Thursday Mar. 27, 2025 - What impact will the auto tariffs have on S&P 500 earnings?
40:07 Share

Here is Professional Money Manager, Bill Gunderson.

And welcome to the Thursday. It is the Thursday, March 27th edition of the Best Stocks Now show with professional money manager Bill Gunderson, president of Gunderson Capital Management. We're back from Sarasota.

And I'm here with Barry Kite, our chartered financial analyst. And the market's slightly down so far. I'm going to blame it on the auto tariffs. That seems to be the new worry that the market is chewing its fingernails over. And right now we have the Dow down 69 points. That's just 16 basis points. The Dow's at 42,385 points.

The NASDAQ, which had a bad day yesterday, is down just 15, 16 points right now to 17,882. The S&P 500 is down 6. 5,706 is where the S&P 500 sits right now. Russell 2000 down 10 points.

Over at the bond market, we've had a little drift higher here in interest rates. Nothing too serious, however. We're at 4.34, 4.34 right now on the 10-year chart.

And I think it's been drifting up just a little bit of fear. Well, what will auto prices do? Well, we see inflation in cars, and that has sent interest rates. Gold, which has been at all-time highs, it's actually up a little bit, 3,047, and Bitcoin is down 479 right now. So welcome to today's Best Stocks Now show.

with professional money manager Bill Gunderson, president of Gunderson Capital Management. And Barry, I've been visiting Sarasota for the last, I don't know, 10, 12 years, and it used to be a sleepy little town. I can remember the first time I was there,

We went. We got in about 8 p.m., and there were no restaurants open downtown. They had rolled up the sidewalks. The city workers come along, roll up the sidewalks. No restaurants open. Now you can't get into a restaurant after 8 p.m. And, you know, the towers that are there now, it is just unbelievable.

Of course, the damage that was done to Siesta Key and to Longboat Key, et cetera, still a lot of work needs to be done there on that. And kind of the migration, I guess you could say, out towards the Lakewood Ranch area and the booming Lakewood Ranch area. They've got a Ruth Chris Steakhouse now and an Owens Fish Camp.

So we've decided next time we go, we've set a date two months from now to go back to Sarasota. And this time we'll base our operations out of Lakewood Ranch and do a workshop there at the Grove. So that should be fun.

And looking forward to that. In the meantime, we're going to get over to Cleveland and to Bloomfield Hills, Michigan real soon also. So we had a lot of fun. We met with a lot of people, a lot of people over the last two days. All good people. Yeah, you guys were busy. Oh, my gosh. But I really enjoyed getting out once in a while, getting away from the –

the confines of the war room here and uh it's still a war room i mean i'm still watching stocks while i'm meeting with folks uh but uh you know yesterday was kind of a rough day uh the market is just not used to uh you know i i think when when when the nation voted for uh and elected trump they wanted big change they weren't happy with the direction of the uh

The country and big change creates a little bit of pain along the way. But, you know, I mean, in the long run, hopefully the country will be a lot better off, even though we're going through a painful period right now. And then there are those that would rather have kept the status quo, you

The problem is the status quo was not sustainable. It's just not sustainable to spend $2 trillion more than you take in every single year. Moody's warned yesterday. So we're on a path that's unsustainable, and someone has to do something about it. It's not always popular. No, it's not popular, and it just seems like cuts across the board.

and bringing back some strength to the U.S. industries and economies that have been hurt badly by competition overseas. And I think what's got the market rattled right now, I mean, think about it. All of a sudden on April 2nd, there will be a 25% tariff on a BMW, on a Mercedes.

On a Toyota Camry, on a Hyundai, on a, you know, across the board tariffs. Now that's just the opening shot, obviously. And Trump obviously wants something in return to grant tariff relief.

And, you know, a lot of these auto companies, Stellantis will not survive, I don't think. There's no way with the 25% tariff on their cars. I mean, it puts a tremendous burden on Mercedes and on BMW. GM's getting hit hard today. Yeah, well, I think that's because of the auto parts. Actually, they should benefit, right, because people are going to buy cars.

a GM car rather than pay up the tariff on a European car. But, you know, it's going to settle somewhere. This is the opening salvo. This is the opening bid.

