Market Volatility, Tariffs & Fed Moves: Anastasia Amoroso’s 2025 Investment Playbook
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Welcome to the Risk Reversal Podcast. Guy Adami. Today I'm joined by a friend, but somebody who when she's on television, regardless of network...

You have to listen and turn the volume up. That's Anastasia Amoroso. She is the Managing Director, Chief Investment Strategist at iCapital. How are you? Great to see you. Pretty good. How are you? I'm well. You were here last in October 11th of last year. A lot's changed since then. We were just talking before this show about what really was transpiring. And we talked about how the Fed had just lowered rates, but interest rates started going higher.

So let's just sort of look back real quick. I'm sure there have been some surprises along the way. Speak to that. Yeah. Well, the surprises in retrospect could have been and should have been anticipated. And, you know, Guy, in the beginning of the year, we released the outlook, and I titled it The Year of Solid Underpinnings and Plenty of Wild Cards.

and all these wild cards that we're dealing with right now they should have been really fully anticipated and some of them i think turned out maybe a little bit better than expected clearly the tariff wild card turned out worse than expected and so what we said in the beginning is it's these wild cards that will ultimately determine the outlook for this year and the true uh perspective outcome for this year in terms of performance and

At the moment, it's not looking like those solid underpinnings are going to be enough. Has the volatility, not so much the spikes in volatility, but the persistence of volatility for the last month, month and a half, has that surprised you? Is that something you think in this environment makes sense? Yeah, no, it doesn't at all surprise us. And in fact, there was one feature that we thought would be a feature of this year, which is more public market volatility, which is why we recommended leading into private markets and leading into alternatives.

Look, if you look at the policy uncertainty index, it is at all-time highs. The tariff news, obviously, is at all-time highs. And if you go back to the 2017-2018 playbook, that's what happened in 2018 as the uncertainty spiked, so did volatility. So the challenge right now, I think, has been showcased by

United, for example, issuing guidance and issuing these two scenarios, which is base case and recessionary case, and you sort of don't know what probability to assign to each one of those. So how do you navigate that? For United, and I'm doing this off of memory, but I think the base case for them for the forward guidance was $11.50 to $13.50, and recession case was $7 to $9. So they're basically telling you

pick a scenario and then within that scenario, try to figure it out within the framework, which is wide as hell. Right. Well, there's a couple of ways I want to answer that. You know, first, we're just going to talk about the S&P 500 math, but then I want to decouple how do you think about that in the portfolio for short term versus long term money? So if you think about the S&P 500 math, $267, that's what we currently expect for 2025. I don't think anybody thinks that holds.

because that number is about three and a half percent lower than what we saw just a few months ago. But what we need to price in right now is the earnings downdraft from a 16 percent give or take increase in the effective tariff rate. So from

my sort of rough math that probably shaves off, let's call it 5% of earnings growth. So you discount that you're probably at $257 in earnings for the S&P 500 being generous, keeping the current multiple of 19 that gets us to about 4,800 on the S&P. So I think 4,800 to 5,000 based on what we know right now, based on not having any deals, that's probably fair value.

for investors. And it makes a lot of sense. We've talked about that. And by the way, as you know, that's where we recently traded down to in the S&P and bounced from effectively. So let's play the game out a little bit more. If we're entering a period of slowdown, and I'm not putting words in your mouth, but that's just sort of my view.

Is it fair to say that maybe even the multiple might be too high? We've seen before in times of unrest and uncertainty and slowdown. I mean, we've seen the market trade with a mid-teens multiple. Yeah, that's right. I mean, for a recessionary multiple, if you really want to go that far, that's 16 times is what we would apply. So that gets us closer to 4,200, 4,000 on the S&P. That's not the current call. But I do think, you know, from a multiple and earnings perspective, it's not a great backer.

backdrop to be overly constructive on equities near term. Now, of course, you and I both know that there could be a headline, there could be a deal, there could be some positive catalyst. So that's why that second point that I wanted to talk about is how do you invest when the answer is I don't know, which is the case for a lot of investors. I think you have to think about your current portfolio versus if you have cash on the sidelines. And for the current portfolio, from my perspective,

