it was below 98 earlier. Meanwhile, gold hitting a fresh high above 3400 an ounce for the first time could be the 23rd record close this year. And the yield on the 10 year, well, there you see it up 4.39% as it continues to edge higher. Bitcoin for its part, also higher, up 3 or 4% to around $87,000. Before we get to some of the bigger implications of these trades today, let's zero in on back where Tesla, Nvidia, Metta, Amazon, Alphabet are all down more than 30% from their recent highs. My next guest counts two of these names among his biggest holdings. Joining us now is value investor Chris Davis, chairman and portfolio manager of Davis Advisors and a director of Berkshire Hathaway. Chris, it's great to see you on a day like this. Welcome.

[Chris Davis]

Oh, Kelly, it's great to be here. Thank you.

[Kelly Evans]

So I look at these declines, you know, 35% or whatnot for some of the the mag seven and I hate to ask this as a question Right off the bat. But are these moments for investors to be looking at individual stocks at the broader market and thinking, okay, we're, we've corrected enough that this is an entry point?

[Chris Davis]

Well, it's, it's a crazy thing to even use these terms like mag7. Right. In other words, people lump businesses together even if the underlying businesses have totally different fundamentals and different prospects. And you can think back to the nifty 50 going back to the early 70s, that was viewed as sort of a category of stocks, the growth darlings of their era. And yet have you looked at the next 10 years? The performance diverges dramatically. So I certainly think that it is a time to really focus on questions like resiliency, durability, valuation and the underlying business model. And when you look at the Mag 7, there are enormous dispersions in business models, valuations, durability, prospects. So selectivity is exactly the word of the day.

[Peter Sapino]

Yeah.

[Kelly Evans]

And you've got Metta, you've got Amazon. I don't see in video, Tesla, I don't see Apple as name. So like that, that's where you come down, is that right?

[Chris Davis]

Exactly, exactly. Each, you know, investing is the art of the specific. And we're trying to look through at individual businesses and we've been in a market that's been based on indexes, themes, people swinging in and out based on momentum. I think we're in a big return to really selectivity. And I think that's why we may actually see a sort of a boom in active management again. It' sort of the whipping horse for, for so long relative to passive indexes. But those indexes got very concentrated, very narrow and very richly valued. So I think you're seeing a move back to active in general and then within active, this real selectivity to be able to look at the Mag 7 and try to pick the three that are the best position to look at 500 companies in an index and pick maybe the 5% or 10% that have the resiliency and durability to get through these tumultuous times.

[Kelly Evans]

Unless anyone think because of our recent conversations, that you're a tech specialist. Far from it. You know, these names have kind of fallen into your lap as you're looking across the markets for value and growth. You've got some financials, then here you've got Capital One and US bank, you've got some health care names, Humana and cvs. Let me just take a step back, Chris, and ask, I mean, what do you think is going on with the market? Here and does it. Do you need to have kind of a grand theory of everything or are you kind of just keeping your head down and looking for stock by stock opportunities?

[Chris Davis]

Well, I think the grand theory you have to have is that we came into this year with three massive transitions happening at the same time. So you had a transition from a decade or almost 15 years of free money, zero interest rates. Magical thinking, modern monetary theory, you know, deficits don't matter, money is free, valuations, endless liquidity. So you have a trend transition from that to a normal interest rate environment. You have a transition in 30 or 40 years of globalization into globalization, rising nationalism, geopolitical force. And then you have this massive transition happening because of the advent of this incredible technology in AI. So you have three big areas of transition. And then on the other side you had transition married to complacency. You had the market at very high valuations, very high concentrations. You had growth. I would look at these growth assumptions that went into these sell side models on some of the tech darlings that were assuming 20% earnings growth for a decade, 50% EBIT margins for a decade. Do you want a number, Kelly? That's amazing. How many companies are able to maintain a 50% EBIT margin for a decade? 1, 10 of 1%.

[Kelly Evans]

Wow.

[Chris Davis]

About 20% revenue growth for a decade. Well, about 5 to 7%. So you know, people were just had this enormous complacency coupled with transition that all these economic transitions, that's a dangerous combination. And I think it set us up for the environment we're in where I can't predict what the market's going to do. But I can tell you selectivity, the opportunity to buy durable, resilient businesses at 13, 14 times earnings and ride through this. This is a wonderful environment for a stock picker and I think a great environment for this transition from this momentum index model to active management. I think that's why you're seeing the growth in some of these actively managed ETFs and things like that. You're beginning to see people getting in front of that move away from the index.

[Kelly Evans]

It's just hard to know who to which horse to bet on. You know, we all. Active managing is probably as hard to outperform in the long run, you know, as some of those earlier stats you mentioned. Let me just ask you about this. So with the shock in business confidence we've seen, by some estimates it's the worst since, you know, 15 years, 20 years. I mean the collapses in the isms, the outlooks that sort of thing. So. And we've had earnings estimates which already started to stall out, especially for big tech, all the way back in June. Have we reached the worst of this now where you think things can trough and look better? Maybe we have to get through the next earnings season, you know, before that. How much more bad news do you think there is before we start to turn a corner here?