This is like the cards have been dealt and everybody's looked at their hand and somebody starts off, fires a salvo, and the next guy says, well, I'll see your bid and I'll raise you. And eventually things settle down somewhere. I always remind folks, I did it yesterday, that nothing has changed as far as the earnings estimates for the S&P 500 this year.

and nothing has changed next year. We're expecting record earnings this year, in fact about 12% growth versus the same year or the same 12 months last year and we're expecting about another 12% growth next year. And you say, well that's just pie in the sky. Well that's analysts meeting with these companies on a regular basis and taking guidance from them.

which is usually guidance that's a little bit on the soft side and adding it all up. And I watch that very carefully. If you're going to go into a recession, you've got to see an earnings recession. And so far, at least for now, take it a week at a time. I update those every Friday and Saturday in the newsletter. There has not been any change. The quarter is going to end.

What is it, Monday? This is the 27th, so 28. Yeah, Monday will be the 31st. Yeah, Monday's the 31st. The quarter will end. People are going to open up their statements for the first quarter of 2025 and see negative numbers unless you're all in gold or all in cash. The markets have opened up after a torrid run. I mean, just a torrid run. They got overheated there after Trump's election.

We entered the year overpriced, and all of a sudden on January 20th, day one, the action started taking place. The layoffs across the board in the government, the tariff threats to companies where we have large trade deficits, which is holding down our GDP and our growth here in America, costing us jobs here in America.

And changes are underway. I don't think the market expected them to occur so rapidly. And I think that's what's kind of got the market spooked and upset a little bit. But nothing's happened with the earnings picture. Things still look pretty good. Now, some of these, I saw one of the banks lower their target price for the S&P 500 this year.

It happens to be a UK bank. I think it was a UK bank. It might have been UBS, which is Switzerland, lowering their target price for the essence. But they're mad and they're trying to talk our market down, right? There's a real kind of warfare taking place right now in the world and we'll see where it all settles. But yesterday we had a bad day in the market.

I found it interesting that Q1 is on track to be the best performing quarter for the European index, the stocks 50, which is like the Dow of Europe versus the S&P 500 in 34 years. Now, I've always avoided European stocks because there's no growth. There's just no growth there.

Single-digit growth. They get taxed heavily. Regulated to death. Regulations. I mean, think about Equinor, great company, but the space it's in. Total energy out of France. I mean, it just goes on and on. But I do think that those that were afraid of the tariffs and the impact and the volatility it would create...

move money to the European markets for the time being and money to the Chinese markets for the time being. But really and truly, there's not much growth in Europe whatsoever. It's kind of been a parking place for money until the rhetoric and the noise in America calms down a little bit. Well, we'll be right back.

This is Bill Gunnarsson with Barry Kite. It's the Best Docs Now Show. What are you feeling?

And welcome back here to the second quarter of today's Best Stocks Now show. Well, the market has improved quite a bit since it opened. We were down about 1% at the open, and now we're flat on the day. So we'll take that. That's a victory to start the morning. Now, okay, so here's the lowdown. Why is GM down? Well, I'm going to tell you why.

Here is the lowdown. At 5.16 p.m. last night, Trump announced, or he signed an executive order imposing 25% tariffs on foreign-made autos. And you say, well, why does that impact GM? Well, 37% of General Motors' North American production is in Mexico and Canada,

A 25% tariff on imported autos and components will be detrimental to its bottom line unless the company can pass the cost off to consumers, which it says it will not. So, I mean, they're between a rock and a hard place, right? I mean, 37% of their production is in Mexico and Canada. And when they bring those cars into America...

They're subject to the tariff. Now remember, this is the first shot across the bow. The negotiations have begun. Stellantis is even in worse shape because at least 45% of Stellantis U.S. sales come from overseas. So they're bringing in Stellantis as many, many brands.

Maserati, of course Chrysler, Jeep, and Alfa Romeo, etc. So 45% of Stellantis U.S. sales come from overseas. Under the helm of former CEO Carlos Tavares, the company shifts much of its production to countries with cheap labor in an effort to fund its EV ventures.

