Deep Dive
Shownotes Transcript
This is Barron's Live. Each week, we bring you live conversations from our newsrooms about what's moving the market right now. On this podcast, we take you inside those conversations, the stories, the ideas, and the stocks to watch so you can invest smarter. Now, let's dial in.
Hello, everyone, and welcome to Barron's Live, our weekly webcast and podcast. I'm Lauren Rublin, Senior Managing Editor at Barron's. Thanks for joining us today to learn more about the markets. My guests are Barron's Deputy Editor, Ben Levison, and Gargi Chaudhuri, Chief Investment and Portfolio Strategist for the Americas at BlackRock, which I believe is the world's largest money management firm.
Gargi and Ben, it is another Manic Monday on Wall Street, and the topic du jour, Trump's tariffs. I think we'll start the conversation there, and we'll see where things go. I want to thank you both for joining me today on Barron's Live. Thanks, Lauren.
Thank you for having me. A pleasure. Gargi, we always love to start with our guests, so you're up today. I'm going to ask you, stocks are sliding for a second consecutive Monday on developments that have really rattled investors. Last Monday, the market sold off on news of DeepSeek's AI breakthrough. And today, of course, stocks have been falling on news that the Trump administration will impose bans
tariffs on Canada, Mexico, and China. Although sometime this morning, the Mexican tariffs had been called off for at least a month. How are you sizing up this confusing situation at BlackRock? What do you see as the economic implications? And what do you make of the market's reaction? Why don't we start there?
Yeah, absolutely. And to your point, it's another second Monday in a row where obviously a lot of volatility in the markets. We saw that last week with the deep seek news as well. I think it's important to take a step back and provide a little bit of context on where we are with the global economy and especially the U.S. economy, even before any of this.
So one of the things that should provide all of us a little bit of comfort is that the U.S. economy is growing currently or as of the end of 2024 at 2.8%. We think that that is a really good starting point.
As we sort of digest, as we in the market digest this news around the 25% tariffs on Canada and Mexico, excluding energy, which is 10% in China, of course, is at 10% as well. I think what we're going to focus on is around, you know, what is the extent of how long these tariffs last? That's number one. To what extent is there going to be retaliatory tariffs?
To what extent is there going to be other ways in which consumers can either sort of change their behavior in terms of buying? To what extent is it inflationary? To what extent are companies absorbing some of those costs? So these are some of the things that we're going to learn.
Obviously, immediately what comes to mind is that at some point this is going to have a slightly negative impact on growth or could have a slightly negative impact on growth. And inflation is already sticky. We saw that from the core PCE data last week. And perhaps at least in the short term, this can have a little bit of an inflationary impact as well. So I'll pause there, but I know there's a lot more to discuss on what investors are thinking.
Well, that's a lot of questions, things that we have to wait for. How do we size things up today? The market has pulled back. I think it's given back some of its losses. And we had an interesting question from a listener. Is today's pullback an indicator of doubt about the wisdom of the tariff strategy, or is it just concerns about the inflation that you mentioned?
Yeah, it's very much about a question on the pullback that we're seeing in risk markets. It's very much a question on what does this mean for corporate profitability? To the extent that these tariffs do go on and stay for a long period of time, on one hand, consumers may pay a higher price.
But on the other hand, what could also happen and will most likely happen is corporations sort of absorb some of these higher costs and therefore lose some of the margins. So the combination of both is going to have an impact on equity markets. And I'll also say that just in the last 24 hours,
There's a consumer sentiment impact of this. If you're learning that prices that you pay for avocados or cars or tequila could go up in the next week or so and will continue to stay high, you're going to perhaps spend less on other things. So this is a sentiment impact. This is a
an inflationary impact, and this is certainly a margin question as well. So all of that is leading together to have an impact on the markets, which, as we can see, is certainly driving, you know, the prices of inflation-linked bonds higher today. We talk a lot about
tips in our year ahead outlook. You can see tips doing really well this morning. You can see some parts of the fixed income market doing well, some not so much. And you can see broad equity markets taking a little bit of a step back this morning. We're actually coming back from the depth that we saw, but it's certainly still down on the day. And I think it reflects all of those facts that I just mentioned. So how do we square what you've just said about tariffs with Trump's pledge to to
sort of end inflation or put a cap on inflation, which he associated with the Biden administration, and also his desire for the Fed to lower interest rates, which seems not the strategy to take if there is more inflation. These seem to be very contradictory prospects. How would you sort through them?
yeah I think it's uh it's definitely important so I I do want to make one clarification uh around you know your point around the Fed and inflation so obviously inflation this time around in 2025 is is that a very different starting point than where we were in 2018 and 2019 the last time we were talking about and thinking about tariffs already inflation is
quite a bit above that Fed's target of 2%. Core PCE is closer to about that, closer to 3% at 2.8%. So we're already at a not great starting point.