[Chris Davis]

Well, the market drops 20% on average every three and a half years. So we're certainly in what I would call normal correction territory now. You get a 50% correction less frequently, but also it's a fairly regular part of the landscape. So what I would say is the key model for people to have in mind is is this the transition from the late 90s, the roaring 90s, into the early 2000s, or is it the transition from the roaring 60s and early 70s into stagflation? So those are the two model. Both models begin with a incredibly concentrated market of a favored few huge tech drivers. And in the case of, of the late 90s, of course, look what happened, you know, if you got out of the market in 99, you know, there were a lot of investors. I think we were up 8 or 900 basis points, 1800 relative. But in the year 2000, so that was now you had what you had the attack on the trade centers. It wasn't just overvaluation. There was a big change in the world order, but that was relatively concentrated, short lived 40, 50% correction, but still activity. You made money all the way through. If you selective that late 7, the late 60s was very different. 72, you had the blow off into the nifty 50 and then you had stagflation. So I think we're teetering between those two scenarios and a lot is going to depend ultimately on what happens in Washington in the next two to three years. So I would say keep your seatbelts buckled up, focus on the kind of businesses you own that had the durability in their earnings base and their business models to ride through these storms.

[Kelly Evans]

A great framework and I think it was in the late 90s, wasn't it, that Berkshire was buying Dairy Queen? You know what else was raising?

[Chris Davis]

Exactly. Berkshire was at an unbelievable low relative to the hot growth index and there was this massive reversal.

[Kelly Evans]

Quick last question, Chris, before you go. So much has been made of the giant T bill pile that Berkshire is sitting. I know you're on the board and is it a question of strategic opportunity or just the fact that the company, as you read Warren's letter, is literally so large they almost can't find anything to buy at this point. So what should investors do? Because now everyone says T bills look like, you know, the, the obvious, the best, the only trader on the planet. And Warren's doing it.

[Chris Davis]

Well, I certainly can never, ever speak for, for Berkshire. I'd say Berkshire is built to last. And that's always been the sort of mindset there. I'd say for the average investor. What you have to be thinking about is you should never be in the market with money you need to spend in the next couple of years. And so that idea of having a reserve makes it. But, you know, in my lifetime, Kelly, I mean, forget my lifetime. Since the year 2000 to today, the purchasing power of a dollar is down in half. So sitting on the sidelines is not a safe place to be. It's almost a certain loss. So you've lost half if you were just sat in the sidelines for since the year 2000. Today you've lost half your purchasing power. So you've got to think time horizon. You've got it. But, but don't try to time the market. Don't try to, you know, get a quick correction. So you spend money you need to spend in the next two years. Keep that conservative reserve. You've got to be certain that you don't get shaken out. And that's, that's sort of the key to riding through market volatility.

[Kelly Evans]

I'm looking up the t bill yield three month is 4.3%. You know, it's not, it's not zero. I take your point about the dollar, especially now. You cannot just sit in cash, but maybe you can sit in T bills.

[Chris Davis]

Well, it's interesting to think of what your purchasing power is going to be like right now versus a year from now and 4.3%. I think it's perfectly probable your purchasing power will be down more than 4.3% in the you.

[Kelly Evans]

That's what I'm thinking as well. I think that's what gold and bitcoin and a lot of these things are telling us. Chris, really appreciate it. Thanks for the time today, Kelly.

[Chris Davis]

I'm always glad to see you. Thank you so much.

[Kelly Evans]

Thank you. Chris Davis with Davis Advisors. The President meantime ramping up his attacks on the Fed chair today. Posting on Truth Social preemptive cuts in rates are being called for by many. With energy costs down, food prices including Biden's egg disaster substantially lower and most other things trending down. The President says there's virtually no inflation with these costs trending. So nicely downward, just what I predicted they would do. There can be almost no inflation, but there can be a slowing of the economy. Unless. Mr. Too late. A major loser, he says, lowers interest rates. Now Europe has already lowered seven times. Powell has always been too late, except when it came to the election period, when he lowered an order to help sleepy Joe Biden. The president says later Kamala get elected. How did that work out? Steve Liesman asked Chicago Fed President Austan Goolsbee about this earlier on. He's here with us along with Larry Lindsey, CEO of the Lindsey Group and former director of the National Economic Council and former Federal Reserve governor. Welcome to both of you. Steve, the president doubling down on this line of attack today, and it did contribute to the markets taking a leg lower tribute.