I still want to be defensive. I want to, and again, we've talked about this coming into the year, I want to prioritize high quality sectors, domestic sectors, defensive sectors, so utilities, staples, to some extent real estate. I want to lean into private credit so you can get paid while you wait out the volatility. So that's the existing portfolio to kind of hunker down and

you know, ride out this period of volatility. But, you know, Guy, you and I both know that investors, when investors are as bearish as they are, the market draws down 20% pricing and 70% probability of recession. Typically, those tend to be great entry points into the market if you can be long term. So if you have cash,

outside of that existing portfolio, I think you use this period, not this moment of adjustment, but this period of adjustment to leg into it. So we're sitting here on Holy Thursday, Good Friday is tomorrow as people are listening to this. We've heard from a pretty decent swath of companies in terms of earnings.

Anything surprise you specifically on the bank side of things? Because for me, I thought the quarters across the board were okay. I thought the fact that JP Morgan took that loan loss provision as high as it was, that sort of surprised me. But did you glean anything from sort of bank earnings?

I think banks actually stand out as one of the more resilient sectors in the current environment. When you look at, for example, the cost of goods sold that are imported across the different sectors, it's one of the lowest percentages for banks, along with Staples, for example. In this environment, the banks are actually benefiting from yields that are still lower than what they were coming into the year. That's positive mark to market on some of those assets.

And also, you know, the very vocal objective of the administration has been lower yields as they fall that should, in theory, boost lending activity. And by the way, Guy, you know, yesterday in the retail sales report, 75% of that pop in retail sales came from autos because consumers were fast tracking the auto purchases

chances are they're not buying that with cash. Chances are they're taking a loan out. So I think lending growth could maybe surprise to the upside. And it was very low in consensus estimates coming into the year. And lower rates also helped the banking sector. So the bar's been, I mean, you put a note out, I think you made comments around this in March. How the bar has been lowered such where there's a real opportunity for some upside surprises, I'm sure in sectors, but in the market as well. Yeah.

I guess there was a longer-term opportunity for upside surprises in a couple of weeks. You know, when you think about the banking sector, again, the upside surprise could be in lending. The upside surprise is not going to be in capital markets at this rate. The upside surprise for the overall market at this point is tariff resolution. And I do want to say, Guy, as...

cautious as I think about the next, let's call it three months. You know, I think the next quarter, this quarter right now is about price adjustments. It's about supply chain readjustments, probably some margin pressure. So that's not overly positive. But if we play the longer game and if

you know, regardless of how you feel about the administration, if you think that they can be successful at actually bringing investment into the United States, by the way, also supporting that with low corporate tax rate and potentially some expense depreciation immediate. So that's a fairly constructive environment to onshore investment in the United States.

And possibly along with that, you get deals that get cut that lower the trade and non-trade barriers. So that's a positive outcome longer term of all of this. I guess that's the biggest potential for upside surprise. But I guess it's just to go...

Getting there is going to be, and that's what we're dealing with now. I don't disagree with you, by the way. If they're able to sort of pull that rabbit out of the hat, I think- It's a gamble. It's a gamble, but it's the bridge to get there and how long it takes and what people, I guess, are willing to tolerate, which is where we are now sort of in the sun. Maybe a lot of this is noise.

But a lot of the real things going on. I know you saw this last week. I don't know if you're traveling or not, but you definitely saw it. I mean, the bond market was melting down. I think it was Tuesday night of last week or whatever it was. And I think enough so where it caused the president to make comments about, I saw Jamie Dimon on with Maria Bartiromo. I saw what's going on in the bond market and I'm aware of it to his credit. Is that a tremor or is that just sort of a one-off in your opinion?

No, I think there is a tension that's being paid to the stock and bond market by the administration. And what's interesting, Guy, we talked about this 4,800 level, 5,000 being the fair value. It seems to also be the area of where maybe the Trump put actually does kick in. And look, when you start talking about the U.S. Treasury market, it's a whole new ballgame. You know, it determines the cost of financing of everything in the U.S. economy.

and that could be that straw that breaks the camel's back. I don't want to play out the scenario of what that happens, but I'm very encouraged that the administration did rein it in after seeing that. But, you know, look, these are the types of tremors that we're likely in for this quarter, maybe next. You asked how long does it take to get to the other side, and it's probably a few quarters time at least. So let me ask you this. I mean, obviously we heard from Jerome Powell this week. He seems sort of dug in in terms of

of being continuing to be data dependent and making sure that, you know, things are moving in the direction that they need to move in order for them to move. Obviously, the president is not really on board. As a matter of fact, I think earlier today, and I'm paraphrasing to a point, but in a tweet at the end of the tweet, President Trump said, speaking about Jerome Powell, his termination can't come fast enough. And I think that's an accurate quote.

