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Bill Barker: Sure. If the news is we were just joking, the markets would cheer that. But short of that, I guess, since you've got 20% out there today being a number out there, if tariffs announced came in well shy of that and with a lot of verbiage that there were good deals that had already been made, and this was going to be short term and was all about getting trade deals which were close, sure, that would be something that the markets would cheer, but I don't expect any of that.

Ricky Mulvey: I went to public high school, Bill, and sometimes there's a feeling in the cafeteria right before a fight was about to break out. You had this feeling you heard Chatter, and you're like, I think a fight might break out. It almost seems like the financial news media is covering this liberation day in the same way. I think investors may want to be prepared for a violent move up or down tomorrow. We've done this scenario where markets cheer whatever comes. What's the scenario where markets are very fussy, where they're taking their cafeteria tray and maybe heading out the?

Bill Barker: I think if here's 20%, it's on everything against everybody. If anybody tries to retaliate in any way, we're just going to drive the higher, and I mean it. The worst case scenario, which is daring your friends to demonstrate any self respect and reply in the most logical and understandable way necessary and to say, if that's done, then we're at war. Now, that would be the fussiest scenario. That would be a major implosion. To what degree we get that, we'll know in, I don't know, less than 36 hours.

Ricky Mulvey: This is the first time I've heard the phrase or the word fussy and war in the same sense. I appreciate you bringing that. [OVERLAPPING].

Bill Barker: You open to this should.

Ricky Mulvey: Yeah, good point. Fair enough. I'm trying to soften things, but sometimes things get a little serious, so you try to make jokes. Sometimes they don't land, anyway.

Bill Barker: I think wars the word that's out there normally for trade war. It's been copyrighted. It's trademarked. It's out there. We're just following the script.

Ricky Mulvey: Longer term. Here's what some investors have been doing. This is, according to a Bank of America survey reported in Bloomberg, basically now fund managers reported being 23% underweight in US stocks, whatever that means, but that's a plunge of 40 percentage points from the previous survey. Couple of weeks ago, I talked to Richard Bernstein on the show. He's the head of Richard Bernstein Advisors, appropriately titled sort of about this long term deglobalization trend. You see a lot of investors going from US stocks to international equities to reduce their exposure to American markets and spread their bets across the world. Is this a trend that you personally are following as an investor, and do you find yourself maybe picking up some international stocks and ETFs if you're doing any buying?

Bill Barker: Yes, in my case, I have maintained international stock holding percentage, and I've increased it in light of really the valuations of US stocks and that was true even before the recent unpleasantness, so they've just been trading at very historically abnormal levels that imply a lot of good cash flows ahead. I think that really above average and above trend growth for a sustained period of time was and still is priced into US stocks. I think international stocks have offered better prices because they really haven't done well for years compared to the US stocks. Whenever anybody is saying, we've been positioning for more international coverage and increasing our holdings, in part, what they're doing is trying to take credit for something that's already happened. Everybody knows international stocks have outperformed the US by a large amount this year. If you say, as I just did, I've been doing that. You're trying to get the credit for outperforming the market. Whether it's true in your own case or not, I think that there's some of that going on.

Ricky Mulvey: Let's talk about a company where there is absolutely pretty much no growth priced in, and it is at the center of the trade wars small lower case TM. That's Harley Davidson, which does a lot of manufacturing in the United States, does some international sales. There's a story in the Wall Street Journal about how tariffs already affect Harley, pointing out the road glide, which is a touring model of their motorcycle, starting at $28,000 in the US. However, in Denmark, it's already at about $77,000. That includes a 25% value added tax and a 150% luxury tax. If the new tariffs that the EU is threatening, that 77K goes to more than $100,000, $124,000. This is a company that's absolutely gotten It's been taken to the woodshed for a number of reasons. Tariffs are one of them. But how is Harley doing in international markets to begin with? How important is Europe and Asia to this company?

Bill Barker: By unit sales, I was looking this up last year, 94,000 unit sales in the US, 151,000 globally. You've got about 60% or so of your sales in the US. Some in Canada, Asia, and Europe is a fair fight, not many in Latin America. I think that it's still a major US brand. I think it's got a little bit of a bull's eye on its back for being so commonly associated with the US as some of the whiskey brands and things are just they're big targets for headlines and things like that when some of the very specific tariffs in Europe and otherwise are designed. They're going to be suffering in terms of international sales. I'm surprised, given the level of tariffs, in Denmark, specifically, but in some of the other places that they do as well as they do internationally, and it's going to be tough for them to maintain that.