[Steve Liesman]

It's all it is. I mean, look, this is what you get. I mean, somebody needs to turn to the camera and tell the president to stop. I mean, he is messing with the foundation of this country. He's messing with the foundation of the economy. He's messing with America's place in the global financial system, not to mention using the word loser. How does a president use childish phrases like that when talking about the Fed chair? I get that there's reasons to dispute or disagree with what the Fed chair is doing, but that kind of language, you just cannot and should not normalize it. Kelly, I just think and I have one other point I think that's worth making. Where's Jamie Dimon and David Solomon and Brian Moynihan? Where are the leaders of our financial community calling on the president to stop this business about trying to fire the Fed chair? And you see what you get here in the markets, right? I think these people have to the leaders of the financial community, they have a ton at stake and I think they have to step up and speak out.

[Kelly Evans]

Let me Larry Lindsey, turn to you. Do you think that's what this market decline is all about, is these attacks by the president on the Fed chair?

[Larry Lindsey]

I'm sure that that's a factor in it. I think, as your previous guest noted, we started this period with people complacent with the market, pricing stretched. And so probably we were going to have a downturn regardless. Do I think that the president has exacerbated it? Oh, I'm sure he has. Let me add that it's important to note the difference between the headlines and the actual wording of what people are saying. For example, on Friday, Bloomberg had a story that they called breaking news that Kevin Hassett had raised this issue. Well, it was Actually raised by. By one of the reporters. What Kevin said was, we will continue to study this issue. Well, if you're continuing to study something, which, by the way, is the only answer anyone can give. I mean, you have to admit studying it, you can't say you've stopped studying it because you're supposed to be studying everything. If we, if the answer is we're continuing to study this issue, it's not news and it's especially not breaking news. So I do think there's a little bit of overhyping and a little bit of almost fake news the way it's being covered.

[Kelly Evans]

Do you think that. So you think that this is all just kind of a tempest in a teapot and that the President is not trying to somehow, you know, I could ask you whether he's going to push him out. I mean, there's plenty of, you know, speculation about that and, you know, legal. And then the Supreme Court. Could he demote him?

[Larry Lindsey]

Well, let's start with the bottom line. I don't think that the President is going to fire Jay Powell. I think Jay will be there if he wants to be, until next May. What the President said would be another example is that his termination won't come soon enough. Well, let's think about that phrase. If the allegation in the news is that the President is going to terminate Powell, then how can it be the President saying his termination can't come soon enough if the President's just going to do what it can do? Okay, so the interpretation in the news is contradictory. I think where the law stands is that the President cannot terminate Powell for monetary policy reasons, but he can fire him for cause. So, for example, I'm being a little bit facetious here. If Chairman Powell were to go swim naked in the reflecting pool with six prostitutes, then I think the President would step in and fire him. But when it comes to firing him because of monetary policy, I do not believe the President's going to do it.

[Kelly Evans]

And, Steve, that's where you wonder, you know, how much the market is taking this and running with it in terms of does it worry that he still might, even though Larry and others think it's unlikely? Is it just that the signal is, you know, hey, the pressure is going to be in one direction or the other or what his next chair might do.

[Steve Liesman]

I would just ask what convention or conventional legal interpretation of a law the President has shown he will not ignore. I get what Larry's saying. I think Larry is probably the conventional wisdom on this. I think people think he Won't go there, but it is a real risk in the market. And I also take exception to the idea that Kevin Hassett saying, we're studying it is not news. It sure is news. When the President's top economic advisor says, we are studying the idea of terminating Reserve Chair. And just to be clear about what the President has said, he has said the idea will be terminated in a way that was unclear. You and I talked about this. He said it twice. Larry took one of the times and he said it another time where he said it was unclear if he was going to terminate him or not. Look, I have a quote here from Krishna Guha. He's hardly a hothead. Look what he said. Let me see if I can find the actual wording. What he said was. Hang on, here it is. There it is. Market action Monday morning sends a clear signal risk to Fed independence is negative for all major US Asset classes and provides a partial foretaste of what might come if President Trump were to actually try to fire Powell.

[Kelly Evans]

Although some have also raised the issue. And Larry, please respond to all of this. And then. And then the following, which is, you still need a majority, I believe, to set monetary policy. I don't know if we've had a Fed mutiny in recent history, but if there were a chair that the members disagreed with, could they outvote him?

[Larry Lindsey]

Of course. I mean, if that were to happen, I mean, Volcker had that problem late in his term where they went back and changed things, but he lost a vote at the fomc. But as far as pressure goes, I'd like to remind Steve, and he's a younger man than I am, what happened to William Chesney Martin? As far as presidential pressure goes, Martin was in the Oval Office.

[Steve Liesman]

Yep.

[Larry Lindsey]

Lyndon Johnson, who was a big man, picked him up by his lapels and slammed him against the wall. So the thought that a politician, a president, won't pressure the chairman of the Fed one way or the other, you know, it's.

[Steve Liesman]

Larry, I just want to respond. I do not take away anything about Trump's ability to even do this publicly. I will point out the scene that you're talking about took place in the Oval Office in private, where I believe before the President, 95% of all haranguing of Fed chairs took place. Sorry to interrupt, sir.