With that said, if that were to happen, let's just play it out a little bit. What do you think happens in the markets? I mean, I think...

it creates some uncertainty. I think it's for the bond market. I think that could create some consternation at best, you know, some flat out panic selling at worst. Well, I don't think we need to see any more uncertainty injected in the bond market and also injected around this whole notion of U.S. exceptionalism, U.S. stability. So I think, and of course, all we can do is read the tea leaves of those tweets and those messages. I don't think he actually means to outrive fire

Fed chair before the end of the term, which is May of next year. You know, I think it just means he is not going to nominate him and support him for the following term. But it is a really hard place to be Fed Chair Powell right now, isn't it? Because you certainly don't want to play into, you know, to play the game that the president is playing. You don't want to give in. You don't want to be seen as being pressured politically. And I think the challenge for the markets is,

the chair will have to see the data deteriorate enough before they step in. And so, you know, that's why I also think the volatility is for now here to stay is because we need to see that data deterioration, which the market is not going to perceive very well before, let's say, two or three week data points later. That's when the Fed ultimately steps in. You know, a lot of these, a lot of stocks, but specifically the stocks we seemingly talk about every day, the seven to 10 names that dominate

the airwaves, they've all recently traded down, in some cases traded through the lows we made back on August 5th of last year, and I know we remember what happened then. Is that enough, I guess is my question. A lot of these were probably stretched on valuation, but

Was that enough to say, you know what, I'm not saying this is the bottom, but this is a place where if you still believe in the fundamental stories, I mean, this is about the best entry point we've seen in a while. Look, it is. And, you know, typically when you think about investing, you look at valuations, you look at technicals and you look at a catalyst. And the first two things are probably checked for some of those max seven stocks.

We're looking at the lowest valuation since 2022. We're looking at certainly oversold technicals. But, Guy, I don't think those two things work on their own without that positive catalyst. You know, the other thing, when you look at the technical setup, we are in a bear market right now. You've got the 200-day or 100-day moving average below the 200. That typically is not an environment where oversold technicals

technicals and low valuations work. So what I would say is I would like to see a positive catalyst emerge first before really stepping in and adding to tech. But I think the story, because the story for tech has changed quite a bit. It has. You know, if you think about all

all the potential slowdown fears that we have in the US economy, Meta is not immune from that and Amazon is not immune from that. So that can affect the top line. And then of course they have to worry about the bottom lines because communication services technology has the highest share of imported cost of goods sold. Not to mention also the retaliation that may come from Europe or China, et cetera.

So as tempting as it is, you know, I guess for a short-term investor, I would want to see that turnaround and a positive catalyst. I'll let you know when it comes. What, I mean, you said a potential deal. I think all other deals are sort of sideshows. The deal with China is the one that people wait.

Yeah. Is that something that, in your opinion, is imminent or is this thing is this something that's going to take a lot longer than the market realizes? Well, go back to 2018. You know, all of 2018 and part of 2019 was about getting the deal done with China and the stages of negotiations and back and forth that we had to go through. It's not a matter of weeks. What's happening between U.S. and China right now is a complete economic standoff and maybe geopolitical and military standoff. And

I do think it's a bit of a change in the world order because, Guy, when you think about what the administration, I think, really worries about is what might China do with the U.S. semiconductors beyond deep sea? What might they do with the military applications? And what does this mean for Taiwan? And so I think it is not as simple at all as China needs to import more goods to

from the United States. It's really not about the trade deficits. I think it's more about geopolitical fears and trying to insulate yourself from those. So let me, we had Howard Lutnick on Fast Money a week or so ago, and I asked him the following question. I'm curious your thoughts. And this is how I set it up.

