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mostly about tariffs, frankly. Frankly, we

1:00

mostly talk about tariffs. I will briefly

1:03

reintroduce someone that everybody should be familiar

1:05

with now, who is Miriam Godfrey,

1:07

who is on her last guest hosting

1:09

assignment before Gunjan Banerji returns, but...

1:11

first in our hearts still. Miriam,

1:13

welcome again. It's great to be here, tell

1:16

us, and I am very excited to talk

1:18

to you about terrorists again. Yes, well, this

1:20

past week, there was... Obviously big big news

1:22

in the world of tariffs the markets obsession

1:24

and it was I mean quite honestly It

1:26

was pretty dramatic I was like having trouble

1:29

sleeping last night just sort of thinking about

1:31

how to pull it all together on Today's

1:33

podcast. We're recording this on April 3rd You

1:35

know the market has obviously reacted quite strongly,

1:37

but I think the drama is even beyond

1:39

you know, we'll talk about what's going on

1:41

with stocks and earnings and things But I

1:44

think this is just like a kind of

1:46

like it just feels like one of those

1:48

reread about in your history textbook kind of moments, right?

1:50

And regardless of what comes next, it just certainly seems like

1:52

this announcement has kind of knocked everybody off their axis a

1:54

little bit. Miriam, can you take... through exactly

1:56

what transpired last night because I

1:58

think just setting it up,

2:00

I think that this was beyond

2:02

what people were saying, I

2:04

guess depending on your point of

2:06

view, best case or worst

2:08

case scenario for tariffs would be

2:10

what was ultimately announced was

2:12

maybe even in excess of those

2:14

scenarios. I mean the administration

2:16

did not hold back. I think

2:18

there had been a view

2:20

beforehand that they will either take

2:22

the across -the -board tariff approach,

2:24

one flat rate for every country

2:26

to pay on imports or

2:28

there will be this reciprocal approach

2:30

where we're trying to bring

2:32

other countries into parity with what

2:34

the U .S. has to pay.

2:36

And in fact, there was

2:38

both. So we have first a

2:40

10 % across -the -board tariff on

2:42

all imports and then even

2:44

higher rates on top of that

2:46

for countries the White House

2:48

considers to be bad actors on

2:51

tariffs. And there will also

2:53

be a 25 % duty on

2:55

all foreign -made cars, which was

2:57

sort of forecast. We kind of

2:59

knew that was coming. Let's

3:01

go to a clip from the

3:03

announcement. We will charge them

3:05

approximately half of what they are

3:07

and have been charging us.