[Larry Lindsey]

Well, aside, not sure what the point is. The harangue takes place and sometimes it gets rather physical. Not in this case. I. Steve, I'll tell you what, what's it May to May 26 is that the last day we should make a gentleman's bet right now, something low, like 100 bucks. I'll make you $100 bet that Jay Powell will still be chairman of the Fed on May 26, 2026.

[Kelly Evans]

You get to take the or whatever the day is because I have one more question for Larry.

[Steve Liesman]

I'm not betting because I'll tell you why, Larry, I'll tell you why. My question now for markets is the following. Do you have to include some probability that this happens? And what is that probability?

[Kelly Evans]

Fair. And here's I mean, by the way.

[Steve Liesman]

I'll do something more interesting than a hundred dollars. If you want to do a dinner or something like that, I'll do that.

[Kelly Evans]

Well, it depends on where the dinner.

[Steve Liesman]

Is, a $200 dinner. But I'm not interested in voting the cast now. The point is that I am interested in debating what markets have to figure out now.

[Kelly Evans]

Totally. Here's my question pursuant to that. And Larry, I'll ask you and then I know we have to go. We always hear about war, who's hardly a dove. Okay. So unless it's going to be someone like Waller, who has indicated more of a flexibility to lowering rates for, you know, can you pick up on this point where the market says, oh, ok, now Warshire, for instance, is the new shadow chair, he's going to be nominated or what have you. And we're all supposed to suddenly interpret that as a dovish outcome. So is then there's not many people who have traditionally been the kind of person that Trump or the GOP would appoint who are dovish by nature. So I'm confused again about what sort of the sequence of events is likely to be, including that that candidate. Maybe it's someone we haven't thought about yet.

[Larry Lindsey]

Well, in that case, a, the event isn't going to happen for another 13 months. And so, you know, it would be, I would say, premature to talk about whether Kevin will be the person or what Kevin's policies will be. I think part of what's driving Trump's frustration is a little bit of political fed history. In 2015, the FOMC with its stop plots, said it was going to cut four times in 2016. Janet made sure they didn't cut. They didn't cut. They didn't cut. Then Trump wins the election and they cut. Excuse me, rates.

[Kelly Evans]

Yes.

[Larry Lindsey]

Okay, raise. He raised right. She raised right after the election was done and not before, and then went on to a series of more hikes with Trump as president. Fast forward when the the FOMC thought that the Trump's 2017 tax cuts would be inflationary. And that was one of the justifications where while maintaining their hiking mode, it turned out it wasn't inflationary at all. We had below 2% inflation every single year. Fast forward to 2021, when the Biden administration sends up a very large stimulus package that my friend Larry Summers and I, different parties, completely agreed was inappropriate, was likely to be inflationary. No objection at all from the Fed. Then it turned out it was inflationary. What happened? Well, they denied it, and then they said it was going to be transitory while we had Joe Biden in office. And here we are again with the same position.

[Steve Liesman]

Hold on, Larry, hold on. Sorry, I know we got to go, but, but no, you have to include in that they then raised rates to 5.3% and left them there for a year. Right. So you can't tell the political story without including that little tiny bit in there. Right. Right after we got, you missed that.

[Larry Lindsey]

High inflation, we got sky high inflation. The Fed responded. What we're talking about here has to do with things like what your initial predilection is. And the Trump can look at the historical facts and think correctly that the historical predilection of the Fed is going to be hostile. So that's why I use the word pissed off. That's why. That's why he's pissed off here. You know, that's, that's the way it is. However, that doesn't change the fact that the President is not going to fire Chairman Powell, period. 100 bucks. What did you want? You wanted dinner.

[Kelly Evans]

Dinner. 200.

[Larry Lindsey]

Oh, dinner. Well, that's a hard high price. I got to put up with you for dinner, Steve, come on. You're, you're asking for the moon. I'm just kidding. Look, I'm, I'll, I'll, I'll be happy to take any bet you propose.

[Kelly Evans]

Larry, we appreciate you joining us today. Go ahead, Steve.

[Steve Liesman]

You take it or I'm not taking a bet. I don't. But the thing is that. Here's the thing, Larry. Are you saying that the risk of Trump firing Powell is zero?

[Larry Lindsey]

There is no thing that has a probability of zero, Steve, period.

[Kelly Evans]

But it sounds like he thinks the number is much smaller than the markets are currently discounting. Anyway, appreciate it, Larry. Thanks for joining us today. Good to see you. We'll check back in soon. Larry Lindsey with the Lindsey Group. Dow still down about 1150 points as it weighs all of this. We've got some news on Uber Deirdre Bosa brings us the details. Deirdre.

[Deirdre Bosa]

Hey Kelly. Uber shares, they hit session lows on this court filing that says the FTC is suing the gig economy company, accusing it of deceptive practices related to its one monthly subscription service, Uber One. It offers members benefits on delivery fees and ride sharing. We did hear from an Uber spokesperson in a statement saying, quote, we are disappointed that the FTC chose to move forward with this action, but we are confident that the courts will agree with what we already know. Uber 1 signup and cancellation processes are clear, simple. Follow the letter and spirit of the law goes on to say Uber does not sign up or charge customers without their consent. Cancellations can now be done anytime in app and take most people 20 seconds or less. Again, Uber shares are down more than four and a half percent cent. And this is another big tech company, not a mega cap, but a bigger tech company being targeted by regulation by the Trump regulatory administration. Back to you, Deirdre.