I said it's pretty clear that the administration believes that all trade deficits are bad. If we have a trade deficit, it means we're getting ripped off. I said that can be true. But what I said is I don't think by definition a trade deficit is a bad thing. And I think that's where I have this sort of disconnect. So my question to you is, by definition, are trade deficits a bad thing? Because as I also said to him,

We are 5% of the global population here in the United States. We're 30% of the global economy, global GDP. It's hard for me to wrap my head around with those numbers justifying or saying that we're somehow getting ripped off. So just thoughts on it, broad thoughts on that. Well, trade deficits are...

are not an accident. This is how we've wired the global economy to run for the past 30, 40 years. And if you take the semiconductor industry, for example, if you read the history of the semiconductor supply chain and how it was built out, it is not an accident that semiconductors get assembled in Taiwan or China. It is not an accident that Europe has the best lithography

equipment in the world is not an accident the us dominates the design part of it so that's what we've designed the system that we've collectively designed over the last number of years and i mean as a result though the unintended consequences is that it does reveal vulnerabilities you know probably 30 years ago

the administration at the time would not have predicted that China is going to become the huge geopolitical rival as they are today. So perhaps the losses are evident today. They were not possibly predicted 30 years ago. So that's one thought that I have on that. The other thought is, obviously, when you look at the share of U.S. manufacturing,

by some metrics, we're actually exporting more manufactured goods than we ever have. But if you look at the percentage of GDP, it used to be 13%. It's now closer to 10% that manufacturing represents as a percent of GDP. But more so than a percentage, it's about the jobs. And Guy, you travel, I'm sure, all over the US. And I remember going to places like Rochester, New York, or somewhere in Ohio. And

I was at a conference in Las Vegas years ago and questions were popping up back then. Do you think it's fair that China is dumping cheap steel into the United States? And so, you know, these are the types of losses that we're trying to make up for. And the last thing I'll say about that, it's about sustainability and self-reliance and bring critical supply chains back to the U.S., which we didn't think about back before COVID, but we have to now.

Do those jobs – this is now we're getting into sort of uber macro stuff, but can those jobs – can we – these hollowed out towns, which I'm extraordinarily respectful of, and it is very disappointing and upsetting, but can you put that genie back in the bottle, I guess, is what I'm saying. I mean, or is that just – is that –

sort of gone bygone era? I think not in the same way. We can't replicate the past. I think we have to reinvent the future here. And, you know, look, I think the future, as the administration sees it, as I would call it, the factory of the future. So you bring some of the production back to the U.S., you automate production,

the factory, you infuse robotics, you probably have 5G connectivity that the robots run on, and you have what's called digital twin software that somebody has to operate to optimize the factory. So I think that's the future and that's the vision. It is gonna require different skillset that we've had years ago. The other thing I would say,

Obviously, everyone doubts that you can assemble semiconductors in the United States or you can assemble the iPhone in the United States. The workforce in Taiwan, the workforce in China has been specifically trained to

on this process for a very, very long time. So I think to replicate that would either take a really, really long time or outstanding technology. - Well you should be Commerce Secretary 'cause you just explained that a lot better than Howard Lutnick's been explaining it, but probably for another show. So let me ask you this. When you try to forecast things and figure things out,

one of the things you have to have a view on is the job picture. And unemployment rate in the country, I think it's 4.2%. Definitely some cracks being felt, but nothing yet to be overly concerned about. But with the backdrop and everything we've talked about, to me, there's an inevitability of the unemployment rate going higher. And when you have an economy that's built on consumers buying things 70%-ish, is that

That gets a little dicey if the unemployment rate starts moving. And I know you know this, and I used to talk about it with Liz Young-Thomas. It moves at sort of escape velocity once it starts to go. And Fed cut rates, don't cut rates. I mean, once it's moving, it's really hard to stop. Right. It probably takes some fiscal policy, not just cutting rates. I do have some concerns for the labor market, and I guess –

less concerned about it this week than I was last week when we had reciprocal tariffs on everybody. But if you think about, Guy, what has to happen in this quarter, companies have to think about how do they either pass on the cost increases due to tariffs to their consumers, or they have to think about how do they rejigger the supply chains. There's cost involved in that, and there's capital cost involved in that. So all things equal, either margins get squeezed,

or consumers' wallets gets pinched. That is not a good backdrop for hiring. And so I do think that tighter corporate margins likely means to less job availability and potentially some layoffs. So it is...