And, of course, that hasn't been a very good investment because now the demand for EV cars, it's backfired big time on Stellantis, number one, by moving that overseas, and number two, by investing so much in EV. Although I think EV could get a resurgence if we can get that Chinese technology here.

that charges a car in five minutes, that's a game changer, I think, because now you're talking the same amount of time as filling your car with gasoline. But Stellantis CEO met with Donald Trump, President Trump, pledged to invest billions of dollars to move production to the U.S. You know, it's getting to be, Barry, that Detroit, Motown,

Alabama, South Carolina, Tennessee, other states are sharing in that Motown kind of manufacturing. And the U.S. is becoming a major manufacturer of automobiles. A lot of...

The high-end Mercedes-Benz are built in Alabama. Well, and we've got, what, Greenville? BMW is in Greenville. You see them come on the rails straight down right here to the port and onto the ship and sent somewhere else. I don't know where they end up. To Germany. Right. BMWs are built in South Carolina and sent to Germany and other countries. So that's the lowdown. That's the skinny. Ford, meanwhile...

They have a stronger domestic footprint than GM. They don't have as much offshore manufacturing. Although the company's CEO, Jim Farley, has warned that the tariffs would have devastating consequences for the U.S. auto industry to head off the tariffs on its imported components. There's the problem, the components. Ford has been stockpiling on parts that comply with the current U.S.-Mexico trade agreement.

and moving more quickly to get assembled engines across the border before April 2nd. So that's what's got the market spooked right now, and I don't think there's any surprise that he's doing it. I mean, it was part of his platform that he ran on and the people elected him on, but it spooks the market, okay? And that's what we're dealing with right now.

Let's see, what else? There were other tariffs. Well, no, mostly it's just the auto industry right now that is in the headlights. Now, okay, so why? Well, now they're going to strike back. They're going to make the second move. We're going to see your 25% tariff, and we're going to slap a tariff on, guess what, California, whatever. I mean, anything coming from the U.S.,

Germany's economy minister has called for a firm response from the European Union after President Donald Trump announced plans to impose sweeping 25% tariffs on cars. Now think how important cars are to Germany's economy with Mercedes-Benz there, with BMW there, with Porsche, Audi, Volkswagen. That's a big industry there.

Germany's Habeck said the levies ultimately will harm the U.S. and the EU and global trade as a whole. The announcement of high tariffs on cars and car parts is bad news for German car makers, for the German economy, and for the EU, but also for the U.S., says Habeck. It's now crucial that EU delivers a decisive response to the tariffs.

It must be clear that we will not back down in the face of the U.S. strength and self-confidence are required, he added. So anyways, that's where we sit right now with the latest round. South Korea holds emergency meetings with car makers over U.S. tariffs.

Of course, South Korea has been a pretty big car maker. What's there, Hyundai? Yeah, Hyundai and what's the other one that is in the Kia? Is Kia the other one in South Korea? Yeah, Kia is exactly one, yep. And we rented a Genesis while we were in Sarasota, which is a high-end car.

Hyundai. It was a high-end Hyundai, right? Yes. I saw a guy at church. It's nice. I saw a guy at church driving a really nice-looking car. What is that? It almost looked Tesla-like. And it was a Genesis, like a really nice-looking sedan, you know, very sporty, really cool car.

But they are meeting emergency response. They rely heavily, South Korea's automotive sector relies heavily on exports to the U.S. So they're asking Trump, what can we do? I mean, that's what gets them to the bargaining table.

And in the meantime, the market chews its fingernails and frets over it all. Japan and Canada vow to fight back. Now, let's move to Japan for a minute. How important is the auto industry to Japan? I can still remember when the first Japanese truck started showing up in America. I was probably in junior high or something like that.

And, you know, we really protected the truck market, the F-150s for Ford, the Chevy Silverados, et cetera. And we allowed in the mini trucks. And there was a major move to the mini trucks there. And then we allowed them to start building full-size trucks there.

And I would venture to say there's as many Japanese cars on the road as there are American cars nowadays. So they are fretting, too. We'll be right back. This is Bill Gunderson. Thank you for tuning in to today's Best Stocks Now, Best Inverse Funds Now show.