[Kelly Evans]

Thank you. We appreciate it. Deirdre Bosa, going to take a quick break here. Coming up, two names that have gone in opposite directions this year. Disney and Spotify. Our next guest just upgraded both, says Disney is priced like the sky is falling, but it's not. He'll join us to make the case and talk about how much upside he sees. And as we head to break, the dow is down 1160 points. We're pretty much sitting at session lows. The S and p is down 3.2%, three and a half for the NASDAQ. And the 10 year yield just hit 440 there. You can see it. We're back after this with much more.

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[Kelly Evans]

To claim this special double roses offer, go to 1-800-flowers.com Pandora. That's 1-800flowers.com Pandora welcome back. Disney and Spotify selling off today along with the rest of the tape. You'd argue they're outperforming Disney. Anyway, it's down one and a half percent. Did get some love this morning from Wolf Research, upgrading the names to outperform in Disney's case on valuation, on Spotify's case on domination. Let's bring in the analyst behind the call, Wolf Research's Peter Sapino. Peter, hard to kind of like pick through the wreckage right now, but is that partly what led to your moves here? Welcome.

[Peter Sapino]

Yeah, I like the way you introduced our call this morning, domination and valuation. And yes, it's a really tough day to even think about buying consumer discretionary stocks. The timing of this upgrade on a day to day basis was about our media preview, which spanned our entire coverage. And we've decided that Disney is closer to, it's closer to go time, so to speak. Disney is a company that has many things going for it at the same time as it's facing real serious economic headwinds. And so we're focused on what happens after the recession. And there's a few things going on. The streaming business, yeah, it's worth about $35 a share and contributes nothing to profits today, will contribute in the future. And Disney's launched three new cruise ships that should contribute $800 million over the next couple of years.

[Kelly Evans]

Can we go back to the part where you said we're looking at what happens after the recession? Is that, I mean, should we now in. A lot of people are saying this and maybe it's true, but it's still something. I don't know. I don't like the idea that, that it's basically inevitable at this point.

[Peter Sapino]

Well, I'm not an economist and I'm listening to the same voices you are. And it's much easier to start a conversation with investors about Disney by level setting on the idea that maybe we'll just have a recession and then what? Yeah, Disney is one of the stocks that's pricing in a very high probability of a recession. For example, we think in the case of a pretty harsh recession, Disney would earn $4.70 per share. The company is guided to 550 for 2025 at 83 with the stock having been 115 two months ago. We think that downside is already priced in.

[Kelly Evans]

I appreciate that, you know, and I can take your point. Instead of arguing about whether we will or we won't, you just say, okay, so we do. And then what? And what about with Spotify?

[Peter Sapino]

So Spotify is the exact opposite of Disney from the stock market perspective. Spotify and Netflix have in common that their utility like subscription businesses, they charge consumers small bills that consumers pay without thinking about it every month, and consumers get a ton of value from these products. The cost per hour of engagement at Spotify is something like 25 cents for each consumer. The cost of an hour of engagement at Netflix is just about twice that in the 40 cent range. So there's a ton of value here. This is the last thing a consumer is going to cut. And their growth outlooks, Spotify's growth outlook is just so idiosyncratic. They have a 30% share of global music streaming, which probably has an addressable market of a billion and a half people based on the number of smartphones in people's pockets around the world. So we think this is going to continue to compound.

[Kelly Evans]

And finally the rest of your group, I mean there's a lot of names in here that are kind of. They include our parent company Comcast. You've got, you know, some of The Tech Tech TMT names in here like T Mobile, Verizon, AT&T. Some of the music, some video game, live entertainment. How do these all shake out in a recession that people now kind of want to take as a base case?

[Peter Sapino]

Well, you've seen it in recent stock price action. The advertising and travel slash theme park related businesses like Disney have all traded really poorly in the last several weeks. The distinction we make on these cyclicals is there's a type of cyclical you want to own on the backside of the cycle and that's a theme park. It's a company that has a business that has real high visibility on recovering its normal profit margins and revenue levels. An advertising business, a linear TV advertising business is just the opposite. Know what you're going to own on the other side of the cycle. Elsewhere in our coverage, telecom is traded very defensively. There's been a lot of, I think flows into that sector that have rediscovered it in the last year and now it's getting a benefit from the weak stock market. And of course, the streaming names like Spotify and Netflix are the perfect storm of positives. I guess that's misusing the metaphor, perfect storm, but they're both visible and growing in a very unique, independent, uncorrelated way.

[Kelly Evans]

Perfect storm of positive, that's another good headline. You've got away with these words. Peter, thanks for joining us today. Appreciate it.

