00:00 Gargi
Gargi was talking a little bit about earnings, you know, I look at Goldman Sachs lifted its S&P target uh yesterday. One of their key planks in that theme was investors would look past any earnings weakness. Heard the same out of BFA’s uh Savita Supermanian this morning when she lifts her S&P but I look at what we are, what we could see in tech in terms of earnings, Dan, it’s not exactly going to be great. I mean, you had Samsung out out here warning uh today. Apple might be under concern because of its exposure to uh China. What are you seeing?
00:49 Dan
Yeah, I mean the the thing here with with tariffs and Apple and and this kind of announcement is, you know, I talked to the ITC. They say that it the new tariff announcements have nothing to do with uh the People’s Republic of China. They they are just left as is from that May 12th uh order that was signed uh between the two countries that. So this isn’t going to impact them. However, there’s plenty of tech companies in the other countries that received those letters uh as well as those that uh could be impacted by the reintroduction uh or I guess the the final introduction of tariffs if they do go into effect uh August 1st. So, you know, when you look at something like an Apple, uh they’re already banking on, you know, billions of dollars, uh billions of dollars in hits uh to their bottom line for the coming quarter. And so now, one of the experts that I had spoken to, uh Jean Munster over at Deep Water Asset Management said, look, now we have to start looking at the December quarter as well because if anything does happen, if anything does change uh with regards to China or or any of these other major supply chain uh countries, that would start to be then reflected in the December quarter. And so that’s going to be a major time for Apple. It’s also that December quarter when we see the first signs of when their uh new iPhone goes on sale. So, you know, for for tech more broadly, as you said with Samsung, they’re struggling with AI. Uh they’re they’re struggling to get the the revenue there. And so, you know, I I think more broadly, it basically resets where tech was back in April uh to that kind of, you know, left in this kind of limbo situation.
03:25 Gargi
Gargi, let me get back to you real quick. Uh there looks to be this this view on the street that earnings that will start in a few weeks, we’ll get a kicking off with the banks, but even industrials, that everything will be fine. Companies will come out here, beat on sales, beat on earnings, maybe reaffirm guidance or even give guidance that they didn’t give three months ago. Is that the wrong move? It can’t possibly be that perfect out there.
04:08 Seema
No, you’re absolutely right. It can’t possibly be perfect. And I think any kind of expectation that the impacts of tariffs are just going to vanish in thin air, I think are is a little too optimistic. So for example, I mean obviously we are, you know, learning about the new tariffs on the 14 countries now, and we don’t know where those will land yet, but we already know that as of right now, we’re still looking at approximately uh a 15-ish percent tariff rate, which is obviously significantly higher than the 3% from last year. Where will that go? We haven’t seen it come through into inflation yet. Uh we haven’t seen that affect margins yet. Uh there’s going to be a combination of those two that is going to play out in the next couple of weeks, months, years. Um I think so far, the fact that there is inventory build up has perhaps uh saved us a little bit. And I think that’s why we need to be really thoughtful about where in the market you want to be investing in the quarters and months ahead. Can equity markets broadly go higher? Sure, maybe. But I think where you pick your spots is really careful. And we’ve obviously talked a little bit about the AI trade. Uh you know, we’re thinking about investing actively even within the AI theme because given these tariff uh tariff news that’s going to continue to play out over the next few months, we think there’s going to be winners and losers within the space, and we think the BlackRock AI and Tech fund, BAI is a really great way of doing that. Another point that I do want to mention, and I talked about this earlier around inflation, as well as margin. We talked about equities, but let’s talk about inflation a little bit. If we look back at the last couple of prints from CPI, they’ve certainly been very welcome by the market. But at the same time, there is still expectations of inflation continuing to remain a little bit sticky, and especially if these new tariffs come through, allocating to inflation linked space with real risk being, especially in the very long end of the curve, going back to levels we haven’t seen in decades. We think inflation linked bonds, things like STIP and TIP can be a really good addition in your portfolio.