3:09

So the tariffs will be not

3:11

a full reciprocal. I could

3:13

have done that, yes, but it

3:15

would have been tough for

3:17

a lot of countries. We didn't

3:19

want to do that. So

3:21

these are pretty extreme changes and

3:23

the market reacted pretty dramatically

3:25

right afterwards to this news. I

3:27

mean, there are a lot

3:29

of different products whose prices will

3:31

likely be affected by these

3:33

tariffs. And it seems like, like

3:35

you said, you know, both

3:37

things happen, right? Even countries that

3:39

the U .S. has trade surpluses

3:41

with will be paying a,

3:43

I think it's a 10 %

3:45

is the proposal as it stands

3:47

now as we record. And

3:49

then countries that had a trade

3:51

deficit, it seems like, you

3:53

know, the journal had a story

3:55

laying out, you know, basically

3:57

the math they did, which was

3:59

like, how big is the

4:01

trade imbalance with the U .S.,

4:03

right? How much? more do they buy from us

4:05

than we buy from them? And then taking that amount and

4:07

I think in some cases like basically dividing it by two

4:09

and saying that's going to be... the tariff. And so those

4:11

add up to big numbers. Yeah, and that's why Trump

4:13

positioned these numbers as being kind to

4:15

other countries. We were being nice to

4:18

them because we're not doing the full

4:20

trade deficit. We're taking it and cutting

4:22

it in half, and then that's what

4:24

we're charging them. But these are big

4:26

numbers. These are big numbers. And you

4:28

know, I can't tell you the number

4:31

of products in my house that say

4:33

made in Vietnam, made in China. You

4:35

know, this is where a lot of

4:37

our goods come. you know, long discussions about

4:39

the economics, you know, of these things. You

4:41

know, there are obviously people on both sides

4:43

of the issue who feel very strongly that

4:45

this is the right or wrong way to

4:48

go about things. But in the meantime, let's

4:50

talk about what the markets have been doing

4:52

in reaction to that. And, you know, one

4:54

thing that the markets have really been struggling

4:56

with is not even so much what the

4:58

tariffs are, but just the exact policies, but

5:00

just that it is done and dusted and

5:02

in in the books. I

5:05

perhaps the market now will at

5:07

least have some certainty that okay

5:09

maybe these tariffs will be slightly

5:11

different but that they will be

5:13

dramatic and significant either way because

5:15

there are still some exceptions right

5:17

I think that Canada and Mexico

5:20

for now are not involved in

5:22

this reciprocal regime you know whether

5:24

or not those things stick around

5:26

we'll see but it does seem

5:28

like there's at least certainty that

5:30

they weren't joking when they said that

5:33

they wanted to do something very significant.

5:35

Yeah, that's right. I think that's true

5:37

and I think what people will look

5:39

for now is whether some of these

5:42

individual countries... decide to strike deals

5:44

with the US to try to negotiate these

5:46

rates down a little bit. I mean, that's

5:48

what the goal of reciprocal tariffs, right, is

5:50

just try to kind of bring people to

5:52

the bargaining table and get something out of

5:54

them. So I wouldn't be surprised at pretty

5:57

soon we start to see certain countries coming

5:59

forward with proposals. that might appease the

6:01

White House and get some of

6:03

these tariffs to be modified. Yeah,

6:06

and so again, for the time being,

6:08

here we are, you know, speaking the

6:10

morning after the announcement, and the US

6:13

market is down, you know, by, it's

6:15

down at this very moment by about

6:17

4%. We'll see, you know, how that

6:20

plays out over time. But I think

6:22

that next week people will be looking

6:24

for those announcements. There's also the consumer

6:27

price index update next week. We'll see

6:29

if there's anything in that report

6:31

that kind of gives us a

6:33

little view of obviously, it will raise

6:35

prices here in the US, that we

6:37

will all be essentially paying for these

6:39

tariffs if they are passed along to

6:41

us in the form of higher costs.

6:43

And so we'll see in the CPI,

6:45

which obviously will not. you know, include what's

6:47

happening now, it's backwards looking. However, you

6:50

know, we'll see if people have started

6:52

to, if companies have started to raise

6:54

prices on things ahead of tariffs, maybe

6:56

as they have tried to buy things

6:59

up, that they want to hoard, essentially,

7:01

before the price of them goes upright,

7:03

if you're buying raw materials and things

7:06

like that, we'll see if those things

7:08

start to filter through two prices. The

7:10

most recent inflation reading we had, the

7:13

personal consumption expenditures index, that was pretty

7:15

hot. interested in what goes

7:17

on with this consumer price index. Okay,

7:19

let's move on to the earnings

7:21

front. The first quarter earnings report

7:23

season is popping off this coming

7:25

week. Miriam, which ones are you going

7:27

to be watching closely? You know, I'm

7:29

really curious about Delta, which already

7:31

lowered its guidance along with many

7:33

other airlines. The, you know, the

7:35

amount that businesses and consumers spend

7:37

on air travel I think is

7:39

an indication of their sentiment, their

7:41

optimism about the future, how much

7:43

they believe they can, you know.

