Closing Bell - Closing Bell: 4/7/25

Episode Date: April 7, 2025

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

Welcome to Closing Bell. Scott Wobbner live from Post 9 right here at the New York Stock Exchange. This Make or Break Hour begins with this highly volatile stock market and how investors should react now to this ongoing uncertainty. We will ask our experts over this final stretch, including Double Line's Jeffrey Gundlach. He will join me at the bottom of the hour for an interview and one we cannot wait for. Here's the picture with 60 to go in regulation. That picture not really telling the story of today, of today's market at all. I want to show you an intraday of the Dow because that does a more than 800 point swing from low to high at one point. It's peaked, I mean we got green for a minute on a headline and we turned back negative and we've been kind of hanging around in this territory for the last hour or so.

There's been some buying today in parts of tech, Nvidia, Meta, Amazon, Alphabet. Look at that, they're all green. Micron and Broadcom are among the chip names getting a little nibble as well. So we'll watch all of that as we head into the last hour here. The VIX shooting higher today was at 50 pulled back just a bit but it's been on the move as well. Bond yields interestingly higher today. Watch that as well.

What story is that telling? Why are they moving up? We'll ask our special guests today. It does take us to our talk of the tape. Will stocks see further selling or is it time to buy some names on your list? Is a White House tariff pivot possible? On that note let's start there with Eamon Javers. He is at the White House tariff pivot possible? On that note, let's start there with Eamon Javers. He is at the White House with the very latest. What a day, Eamon.

What a day indeed, Scott. Certainly anything is possible here at the White House. No indication, though, that a pivot is in the offing. We're now waiting for an event here with Israeli Prime Minister Benjamin Netanyahu and President Trump in the Oval Office. That was expected to start about a half an hour ago. They've slipped a little bit in the schedule. We do still expect to see the two men in front of reporters and to take a couple of questions. So we'll see if the president has any comment to make in that event. Meanwhile, we just saw this tweet from the Treasury Secretary, Scott Bessent, who posted

that he is engaging in negotiations at President Trump's direction with the government of Japan. That's an interesting one, Scott, because that does seem to indicate that there are negotiations going on behind the scenes, or at least they're starting today. And one of the big questions for the market in all of this was whether or not this is a negotiating strategy or whether this is a permanent tariff strategy. We had Peter Navarro on CNBC earlier today saying this is not a negotiation and that even if a country like Vietnam came and offered 0 percent tariffs, he said that wouldn't be

good enough. We have to go below zero by getting rid of all the non-tariff barriers. Here you see Scott Besson saying, well, it is a negotiation. So make of that what you will, but it seems to be at least a little bit of a positive for those who don't like these high tariff rates, Scott. All right, Aiman, thank you very much on the North Lawn. It's Aiman Javras for us once again. Appreciate you.

Thank you. Now let's bring in Trivariate Research's Adam Parker, Apollo Global Management's Torsten Sloak, Adam's CNBC contributor. It is great to have you both with us. Adam, I'll begin with you. Is everything hinging on a so-called pivot at this point from the White House? I think in the next few days, yes. It's hard to see how we'd have a big rally without some sense that this isn't going to be a prolonged trade war. The way

I try to think about it is I think what's happened is one year of earnings growth has been already taken out based on lower consumer confidence, management teams not knowing what to do. So maybe my 2026 earnings are now my 2027 earnings. Maybe that's okay because so many stocks are down 15, 20%, that maybe they're discounting that one year already. And so it's getting close as we tried to,

you and I danced around the last couple weeks talking already, and so it's getting close as we tried to, you and I danced around the last couple weeks talking about, I think it's getting close. What I think is true, and then I got a little concerned I was wrong already, is that the tariff news wasn't gonna get worse, that that 34% number would be the biggest I was gonna hear, and then while I'm in a meeting with a couple hundred people on today, I see a 50% number come across the screen

and I thought, whoa, you know, so I think if the tariff news doesn't get worse, we can start focusing on earnings guidance and the stock action and maybe get to a brighter day later in the year. But I'm still too nervous based on what I'm seeing today. Torsten, it's good to welcome you to our program today. How does that match up with your own view? Well, I think that the challenge at the moment is that we should probably assume that tariffs are going to stay in place.