So our estimate of what the Fed will do between now and the end of the year is that they're actually more likely to stay on a prolonged pause. And by the way, this was our view not just based on the tariff action from over the weekend. This was our view even coming into this year where we felt that after the 100 basis points of rate cuts that the Fed delivered and
The strength of the labor market, the strength of the U.S. economy, and the stickiness of inflation. All of those things means that the Fed can be a little bit more patient. They said themselves that they're not in a hurry.
I think that as tariffs evolve, they have to make a decision around how inflationary can this be. And let's remember that the Fed, what the Fed pays attention to is the rate of change, right? So tariffs, you know, tough for all of us if we pay higher prices and if it's a one-off hit.
for all your prices to readjust at a higher level because of the tariffs that were announced. If that keeps on happening, it's a rate of change that is inflation. So we can reset higher or we can have a rate of change. And to the extent that hopefully this is a one-time impact versus a rate of change and constant inflation, I think maybe that could have some different dynamics from the Fed. At this juncture, we think that the Fed is on pause. At least till sort of the second half, if not longer,
part of this year. And that has nothing to do with the tariffs. It's very much around where inflation already was coming into this year. Well, Fed Chair Jay Powell has certainly said not in a hurry to raise rates or to lower rates. Yeah. That was quite a few times. So let's move on to the stock market.
At BlackRock, you were bullish on U.S. stocks coming into the year. You expect another year of so-called American exceptionalism. That is, the U.S. market's doing better than anyone else. So explain your thesis to us and what it means for the sorts of stocks you favor.
Absolutely. And I think that the background of why we wanted to favor U.S. stocks and the kind of U.S. stocks, a lot of our research is focusing on these higher quality parts of the market, the parts of the market that are
very characterized by earnings growth, by low leverage, by a lot of free cash flow. I think that's really important. And that's probably more so important now that we think that the Fed is probably going to stay on hold for a longer period of time. Maybe they can still cut rates maybe one or two times by the end of this year, but rates are likely higher for longer, for even longer. We've been seeing those higher for longer periods.
we've been using that phrase for a while, but they stay higher for longer for even longer, which means that thinking about companies that already have strong earnings growth and that don't depend on a lot of leverage is really important. So the U.S. exceptionalism story comes in specifically with the first point I made as we started speaking today, which is around U.S. growth. U.S. growth is expected to be a
much above potential, potential GDP for the US is about 1.7%. Even at this point, if we expect somewhat of a slowdown, obviously depending on how the tariffs play out, we're still learning around that and how companies and consumers change their behavior as a result of tariffs and as a result of retaliatory tariffs, all of those are still unknown. But even if there is an impact of growth from that, the impact
on growth on the US is actually probably lower than the impact of growth on some of the other countries. And we were in a stronger place to start from already, as I mentioned, 2024 GDP already at 2.8% and probably slows down a little bit, but nowhere near recession-free territories.
That's very different. That's a very different picture from where European GDP is, for example, where you're nowhere near potential growth and you're a lot slower than that. So the U.S. earning story comes from the U.S. growth story and our view around owning U.S.,
especially large-gap quality U.S., looking at things like 2UAL, which is a ticker we talk about a lot, is grounded in that earning stability, which, frankly, as we're seeing earnings season flow through and we're seeing slightly stronger-than-expected earnings, that makes us feel better about this large-gap, high-quality focus on U.S. call.