7:45

shell out versus how much they

7:47

have to save just in case

7:49

things go wrong. Absolutely big consumer

7:51

read there. And then I think one

7:54

I'm watching is Carmax. They are

7:56

the kind of car seller. They

7:58

sell out of used cars. It's

8:00

going to be super interesting, I think, to see

8:02

what happens with them. Their stock has been a

8:04

bit of a roller coaster lately because on the

8:06

one hand, you know, if you tariff the importation

8:08

of new cars or new car parts, that

8:10

should, I think a lot of people think,

8:12

make used cars. prices go up. So in

8:14

theory that might be good for Carmax, but

8:16

you know the the in the immediate aftermath

8:18

of the tariff announcement, their stock was down.

8:20

So I think it'll be really interesting to

8:23

see what they say. That was just everybody

8:25

selling off autos. Who knows? Sell your

8:27

winners. You know, maybe that's the old

8:29

saying goes. So so it'll be interesting

8:31

to see what they report and what

8:33

they say and also how the market

8:35

reacts to it. But I want to step back

8:37

a little bit on earnings, given the

8:39

environment that we're talking about here.

8:41

Obviously we know that there are

8:43

worries about the economy amidst what's

8:45

going on with tariffs and frankly

8:48

other kind of big policy changes.

8:50

There are recession risks that people

8:52

are talking about. But that is not

8:55

the same as saying how are

8:57

companies themselves actually doing corporate earnings

8:59

because as much as big companies

9:01

collectively make up, you know, our

9:03

economy, you know, they employ us,

9:05

we buy stuff from them, their

9:07

fates, and the economies fate are

9:09

not exactly the same. tariffs could

9:12

increase costs, maybe companies pass

9:14

along those costs to consumers. Maybe

9:16

some companies raise their prices because

9:18

other prices are going up and

9:20

they end up making more money.

9:22

That could at least improve profitability

9:24

in the short term, we don't

9:26

know. Absolutely. What if companies lay

9:28

people off and improve their profitability

9:31

that way, right? We could see a struggling economy,

9:33

but companies doing okay to maybe

9:35

well. Or at least in the short term.

9:37

Because I think, you know, consumer spending

9:40

is still an important part of the

9:42

economy. And as that comes down, that

9:44

will eventually affect companies. Companies

9:46

need to sell stuff to someone. Yeah.

9:49

Those someone's being you, me, people. Exactly.

9:51

And then does the market even care?

9:53

Right. Does the market care about how

9:55

companies are expected, their earnings are

9:58

expected to perform because really... You

10:00

know, the market is sort of two

10:02

things, right? One, it's a sort of

10:04

prediction of what company earnings will be,

10:06

and then also how much it values

10:08

those company earnings and what kind of

10:10

volatility it expects from those things. So,

10:12

and there are times when companies have

10:15

great quarters, they report big positive

10:17

earnings, and then their stock goes down.

10:19

And that makes our jobs as

10:21

reporters interesting, but also difficult. Because

10:23

we have to explain why that happens.

10:25

That brings us to our interview this week.

10:28

We spoke to Christine Short. She is

10:30

the head of research at Wall Street

10:32

Horizon, a TMX group company. And she

10:34

looks at earnings in really a mind-boggling

10:36

level of detail. So she talked to

10:38

us about what we should expect

10:41

from earning season, what impact tariffs

10:43

could have. We looked at a

10:45

bunch of different sectors, individual companies.

10:47

It is a wide-ranging conversation and

10:49

a user guide to the upcoming

10:51

corporate earning season. Stick around for

10:53

that. It's going to come right

10:55

after the break. I'm

10:59

Christopher Mims of the Wall Street

11:01

Journal. Every day we talk to the

11:03

leaders behind bold name companies, and you

11:06

can hear from them in bold names

11:08

from the Wall Street Journal, wherever you

11:10

get your podcasts. Today

11:19

in the studio we are joined by

11:21

Christine Short to talk about first quarter

11:23

earnings which kick off this coming week

11:25

She is the head of research at

11:27

Wall Street Horizon a TMX group company

11:30

Christine welcome. Thank you so much

11:32

for having me So we are about

11:34

to enter earnings season and tariffs are

11:36

looming large. What does that mean for

11:39

corporate earnings? Will some companies be able

11:41

to pass these tariffs along and what

11:43

kinds of companies will struggle to do

11:46

that? Yeah, well, we heard about tariffs

11:48

a lot in the last quarter and

11:50

the Q4 reports. Once it was confirmed

11:53

that President Trump was in office, we

11:55

started to hear a lot more about

11:57

companies that how they would be impacted.