Ricky Mulvey: I don't want to buy a motorcycle to begin with. Not my style. No disrespect to the motorcycle lovers. I just I like my car. I can't imagine spending more than 100 grand on one that I know goes for less than 30,000 elsewhere.

Bill Barker: It's very effective in protecting the local sales BMW and the European brands. When you hear headlines like that, you definitely see that there is an argument for some tariffs imposed by allies as being really unfair on their face to specific US companies and that there's place to negotiate about some of these things, whether bringing out a 20% tariff against everybody on everything is the way to negotiate is something that the market will weigh in on tomorrow, perhaps.

Ricky Mulvey: This is something that CFO Jonathan Root, the CFO of Harley Davidson, was talking to Congress about where the markets overseas are very unfair to his company. Mentioning that bikes brought into the United States receive at most about two and a half percent tariff. They're playing this unlevel playing field internationally, popular within the United States. But I wonder could retaliatory tariffs, could a trade war, not focusing on the entire market actually benefit a company like Harley Davidson, which would have a lot of competitors shut out of the United States and maybe have some negotiating leverage to sell more bikes in international markets?

Bill Barker: It could. I wouldn't want to bet on it, but it could. If its strength in the US grows, it's got about 37% of the heavyweight market in the US, and it's the leading player. It used to have 50% of the heavyweight market before COVID. It's been bleeding market share, giving it up to competition, tariffs could help it domestically. Could they help enough domestically to make up for lost foreign sales? Your guess is as good as mine on that, but the steel and aluminum tariffs, either way, they don't help. Harley's costs for producing bikes here. A lot of their input costs are already subject to tariffs, and they're going to be weighing on the margins and I don't think Harley can just pass on all of those costs easily and maintain profit margins that it's got at the moment.

Ricky Mulvey: You're not the only investor who's pessimistic about HOG. That's the ticker symbol for Harley Davidson. It went from about 10, 12 times trailing cash flow now to three times trailing 12 months cash flow, and it did post an operating loss in its latest quarter. Market Cap went from more than six billion a few years ago, now to about three billion. Besides the tariffs, you had CEO Johan Zeitz pointing to, continued cyclical headwinds for discretionary products, including the high interest rate environment, affecting consumer confidence. I'm trying to find my contrarianside. There are times where as an investor, you want to look for those blood in the streets stories where you're finding extraordinarily negative headlines about companies affecting stock prices for good long term investments.

The problem, Bill, is that often the market is pretty good at assigning price tags for companies, and contrarians often look foolish, lower case foolish, in the end for folks like me. Any general advice for people who want to be a contraar and watching these trade wars play out and maybe thinking about putting some money into a dumpster fire.

Bill Barker: I would not open up thinking of Harley as a dumpster fire, even though the market, as you point out, is treating it as a bit of one at about a PE of 7-8 right now. This is a company with long history. It's got a product which remains roughly as relevant as ever. It's not going away. It's not necessarily a value trap in the way that some companies like a Kodak or something where you just see their product evaporating over some period of time, and even though it's at a very low PE, it's, well, things could get a lot worse. I think that the things which weigh most heavily on the company right now are more transitory. I don't know what's going to happen with the tariffs in terms of their duration.

But I don't see the product itself as becoming significantly less relevant year after year after year to the purchasing public. They've got a one billion dollar buyback authorization out there. If they're buying up their shares, an authorization doesn't mean they're actually buying, but they're authorized to buy their shares. If they're buying their shares in volume, I would like to see that as a sign that the company sees value in its stock.

Ricky Mulvey: Yeah, that buyback authorization would be about one third of the company's total market cap right now. Let's go to this OpenAI story, which just closed a $40 billion funding round. Congratulations to Sam Altman and the team. The value for this hybrid non profit is now $300 billion. This is the largest amount raised by a private tech company. It was led by Softbank at a $30 billion commitment. This is one of the hottest companies in the world. We talked about one of the least hot companies in the world. OpenAI is one of the hottest companies in the world, led by Masa Sun over at Soft Bank. He called you and he said, Hey, Bill, I got this funding round going. You want to kick in a couple of bucks? Do you want to buy some shares of Open AI at a $300 billion valuation? What say you?