[Peter Sapino]

Thank you.

[Kelly Evans]

Peter Cipino with Wolfe Research. Take a quick look at the mortgage companies. We're talking rocket, United, Wholesale, Mr. Cooper, which is being bought all under pressure as rates are moving higher again this week with treasury yields on the rise. The rate on the 30 year fix is just below 7%. Just a hair and it could be higher still after today. We're back in a moment on the exchange.

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[Kelly Evans]

Welcome back. We mentioned this earlier on now, Chris Davis won't like that. I call it the Mag 7, but it is down 4% today with Tesla and Nvidia leading the declines. Deirdre Bosa brings us more in Tech check. Hi again, Deirdre.

[Deirdre Bosa]

Hey, Kelly.

[Kelly Evans]

So big tech.

[Deirdre Bosa]

It's not just navigating volatility anymore. It is increasingly getting boxed, boxed in. And the fundamentals are increasingly at odds with the headlines. And that is going to play out as we get deeper into earnings season. That could be and rather what was thought to be safe and even an untouchable theme. Even amid this tariff Turmoil has been spending. But a note from this morning from Wells Fargo's TMT team. It cites several industry sources that say US has paused a portion of its leasing decision discussions. Now, if Amazon is slowing down on datacenter expansion, that could mean that spending isn't as safe or as full throttle as thought. And it could raise questions about demand and whether enterprise adoption really is keeping pace with all of the hype now. Also important, this echoes positioning from Microsoft that it may be digesting leasing deals for data centers. And if two of the three hyperscalers are pulling back, that could further shake confidence in across the entire trade. And certainly that is playing out today in the session. Stocks in the AI powered data center semi trades, they're all getting hit hard. Not to mention the magnificent Seven, which are now getting pinched by Trump's policies at home and China's increasingly competitiveness abroad. Now this certainly raises the stakes, Kelly, for Google's earnings that comes up on Thursday. Will it remain committed to its AI spend or will it give us any hints about 2026 CAPEX or even 2025 that will be key for the broader air trade which has been hurting this year after sort of only going one way for a long time. And remember, Google is the third largest hyperscaler. So if there's any sort of cold water that they throw on Capex, that could really hit the entire trade. Some of the stocks that are under pressure already today, although it's weird, we've.

[Kelly Evans]

Had this a couple of times now. Who was it the first time around? Was it also Amazon? Was it. But no, was it Alphabet when we had one analyst with the like we get, we get analysts.

[Deirdre Bosa]

Microsoft.

[Kelly Evans]

Microsoft, thank you. Now we have an analyst note saying Amazon, what it's just like. So there's clearly a little cottage industry right now in the trying to figure out if these big tech players are pulling back on their plans. It'd be nice if they just told us but maybe that's, I mean, and.

[Deirdre Bosa]

It'S so at odds with what we hear from big tech, right? They say that demand is red hot, they need to keep up the spend. But then you do hear this sort of trickle of news that maybe they're going to pull back. And Satya Nadella, the CEO of Microsoft even uses words like there will be overbuilt. So we do need a clear answer. But it's clearly the markets are reacting to the idea that we don't have one. And it feels like every week or so we're getting some cold water porn on those on that sort of sentiment that the trade is safe or spending is safe, maybe it's not.

[Kelly Evans]

All right, Deirdre, thanks. Appreciate it. Deirdre Bosa, let's stick with the theme. Our strategist here sees opportunities beyond just the pure infrastructure plays, but still sticking with the AI trade. Roosevelt Bowman, a senior investment strategist at Bernstein Private Wealth Management. Did you say Bauman or Bowman?

[Roosevelt Bowman]

Bowman.

[Kelly Evans]

Okay. The second it came out of my mouth, I was like, wait a minute, I think I just got that wrong. Anyway, thank you for being here, especially in a very tough day like this. And we always hear people say, you know, in the private markets, you know, you're not down 3% or maybe you just don't know it. But the larger questions about the trade. Do you have some of these concerns that Deirdre and others are laying out or do you think that it is full steam ahead for investors?

[Roosevelt Bowman]

I think it's full steam ahead, but in a different way. Most of the focus has just been on semiconductors, your cloud computing, the nuts and bolts. And that seemed to be perfectly fine when market volatility was so low over the past couple of years. You could load up and be super concentrated in a few names in those themes. Now, I think with first the deep seek news and then now all this market volatility, some of the concentration has been proved quite painful for investors. So that's where you want to broaden out to power cooling, skill boosting stocks and then some of those, even big box retailers that have a lot of that data, which is the foundation of these models.

[Kelly Evans]

But are you looking at publicly traded kind of plays here? You know, the typical set of names that, that we all talk about, a lot of which are well off their highs or are these more like private market vehicles?

[Roosevelt Bowman]

I think it's both. I think there's still a great opportunity in the public market because I would argue, and we would argue that the adoption for AI is varied across industries. So some of even the low hanging fruit of just seeing more small and medium sized businesses incorporate AI into their processes means the public names can still thrive outside of just semiconductors and cloud computing. But there's opportunity in the private world as well. When you think about data centers and those types of facilities, it makes me nervous.