There could be some reductions coming, but if tariffs are going to stay in place, of course, it will over the next several quarters begin to have negative consequences for earnings and for GDP. It could drag GDP down as much as one and a half percent and at the same time put one and a half percent upward pressure on inflation. And combining that with weaker corporate confidence, weaker consumer confidence, uncertainty about retaliation, and now on top of that the negative wealth effect of the stock market being down seven trillion dollars, all those things are just weighing on the economic outlook going

forward. So it is just the case that the outlook here is still being dragged down by a number of negative forces weighing on the economy. Adam, I hear a description of stagflation without saying the word, but that really is what the great fear is here, is it not? Yeah, for sure that's terrible for stocks if that happens. But I think what the plan is, and the administration has been consistent that they've been worried about trading balances and that they've been consistent about tariffs.

But the other part of the plan is that they're going to try to offset some of that with taxes and tax relief being extended and with regulation that can help offset it. And so I think in order to get the Republican Congress to agree to the tax deal, you know, they could start pressuring the administration if some of this stuff really starts hurting their constituents. And I was sort of half joking in my note on Sunday, but you got a third of a trillion dollars lost from some of the Mag-10 CEOs who, in my recollection, had better seats than Ush Vance at the inauguration.

Like he's probably, you know, going to get some tax from those folks at some point too. Yeah. You could start seeing... Give your million to lose billions. Yeah. Nice trade. Yeah, good trade there. You buy the Washington Post and you lose 200 billion personally

Well, you know, so I think there's some stuff like that where they could start getting pressure I'm not saying it's at five thousand and that's where the put is I still think it's too early to take risks But I think at some point who'll need that tax agenda and regulation agenda to be on the minds of people not Getting worse every day on tariffs orston you paint a scenario which sounds to me that is one where there's no confidence at all in what earnings could actually be. And if you don't know what earnings are gonna be,

because you don't know what the economic environment is going to be, then you have no clue as to what the multiple should be on this market and what investors would be willing to pay for stocks. Therein lies the underlying issue for this market. Absolutely, and therefore volatility will likely continue. And adding to that, the really unusual development today is what's happening in rates. Normally when the stock market goes down, long rates and short rates should be going down.

But long rates today went up 25 basis points on a day when stocks are going down. This was likely driven by a combination of factors such as supply worries. It's also what's going on in credit spreads widening out. It's also probably general risk reduction. There's worries about whether this is a basis trade unwinding, but there really is a very fundamental question about if the risk factor,

meaning the factor that I use to discount my stock cashflow earnings over the next several years with, if that's also going up, then that does increase even further the volatility in markets, because then it's only not a question about what are future earnings, it's also a question about what is my discount factor, and if that's now suddenly higher, that creates a lot of things that are problems for valuations going forward. Let's stay on the earnings thing for a minute. You share those concerns, like you don't have any visibility

on what you think earnings are gonna be. How are you gonna map this whole thing out if you don't have no idea? If you went out running a company, CEO, CFO, we report next week. We're having a meeting. Who's who? You were the CEO, you see how I did that?

I want, yeah, I was clear. But we'll be having a conversation about what should we guide to to make sure we don't foul up this July earnings guidance. The skew to that's gotta be the negative. Why would we set the bar high where we can't meet it with all this uncertainty? We don't know what our consumers are saying.

We don't know the capex of our customers. They know they're gonna keep cybersecurity and nothing else. We're worried. So we're gonna set the bar low and hope the market digests it. We have no choice. So I'm worried that the guidance will be bad.