Bill Barker: I don't think that Masa Sun being interested in it at this price would be enough information for me to act. He's had some great investments and some terrible investments. This is not going to be one of the truly terrible ones. But I don't know that I would choose it and the what's behind door number two aspect of it, because I don't have any look at their financials compared to things which are in competing space. Google is available for 20 times earnings right now. It's got a lot of the same sorts of investments and capabilities. It's obviously not a pure play for AI, but it and some of the other names that you know are, I think, ones that depending on your investing style, might be more interesting than what is going to be a remarkable story if Open AI does, in fact, go public at some point in the near future, it'll be fascinating to see what value it gets. But I think there's tons of value here, but I have no way to quantify it.

Ricky Mulvey: What is the pivot that Open AI investors are banking on? The CFO Sara Fryer told Bloomberg that roughly 75% of Open AI's business comes from consumer subscriptions, the $20 a month payments they get to make really cool videos and extended basically question asking and feeding and images, that kind of thing. The investors don't seem to be banking on this as a subscription business, though. What is the pivot that these Open AI investors are seeing here?

Bill Barker: It's such an open question as to what the revenues are going to be, how much of this is going to be enterprise versus consumer. There seems to be a willingness at the moment to consider the infinite value that AI may create and that Open AI may be getting the largest chunk or a very large chunk of that infinite value. I don't know that it's going to play out that way. No one does. But the number of applications for this with Agentic AI and things going well beyond putting a query or a prompt into a bot and getting an answer or getting a funny or whatever picture. The application of this at the enterprise level is going to be, I think what investors are going to need to see to come up with a $300 billion valuation.

Ricky Mulvey: Once the agents can take action on your behalf. Sounds nice for email, but also might be a weird environment when my AI agent is talking to your AI agent to book a podcast conversation, but then you have a vacation we didn't know about, that kind of thing. We'll see how it plays out. Bill Barker. Appreciate you being here. Thank you for your time and insight. Thanks.

Bill Barker: Thanks for having me.

Jane Perles: As a longtime foreign correspondent, I've worked in lots of places, nowhere as important to the world as China. But these days, few journalists are able to get the inside story. That's because China has shut the door to much of the media. Authorities have far more efficient tools to control the press and they're far less reluctant to use them. I'm Jane Perles, former Beijing Bureau chief for the New York Times. On Face Off the US versus China, we're trying to break through. We'll talk about Trump and Xi Jinping, AI, TikTok, and even Hollywood. New episodes of FaceOff are available now wherever you get your podcasts.

Ricky Mulvey: Up next, Alison Southwick and Robert Brokamp share some tips to help you recession proof your finances.

Alison Southwick: Recession risks are on the rise. Impending trade wars, accelerating layoffs, declining consumer confidence, and a stock market correction, have Americans understandably skittish. According to Google Trends, searches on the term recession are at the third highest level of the past 10 years. These concerns are reflected in plenty of recent headlines, such as a recession may be coming. It's not too late to prepare, says USA today. Or CNBC with recession is coming before end of 2025, generally pessimistic corporate CFOs say. That's my number one barometer is the generally pessimistic corporate CFO indicator. How about one more example? Stocks fall sharply, bonds, gold, buoyed as tariffs, stoke recession fears, say Reuters. To be sure, many aspects of the economy are humming along just fine. A recession over the next year or two is not a certainty. Goldman Sachs recently estimated the odds of a recession over the next 12 months at 35%. Not great, but less than 50 50. But a recession eventually is guaranteed because we haven't yet figured out how to eliminate the boom and bus cycles of the economy.

Robert Brokamp: Let's talk a little bit about the history of recession. It's commonly thought that a recession is defined as two consecutive quarters of declining GDP, but that's actually not the official definition. It's certainly a sign that things are slowing down. But we don't really know when an official recession has begun or ended until the National Bureau of Economic Research says so. The NBER is a private nonprofit research organization made up of more than 1,800 economists, and they're folks who say, basically, recession began and the recession ended. The NBR does provide data on recessions as far back as 1854. Since then, the US has experienced a recession on average every five years. However, there was more than a decade between two of the last three recessions. The average recession has lasted 17 months, but since 1945, the average has been just ten months. The last two downturns were like on the opposite ends of the duration spectrum. The 2000 2009 recession lasted 18 months, and that was the longest recession since the Great Depression but the most recent recession, which was caused by the pandemic panic of 2020 was just two months, and that was the shortest recession ever.