All right. You mentioned earnings and you mentioned large cap U.S. quality stocks. So I'm going to switch to Ben for a moment and talk about some of those companies that are reporting earnings this week. Then we'll get back to you, Gary. We'll talk a little bit more about the sectors you like and the fixed income market. But first, Ben, I wanted to ask you, Alphabet is reporting on Tuesday. This has been a Barron's favorite. What is Wall Street expecting from the company? Alphabet, of course, being Google's parent.
yeah i mean this is this is a baron's favorite uh we picked it uh towards the end of last year it's done pretty well for us um and you know it despite it you know all the attention from uh the government wanting to break it up there's a lot going right for the company um wall street expecting a profit of two dollars and 13 cents which would be up from a dollar 64 so you're still getting the earnings growth you're also getting the sales growth 96.7 billion versus 86.3 billion
96.7 is expected. Last year was 86.3. The stock has done well over the last 12 months. It's up 43%, even though with the last three, it's up 19%. Those trading a little bit sideways right now in a range up near that high. I was reading an Evercore note and they were talking a little bit just about they expect a modest beat here. But I think a lot of the attention is once again going to be on their spending.
um on ai especially uh the deep seek kind of uh with deep seek now in the news um what the what is that going to mean for their for their spending what is it going to mean for their cloud business um and i think the the color there is probably going to uh move the stock more than the actual earnings unless they're of course miss which they never do but um and the focus is also going to be on the uh the margins and when it whether it can expand uh right now they're about 31.3 percent and there's a little hope that it's going to
got bigger. But the reason we've always liked the stock, I mean, it's partially because they have this powerful search business. They sell advertising against that. They make a lot of money, but they also have these other bets, which actually are getting close to paying off now. That includes Waymo, which does the autonomous driving. They're going to do the robo taxis, and they're probably further along than anybody is
And that actually has the potential now to turn into real money. So I think there's just a lot going right for Alphabet. And we'll be looking to hear about it on the earnings call, which is on Tuesday after the close.
Well, if all those other bets begin to pay off, the last laugh is certainly on Alphabet because so many people on Wall Street doubted them for so long. That's for sure. All right. Amazon reports on Thursday it hasn't done quite as well as Alphabet over the past 12 months, but the stock has really been a rocket over the past three. It's up almost 40%.
What is driving Amazon these days and what's on tap when the company reports? I think it's partially the strength of the consumer, but also the sense that things are turning in favor of it. It also has a cloud business. I think AI is going to make it a more profitable company.
And that should be helpful as well. Again, I'm looking at Evercore. They did a lot of writing on these two stocks over the weekend. But they actually think that Amazon will beat and then their guidance is going to not be raised, but will be kind of bracketed around the market.
um the expectations and that's should be good enough for the stock um revenue is supposed to go up about 10 percent um and you know it looks like a pretty solid quarter uh once again it's it's about you know we're gonna have to hear about how tariffs impact because they sell a lot of goods that uh get imported from china um and among other issues but it's one that again if you look at the uh the charts of the two stocks
Amazon and Alphabet look very similar. They've kind of creating these, they go up and then they go sideways for a while and they go up again and they go sideways. And right now we're sort of stuck in one of these sideways situations.
kind of periods, but they've held up very well despite the deep seek. The deep seek losses were made back very quickly. And even with the tariff news on Friday and then today, the stocks are doing, you know, they're hanging in there. Amazon is actually up 0.1%. That's what we're going to be listening for again. Deep seek tariffs. What's it all going to mean?
Right. The perennial questions this year, at least so far. Yes, they are. So, all right, let's look at some smaller tech stocks. Investors are perennially fascinated by Palantir. The company has been a huge winner over the past 12 months. The stock is up 385%. The company reports today. What are you looking for from Palantir?
Well, you know, the first thing is that Wall Street expects its profit to actually be profitable. It's supposed to earn 11 cents. That'd be up from 8 cents revenue to $776 million from 608. Basically, this is an AI stock that hit hard with deep seek but made back everything. And tariffs don't really seem to hurt it at all. It's, I think, very focused on U.S. businesses and whatnot. And a lot is going to be focused on how fast it can keep growing.
UBS expects it to be around 28%. And there's this dream that it'll actually get to 30% growth at some point, 28% should be good enough. But also just on this business model it has of using engineers to go into companies and help build out AI that actually works for the company is a very interesting one. It works very well for the government. So I think that's, people just wanna see that this company can keep growing.
You know, it's always hard. You said it's up 385% over the last year, which is incredible. It's almost doubled over the last three months. And, you know, that sets up a lot, you know, high expectations heading into the call. And so it's going to be paying attention to that growth. Are there...