On Torson's point, the one thing I've learned, and this could be, like everything I'm saying, this could be wrong, but what I learned at Morgan Stanley during all those years was the supply demand argument is not a good argument for bond yields, okay? It just isn't. When people are afraid, almost always,

the 10-year yield goes lower. Tor operation, Twist, Tor QE1, QE2, Q always the 10-year yield goes lower. Tor operation twist, Tor QE1, QE2, QE3, all that stuff. Morgan Stanley's guys are saying, oh, the supply is coming on and it will back up, and every single time yields went lower because people are afraid they buy the 10-year. On a day-one-day basis, you can have weird mechanical stuff. But if the economy slows, I'll make a bet strongly the 10-year yield goes lower over time. No, but there is, I mean, there is part of a concern. I mean, I know people are talking about it, whether you get a, Torsten, a policy protest

from foreign governments who then start unloading treasuries, which start, starts to move higher in yields. I mean, that's an issue to potentially contend with if it, if it ever ends up happening. No, no, and I agree with Adam, Adam of course on the normal circumstances if the economy and equities go down then rates will and should go down that's why today is so unusual let's just agree that today there was more supply than demand and that was the reason why rates went up that's why it becomes so important to understand and think about why are rates moving up today the dollar actually went

up today so it doesn't look like this is foreigners selling, it doesn't look like this is China selling, so it must be some domestic selling, which is why it could be basis trade online, it could be just risk reduction on the equity side, risk reduction on the credit side. But the fact that rates are moving up is creating a lot of homework for investors

for the following days. Is that something though that you would worry about, foreigners selling our treasuries in some sort of protest? The key place to look for that is the dollar. And given the dollar did not go down today, then I'm not worried that it was foreigners that were selling today. But I do worry about that. And if they were, we have such a volatile environment for equities,

the fact that rates, I mean, 10-year rates up 25 basis points, it is, excuse me, totally wild relative to what we normally see. So it becomes very important to get some understanding of why is it long-term interest rates suddenly are moving in the complete opposite direction and multiple standard deviations from what we normally see. If we've gotten you to use the words totally wild, we know we're in charter territory. I will say this though, when I look up and I see Hong Kong down 17 most European markets down five or six one thing I've heard consistently all year is people like non US equities more than US equities. I don't think that makes any sense

I think today is gonna hurt people's confidence on some of those other areas at the end of the day all the major growth themes That US equities over index to so you could have some stuff going on there where money's going into mag seven and out of other non-US countries also. Let me just ask you really quick before I let you go and move the conversation on. These are somewhat unprecedented times, right? Uncharted waters, you've got a president who at least to this point seems willing,

that's the word that I hear from investors when I talk to them on Wall Street, willing to send the stock market lower to cause a tank in the market over three days that you only see a few times out of history. Does that resonate with you to some degree? Look, I think the truce always in between. We sat here on the election night together,

and it was, I don't know how to pronounce the word, ebullient, is that how you pronounce it? Ebullient, ebullient? And it was, this guy't know how to pronounce the word, ebullient, is that how you pronounce it? Ebulent, ebullient? And it was, this guy's amazing for the stock market. Right, it was only five months ago, everyone thought this guy's the greatest guy ever for the stock market, okay? We wrote a note, buy the election, sell the inauguration.

That day, and I think that's still in place because implementing all this policy is not without hiccups, and the main, Torres and I totally agree that uncertainty is bad for equity multiples. And so you can't tell me you're gonna pay a higher multiple when you're just uncertain. When we finally, whenever it is, get on the other side of this,

and get more certainty about what the plan is, and we can start talking about the pro growth stuff, then we'll have a huge rally. And you saw from that minute earlier today, people wanna buy stocks. They wanna buy Nvidia down from 145 to 90. Oh, we're hanging on anything positive, obviously. Yeah, and I think when you get that rally,

it's semis that are going to work. I'm like really convinced. And $11 trillion worth of wealth wipeout will actually do that too, right? Yeah, totally. Adam, thanks. Torsten, thanks to you as well. We'll see you soon.