And by the way, throw on top of that, the fiscal restraint that's also working itself through the system. So it is definitely a looser labor market that I would expect. I agree with that. And that's to me, that's always been, not always, for the last year and a half, two years, that's the final component of the potential of

a stagflationary environment which makes the fed's life even more difficult than it currently is so it was a month it was a year ago almost to the day where jerome powell said in response i think to a question i see neither the stag nor the flation or stagflation that you know that was somewhat glib and you know whether he should have said it doesn't really matter here we are though everybody seems to be talking about that possibility now is that is the unemployment picture like the final piece of that puzzle

Yeah, I'm still not in the stagflation camp because you do have a scenario where, especially if we're talking about tariffs on China, you can have the substitution effect and you can certainly feel some price pressure. But most likely that is a one time reset in the level of prices and does not necessarily mean that we're going to have sticky inflation forever.

And at the same time, if it does mean tighter corporate margins and some layoffs, then I do think the Fed is going to have to worry about the growth outlook more so than the inflationary outlook. And I have to look at the chart again, Guy, but at the depth of the sell-off last week, if you looked at inflation break-evens, five-year, five-year inflation break-evens, they had collapsed.

collapsed because the markets started to worry much more about growth than they did about inflation. So the Fed does not want to go there. They don't want to admit it. They don't want to play into the president's hand. But I think ultimately, that's what they may have to react to.

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Credit spreads, I don't want to say blew out, but they certainly moved last week and things have calmed down a little bit. But is there anything sort of on the credit horizon that you've noticed or starting to pay attention to? I don't want to say that's giving you concern, but just sort of grab your attention.

Yeah, I mean, the story of last week in credit has been about lack of liquidity and, of course, rampant volatility that all things equal just causes these outside technical moves. It was interesting because the publicly traded BDCs, so the private credit loans that are packaged in publicly traded vehicles, they traded as poorly as equities did. And I think some of that was also due to the credit concern.

But when I look at credit fundamentals today, and let's talk about private credit, for example, because the Fed did manage to lower interest rates, the interest coverage ratios for private credit loans improved. They're 1.8 times, which is off the lows of 1.1, give or take. So I do think there's enough buffer, there's enough coverage there. And look, for the time being, we don't have an economy that is collapsing or going into a recession. So I think...

at least on the direct lending side, the fundamentals hang in there. The risk for high yield, for example, or the risk for leveraged loans is they're at the whim of the market technicals. And so that's why I would focus more on the private side of credit versus public.

Something we talked about last year and it's sort of play out. I thought there'd be a scenario where you could start to see yields go higher and the dollar go lower. And Janet Yellen over the weekend was on a lot of the Sunday show, one of the Sunday shows. And she was talking about that specifically and saying it was raising some concern with her. So.

Forget about interest rates because they've seemingly sort of found a home for now. But the weakness in the U.S. dollar over the last month or so is noticeable. So thoughts on...

that and what the continuation of that could potentially mean. Right. I think some of the weakness in the dollar has to do with the expectation for real yields. And, you know, inflation does spike if the Fed holds steady and possibly cuts interest rates. You know, that's not a great interest rate differential for the U.S. dollar because for a long while we've had that advantage and that's starting to erode. But perhaps the more concerning thing that I think investors are pricing in is if the U.S.

administration cannot be counted on. If we can't be counted on as a reliable trade partner, will countries continue to diversify away from the dollar? You know what's happening. You know what's happening in China. You know, it's happening elsewhere. So I'm not in the camp that that's an imminent concern, but I think that's part of what's being priced in.

The gold market is now top of mind for everybody. It was sort of hiding for a long time, but now everybody seems to be talking about it. Thoughts on that? Thoughts about, forget about where it's going, because I don't think that's necessarily an interesting conversation, but what it means, I think it's a more interesting conversation.

Well, I mean, talk about all the things that could possibly go right for gold in the last six months. First of all, you had this collapse in real yields. Then you had the geopolitical concerns about the Middle East and Russia, Ukraine, and now the world economy. So that's why investors have flocked to gold. It's probably

It's probably not the right moment to continue to chase that trade, but it is a reminder that US stocks, international stocks and high yield, that's not a diversified portfolio. - What do you, do you think it's, is it sort of some cautionary tale out there because the buyer of gold outside of just sort of, you know, the general public at Costco every month, I mean, the real buyers of gold have been central banks, specifically the Chinese now going on over four years.