12:00

tariffs, what they would do to either

12:02

pass those on or move their production

12:04

facilities. And actually I will say in

12:06

Q4 we saw the most tariff mentions,

12:09

even going back to the first Trump

12:11

administration. So over half of

12:13

S&P 500 companies mentioned tariffs. Most

12:15

of those were to a negative,

12:18

you know, degree. And so what most of

12:20

them are saying is that they will

12:22

be passing those on to the consumer,

12:24

which was a bit surprising because some

12:26

of these like big box retailers or

12:28

these larger, these are the largest companies

12:30

in the world, right? But even the

12:32

likes of Walmart said, look, we're going

12:34

to try to price protect as much

12:37

as we can, we are known for

12:39

value, but even though we get two-thirds

12:41

of our goods are made domestically, we're

12:43

still going to on that other third,

12:45

we are still going to have to

12:47

raise prices and those will pass on.

12:49

So they were basically saying we're

12:51

powerless against these tariffs, like even

12:53

we these big companies can't really

12:56

push back that much? amount of

12:58

tariffs, there's a higher percentage of

13:00

tariffs, and the timing wasn't a phase

13:02

in. It was like going to happen

13:05

all at once. And so that was

13:07

something that companies said they were

13:09

really going to face challenges with,

13:11

because you can't move your supply

13:13

chain, you know, immediately, right? That

13:15

takes years, that takes lots of

13:17

money. And even the companies that

13:19

said, like Steve Madden, for example,

13:21

the shoemaker said, we are going

13:23

to try to move to some

13:26

time. and those costs will get

13:28

passed down to consumers. So no

13:30

matter what it was, we almost

13:32

heard across the board that these

13:34

S&P 500 companies, if tariffs are

13:36

implemented, those will have to be

13:38

passed on. So. Obviously, we're looking at

13:40

first quarter results. So these are how

13:42

companies did in the first three months

13:44

of the year when tariffs were nascent,

13:46

right? They were just beginning. So we

13:49

might not see an actual like earnings

13:51

hit from even companies that will be

13:53

dramatically affected. We won't necessarily see it

13:55

yet. So what kinds of things should

13:57

we be looking for from earnings reports?

14:00

mention companies talking about tariffs, is it

14:02

forward guidance? What are other things that

14:04

we might hear or see in earnings

14:06

reports that will spark the market and,

14:09

you know, move prices? That's a good

14:11

point. Earning season's always backwards looking, right?

14:13

So while we care about the results

14:15

and stocks will often, you know, go

14:17

up or down depending on whether companies

14:20

be or missed, it's really the forward-looking

14:22

guidance that we want to be aware

14:24

of, right? Because currently Q1 expectations are

14:27

quite good. There SME 500 earnings per

14:29

share is expected to increase 7% year

14:31

every year. That's a long streak of

14:33

increases. That is the seventh consecutive quarter.

14:36

Revenue is a little lighter at

14:38

4% and that's the 18th consecutive

14:40

quarter that we've seen these constituents increase

14:42

sales. And so neither of those numbers

14:44

are to sneeze at. I'd say the

14:47

one sort of worrisome trend is

14:49

how analysts have ratcheted down specifically on

14:51

bottom line estimates. That 7% I just

14:53

mentioned back at the beginning of the

14:56

year was expected to be 12%.