Let's send it now to our senior economics correspondent, Steve Leesman, for more on how the Fed Steve is thinking about all of this. What are you hearing? Well, what we've heard them say, Scott, Fed Chair, Jay Powell, and others is that they can't, and they will not, and they cannot ride immediately to the rescue here of these markets and the economy, and that's despite what is clearly surging recession probabilities, and you can see why in the Flash Fed survey we did over the weekend. Take a look here the

recession probability up by 33 points since January to 56% so it's not just JPMorgan it's a lot of the street is up there that's the fastest rise we've seen to a number like that and then you heard torsion really lay it out very similar numbers here down 17 on GDP for the year to an anemic 07 and then up 09 call it a percentage point to a place the fed is not going to be happy about 3 6 on the cpi well what's their dilemma they have inflation and inflation expectations on the rise or at least elevated the fed wants to hold on to its hard one inflation progress so it's not on to its hard-won inflation progress so it's not going to be pleased with these inflation numbers.

And Fed Chair Powell is taking a tough line as he did on Friday saying, the Fed has an obligation to keep tariff inflation from being a one-time increase and not spreading beyond that. What could the Fed bring into play is concern over systemic risk. There's no evidence of this happening now.

Got to watch it though. It's unlikely to act preemptively despite urging from the president. Here's Douglas Gordon, senior portfolio manager at Russell Investments, writing in with the survey, the Fed looks increasingly behind the curve as it waits for greater clarity from the Trump administration. As a result, recession becomes the more likely scenario unless there is a timely pivot, there's that word, towards trade deals, rate cuts, or both. But the Fed, Scott, I'm afraid, is going to need to be convinced that the risk to employment

is worse than or greater than the risk to inflation. Or that issues, thank you very much, Steve, by the way, Steve Leesman, or that issues start to pop up in credit markets. Investors watching those markets very closely for any signs of stress. For more let's bring in Bruce Richards, he is CEO of Marathon Asset Management, he's with us again at Post Nights. Good to see you. Hello Scott.

How much pain do you think is out there right now in credit books and what do you think the fallout could potentially be as a result? There's a lot of pain actually starting to accumulate. High-yield spreads have widened from 300 to 475 today. We think will continue to widen based upon and we don't believe recession is going to be the base case. We believe it's stagflation but with stagflation... Wow that's great that's so much better. But at least it means positive economic growth with a fair amount of inflation. We haven't seen that in about 40 or 50 years in this country. So a lot of people don't

know how to respond to that. But at the end of the day... Bear with me one second. The President is speaking in the Oval Office. I want to listen in. Together, we had meetings together along with his very capable staff. And I think we've come up to some pretty good solutions and conclusions. And we'll be working a little bit after this. And then I assume you're going back home.

This is a quick stop in and out. But we appreciate you being here. And we are a friend of Israel, as you know. I would say that I'm, by far, the best President that Israel has ever even thought of seeing. And it's an honor to be so, and to be so thought of. Many friends in Israel, they are not in an easy area. It doesn't go easy, but we are helping them.

And likewise, they've been helping us very much. And so we'll see how it all works out. But we had great discussions today, I think, on the obvious subject of Iran and also the less obvious subject with respect to Israel, and that's trade. And I think the Prime Minister is going to tell you a little bit about trade and what they're doing for the United States. So I want to thank you all for being here.

Thank you very much. And, Benjamin, thank you very much. Thank you, Mr. President. Thank you, Delma. Thank you. Mr. President, I want to first thank you for inviting me again to the White House. You've been a remarkable friend of the state of Israel.

You stand by us. You're standing with us. You are a great, great champion of our alliance. And you actually do the things that you say you do. And I think that people respect that enormously. I certainly do, and the people of Israel do. And I think the Jewish people do as well. We just saw your representative in the Department of Justice

fighting anti-Semitism, standing up for Israel in international forums. I just want you to know from the heart, it's deeply, deeply appreciated. As you said, we had the opportunity to talk today about many subjects. First, if I can mention tariffs, it's a subject of some interest today.

I can tell you that I said to the President a very simple thing, we will eliminate the trade deficit with the United States. We intend to do it very quickly. We think it's the right thing to do. And we're going to also eliminate trade barriers, a variety of trade barriers that have been put up unnecessarily. And I think Israel can serve as a model for many countries who ought to do the same.

