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Welcome to Stocks and Translation Broadcasting from the New York Stock Exchange. I'm Jared Blickery, your host, and with me as always is the voice of the people, Sydney Freed. Please like, subscribe, comment on Stocks and Translation on Spotify, Apple Music, Amazon, or YouTube, and today we are welcoming back Ann Barry. She is a founder of Thread Needle Ventures, and she was one of our very first guests here on Stocks and Translation. Great to see you again.Today we're gonna try to make sense of all the tariff drama and what it means for investors this year. Our word of the day is guidance. I think we could all use some, but we're talking about the corporate kind today which is getting yanked. This episode is brought to you by the number 3.89%. That is the most recent low in the US 10 year yield, which has now given way to the biggest three day jump since 2001. What that means for investors every day. We'll get to our phrase of the day in a minute here.But first, could you give us an idea of what you're looking at in the markets right now? And I just want to add, we are taping this at the New York Stock Exchange when we just got news that there is a pause on tariffs, so stocks are ripping the most in years, and we're just trying to make sense of this all here. How are you making sense ofthis?

Well, I think the key to making sense of the market right now, Jared, is trying to make sense of the trade policy regimen that we're in. The fact that this kind of roller coaster is possible.The fact that this kind of volatility is possible and this kind of policy sea change and then reverse reversal is possible, to understand the market, we've got to understand what's the trade environment gonna be and then how business is going to respond long term in terms of caps and investment.

Well, I want to get into our phrase of the day because this ties directly into what we're talking about, and that is guidance. So I'll give a quick definition here. Forward guidance is the company's predictions about its future financial performance, which oftentimes carries more weight with investors than the company's historical performance or what they already did. And so very recently, uh, right before we taped this, we got.And I believe Delta Airlines, they have pulled their guidance. That is a big deal for companies to do. They don't want to do that because a lot of time that just hurts their stock price. But this reminds me of the pandemic. Once you see a big, a few big players do it, others pile on and soon, sooner than later, you have all these companies pulling their guidance and some and then the analysts, they follow suit, and then you have this re-rating to the downside.Despite the news of the day, you know, we could still have some further repercussions here. How does this all play out, do you think?

I thinkyou're exactly right that the guidance that we're used to getting is going to evaporate in this coming earning season, and I, the two names that you just called out, Jared, Walmart and Delta, these are blue chip, right? These are leaders.In their sectors. And the fact that they will step back and say, we don't know how this is going to play out. I don't know how you expect some of the smaller players who are much more subject, um, to sort of the repercussions secondhand, it's gonna play out. And that lack of guidance, you just said it, the Wall Street and all investors hate uncertainty. And to not have any of the signposts to try and guide ourselves by is just really incredibly difficult. And the other thing I will say about guidance, and I'd love to just to get your perspective on this is, um,I do think this earnings season is where people say, oh by the way, here's some bad news. Right, here's here's not what's not been working at the company, and we've gotten to the bottom of it now, and here's the bad news PS tariffs. And here's a little bit more bad news over PS tariffs, right? Things like tariffs and macro overhangs tend to be the times when companies come out and flush their bad news out

of the system. A throwaway quarter, for instance, and sorry to interrupt you. No,

no, no, no, so Delta reported today, but Walmart didn't report yet, but they pulled their guidance. Any chance?They put it back because of this pause, or you think like once you make a decision like that, and we still don't have certainty, right, because it's a 90 day pause, not certainty, but you don't think something like that would probably happen?

I don't think it goes back in. In fact, I would take if I were in Walmart, I would take advantage of the fact I've already said no guide guidance. I would take advantage of the 90 day pause and I'd look to kind of pop back out of a cake 100 days from now, right, and say, actually, here, here's the tariff regime we think's happening, we've internalized it.And PS, Wall Street, and investors in that 1900 day window. Here are three specific things we are going to do to come out of the other side of this better positioned or stronger or more competitive. It gives them time to actually come back and try and differentiate themselves from the market by being more concrete and with better planning than perhaps some of the others might be.