Are they making moves into that commercial area? Because right now, the thesis on them is that Palantir, what it does for the government, it's going to start doing for private companies as well. And that hasn't happened yet. And I think that's another thing that people are waiting to see, that they're actually getting those private companies to start paying for their services. That would be a big breakthrough for the company.
So let's take a look at one more, AMD, Advanced Micro Devices. This company was thought to be giving NVIDIA a run for its money, but it didn't.
really turn out that way? What's going on there? The company reports tomorrow. It's actually kind of worse than that, Lauren. When we picked the stock last year, the argument was that AMD has always been kind of the number two company. It was when Intel was dominant in chips for computers, AMD was number two and that was okay. The stock did okay.
um and we thought that it would be okay for it to be number two behind nvidia um but but that that hasn't worked out um you know with this the stock uh did get a little bit of a pop um like april uh march or april of 24 but it's really been going downhill since then you know with the these little again upside pops to make you think that the stock is doing like that okay now now's the moment
And it's been, you know, everybody on Wall Street has been seemingly waiting for this. It was one where when we did our report card, we decided that basically we ended up skewing too close to the consensus. We thought it was, you know, cheapish and that there would be room for it to have some business within this NVIDIA ecosystem. But it hasn't proved wrong or hasn't proved right. And one of the things that I always think is when we have a thesis,
And things are happening. Like we're seeing better numbers from them in AI and, you know, some things start playing our way, but the stock doesn't go up. That tells us that there's something else going on. And, and,
It's unclear at this point exactly what it is, but I think the big fear is that Nvidia is actually going to be able to take even more market share from AMD in lots of areas where it hadn't yet. And that that is going to be a worry. And so when it reports earnings, I mean, it's growing. It's going to expect to report a profit of $1.08. That'd be up from 77 cents. Sales are supposed to rise to $7.5 billion. That'd be up from $6.2 billion.
But the stock just isn't working. And I'm not sure what they're going to say on their call. They might beat earnings. The stock might pop. But I don't know what they do that convinces people that they're going to be a growth story in the year ahead.
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Gargi, I wanted to go back to you and ask you to drill down a bit to look at particular investments that will benefit from the scenario you've laid out. Listeners should know that you express your market views via exchange traded funds or ETFs. You don't pick individual stocks. So let's start with the industries that you favor and the ETFs that best express those. Then we'll move on to fixed income.
Yeah, absolutely. Like we were saying before, I think focusing on large cap companies make a lot of sense in this environment. That is also where we, you know, as Ben was talking about before, that's also where we continue to see earnings growth. And that's where we continue to see earnings actually surprise to the upside. So focus on large cap growth. And then focus, obviously, when we talk about large cap growth, the way in which we phrase this is don't just think tech and comm services.
Think about quality companies. So we're talking about the factor here, more around quality as a factor, which focuses a little bit around, as I said earlier, strong cash flows, stable earnings growth, and importantly, low leverage.
You know, you can get access to that with a ticker QUAL, which is the one that we favor. And then we're also telling investors, look, this is a time when we're going to not be driven by one macro news for the entire quarter of the year, but a lot of
micro-narrative. This is the year of micro-narrative. We've already seen that already in the first month of the year. We saw the impact of deep seek. We saw the devastating news from the LA fires and that have an impact on markets. This week it's around tariffs and hopefully next week is slow, but
it could be something else. So in a micro narrative year and a micro narrative period, you want to be nimble. You want to be very tactical. So using sort of an active approach within your ETF allocation. And the one we like is a dynamic factor rotation fund, DY&F, which again looks at signals that are in the markets to decide where in the different parts of the equity markets. Again, looking at
mainly large-cap valuation companies to allocate to. So those investors that are thinking about sectors, one of the areas of the market that we think could do well away from the large-cap tech and communication services and quality companies, actually financials. We've already seen that come through within financial space.
Specifically, we talk about large cap banks and brokers. So a ticker like IAI would do really well for you. And again, this is a story around earnings growth coming back. We've seen that this quarter, very strong earnings growth. And again, if you look at
the remainder of 2025, given the deregulation impact, given the increasing sort of deal making that's going to go on, and given that the earnings growth is already favored to be about 16%, we expect that to be very profitable for financials. So that's another area of the market that we're telling investors to go to. If we move to fixed income, I- Oh, go ahead.