I put several hours of research in during the wee hours of the morning each day to bring you the very best cutting-edge stories that I can. To get two free weeks of my newsletter, go to GundersenCapital.com. To talk to us about our fee-based only money management services, call us at 855-611-BEST. Now, back to the second half of the show. ♪♪♪

The instigators, because there's something here. We've got to get together sooner or later. And welcome back here to the second half of today's Best Stocks Now show. Well, the five countries that we have the biggest trade deficits with, actually it's six countries,

China is the biggest one, obviously, where we buy a lot more from them than they buy from us. Mexico is number two. We buy a lot more from them than they buy from us. Vietnam is number three. I didn't know we did that kind of trade with Vietnam, that amount. Ireland is number four. Germany is number five. And number six is Taiwan, believe it or not, because of the chips.

And Taiwan is already coming to the table and saying, hey, we're going to buy U.S. energy. We're going to import more U.S. energy. And they're going to lower their tariffs that they have against U.S. goods coming into their country. So, you know, I mean, it does begin the negotiations unless you get a big standoff.

And one side digs their feet into the sand and says, we'll destroy our economy in Canada just to get even with not to bow to the U.S. So that's kind of the good, the bad, the ugly of it all. Some think that at the end of the day, that's all that matters is at the end of the day. This is day one of all of these moves. Where will it end up?

Well, obviously, Trump hopes for a more balanced trading environment around the world. And Taiwan has already made some big moves towards the U.S. in lowering that huge trade surplus that they have. We imported a record number of goods from Taiwan, things like semiconductors especially,

because they're made there okay now europe is not real friendly to the u.s right now they're not real happy with the u.s right now and one of their european banks actually it was barclays which is out of the uk they slash s&p 500 target to 5900 the the consensus is 6900

So that tells me that Barclays got a bone to pick with the U.S., and their previous target was $6,600. I can't see how what's taking place is going to lower the earnings picture by the amount that Barclays is saying it will,

But I think on the one hand, they're using the worst-case scenario. And on the other hand, I think, fine, if you're going to do that to us, we're going to lower your target price there. How do you like that? Earlier this month, Goldman Sachs lowered their target price to $6,200.

And RBC Capital, which is another country that's not real happy with this, Canada, they cut the target price for the S&P to $6,000. Them cutting the target price does not mean that the S&P, anything has changed there. I think a lot of it's just out of spite myself and putting in the worst-case scenario because the earnings have not changed that much.

Very little so far for 2025, which we're in.

I haven't seen any changes to 2026 yet and 2027. I haven't seen any changes to the earnings estimates, but that's something I watch. In the meantime... Something you put in the newsletter every week. Yes, every week. I stay on top of that probably more than anybody in the market or as much as anybody in the market. Now, where are people running for for safety? Obviously, gold is one of those places.

And gold is a well-performing asset once again today. Now, you know, last time I looked, the 10-year average of gold was in the single digits return, like 5%, 6%. But with this latest action, which does play into the 10-year because you're moving it a day forward every day, now we're looking back over the last 10 years that would include these last three months. It makes the picture look a lot better today.

Gold has averaged 9.5% per year over the last 10 years, but the S&P has been about double that at 17%. But recently, if you're just taking a look at the last one year or the last six months or the last three months, it's obvious that there's quite a few people saying, I'm just going to park my money in gold until this whole thing passes with these tariff wars.

And, of course, gold hit a new all-time high. And Bank of America, okay, while they're lowering their target prices for the S&P 500, they're raising their target prices for gold. Bank of America raised its target price to $3,500.

It's at $3060 right now, $3060. At the same time, Bank of America has been lowering their target price. No, actually, Bank of America said they think that the auto thing will work its way through.