14:58

in, they've pushed estimates down mostly for

15:00

the first half of the year because

15:02

of this uncertainty, and they're pushing most

15:05

of the corporate earnings growth into the

15:07

second half of the year. But again,

15:09

I've covered earning seasons through the COVID

15:11

lockdowns through the subprime mortgage crisis, 7%

15:13

is a great number. And as we

15:15

know, where we start in the beginning

15:18

of the quarter, we don't always end

15:20

because a majority of companies beat because

15:22

companies issue guidance that is very conservative.

15:24

We know the game. They issue conservative

15:26

guidance hoping to under promise and over

15:28

deliver. That's a way to get the

15:30

stock to pop when you say, well,

15:33

we beat. You know, we actually ended

15:35

up beating on both of our metrics.

15:37

What I will say is somewhat worrisome

15:39

is that

15:41

more

15:45

companies

15:49

are

15:52

issuing

15:54

negative

15:57

We're

16:00

running higher than the five-year and

16:02

the ten-year average at this point. So

16:04

that's a little worrisome when you see

16:06

breaking from some of the averages. But

16:08

again, this is a little bit of

16:10

a game. Corporations play. Tell us and

16:12

I have both covered a lot of

16:14

earnings reports, and we know that sometimes

16:16

the stock doesn't move in the way

16:18

you expect it to. So do beats

16:20

and misses really matter? I mean, what

16:22

should investors actually be looking for on

16:24

an earnings report to tell them how

16:26

the stocks going to move? earnings for

16:28

15 years, I feel like at one

16:31

point, though, be on the top and

16:33

bottom line really mattered, I feel like

16:35

it's mattering less because there are different

16:37

KPIs for each company, right? If you're

16:39

looking at... KPI's are like numerical targets

16:42

that people are looking at that

16:44

might not be... earnings revenues right and

16:46

it may be company specific or like

16:48

Netflix it might be new additional subscribers

16:50

right for some of the social media

16:52

companies it may be monthly active users

16:55

or and sometimes you don't you have

16:57

an idea okay for Apple will it

16:59

be iPhone sales but each quarter that

17:01

target could also move but yeah so

17:03

and guidance is a huge piece of

17:06

that back to your earlier question tells

17:08

like the quarters backwards looking all of

17:10

those metrics are backwards looking its guidance

17:12

going forward that you really want to

17:14

pay attention to how does it compare

17:17

to what analysts were expecting and

17:19

how does it compare to prior

17:21

guidance that the company issued. Investors

17:23

really don't want to see especially

17:25

this very crucial corridor where there's

17:27

so much uncertainty they are not

17:29

going to react well to guidance

17:31

that is moving lower. Similarly last

17:33

year we saw you know price earnings ratios

17:36

valuations were so high that you had

17:38

to be perfect especially like the mega

17:40

tech names the mag seven it was

17:42

like investors really wanted everything to line

17:44

up a one penny beat wasn't gonna

17:46

do it you know you really had

17:48

to come and show that the strength

17:50

was continuing because the price you're paying

17:52

for these stocks have increased so much

17:54

yeah I want to ask you you talked

17:56

about this kind of you know expectations are

17:58

changing I feel like Delta and maybe

18:01

airlines have been an interesting one,

18:03

right? After the fourth quarter reports,

18:05

Delta was very optimistic. They came

18:08

out in January with positive indicators,

18:10

you know, the stock was doing well, but then,

18:12

you know, in recent weeks,

18:15

Delta has lowered its first

18:17

quarter outlook, citing reduced consumer

18:19

and corporate confidence and economic

18:21

uncertainty. So, you know, that seems like a,

18:23

kind of a bellwether that, you know, people

18:25

aren't. If people aren't flying,

18:27

they're probably tightening their belts

18:29

in other ways too, right? Yeah, it's

18:31

interesting you say that because CEO of

18:33

Delta Ed Bastian had said back in

18:35

January, this is going to be a

18:37

record year, best year. So, and then

18:39

two months later, as you said, they

18:41

issued guidance saying, well, actually they pulled

18:43

back. earnings per share on the year

18:45

fell from originally 70 cents to a

18:47

dollar a share and now they're down

18:50

30 cents to 50 cents a share.