Alison Southwick: Now recessions can have an impact on most aspects of your finances, but not all in bad ways. Here's how a recession generally affects different aspects of the economy and your money. Let's start with stocks go down.

Robert Brokamp: Yeah, the stock market is considered a leading economic indicator, so it tends to drop several months before a recession officially begins, and stocks usually, but not always rebound before the recession ends. If you're trying to say, you know what? I'm going to keep some cash on the side, I'm going to wait for the economy to recover before I get back into the market, you're probably gonna miss some of the best performing days of the according to Truist CO Keith Lerner, the median recession associated decline in the SP 500 since 1948 was 24%, and the sectors that tend to hold up the best during recessions are consumer staples, utilities, and healthcare.

Alison Southwick: Another thing that tends to happen during a recession is that interest rates usually go up.

Robert Brokamp: Yeah, the bond market and the Federal Reserve both react to recessions by driving down interest rates. However, if inflation stays high or increases during the economic downturn, what is known as stagflation, interest rates may actually go up as happened during the 1973 74 recession. Rates have already actually started to decline so far this year, and while the Federal Reserve held rates steady at their last meeting, they've indicated that they've penciled in two rate cuts this year. The takeaway for your finances are that if rates do continue to decline, you may want to lock in current rates with some of your money, maybe by buying CDs or bonds. Also, depending on where rates end up, a recession actually could be a good time to refinance loan like your mortgage.

Alison Southwick: Interest rates usually go down and bonds go up, depending on the bonds.

Robert Brokamp: Yeah, so bond prices move inversely to interest rates, so if rates go down, bonds usually go up. Plus, there's often this flight to safety during a recession, which means people sell their stocks and buy bonds, which also drives up bond prices and this is already happening with the Vanguard Total Bond Market, ETF up 3% year to date, not a whole lot, but that's pretty good for three months worth of work from the bond market. That said, it does really depend on the quality of the bonds. Treasuries tend to hold up very well during a recession. Investment grade corporates historically have been more of a mixed bag. Riskier corporates like high eld junk bonds, they tend to go down right along with stocks during a recession, sometimes not quite as much, but still pretty 10, 15, 20%. For money you want to hold up during the downturn, stick with FDIC-insured cash and Treasuries with maybe a complement of diversified bond funds that are a mix of government-issued debt and investment grade corporates.

Alison Southwick: How about home prices? Well, they normally hold up all right.

Robert Brokamp: Yeah, home prices have declined in just two of the six recessions since 1980, and one of those was just a decline of less than 1%, so no big deal. Research from Mark Holbert Market Watch found that from 1952-2018, home prices on average actually grew more during bear markets and stocks than during bull markets. Now, I know most of us are thinking about the 2007, 2009 recession, which is when both stocks and home prices plummeted, but historically speaking, that actually was an outlier. Home can be a good stock market hedge as well as a good inflation hedge. But as they always say about real estate, location, location. For example, during the oil bust of the 1980s, home prices in Texas, they really struggled. I got to say, as someone who lives in the DC suburbs of Northern Virginia, I'm going to be very curious to see what happens to home prices in this area with so many federal employees getting laid off and so many government contracts getting canceled.

Alison Southwick: Another factor of the economy, this one's probably not going to be so surprising is that the unemployment rate rises.

Robert Brokamp: Yeah, on average, the unemployment rate goes up by approximately three percentage points during a recession, but during the 2007, 2009 recession, which was pretty bad, it doubled from 5%-10%, and people were out of work on average for almost half a year. Six months, which explains a little bit about why we always say you should have an emergency fund of around six months. During the pandemic, unemployment skyrocketed from 3.5%-14.8%. For people who are many years from retirement, I would say job loss is actually the biggest risk of a recession. If your portfolio drops, you could write out the downturn and your contributions to your 401k and your IRA buy stocks at cheaper prices. But losing your job can range from being disruptive to devastating. I would say now is really the time to bolster what I call your human capital, look for ways to demonstrate your value to your employer and your customers, maintain your professional network, and keep your skills up to date in case you need to hit the job market.

Alison Southwick: If you don't have to hit the job market, you may be wondering about benefits. Well, workplace benefits tend to stay flat or get reduced.