And at the end of the day, we'll not have that much impact on earnings. That's coming from Bank of America. While countries in Europe and Canada are lowering the target price on our S&P 500, saying that what Trump is doing will have a massive impact on S&P 500 earnings. Open AI. Okay, why did the AI stocks sell off? You know, they don't have much to do with the auto tariffs.

other than maybe the chips that go into the cars, you know. But yesterday, Microsoft, there was some, oh, Microsoft. They essentially canceled a contract where they were building some data centers. And we've had a couple, you had earlier this week the Alibaba chairman canceling

you know, mentioned, you know, kind of referred to an AI bubble. It was really in the data center space in terms of, you know, with things like deep seek or, you know, as technology changes, the thought is maybe you don't need as much data centers as we thought, right, which, of course, then affects

Maybe we don't need as much power as we thought. A lot of that's still up for debate. Well, the nuclear stocks were down 8%, 9% yesterday on that news that Microsoft was lowering their ambitions on building data centers. In the meantime, NVIDIA is buying a company that actually builds data centers and then rents them out.

So NVIDIA still sees robust demand. But as I look, here's some of the data center indicators. There's two companies that really make the air conditioning for these data centers that is appropriate and meets the standards that the data centers require. The first one is Aon.

which the symbol is A-A-O-N. And we owned Aon for quite a while. We sold it at $106.81 for a very nice profit. It's down to $81.65 now. So it's come down $25 a share, which is pretty big, 25% almost, since we sold it.

And that's just an indication of, you know, that the expectations for data center growth was a little bit too buoyant. The other one that has the goods is Vertiv Holtings, VRT. They provide a lot of the infrastructure, including the cooling systems for these data centers. And Vertiv has been cut in half, really, over the last three months.

So the AI is definitely being tempered downwards. And you're seeing that in NVIDIA too. I mean, NVIDIA has come down. It's firm today, but it's come down from 153. It went down to 104. That's a pretty big drop, 35% drop. So obviously we were ahead of ourselves in data center expectations there.

And you've also seen the sell-off in Microsoft, which is ChatGPT. But now, you know, and then, of course, the energy to supply the data centers. We've seen a big drop-off in Vistra, a big drop-off in Constellation Energy, a big drop-off in Talon Energy. That's all the data center stuff.

All right, and that affected the chip stocks yesterday big time, that news that Microsoft was kind of toning things down on their data center ambitions. All right, Tesla. Where does Tesla fit into all of this? Well, there's a lot of different and wide-ranging opinions on Tesla.

If you go to the extreme, Cathie Wood has her $2,600 target price on Tesla. I was waiting for you to get to that. Yes, which is a little ridiculous, which she normally is. Wedbush sees the shares doubling, while HSBC, who does not like Elon Musk, warns of a 50% decline in Tesla. So take your pick.

2,600, the shares double or they lose 50% from here. We'll be right back. On a winter's day. You gotta go where you wanna go. Do what's on the do with it. Do the way you wanna go. Whoever do you.

And welcome back here to the final segment of today's Best Docs Now show. Well, Barry, I enjoyed my black and mahi Caesar salad.

And, you know, the wait at the Columbia just to get the salad there, you know, was an hour. One hour. I can't do that. I've got to go to bed at 8 o'clock. I can get up and look at a thousand charts and do a radio show and manage money the next day. Right.

But we had a nice dinner over at the Speakeasy, the clam joint, right? It was not bad. They make homemade pasta and whatnot. I didn't make it to Owen's Fish Camp. We're going to do that next time. And by the way, the owners of Owen's Fish Camp were very happy that we mentioned them on the air. They don't have the fire-roasted oysters anymore anymore.

But the rest of everything else they have. So next time we're in Lakewood Ranch, and two months from now, teaching a workshop at the Grove and meeting with folks for a couple of days and then coming home.

We'll definitely include Owen's Fish Camp on our culinary tour of Sarasota. Yeah, two locations there, if I'm not mistaken, right? Yeah, I didn't know about the one in Lakewood Ranch. I can't wait to see what's going on out there. I stayed there a couple years ago out that way, and I could see it was booming, but I had no idea.

I still like the place downtown with the Italian sandwiches. I can't think of the name right now. Yeah, that's a good one. Oh, man. They don't need any help from us. No. They're always busy. Yeah. So, anyways, we can't wait to get back there. And the market has improved here. Let's just get a little update. It's a little green on the screen at least. Yeah. Let's just get a little update here. Yeah, it's gone green. How about that? I told you to get used to Trump. Yeah.

