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Michael Reynolds, VP of Investment Strategy at Glenmede. Michael, I want to get you in here just on how you guys have tried to think through what we've seen over the last 48 hours in markets, what you've talked about internally with clients, and how you're trying to get your head around what's, you know, getting close to a 10% drop here in the S&P in just two sessions.

Well, we knew we were heading for some volatility here when, uh, liberation day, so to speak, came around. And the expectation was perhaps we'd get a little bit more certainty on trade policy. To some extent, we actually did, but when one question was answered, it seemed to bring up two more. The biggest of that is, well, okay, we've got the details on what reciprocal tariffs mean now, but what does that mean from here? I mean, countries, some of our trade partners can take one or two paths. They can either bring their rates down and maybe we soften the impact of these tariffs, or maybe they ratchet things higher by putting in tariffs of their own. And so we have so many different questions of where things could be going here. The uncertainty is really here to stay for the near term. So it really doesn't surprise us to see a lot of this volatility when you have really a regime shifting change to global trade, when globalization has become such a big theme over the past two decades. Upturning that is really having some implication for risk assets.

I don't know if it's liberation day or obliteration day. It seems like the latter. I mean, I'm just going to go with it is the latter. We can see what's happened to the market here in these last few obliteration days. Um, am I right to focus on when I'm looking for companies that are going to feel the most pain? Am I right to focus on companies that are producing in I'm looking at the 10k of a company. Since I already mentioned one of my shorts, I won't mention this one, but, uh, 91% of our revenues in fiscal '24 are from Malaysia, Mexico, Vietnam, China, Indonesia, and Taiwan. That's not good.

So we think there's two ways to look at this. You can look at the direct impact and you can go down that thought process where you look at the companies that are exposed to foreign trade, and really there's nowhere to hide anymore because there's 10% universal tariffs and maybe higher for your Vietnams, your Southeast Asia. But the other part of this is if other countries are going to retaliate, maybe they're going to go after the US cash cows, which is like I would call Big Tech, Mag 7, whatever you want to call it. That's really a big driver of our economy, and if we're going after big drivers of their economy, that's sort of what's vulnerable on the US side. So we're thinking through both indirect impacts as well as the direct impacts, and it's it's really quite a lot all at once. So it's again, not surprising to see a lot of this volatility to the extent we have.

All right, this is probably impossible to do, but give us a couple names that are being unduly punished so we can sort of finish maybe on an encouraging note today.

Sure. I don't know about specific names, but we're looking at small cap in particular, which has gotten hit really hard in this environment. We sort of liked small caps on some interesting valuations to start the year, and if you liked them then, you're certainly going to love them in a bare market here. But what we've got to watch closely here is where the earnings are going to go, because if things get cheap on earnings that just haven't been adjusted for what the tariffs could do here, maybe you're catching a falling knife so to speak. We're starting to think about that a little bit.

And the reason is, Lex, small cap, for the uninitiated out in the audience, is they don't have the exposure to the external sector on tariffs on imported goods for the most part, right?

For the most part, yeah. I mean, they're more domestically focused. A smaller portion of their revenues relative to larger cap companies are exposed to to foreign trade. There is some argument to be made that larger companies perhaps are a little bit more dynamic in resourcing their supply chains, and we think there's some truth to that, but at what point does the sell-off get too much? We're starting to have those conversations, and really we're looking at the things that are down the most, and small caps are fitting that bill.

You know, Michael, I'm curious. We got a minute here to the bell, and I want to be quick, but just are portfolios in your view positioned to take advantage of these sell-offs? I mean, how are you guys thinking about the mix coming into a year like '25, particularly coming off two straight years where the S&P was up 20%?

Well, we've been making the case for diversification really hard at the beginning of this year, and that was both between asset classes as well as within. So if you had a more diversified approach and you're say large cap bucket, you're probably avoiding some of the stocks that are down the most this year. Uh, in addition, if you had some international equities in your portfolio, yeah, I mean, down quite a bit today, but actually year to date doing considerably better. So it sort of depends the approach you took coming into the year. If you were diversified, you had some bonds in your portfolio, yeah, this doesn't feel great, but you're certainly doing a bit better than some of the stark numbers you're seeing on the screen today.