So it sounds like there's almost a gaming of the system here. Companies have to report their profits and losses as well as their revenues, which is their sales, on a quarterly basis and on anbasis here and so the strategy strategy might just be in the midst of all this market upheaval which everybody is facing right now, we're going to lower the bar. We're going to watch everybody lower the bar, and then we're going to come back as you said, Ann, pop our heads out of the cake 100 days later. I can't wait for this moment and suddenly everything looks rosy and the stock market has already anticipated this. The lows in and then we just sail to all-time highs. Is that the plan?

Idon't want to be very foolish to try and predict where the market's going to go at this moment in time.There's just one overarching piece here that I that really worries me. Even if the tariffs get resolved with a really fantastic outcome, right, the passes our wildest dreams, um.Here's where I think there are issues, and this is where I'm already hearing the chatter amongst corporates. Forget Wall Street but the actual big companies. It is really hard for corporations to make longer range planning, decide to spend big capex numbers, decide to do big cross-border M&A if they are not sure whether the environment around tariff policy or other is going to change on another whip or change on another dime. And so I think no matter what happens, capex, investment, cross-border act.is gonna come in lower than it would otherwise have been, but for the kind of extreme volatility and the extreme policy that we just get announced over the last week. What about

AI because we're talking about Kevin and the other and it doesn't look like that guidance is getting pulled just yet, but we've seen some huge reactions by, for instance, Meta in the past when they had to get when uh Mark Zuckerberg had their year of cleansing, that's not the right word, but they, their stock got cut by 75% and he just cut a lot of heads in the meantime.Um, do you think they cut capex in a similar way in response to market environments to, you know, prop up their stock or at least arrest thefall?

I don't think necessarily on AI driven capex and here's why, and it's interesting, you know, just today, um, I think it was um uh alphabet that reaffirmed it's is it was Alphabet or Microsoft that just reaffirmed its capex numbers for the year, um.I think the AI narrative has gotten to such a different place, right? This whole narrative of it's more dangerous to not spend on capex than to risk overspending on capex has become so embedded in the analysis around big tech right now. I think for them to pull back and say, because of a temporary um,Shift in the tariff regime, um, or to really sort of try and peg it to this too much is very difficult for them. The other thing I, I do think is the returns on investment in AI. We're not really going to see them in a tangible. They're so far. Well, so far, right? And it's interesting because you know, I had a conversation with the CFO of Adobe very recently, and he kept on saying, look, we've got $3.5 billion of AI addressable revenue.But the amount generated so far is 125 million, right? So to your point, it's a very tiny proportion. Um, and I, I just think while the returns are so unclear, I think it's almost hard for the big tech names to pull back because it's hard to provide the rationale on why.They can't see the ROI is not turning out the way we thought that it could be. They're doubling down now despite the tariffs. I don't know what the catalyst would be there. It's difficult.

So considering this capex spending, even considering some of the volatility in the market, are we seeing a buying opportunity right now in the mag 7 potentially onsale.

I think that there are a couple of things embedded in your question, and there is nothing average about about about just needed, it just needed to be said. Um, there's a couple of assumptions embedded in your question. When you say it's gone on sale, because just because the price of something dropped.Does not mean it has gone on sale, right? And I'll give you a different example to to depersonal. Do you remember when there were you mean coins were a thing? Do you remember peak of mean coins, I remember having a conversation actually with a journalist who said, Well, isn't it great now that this mean coin is cheap?

yeah,

now I,

now I see what I walked into because this is a really, really important debate. I think it's a really important debate, particularly among people who've got platforms and are visible and that folks like, you know, that you're you're listening to. And I remember in that moment exactly that question, Jad, cheap relative to what? Re to some fundamental value. Now here is my belief and it's one person's view.I think this is the kind of moment where there's this kind of volatility, where it can't just be assumed that the fundamentals are the same and the prices drop, therefore it's cheaper. It may turn out to be that way, but it could also be that fundamentals are shifting as a result of this volatility, at least for now, and they may shift again, they may go back to where they were.So I think just going on sort of autopilot and assuming and not not stopping and saying if something changed here, I think is is something I would really caution against.