Robert Brokamp: Yeah, workers who are fortunate to keep their jobs could still experience a reduction in their overall compensation package during recession. Raises and bonuses are hard to come by. Companies are really struggling actually may reduce your pay and other benefits. The next company gathering may be in the office conference room instead of at a restaurant or hotel, and you may see other perks curtailed. For example, around 10% of companies reduced or eliminated their 401K matches during the pandemic, and the figure was closer to 20% during the great recession of 2007.

Alison Southwick: Finally, after all of that bad news, maybe there's a little bit of good news, inflation tends to go down, at least we hope.

Robert Brokamp: If there is an upside to a downtrodden economy, it's that the cost of living doesn't go up as much and actually sometimes goes down. Consumers usually cut back on their spending during a recession, so businesses often reduce their prices to try to get people into the stores. If you have the means, you have a job, you have the money on the side, or recession, actually, could be a good time to make a big ticket purchase, such as a car, refrigerator or other big household appliance. That said, some of us are old enough to remember the 1970s and the stagflation, when price kept going up despite a muddling economy. I have to say that's probably more of a concern these days since President Trump wants to impose significant tariffs, and tariffs can be inflationary.

Alison Southwick: Bro, let's bring us home. What's the foolish bottom line on recessions?

Robert Brokamp: Yeah, I would say to get your finances recession ready, start with that boring, yet important advice to make sure that you protect any money you need in the next few years by keeping it in cash, short term bonds. This is also probably a good time to look at your budget, reduce any unnecessary or underappreciated expenses, maybe use that money to build up your emergency fund, and as I said earlier, do everything you can to shore up your job security if you're still working. If you're near or in retirement, the concern really is probably more about your portfolio since you'll soon be using it as a paycheck if you're not already and this is where asset allocation and diversification really becomes important. It starts with building that income cushion, which is five years worth of portfolio provided income in cash, maybe short term bonds. It's also crucial to have different types of stocks and own enough of them. We often say here at the full that you should own at least 25 I like more and maybe throw in some index funds as well. You can always keep investing in growth oriented stocks, tech stocks, but maybe have a compliment of some solid dividend paying consumer staple stocks. You just don't want too much of your retirement writing on just one sector, one industry, or one style of investing. Finally, the good news is just to take heart in the fact that every recession has been followed by an economic expansion, they don't last forever. Eventually, unemployment will come back down. The holiday party will want to be held at some fancy hotel, and the stock market will get back to new highs, eventually.

Alison Southwick: Well, one last thing. While it is April Fool's Day, I have something that's not a joke to share. My time at The Motley Fool is drawing to a close, and today is my last episode of Motley Fool Money. As some of you know, Bro and I, with Rick behind the sometimes Literal Glass, have been podcasting together for over 10 years. It all started with the Motley Fool Answers podcast back in 2014. Now because of my time with Bro, I've forgotten more things about finance than most people will ever know. Because of the hundreds of postcards we received over the years, I like to believe we made a difference in a few people's lives. Anyway, thank you, Bro, Rick, Ricky, and to our dozens of listeners, so long and thanks for all the stocks.

Robert Brokamp: Well, Alison, I have to add in my own thoughts. Of course. Yes, it has been more than 500 episodes together. As I've told you many times, working with you and Rick and doing this podcast has been one of the highlights of my career, if not the highlight. You're smart, you're funny. You're hardworking. You have a big heart, and, of course, you love Star Wars and a good Christmas song. I know I speak for our dozens of listeners, when I say, thank you so much, we're going to miss you, and we wish you all the best.

Alison Southwick: Thanks, buddy. Rick, are you crying?

Ricky Mulvey: I am.

Alison Southwick: You'll be OK.

Ricky Mulvey: As always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against still buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. Motley Fool only picks products that they would personally recommend to friends like you. I'm Ricky Mulvey. Thanks for listening. We'll see you more.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Alison Southwick has no position in any of the stocks mentioned. Bill Barker has positions in Alphabet. Ricky Mulvey has no position in any of the stocks mentioned. Robert Brokamp has positions in Vanguard Total Bond Market ETF. The Motley Fool has positions in and recommends Alphabet and Vanguard Total Bond Market ETF. The Motley Fool recommends Bayerische Motoren Werke Aktiengesellschaft. The Motley Fool has a disclosure policy.

Are Investors Leaving U.S. Stocks? was originally published by The Motley Fool