I don't know. What will he do today? S&P is up a quarter of a percent. NASDAQ is up 30%. I guess if you really don't like the direction the country was going, you're happy. And if you like the way things were going, you're very upset with all the change that is happening so quickly. So anyways, let's take a look underneath the surface of the market here.

And as always, you know, I always remind folks of what the earnings picture looks like for the overall market. And I explained that to a lot of people as we met with them. How do you know when it's time to get out? You know, I said the problem with asset allocation, it's based on your age. Well, what about earnings in the S&P 500 if you're invested in stocks? And what about interest rates if you're invested in bonds?

Shouldn't that be taken into account more than anything, especially your age? Age is a factor way down here because, you know, there's people that are 80 years old that want their accounts to keep growing for their children because they're going to pass it on to them.

So there's all kinds of different circumstances, and of course as a certified financial planner, Barry, you understand all of this, but I say conditions in the world are a very important consideration, paramount.

as how much to allocate to equities and how much to allocate to fixed income and safer investments. Well, it can keep you out of trouble, right? You want to minimize those drawdowns, and being active helps you sidestep some of that drawdown. Well, I mean, 2022 was the...

Greatest example, recent example, we knew interest rates were going higher because the Fed signaled it. And did Silicon Valley Bank get out of the way? No. They loaded up or they had a huge portfolio of long-term, long duration. That's the worst place you could have been. And I told the folks, we bought an inverse fund against the bond market that went up like 90% that year.

Is it TBT or TLT? TBT. Yeah, TLT is the long side. TBT is the short side. And the other subject that came up that they say, Bill, you don't talk enough on the air about that.

People think that they've got to buy a dividend-producing ETF or a dividend-producing stock to get income. No. The vast majority of your income is going to come from capital appreciation. There's always going to be... So I tell people, okay, you've got $400,000 with us.

Take 5%, 6% a year and get a check every month for $2,000 or $3,000. Well, how can I do that if my dividend yields only 1%? Well, don't forget capital appreciation. When I got in the market in 2000, the Dow was about $4,000 or $3,500. Now it's $45,000.

95% of that has come from capital appreciation. So every month I get a little, we have people set up to get a check every month from their account. And it's my job to make sure there's enough cash there on that date to

There usually is. Very rarely do I get it. And if there's not, I get a little thing. Hey, you've got to raise $2,000 for so-and-so. So I'll sell a portion of a stock that doesn't have any gains in it or maybe a small loss so there's no capital gains consequences.

Take your income from the gains in your stock. That's the beauty of it. You know, you can't do that in your house. As your house goes up in value, yes, your balance sheet swells, but it doesn't change your income. In the stock market, I can't sell off $2,000 worth of my home and take that money and use it. That's the beauty of the stock market. Yeah.

You have totally liquid assets that can be sold in 10 seconds, and you've got cash available if there's not enough cash available to get that monthly check. So, you know, look, on a very conservative basis, people will say you can take out about 3% or 4% a year. Well, maybe you can do a little bit more than that.

You just have to keep your portfolio in growth mode and protecting it on the downside. So you're going to get most of your income from your capital appreciation. That's the beauty of the stock market. You're dealing with liquid things that are in little increments that you can sell when you need cash.

All right, well, we're out of time for today. The value fund is, I am funding it today with me, my own portfolio. One of my portfolios is going to be invested in the value fund. That's the model.

Is it good enough for Bill? Is it good enough for you? We'll find out. But anyways, we're going to buy relative value stocks that have been beaten up a little bit, but they are still best stocks now. To make an appointment with us, 855-611-BEST. To get the four-week trial and watch what we do on a daily basis, GundersenCapital.com. GundersenCapital.com. Have a great day, everybody.

This show is not a solicitation to buy or sell any securities. Bill Gunderson or clients of Gunderson Capital Management may have long or short positions in stocks mentioned during the show. Past performance is not indicative of future performance. Gunderson Capital Management is a fee-based registered investment advisory firm. All accounts are held at Charles Schwab. Schwab is a member of SIPC and FINRA.