So valuation that takes a while to play out because we need company warnings to do that. We have one season right here at our doorstep? Does it take two seasons? How long does it take for this valuation to potentially reset off of this? Well, look,

Ithink valuation is a function of guidance, right? And that's a function of executing against.So I do think that this earning season, if it becomes, and my sense is it may well become a season with little to no guidance, it becomes a flying blind season, right? In which case, I think we then need to get to another season after that where we start to see some rear view mirror data coming out. We get to hear some concrete articulation of plans that have been put in place to deal with whatever tariff regimen it is that we end up with. And thenI think guidance kicks back in, and then I think valuation could be pegged to something more fundamental. That's

minimum 3 months from now. So. And

I actually think it's more like 6 months from now, because I think we get through this earning season, 90 days from now, as a filming, we may have some perspective on what the tariff regime is, then we need to hear what is the response of companies going to be? What are they going to do with their supply chain, and then we go see how they execute. Have

to here we come, becauseYeah, that's a lot of guests are just saying don't, don't expect to learn that much in the first half. It's gonna take a while to shake out. Um, go

ahead. Taking a step, like a big step back with Outlook. I actually didn't know that companies were not required to put their Outlook out. Is that right? Yeah, so I don't, why do they do it in the first place? Why pull it instead of being aA little more I guess it is honest to say we don't know what's happening, but I said this to another guest, it's like why pull it when times are bad but do it when times are good kind of thing. I, and then sometimes I guess you know I'll say I'll say sometimes we see a stock actually go down when the guidance was bad, but the, uh, earnings were good and I'm like wait, then we get all confused. So that's a lot I just threw at you like.Start out with just like why we have guidance in the firstplace.

Because of the timing at which the reporting happens. By the time that you get the report on Q1, think about it. It's, it's maybe it's April at the earliest, which means that historical data is already to that point. It's historical.It's already coming up to 4 weeks out of date. You're already nearly a third of the way into the next quarter by the time you hear about the last one. And so the guidance is sort of an important way of the market to be able to try and keep us as current as it can be with what's going on with these companies. That's number one. Number 2, so your second question, which was why is it issued when times are good and and not when times are bad. Can IPerhaps try to rephrase what you just said. I don't put words in your mouth. Are they issuing it when times are more certain and pulling it when times are less certain? And then is there a correlation between good equals more certain and bad equals less certain? That's, that's what what I and COVID was Jared.So at the top is when we saw guidance pulled, and those were not good times and very uncertain equals bad and not good at all.

Hold that thought. We need to take a short break, but coming up we're going to be talking about the frenetic moves in the bond market and a runway showdown that looks to the future, but how far?This episode is brought to you by the number 3.89%. That is the most recent low in the 10, the US 10 year yield, so government debt that's, uh, issued 10 years out, that matures in 10 years, pays a 3.89% interest rate. However, that was just a few days ago. In the interim we have.Rocketed higher by 0.5% point, basically 55, 56 basis points. That is the biggest three day jump since we've seen, not since the pandemic, not since the global financial crisis, but since 2001, and we've seen markets kind of get risk markets get rocked when we have this kind of bond market volatility. How does this factor into anything you're thinking about?

Oh wow, if if that was a tough conversation on stocks and getting to the ones on bonds is really difficult. I come back to um volatility and it gets really hard for folks like the banks to start managing their balance sheets when you've got this kind of volatility in the bond market, um.And I worry about that again in terms of asking back to your question, is this a time, is this a, a time to buy, is it time to sell? Um, it just goes to show how fragile these moments of uplift are and, and how uncertain how long those moments of downdraft are going to be. So I type back to the equity markets, which is where I think a lot of retail investors are playing and say this kind of bond market volatility isn't, is not great either. And you know who it's also not great for? Consumers. Can you imagine trying to go get a mortgage?With this. Lock it in. But you know, you can, you can miss it by a day or two. and so I think that's where it gets, it gets really difficult.