Now I was going to ask you, what about another equity sector? And then we'll move on to fixed income.
yeah so we talk you know a little bit around sectors where we talked about tech within tech i think going forward something like software could probably do a little bit better so igv is a stock that received a tremendous tremendous amount of um inflows over the last three months or so as more and more investors are thinking about software so keep that in mind uh think broad quality with qual think about financials with iai
And I would also say, especially with everything that we've heard around tariffs, thinking about tech independence is really important. So focusing, yes, on tech, but particularly those type of companies that are getting a lot of their
that are focusing a lot on revenues generated and supply chain that is focused on the U.S. itself, that independence within tech. So IETC is a ticker that captures that tech independence theme. So moving away from that, I do think it's-
Okay, that's iShares U.S. tech independence focused, IETC. U.S. tech independence. That's exactly what I just talked about. Yeah, tech independence. Yeah. So if we sort of focus on fixed income, if that's okay for just a second, because I do think that's an area that's getting a little bit, yeah, that's getting a little bit maybe under club because there's been so much news around, you know,
equities recently but i do think this has been a really generational opportunity to lock in yields given the repricing higher in interest rates that have taken place over the over the last sort of uh six to 12 months or six months especially since the fed started cutting interest rates
So where we think that investors should actually focus on within fixed income is particularly unique. We don't think that you need to take on a lot of interest rate risk right now because of the unique shape of the yield curve. We think you can get, you can lock in income in the very front end of the curve. You can lock in income in the belly of the curve and you don't really need to extend
then duration out too much. So really focus on that zero to maybe five year part of the curve and focus on those income generating sectors like high yield markets, focus on securitized assets, certainly treasuries as well and importantly,
inflation-linked bonds, especially in the front end of the curve. So some of the tickers that we're telling investors to maybe take a look at is FDIP, which focuses on the very front end of the inflation-linked bond curve, especially given some concerns, some rising concerns around inflation. And of course, we were
sort of highlighting this from the end of last year, and we've seen some of that come to fruition, but I think that could be a little bit more of that to come. And also focusing on BINC, which is our, Ayesha, sort of flexible income strategy that gives you that 6% to 6.5% coupon that I think is really important that investors try to sort of lock in right now before
rates move down any further if that's something that happens later this year. So yes to fixed income, lock in yields right now because we've had this repricing move higher to yields, but don't take a lot of duration risk. You don't need to do that. Really focus on the front end and belly of the curve and BINC does that for you.
Think about inflation hedges, SDIP does that for you. Think about other income generating sectors of the market. We like high yield certainly, where the all in yields are really attractive here. And that's sort of another area of the market that you can focus on as well as- - What would be a picker there for high yield?
- Yeah, so high yield, we would say HYDB is the one that we focus on. And for securitized assets, we focus on CLOA. Those are two that you can take a look at. And then obviously if you want an active manager to manage that for you,
you're not quite sure how much of one versus another you should buy, then BINC would be that actively managed solution for you, which goes towards all these higher income parts of the fixed income market that don't take on a lot of interest rate risk, given that the long end of the interest rate curve, not as exciting as the front end and the belly of the interest rate curve.
All right, before we go on to- And then lastly, I think what, yeah, sure. No, I was going to- I just want to say one other thing because I think it's important. Is that also thinking about some other assets in your portfolio? We think gold, especially right now, really important for investors to think about as a driver of real return in portfolios. And I'll stop there.
And what is your preferred approach to buying gold? Do you buy bullion? Do you buy ETF? Yeah, you have an ETF for that, so that's easy to manage and easy to store.
store and easy to get liquidity from. So IAU or IAUM are two tickers that you can go towards, especially if you want to sort of have a little bit of diversification in your broad portfolio. So gold, we know it's done really well already. Year-to-date, we saw we're at all-time highs, but I still think that that can be another area for a small allocation.
IAU and IAUM were the two. Got it. I have a quick question about the ETF market, and then we will get on to those questions. BlackRock's iShares platform recently surpassed $4 trillion in assets under management globally. That is quite a landmark. And I am curious to ask, where will further growth come from in the ETF business, number one? And number two, what's on the drawing boards in terms of product innovation?
since so many of our listeners. Yeah, it's such a great question. Yeah.