18:52

So that's a meaningful drop and like

18:54

you said certainly a bellwether they actually

18:56

report on Wednesday so before we even

18:58

hear from the big banks Delta comes

19:00

out and it's not just them

19:02

America lowered guidance last month American

19:05

Airlines lowered guidance last month southwest

19:07

not only lowered guidance revenue expectations

19:10

are now 4% seven, but they're

19:12

also going to charge for check

19:14

bags. They've never done that before.

19:17

United didn't lower guidance, but at

19:19

the JP Morgan Industries Conference back

19:21

in March, they echoed the same

19:24

sentiment. We're seeing travel demand falling

19:26

for government, so a lot of

19:28

federal workers losing their jobs, so you're

19:31

not seeing as much travel on that

19:33

front, but also leisure travel. And like

19:35

you said, you know, that was like

19:37

a hot spot post COVID. Everyone

19:39

couldn't wait to get back.

19:41

Exactly, and even as recently

19:43

as January, that trend was expected

19:46

to continue. So to see it

19:48

drop so precipitously just in two

19:50

months, to your point, means consumers

19:52

are really tightening their belts on

19:54

the things that they were willing

19:56

to spend on, you know, the

19:58

travel, the leisure, the... experiences, we

20:00

just saw this in the

20:02

recent inflation report that dining,

20:04

you know, going out to

20:06

eat has fallen and that was

20:09

one area that certainly benefited. That had

20:11

been a stalwart of consumers spending the last

20:13

few years. What about another mode of

20:15

transportation, which we can't really live without,

20:17

which is cars? I think that's going

20:19

to be a big focus in this

20:21

quarter, right? That seems complicated to figure

20:23

out with the tariffs on a car made

20:25

here, has imports, or it's a car

20:27

made over there, you know, it's so

20:30

complicated. Can the automakers pass along

20:32

these price increases? They've been

20:34

struggling even before tariffs, so the

20:36

big three here in the US

20:38

struggling with competition, obviously the tariffs

20:40

in a way meant to make

20:42

that better, but as you point

20:44

out, the tariffs aren't only on

20:47

the completed vehicle, which is, you

20:49

know, for GM Ford, Chrysler is

20:51

completed here in the US, it's

20:53

those parts that are coming from

20:55

low -cost countries, you know, abroad,

20:57

and each of those will have a

21:00

levy placed on them, and so

21:02

the automakers have warned this will

21:04

be disastrous for the industry. And

21:06

on top of that, as you

21:08

mentioned, not only will that drive

21:10

up the cost of cars that

21:12

they're already having trouble selling, but

21:14

now we've got a consumer that's

21:16

really holding back on big -ticket

21:18

purchases like automobiles, like, you know,

21:20

appliances, and so it's like a

21:22

double whammy for that industry. And

21:24

didn't President Trump explicitly warn the

21:26

auto CEOs do not raise prices

21:28

as a result of these tariffs? So

21:30

the spotlights kind of on them

21:33

right I suspect there's a bit of

21:35

negotiations going on in the background

21:37

with regards to these tariffs and getting

21:39

exemptions on those parts tariffs or

21:41

certain, you know, low -cost parts to,

21:43

again, we're kind of in this fog

21:46

of uncertainty around what the tariffs

21:48

are, what they're on, what the timing

21:50

is, but I have to imagine

21:52

those CEOs are going to the administration

21:54

and trying to negotiate those right

21:56

now. Could there be companies that

21:58

actually benefit - this dynamic, right?

22:01

Like we have, say, a company

22:03

like Carmax, right? They report next

22:05

week. Maybe you're going to rush

22:08

out and buy a used car,

22:10

right, before you think the prices

22:12

of cars are going to go

22:15

up. If you think the price

22:17

of auto parts are going to

22:19

go up, maybe you rush out and

22:21

you buy all of the parts

22:23

you need, you know, now, right?