So what do you tell people about whether to buy or not back to this question. Do you say like, hold on a sec because there's so much volatility, just don't do anything freeze, or is there a certain type of bond you would say that's probably best for this kind ofsituation.

So the first thing I've always said about investing is diversification.Some bonds, some equity and that is a platitude. This is generic. This is, you know, you've had this you can go look this up, right? And so there's that. Then there's a question of what do you do now?I do believe staying in the market, staying investor is important. I have not sold and I, you know, I, I've bought in the recent downturns, but only size by the amount that I would have invested anyway. I haven't made big swinging bets. And here's why, to be honest with you.People have lives that they're living, right? If you are looking to go retire, right, are you gonna take a big swing right now on what might be a protracted upturn or downturn? Probably not. If you're saving to buy your first home.Right, if you're planning to have a family, if there's any reason you need to tap your liquidity at some point over X period of time, that informs how much risk you're willing to take over one period of time. And it is always true, that is also a platitude. But I think in these moments of real with volatility more than we have seen recently, I think really stepping back, whether you're a corporation, trying to think about how to conserve your liquidity needs, if there's a recession.Are you worried about your jobs? Are you worried about what you're gonna have to do your cost structure? I think this is the time to start with what liquidity am I solving for first, and then think about whether to go buy, sell, or otherwise in this kind of market.

Sticking with diversification, I'd be interested to know how closely you follow commodities, and I saw you tweeting about crude oil recently. WTI just hit 55.And that is a, I believe it's a multi-year low. I haven't seen that price in a while. Of course, over the pandemic hit, it hit -40 intraday, which still blows my mind. I don't know how that happened, but I mean, how much do you pay attention to some of these macro moves and do you figure that into some of your investment strategies?

Yeah, I do factor in. I do look at WTI. I think it's it's an important.indicator of global demand. It's therefore an important indicator indicator of global recession risk. Um, and it touches so much of the inputs into pretty much everything we consume. I also look at it as an important way to think about what inflationary risk or counter inflationary mitigant it can actually provide. So that is one I actually I do keep a close eye on.

In terms of being diversified, if you are a younger investor, um, and you're, you know, you're watching all this volatility, I don't know, like, do you jump into things that you don't have like commodities? If you're not already invested, is it kind of like, because I don't know, I'm just, I'm just literally thinking out loud here it's like, do you, do you put some more money that you may have already put in the market but you put it to things you already know.Um, even though it might not be diverse because you already have it, or do you say, listen, I don't have any gold in my portfolio. I don't have any oil. I, I don't know, like, do you go in that I don't know.

I think that's really, really great. I told you you weren't average. This is such a great such a great question. I do believe over time.That there is, it is important to have diversification. Now, if it were assets I wasn't so familiar with, or more volatile as higher beta than others, here's here's an example of how I would think about the world. This is just me. If I were planning to invest $1000 this month, for example, and I'd been investing only in stocks, because that's what I knew and I was comfortable with, but I also kind of had this sense.I should be diversifying more. Maybe I would spend the next month, you know, 100 of that $1000 goes into something like, you know, a broad-based commodities index, and then the other $900 goes into what I know. Same with bonds, lots of people are moving in and out of stocks. We, you know, there's not so much activity, I think, on the retail side in bonds, but there's lots of opportunity to do. So I think starting to lag into diversifying.Uh, is incredibly important

anddoing it kind of with a maybe smaller amount of money so you're not taking such a risk, but you're slowly getting into different things