Absolutely. Such a great question. So to your point, you know, when you think about especially 2024 was such a great year for flows across our broad ETFs and certainly iShares ETFs. As I think about, you know, what is in the months and quarters and years ahead, the three areas where we expect growth
more adoption and more flow and more growth to come from. First is just around the growth of active. You heard me talk a little bit about active earlier, but I think that as I look across the industry, active ETFs surpassed one trillion globally.
that was led by the U.S. and certainly now expanding a little bit to Europe, but that only represents 7% of assets. So by 2030, which is five years away, but it'll come to us very quickly, we actually expect this market to grow to $4 trillion. So that is one area that we expect a lot of growth and a lot of adoption to come from over the next five years. The other is fixed income ETFs.
So that's both active and passive or indexed fixed income ETFs. Ayesha has launched the first fixed income ETF about 20 years ago, and we still think there's so much room to run. We talked a little bit about Bink and things like S-Tip, which are very popular with clients. But if we think about fixed income ETFs, they still represent about just 2% of
of the global 130 trillion fixed income markets. So we expect that industry to reach about 6 trillion in assets by 2030. And we think that ETFs are going to become more and more incorporated in all our clients' portfolios. And then you asked a question around innovation. Look, we continue to see more, as I said earlier, we had such an incredible year
in flows. Some of the flows that we saw came from areas of new innovation. For example, we launched our IBIT, Bitcoin ETF. The launch of crypto ETF was the first time in 2024, and we immediately saw a lot of adoption of that, surpassing $50 billion in inflows. So again, thinking about where the innovation comes from, we think that there's going to continue to be that adoption of
active fixed income ETFs and sort of just a rapid base of innovation in things like outcome ETFs. All right. There's a lot to think about there, and it's a subject we'll come back to over time. I want to go to some listener questions now. I'm going to start with a question for Ben today. We have a question from TJ about the equal weight S&P 500 versus the S&P 500 market weight. And
He wants to know whether the equal weight or perhaps TJ's a she, I am not sure. Will the equal weight outperform the S&P 500 cap weighted over time over the next 12 months? Or do you expect the S&P 500 to stay in the lead?
How do you look at this, Ben? Yeah, I mean, I think it's a tough one. We've been waiting for RSP for a while for this rotation to sort of come into play and have it beat the S&P 500. But the S&P 500 with its market cap weight has still been beating it. I do think the odds are getting nearer that RSP, the equal weight, will...
will outperform and I would feel more comfortable over a longer than 12 month period. I mean, I think one of the things when you're making decisions like this is partially you want to, you know, as the question even says, over 20 years, RSP has done very well, but over five, it hasn't. And in some ways, I remember talking to someone just when low volatility ETFs were popular,
And he was talking about that, you know, over a cycle, you will get either equal or better returns, but you can have a lot lower volatility. But the key is over a cycle, you have to and you know, you have to choose your strategy and stick with it even when it's underperforming. And I think that's what makes it so difficult, because the last five years have been kind of painful.
It's been hard watching a lot of these for people who are value investors or looking for stocks that aren't among the big 10 or whatever they're leading the market. It's been painful. And so you really do have to be comfortable
holding through those periods of pain. Or at least, you know, maybe use both ETFs and balance between them. But I don't think this is a terrible time to do it. I mean, I think the more the big tech companies go up, the more expensive they get, the more likely we do get a rotation. So that's definitely possible. And you're right, we've been waiting a long time for the equal weight. Yeah, I guess that was not really an answer answer, was it?
But it speaks to the issue of how unloved the sector of the market is. So let me ask, Gargi, we have a question from Riti. What is the outlook for small and mid-cap stocks and value stocks over the next decade? You can settle with the outlook over the next year if you want to. What is BlackRock's view?