I recognize the position of the United States. It says, you know, we're allowing other countries to put tariffs on us, but we don't put tariffs on them. And, you know, I'm a free trade champion, and free trade has to be fair trade. And I think that's basically the position that you've put forward, Mr. President. We are going to eliminate the tariffs and rapidly. I had the opportunity to speak to Secretary Lutnick yesterday. We talked about how we could affect this quickly, and I hope to bring the solution very quickly.

We're not talking about intentions. We're not talking about intentions. We're not talking about, you know, just words. We're talking about results. Those results are going to come. That's the first thing. Thank you very much. Thank you. Mr. President, what about the hostages?

Well, I didn't finish. We spoke about not only the hostages, but about Gaza. The hostages obviously is a human story of just unbearable agony. I speak to the families. I spoke to them yesterday. I spoke to another one when I was in Hungary before I came here. I speak to them every day. They're in agony. The hostages are in agony. And we want to get them all out.

Steve Witkoff, President of Trump's very able representative, helped us get a deal that got 25 out. We're working now on another deal that we hope will succeed. And we're committed to getting all the hostages out, but also eliminating the evil tyranny of Hamas in Gaza and enabling the people of Gaza to freely make a choice to go wherever they want. I mean, they should have that choice.

And the President put forward a vision, a bold vision, which we discussed as well, including the countries that might be amenable and are amenable, to accepting Palestinians of their free choice if they choose to go there. And I think that's the second thing that we discussed. But the hostages came right on top. We also discussed the situation in Syria. We have – we've had neighboring relations with Turkey that have deteriorated, and we don't want to see Syria being used by anyone, including Turkey, as a base for attack in

Israel. Turkey is a country that has a great relationship with the United States. The President has a relationship with the leader of Turkey. We discussed how we can avoid this conflict in a variety of ways, and I think we can't have a better interlocutor than the President of the United States for this purpose. And of course, we also discussed Iran. Look, we're both united in the goal that Iran does not ever get nuclear weapons. If it could be done diplomatically, in a full way, the way it was done in Libya, I think

that would be a good thing. But whatever happens, we have to make sure that Iran does not have nuclear weapons. That's the end of my speech. Mr. President, any comments on the nuclear deal? Mr. President, we're going to the White House? We are having direct talks with Iran. Wait, wait, wait. We're having direct talks with Iran. And they've started.

It'll go on Saturday. We have a very big meeting, and we'll see what can happen. And I think everybody agrees that doing a deal would be preferable to doing the obvious. And the obvious is not something that I want to be involved with or frankly that Israel wants to be involved with, if they can avoid it. So we're going to see if we can avoid it. But it's getting to be very dangerous territory. And hopefully those talks will be successful.

And I think it would be Iran's best interest if they are successful. And we hope that's going to happen. And we had just a lot of good talks on a lot of things. I appreciate very much what you said about the tariffs. We've been ripped off and taken advantage of by many

countries over the years. And can't do it anymore. Just can't do it anymore. Can't be the stupid people anymore. And it's all because of the people that sat in this seat, right here, not your seat, but this seat. They allowed things to happen to our country that they shouldn't have allowed to happen on trade

and other things, many other things. I mean, look at what's happened with our last president where he allowed millions of people to come into our country with an open border. Who would want an open border? How stupid was that? But he allowed millions and millions of people, and of the millions — and I think it was 21 million people, but let's say three of them were serious criminals, serious murderers and drug dealers and gang members and people from jails. All the jails emptied out right into our country, right along the open border on Mexico,

generally the Mexico. They came in from Canada, too, by the way, a lot. But generally speaking, on the southern border. And what a shame it is that we are now working very hard to get them out, get the criminals out, get the murderers out, the drug dealers, the mentally insane. Get them out. They dropped the mentally insane in our country, too.