and learning and

the important thing we got to learn some lessons here and this is a great segue to learn something from our runway showdown this week. Uh, it's very simple. What is your time horizon? How far does your future andPlans stretch. So on one catwalk we have China's flowing robes of long game luxury. China's look is minim minimalist, but it's built to last. It's stitched together with 5 year plans, strong historical memory, and an eye on 2049. That's the year. It's slow fashion for geopolitics, less about seasonal trends, more about legacy pieces that do not go out of style. But here comes.chic, fast, flashy, and fearless, it struts the US in bold cuts and high turnover, driven by quarterly earnings and four-year election cycles. It's high stakes runway drama here, campaign trail makeovers, mid-cycle fiscal pivots, and market moves that change with the lighting. So Anne, who is wearing the strategy of time itself the best? Is it China's luxury game?Which takes to the long term, or is it America's quarterlychic?

And the great irony in everything you just said is that America has been importing its quarterly chic from China, right? All the fast fashion, all the, you know, Cheyenne and all the rest of it. Uh, I, I do think when it comes to the willingness to absorb, um,Pain coming out of this. I think if we're going to have a US China prolonged trade war, it's election cycle tolerance for pain, that's the US versus um a longer term ability, I think, to withstand it in China, not subject to the same election cycles. Now all that being said, I think Jared, if you'd asked me that question.10 years ago pandemic, pandemic.I would have said that the Chinese willingness to withstand pain from this would have been higher than it is today, because in the interim period, we have had Chinese consumers.Coming to know and love US brands, right? Coming to know and love a lot of the things that are being imported by China, uh from the US. And so consumer preferences do matter. OK, so yes, it may not be a case of whether there's an election coming up and those consumers, they really, you know, annoyed they don't have access to XYZ. they're going to, there's a vote to come. But there is a form of domestic pressure that I do think matters even if it doesn'tManifest itself in exactly the same way. The scent is never comfortable.

Well said, we got about 2 minutes left, so I did want to ask you, since we're kind of kind of talking about time horizons, how do you approach risk management? We've touched on this a little bit. You said you're still holding, but when you're putting on positions, maybe just punting something, do you have a stop in mind? How do you think about preserving your capital?

Yeah. So I, I have been very deliberately, uh, holding more cash, waiting for a correction since the end of last year. I didn't anticipate the kind of correction we had. And in that period of time, Gerald, I've been trying to educate myself on where would I stock pick? I would not be stock picking in this market, but where would I stock pick if I had more of that certainty? And I have believed that at some point a recession will come.Or at some point a slowdown in GDP would come, and there are certain sectors I've looked at to position myself there. For example, this is just one person's view. Um, when I think about the cruise industry, like if you go back in time, even look at what happened post the recession, the cruise industry actually came out of it, um, with a really compelling value proposition for consumers that all inclusive vacation was something that even if you were really stretched to go on vacation, people found a way to make that work. That's the kind of sector I'm looking at.

What other ones now I'm curious. Yeah, tell me all yourtricks. Well,

again, this is just my view. I've long time been a fan of Walmart. I mean, I'm so boring about Walmart because I'm so excited about it and have been for such a long time because I look at that kind of business where I say, OK, it's, you know, America's favorite retailer, um, the sheer scale of it, you know, we saw with the tariff overhang, um.The impact that it would have on Walmart in terms of margins. But ultimately, it's a state, you know, it's it's a staple within consumer discretionary. It's got its grocery exposure. But what I do like about Walmart, it's got hidden inside it, this sort of tech and retail media business. It's a data analytical machine. It's growing its media platform within it. It's it's digital advertising business. And I think it's the kind of company where it's taking kind of old school.Retail, generating cash and redeploying it, I think, in a pretty intelligent way around things that are going to be, you know, faster tailwinds for growth like digital.

All right, we have to leave it there. Really appreciate you stopping by again and we have wound things down here at Stocks and Translation. Please be sure to check out all our other episodes on your favorite podcast platform or the Yahoo Finance site or mobile app.