22:25

You get a couple of windshield

22:27

wipers or have... give strong guidance

22:29

because of the anticipation of tariffs. Yeah

22:31

in the short term there could be

22:33

strength. I mean anecdotally I will just say

22:36

my sister-in-law was saying our car we

22:38

need a new car I checked how

22:40

much it would be to fix it you

22:42

know it's like almost as much to

22:44

fix it as it would be to

22:46

just get a new one I have to

22:48

buy this now because I have read

22:50

that I have six months until car

22:52

prices you know the tariff says we know

22:55

impact every good differently so when will

22:57

those prices filter down to consumers, well

22:59

if we're talking about produce, that's an

23:01

immediate thing. You can't keep, there's no

23:03

shelf life for bananas. So cars, there's

23:05

obviously an inventory that's already out there

23:07

on the lot. So yes, I have

23:09

heard this anecdotally from friends from family

23:11

members that are like, I better get

23:13

my big. I need a new washing

23:15

machine, you know, so maybe I get

23:17

that now. So that's just in the

23:20

short term, right? But in the long

23:22

term and the guidance we see, obviously

23:24

these companies will be reflecting what's going

23:26

to happen throughout this year and next

23:28

year and likely will be a negative

23:30

impact there. So in general, if tariffs

23:32

do what I think, you know, the president

23:34

and people around the administration intend,

23:37

which is to, you know, reassure

23:39

parts of American manufacturing and things

23:41

like that. Are there companies whose

23:43

shares or earnings might reflect that now

23:45

or are we just in a long

23:47

adjustment period and those benefits will be

23:49

difficult to quantify or things that we

23:51

might not see for a long time?

23:53

What should we be thinking about that

23:55

in earnings now or is it too

23:58

soon? I think it's probably... too

24:00

soon. I think earnings and guidance

24:02

are going to be a little murky

24:04

this quarter. I mean, obviously there

24:06

are intended beneficiaries. I just saw U.S.

24:08

Steel got upgraded by few analysts because

24:11

they are set to benefit. At some

24:13

point, but we know they don't necessarily

24:15

have the ability to create the supply

24:18

needed, right, as tariffs are placed on

24:20

steel imports from other places.

24:22

So there's going to be an

24:24

adjustment period even for the beneficiaries.

24:26

There's going to be a lot

24:28

of supply, a lot of demand,

24:30

and they won't. necessarily be able

24:33

to keep up with that supply

24:35

from day one. So again, I've

24:37

already started to see it a

24:39

couple weeks ago, Dollar Tree, for

24:41

example, reported. They're not one of

24:43

the intended beneficiaries, but they gave

24:45

guidance that excluded the impact of

24:47

tariffs. And I think you start

24:49

to see a couple flavors of

24:51

guidance this earning season. Those saying,

24:53

here's our guidance, you know, not including

24:55

the impact of tariffs, maybe here is another

24:57

metric that includes it, but I'd say for

24:59

the most part, some of these companies will

25:02

go the way of Dollar Tree and just

25:04

say, you know, they will mention, hey, we

25:06

know. This is going to have to filter

25:08

into our guidance at some point, but we're

25:10

not ready to say what that impact is

25:13

because frankly we don't know. Some of them

25:15

might be rewriting their guidance up until the

25:17

minute before their earnings call. I mean, we've

25:19

got some, you know, there's certainly news happening

25:22

every day and, you know, like you said,

25:24

the situation might be changing day to day.