Yeah, thank you, Riti, for the question. It's a great one and comes up all the time with clients. So I will say that especially I'll answer small caps first and then go to value second. As it pertains to small caps, the problem is that we just haven't seen the earnings growth that you need to. Every single quarter, the expectation
of earnings just gets pushed further and further out. And right now, about 45% of a small cap index is still actually in negative earnings, right? So you haven't, not only have you not seen that earnings growth, you actually have negative earnings growth. On top of that, unfortunately, what we're learning now is that rates are probably going to stay a little bit higher for longer,
Rates staying at a higher level certainly does not benefit small cap companies because they are highly levered. They have a lot of debt on their balance sheets. And then lastly, I would also say that usually the time for small caps is when you're sort of coming out
out of the the darkest period of growth in the economy in a cycle you're coming out of recession going into an expansion right now growth looks solid growth looks strong but we're not actually growth is slowing down where we were in 2024 where we will be in 2025 we'll be a little bit softer nothing to worry about not recession but we're not accelerating in growth so all of that makes us not favor small caps
We can certainly have periods where small cap outperforms large cap, and we've seen that. We saw that towards the end of the year. But for a sustainable period of outperformance, you need to see earnings growth, and you need to see rates move significantly lower. We just haven't seen that, and don't anticipate that.
Your second question was around value, which is a really great question because actually large-cap value, and I don't think we should paint value in small caps with the same brush. I think large-cap value does begin to make some sense, and I think we're seeing pockets actually of value earnings coming back. So I talked about
financials earlier. I think that's an area within value, of course, where we have seen earnings. We saw 16% earnings growth or a little bit above that this quarter. So we do think value begins to make sense, but we think investors should do that in an active manner because not all parts of value are going to do as well as others. So financials, we think, make sense.
You know, we tell investors, if you're looking at value, we still think there are pockets of opportunities. Go active. And the fund that we are telling investors to focus on as it pertains to a large cap value is BLCV. So, again, focused on large cap and looking at active management. BLCV. V as in victory. Okay.
Okay, got that. Yeah, it's the ISHA's, yeah, ISHA's large cap value ETF. So just as the name suggests, focusing on large cap, focusing on value, but doing that in an active manner so that you're not sort of going towards parts of the value traps, if you will. We had a question, if you could give us again the ticker for the software ETFs, that would be?
Much appreciated. Yeah, absolutely. The expanded tech software sector is IGV. Again, V as in Victor. Okay.
Very good. And I do want to say that one of the unique things, yeah, the unique things about that has been, you know, as investors have focused their minds from, you know, what does deep seek mean? Is it bad for AI? I think we've moved on to the Jevons paradox where more of something at a cheaper price will lead to more productivity enhancement and more usage. The beneficiaries
could be some of the software or the adopters, and software is a great way to play that. And IGV certainly is an area of the market that investors have turned to. All right. Thank you for mentioning that. You also mentioned the U.S. independence in software. What was that ticker again? Yeah, absolutely. IETC. Okay. The U.S. Tech Independence Initiative.
You know these tickers. The rest of us really have to get our list together. No, absolutely. And I will say that if you go on iShares.com, on the front page, you have our outlook and many of the tickers that I talked about as it pertains to fixed income, equities, and the hedges are all out there. But of course, I'm happy to sort of follow up with them as well, Lauren. Thank you very much. Okay. One last one. We had a question about the large cap fund symbol. That was the large cap quality growth symbol.
Yeah, so the quality fund that we talked about earlier was Q-U-A-L, so quality, so qual, which basically is a good way to think about that earning strength in your portfolio. And then the other one, which is a large cap fund that employs a more active approach and rotates from one area of the market to another as the market environment changes, is the D-Y-N-F, which is the
ISHA's Factor Rotation ETF, Dynamic Factor Rotation ETF. So that's D-Y-N-F and Q-U-A-L.
Excellent. Gargi, the next time you're on, we're going to do this more efficiently. I'm going to get the tickers ahead of time and post them in the chat. But thank you. Thank you for today. I want to thank both of you. It is very hard to assess the meaning of market developments as news is unfolding, as it did this morning. But you've both done a great job. And I want to thank our listeners as well. And thanks for your great questions.
Ben and I will be talking markets again on Barron's Live next Monday, and we hope you'll tune in. Also on Tuesday, next Tuesday, that is not tomorrow, but a week from tomorrow, Barron's will hold a virtual live event at noon, Retirement Checklist, Saving Spending Security.
I'll be moderating a panel with two veteran money managers and asset allocators, and my colleague Elizabeth O'Brien will be talking with several retirement planning experts. We're excited about this event, and we invite you to register via the link in the chat box. Thanks again, Ben and Gargi, and thank you to our listeners. Stay well, everyone, and we hope you'll tune in next week. Thank you.