[Kelly Evans]

It makes, you know, because you sort of think, well, in the long run, what are the kinds of companies that are going to have like, like really great, I guess, moats, for lack of a better word, or really durable businesses that don't get quasi commoditized. Over time, like once the initial gains have been made, these stocks are up 300%, you know, the last couple of years, that kind of thing. But now that it's so owned and now that they're struggling to perform, will that magic ever come back?

[Roosevelt Bowman]

So I think it will, but in a different shape. So, you know, think about a moat, right? I think one of the big moats to go back to the big box retailers is having all of the information and data that is very difficult to replicate in any efficient and cost effective way. So if you have all that data about where your customers are buying goods, when they're buying it, where your trucks are going, you can use machine learning and AI to optimize your sales and distribution process. And you're not paying anyone for the basis of the model, which is the data.

[Kelly Evans]

Yeah, no. I don't know if you can name specific names or if it's just kind of go figure it out and do the research for yourself here.

[Roosevelt Bowman]

But I think it's the sort of normal big box retailers that you would expect that, you know, are usually selling to your small and kind of medium level income consumers. They're gonna do quite well because they have tons and tons of information about consumer behavior.

[Kelly Evans]

And you're also, it's not like this is the only kind of game in town for you also looking at healthcare and some of these other areas.

[Roosevelt Bowman]

Yeah, for sure. I mean for us, I think healthcare is both a dual play playing into the slowing economic growth that we're seeing in the US and anticipate abroad as well and being more defensive. But it's also that I would put health care in one of those industry buckets of hey, we've seen some adoption. Drug discovery certainly has been well reported, but there's so much that can be done in terms of transferring information from patients to caregivers and improving that process and patient outcomes. So a lot of low hanging fruit there.

[Kelly Evans]

Roosevelt, thanks. Pleasure to have you here. We appreciate it.

[Roosevelt Bowman]

Thank you so much.

[Kelly Evans]

Roosevelt Bowman with Bernstein Private wealth. And check out the health care providers. Speaking of which, before we head to break the iShares, ETF is down about 4% today, but down 12% over the past five days on some big selling activity. Obviously we saw United last week, got Humana down 7% today. Tennant and some of the hospital names taking it on the chin as well. Acadia Healthcare down 13% for a sector that's been under pressure, continues to struggle. We'll have more coverage of this market sell off after the break.

[Pippa Stevens]

Welcome back. To the exchange. I'm Pippa Stevens with your CNBC News update. The first of many public ceremonies to celebrate the life of Pope Francis getting underway in St. Peter's Square at the Vatican right now. The recitation of the rosary, which is a meditative prayer, began just minutes ago. The Vatican announced the 88 year old pope death early this morning. He's expected to be laid to rest in the next few days. The Trump administration is threatening future approvals for federal funding of transportation projects in Manhattan if New York City doesn't end its congestion pricing program. The threat comes as the MTA is still charging the toll for motorists driving into parts of the city after the Department of Transportation gave an April 20 deadline to end it. And Homeland Security Secretary Kristi Noem continued confirming her bag was stolen Sunday night while eating dinner at a restaurant in D.C. according to CNN, the thief got away with about $3,000 in cash, along with other items including her driver's license, passport and work access badge. A Secret Service which guards the secretary is investigating. The exchange will be back right after this.

[Kelly Evans]

Welcome back to the exchange. CNBC's newest subscription streaming product is CNBC Plus. It launches today and we're taking a moment to show you exactly what it looks like. You can see here around me. CNBC plus Data feed shows enhanced data and the latest headlines during our live programming. You can also stream this show and any of your favorite CNBC shows any time, anywhere. Get an even closer look at the 1200 points the market is down today. Tesla shares are part of this. They're down more than 7%, one of the worst performers on the S and P. They report after the Bell tomorrow. Let's bring in Philippeau with more details as we'll start to hear from the other automakers soon, too. Philippines, yeah.

[Phil LeBeau]

And Kelly, the Q1 results, that's a little bit of what people will be watching. But more importantly, it's the commentary about the second quarter and the remainder of this year. What's going to happen with tariffs? What's going to happen with trade policy? So as you take a look at the automakers and yes, it starts tomorrow. You get Hyundai tomorrow. We also get Tesla after the bell. Was there a sales boost in March because so many dealers said, yes, we'll take as many as we can get before the tariffs kick in. Also, what are the plans for managing tariff impacts? We've heard from a number of automakers saying we're not changing MSRP, maybe for 25 models, maybe through the end of May. Will there be greater clarity there. We do know that a number of them have already said, look, we're looking for ways to add US Production either by maxing out capacity or seeing if they can add some shifts here or there. No comments yet from any automakers about adding actual production plants. Meanwhile, when you look at Tesla, the question tomorrow will be what's the guidance for the remainder of this year? Remember, Q1 deliveries fell by 13%. Also, will Elon Musk during the conference call signal that there is an end date for his work with the Trump administration? And speaking of the Trump administration, all of the automakers will be facing questions, especially the domestic ones, regarding the White House is pushing for more US Production. Can they add it? As you take a look at shares of gm, Ford and Stellantis, keep in mind that auto prices, especially domestic auto prices, will be in focus. And that's it's going to be an interesting couple of weeks, Kelly, to see exactly what we hear from the automakers. I think investors may not be satisfied because I think what you're going to hear from executives is, well, we think we're planning this, but we're not entirely sure what's going to happen with the policy coming from the Trump administration.