Is that something that people should pay more attention to? Because there's clearly some...

diversification away from the dollar going on. Right. Well, that's a really good point, actually. And that could be the continued pillar of support for gold, because if you look at China, for example, and if you look at the share of their central bank reserves that are allocated to U.S. Treasuries, that share has fallen fairly significantly over the last number of years. And I assume if we look at the percentage of gold that's risen, that might be happening all over the world. So that's certainly a flow that supports gold.

I tend obviously to focus on what can go wrong. There's a lot that can go right. So I know, and you're an optimistic person. You've been right far more than you've been wrong. What out there that you're seeing now is giving you some optimism?

Well, I guess it all has to focus on the trade deals. And what's given me some optimism in the last week is that there does appear to be a level where the administration feels the market pain, feels the investor pain, feels the consumer pain, and they're willing to step in and don't have a blanket approach that, you know, that does that destroys the market. So that's the first thing. The second thing is, you know,

There's scope for deals to be cut and there are countries that are willing to reduce their trade and non-trade barriers. And if we just envision the world, let's say, you know, sometime by the end of the year, if those trade deals actually do get done and if we end up with trade deals, no tariff barriers, then

If we end up with investment that flows into the United States and we end up with more exports out of the United States to the other countries, that is a pretty good scenario for just about everybody involved. So it's a big if.

However, I think we have to allow for that possibility. Europe was not a place to be for the longest time. And over the last few months, European equities, especially European defense stocks, have done very well. Are there places, I mean, we can talk about China. They had a huge run up in China last fall, subsequent sell off.

then the ensuing run up, bit of a sell off again. So China's been a bit of a sign curve. Are there any places out there ex-US that you're finding interesting? I think pockets. You mentioned European defense stocks, and obviously they rally quite a bit, but that is likely to be a multi-quarter, a multi-year theme. And

if European allies cannot rely, I think initially what's likely to happen is they will continue to buy the defense equipment they need from the United States, but some of the largest defense companies are actually in Europe. And so spending on that domestic equipment is likely to be prioritized. So I think that's kind of a subset of Europe that should continue to draw attention.

More broadly, the European consumer has suffered from high interest rates, let's say a year ago. But if you look at the ECB rate cut today, two and a quarter percent, it really gets us back to somewhat low level of interest rates in Europe. So when you think about the housing market in Europe

and how much floating rate exposure those mortgages have, it's starting to be a tailwind. Low interest rates are starting to be a tailwind to some of those European consumers. So much like you might want to focus on U.S. domestic everything, you might want to focus on the European domestic consumer and areas of that consumption that could benefit from lower interest rates. The retail sector has been

in some ways easy to figure out, in some ways very difficult to figure out. Seemingly Walmart's world, Costco's, you throw TJX in the mix, their world and everybody else's living in it. The flip side, Lululemon's been a disaster, probably a lot of self-inflicted wounds there, but even the higher end, we heard from LVMH earlier this week. So how do you make sense of

retail here in the United States? I think if there is any one sector in addition to tech that is as tangled up in tariffs, it certainly is retail. And I do want to decouple consumer discretionary from consumer staples. And if you look at some of the consumer staple stocks, especially the food-related ones, most of their inputs are domestically generated. So they're not going to bear the brunt of the burden of China tariffs. But that's not the case for a lot of those discretionary retail names.

And if you think about who's going to be most actively rejiggering their supply chains is those retailers. So I think it's a tough backdrop for those stocks for now. And speaking of luxury, I know that it seems that the luxury brands are going to pass on the

tariff increases, but stock markets are down. The net worth is down and I think that's going to drive the propensity to spend for the high-end consumer. Do you think consumer sentiment here in the United States is as simple as a deal gets done with China and people start feeling better about things because

Theoretically, the stock market gets back on the horse. I mean, is it just that simple an equation or is there something else going on? Was that just the final straw of some of the forces that people have been feeling the last couple of years?

I don't think it's as simple as getting a deal done with China because you get done with China, but maybe you impose a semiconductor tariff or maybe you go after the pharmaceutical industry next or what happens with the deal with the European Union. So there's too many unanswered questions. So I don't think it's a quick fix for consumer confidence.