25:26

It might change the day before their earnings

25:28

and they might be pulling it all night

25:30

or with the IR team to figure out

25:33

what exactly they're they're willing to say about

25:35

it. Are there any companies that stand

25:37

to more or less directly benefit

25:39

from tariffs? Are there people who,

25:41

because of the impact that tariffs have

25:43

on the price of imports that they

25:45

compete with, maybe it's because of

25:48

something that happens because of currency

25:50

movements and things like that? Are

25:52

there any companies that are like tariff winners

25:54

that you would point out? In the long

25:57

term, some of the materials names, certainly,

25:59

you know. moving production back here,

26:01

leaves you with less of a

26:03

choice. Materials, that's like making basic

26:05

stuff, right? The raw materials that

26:07

go into the raw materials, yes,

26:09

yes. Okay. And then, you know,

26:11

even on the consumer front, I

26:13

think about a Walmart, right? They

26:15

have a, they've been doing pretty

26:17

well, a large portion of their

26:19

businesses, grocery, we all need groceries,

26:21

right? That's why they've outpaced target

26:23

in the last year. They have

26:25

more of an ability to negotiate

26:27

and to stock those shelves before

26:29

tariffs go into effect versus smaller

26:31

businesses that don't have the warehouse

26:33

space. I will say though, even

26:35

those costs I think kind of

26:37

get passed down to consumer to

26:39

some degree because you do have

26:41

to pay to stock up and

26:43

stash in your store things. But

26:45

those bigger box names, there will

26:47

be more pricing flexibility. And Walmart

26:49

has said they are trying to

26:51

price protect for their consumers. Look,

26:53

they have benefited from inflation. They

26:55

not only have their target group,

26:57

but they have higher income groups

26:59

moving into target. It's a one-stop

27:01

shop. You can get your groceries.

27:03

You can get your discretionary items.

27:05

As people are. trading down and

27:07

looking for ways to save money,

27:09

Walmart has been a winner. And

27:11

again, because of their size and

27:13

their ability to negotiate with suppliers,

27:15

hold things in warehouses, I think

27:17

they can price protect a little

27:19

better than some of the smaller

27:21

names in retail. Interesting, Miriam, of

27:23

course, we had an episode, a

27:25

couple of episodes ago, we talked

27:27

about the difference between small companies

27:29

and large companies, having lots of

27:31

ability to. negotiate and other kind

27:33

of levers that they can pull.

27:35

It might be the smaller mid-sized

27:37

companies that really feel the heat

27:39

from tariff and trade policy. All

27:41

right, Christine, we're going to take

27:43

a quick break, but when we

27:45

come back, we've got one more

27:47

question for you. So stay put.

27:49

All right, welcome back, Christine. In

27:51

30 seconds or less, is there

27:53

a sector of the economy that

27:55

will surprise the market this quarter?

27:57

Yeah, I think... I think I'm

27:59

going to go with tech there

28:01

just because it's gotten such a

28:03

bad rap this quarter. So many

28:05

of those MAG 7 names have

28:08

fallen, but the base case remains

28:10

the same. A lot of these

28:12

names underlying fundamentals are still quite

28:14

strong. I still like invidia. Their

28:16

sales for their Blackwell chip have

28:18

come in about 3.6 million orders.

28:20

That's their most advanced chip that

28:22

they've recently launched. CEO Jensen-Hong said

28:24

the demand is crazy. And so

28:26

I'm going to listen to things

28:28

like that. When the underlying fundamentals

28:30

are still strong, they're still expected

28:32

to post earnings and revenue growth

28:34

over 60%. So I'd say you

28:36

still see some winners in the

28:38

tech space. AI isn't dead yet.

28:40

Thanks, Christine. Thank you so much

28:42

for having me. Yeah, thanks for

28:44

being on. It was my pleasure.

28:46

And that's everything you need to

28:48

know, to take on your week.

28:50

The show is produced by Trina

28:52

Manino, Jessica Fenton, and Michael Avell,

28:54

and Jessica Fenton, are our sound

28:56

designers. Michael also wrote our theme

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music. Aisha al- Muslim is our

29:00

development producer. Scott Salaway and Chris

29:02

Zinslie are the deputy editors, and

29:04

Philana Patterson is the head of

29:06

news audio for the Wall Street

29:08

Journal. For even more, head to

29:10

w.j.com. I'm Tell us demos. And

29:12

I'm Miriam Gottfried. Until next time.

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