[Kelly Evans]

No, I understand. How can they know, right? Unless they maybe, maybe they have special information.

[Phil LeBeau]

I don't think they have special information. I think they all have lobbied for what they think should take place, whether it's with their, with the OEMs, the, the automakers or with the suppliers. And there's been some progress on certain areas, but we've yet to see something definitive from the Trump administration, aside from what they put in place in terms of 25% tariffs for those vehicles built outside of the United States, with some exceptions for those that are USMCA compliant.

[Kelly Evans]

Yeah, no, I heard about it. We were on the Ford lot the other day. I was hearing about it firsthand. Very interesting. We'll talk about that another time, Phil. Appreciate it. For now. Thanks, Philibo. Stocks are near session lows, as I mentioned. We're down 12:30 on the Dow and we're down for the fourth, fourth straight session for the Dow in the Nasdaq. And even the Muni market has been shaken by this recent turmoil. Let's bring in Dan Close. He's newveen's head of municipals. Describe what it's been like the last couple of weeks. Welcome, Kelly.

[Dan Close]

Great to be back. It has been a really tough time for the municipal market. We've dramatically underperformed the treasury moves, even though fixed income has backed up. The municipal market has backed up even more.

[Kelly Evans]

Is China selling munis? Is that what's going on here? Why the underperformance?

[Dan Close]

You know, it's. Most of the ownership is with individual retail. So a lot of the underperformance has nothing to do with the fundamentals. Fundamentals continue to be very good. Municipalities aren't really involved with tariffs. They're not making anything that's shipped overseas. They're not importing. So a lot of the volatility we're seeing is just a lack of liquidity and a lot of supply in the market.

[Kelly Evans]

And that's why it's so interesting, because you can almost look same thing happened during COVID and say if a market like Muni's, where the fundamentals, if you they change, are going to change in a very long time horizon, that's kind of where you're seeing the traces of the broader liquidity problems in the market. It just kind of tells you how deep they run. We're nowhere near as bad as we were during COVID now, though.

[Steve Liesman]

No.

[Dan Close]

And you know, if you look back at Covid, that had a little bit of a whiff of credit related to it. The same with 2008. But what's been fascinating in our marketplace is we've now gotten cheap enough that we have crossover buyers coming in, buyers that don't need the exemption that are saying, I could have a higher yield than Treasuries, it could be tax exempt. I don't plan to stay in the asset class for too long, but I'm going to come over and buy in this asset class because it's gotten this cheap.

[Kelly Evans]

The only thing I wonder about is a little bit of the credit issue as we're seeing now kind of the. They're trying with the budgets, they're trying with Medicaid. They're trying, you know, and those. I mean, all of us probably live in towns where the newspapers are full of these stories about we're going to have to raise taxes because this federal program is sunsetting or we're not sure what's going to happen when these subsidies go away. So I do wonder about that.

[Dan Close]

Yeah, there is some. I mean, if you look at a state's budget, the two biggest items are K through 12 education and Medicaid. So if that is cut or does not grow as fast, depending how you look at it, that could really have a meaningful impact on state budgets. But you know, there are a lot of different municipal sectors, you know, the have and have nots, higher education Certainly with student loan cutbacks, with NIH grants, you know, we're very cautious about those. And especially those that are the smaller tuition dependent liberal arts schools that don't have the large endowments. You know, it is certainly something that we're navigating through and one needs to be careful with.

[Kelly Evans]

It's a great point. As you mentioned. I'm like, geez, where do I go in Muny's for something that's not under siege right now.

[Dan Close]

No. And certainly there's a lot of very, very good options we're looking at. In particular water and sewer credits. One of their biggest expenses are consent decrees to go in and deploy, put through new pipelines, let's say, and they really don't have as many in this current administration. So your essential service monopolies are going to continue to do very well. Your water and sewer credits, you're going to continue to pay your property taxes. And of any markets, this is one that really can go in and avoid a lot of the taper or, excuse me, the tariff tantrums.

[Kelly Evans]

I think you perfectly encapsulated the market today, which is you go to water and sewer bonds because that's the only thing where people feel a modicum of safety. Dan, appreciate you coming back in. We appreciate you. Check back in soon. Dan, close with Nuveen. That does it for us. Thank you for watching the Exchange. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.

[Chris Davis]

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[Phil LeBeau]

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