But what I will say, Guy, is that when you look at consumer confidence and you zoom out from 2022, it's not like consumers have felt great over the last three years. There are times where we certainly felt better than we did today, but we never got to those 2021 peaks.

So from the perspective of the economy, you can feel bad about things, but it doesn't mean that you don't spend. And case in point, consumer confidence is at dismal levels, and yet we have consumer spending that's running at 4.6% year over year. And we talked about that earlier, but do you think that's just a function of...

whatever pull forward you want to call it, people just trying to get ahead of what they deem to be the inevitable in terms of price raises on the back of tariffs? Some of it, some of it. But even in March before this Liberation Day announcement, you did still see credit card spending, for example, that's running at 3% or 4% year over year increase. So I don't think it's only that. What is your takeaway just in terms of

a lot of the day-to-day, how do people drown out the day-to-day noise and focus on the things as you started the show with understanding whether you're an investor, trader, longer-term outlook? How do you sort of rid yourself of, how do you do it personally, try to stay above the fray? Yeah.

Well, first of all, you try to understand what is actually currently being reflected in the market. And when you looked around, I guess after that 10 or 15 drawdown that we had in two days, you look around and you say, well, as bad as it feels out there, we've actually priced in a 70% recession probability.

You know, maybe we need to price in a little bit more, but if the recession ultimately happens, we priced in a big chunk of that. So at that point, it is too late to panic. So I think that's why investors also need to think carefully about the buckets of money that they have. You know, there's short-term liquidity and you certainly don't want to be making long-term bets with that.

In this environment, it is hunker down, it is focused on income, it has prioritized some of the hedges, and that's how you manage the volatility near term. But at the same time, there's got to be a bucket of longer term money because you don't need all of it for the short term. And from that perspective, you look at the stats,

And if you look at this level of bearishness that we have, which now I think is going back to the same level we saw in 2009, from this level of bearishness, the forward 12-month return typically has been an average of 23%. You could look at other stats where we had significant market drawdowns and a 12- and 24-month basis, you had significant recoveries. So for your long-term bucket, that's what you focus on. That's where you step in, and you don't look at that day to day.

The semiconductor trade, and I'll end with this. I mean, as much as people want to continue to talk about it, that sort of topped out last summer. Yeah. And the AI trade, depending on who you're looking at, but NVIDIA made its all-time high in January of this year. And obviously, none of those stocks have traded particularly well. So I'm not going to suggest the trade is over, but are the best days in the stocks in terms of performance

over. We just sort of found this middle ground we're going to muddle along for a period of time. For now, for now, the best days for semiconductors have been behind us. And let's talk about the backdrop going forward. The backdrop is export controls, potential for decoupling of supply chains. And even if some of that doesn't happen, the backdrop is likely for the manufacturing sentiment to decline.

and with the cyclical activity in the world to decline as well. That's what happened in 2018. It was not a great year for semiconductors because they move the way that cyclical sentiment moves. So I wouldn't be surprised, continued weakness in auto semiconductors or memory or very cyclical parts of it. So I think

That's the situation for now. At some point, we either price in that full recession or we have a trade deal. And that'll be the turnaround moment for semiconductors. But I will say this guy, if you take a step back and if you think about the artificial intelligence theme, that's not gone away. That's going to continue. But what investors should appreciate is the type of investments you make for AI have to change depending on what stage of the AI build out you're in.

And for the last couple of years, it's been about the data centers and specifically buying up enough GPUs to train the models, maybe inferencing as well. But if you think about the 88% of the total addressable market for AI, it's not hardware, it's not semis, it's actually software. And so that's why the one thing that I would be adding to, especially from the long-term perspective is,

AI software, software that has built in AI capabilities, because I think that's ultimately the proof point of AI is what applications using AI will be the killer apps that we can use in our life. So that's the segment I'm looking for.

Well, it's always great to have you on. You know, as you point out, as much as people wanted to say it's different this time, you know, semis are extraordinarily cyclical, as are the banks. And we're starting to see, you know, in real time how that's playing out. But we had you on in October, back here in April. Hope to have you on a lot sooner than that. Anastasia, thanks for joining us. Thanks so much. See you soon.