And this was all done by the Biden administration. It's a disgrace that we have to work so hard. And then we have judges that try to protect these people. But they didn't protect us when the people were being let in. But to get them out is never easy with these people. So I think we're doing a great job. The border is the best it's ever been. Even as strong as it was, I had a great, solid border.

I think it might even be tougher right now and stronger. So people are coming into our country, but they're coming in legally. We have a legal process, and we have that moving along properly because we need people to come into our country. But we want people that can love our country and cherish our country. So that's where we are.

And with that, any questions? Mr. President, would you be open to a pause in tariffs to allow for negotiations? Well, we're not looking at that. We have many, many countries that are coming to negotiate deals with us, and they're going to be fair deals. In certain cases, they're going to be paying substantial tariffs.

They'll be fair deals. As you know, I spoke this morning with the Prime Minister of Japan, and we had a very good conversation. They're coming. And I said, one thing, you're going to have to open up your country, because we sold no cars, like zero cars, in Japan, and they sold millions of cars into our country.

They don't really take our agriculture, a little bit of it, just to keep us slightly happy, but they don't take what they're supposed to be taking. So, we have a great relationship with Japan. We're going to keep it that way. But they're coming in to meet and other countries are coming in. With China, as you know, against my statement, they put a 34 percent tariff on above what their ridiculous tariffs were already. And I said if that tariff isn't removed by tomorrow at 12 o'clock, we're putting a 50

percent tariff on above the tariffs that we put on. So they've gone for years. They've become a rich country because of people, again, that were in the White House that allowed this to happen. Hundreds of billions of dollars a year they've making us on trade, and it shouldn't be that way. And I have a great relationship with President Xi. I hope it's going to stay that way.

I have great respect for China, but they can't do this. We're just — we're going to have one shot at this, and no other President is going to do this, what I'm doing. And I'll tell you what, it's an honor to do it, because we have been just — just destroyed what they've done to our system. You know, we have $36 trillion of debt for a reason. And the reason is that people allowed it to get that way. So we'll be talking to China.

We'll be talking to a lot of different countries. And I think, you know, if we can make a really fair deal and a good deal for the United States. Not a good deal for others. This is America first. It's now America first. And we didn't put America first. We put America last. The people that were in the Oval Office put America last,

and we're not going to stand for it. Yeah. The Press. The Press. The Press. The Press. The Press. Who is going to represent the U.S. in the talks with the United States? Two questions. Do you expect any of these deals to be made before April 9th?

And secondly, there have been some mixed messages from your administration. You're talking about negotiations and yet others in your administration are saying that these tariffs are actually permanent. What is the actual — Well, it can be — it can both be true. There can be permanent tariffs and there can also be negotiations, because there are things that we need beyond tariffs. We need open borders.

You know, we almost had a deal with China, where we were going to open up China. It was almost done — some of you remember it — during my first term. And it was very disappointing. We ended up making a great deal — $50 billion worth of product or so. $50 billion, you'd like that in Israel. And I made that deal, but it wasn't the deal that I wanted. It was the deal that I wanted was that plus they were going to open up China so that our companies could go into China and compete with other countries and China for the, you

know, for a large number of people. And at the very end, that deal was terminated, and we went to a piece of the deal. And there — so there are a lot of things outside of tariffs, but tariffs are very important. But there are a lot of things like opening up countries that were totally closed. China is essentially a closed country. In fact, it is a closed country. And what they do is they charge tariffs so that if you sell cars or if you sell anything, nobody is going to buy it because the price is out of control. But that's true with a lot of other countries also. So we're going

to get fair deals and good deals with every country. And if we don't, we're going to have nothing to do with them. They're not going to be allowed to participate in the United States. Mr. President, many of Palestinian Americans who voted for you, who voted for you, are not for Biden because you've promised them to end the war in Gaza. The war is still going on, and there's no hostage deal. Do you have any update on that? Well, I'd like to see the war stop.

And I think the war will stop at some point that won't be in the too distant future. Right now, we have a problem with hostages. We're trying to get the hostages out. We got quite a few of them out, but it's a long process. It shouldn't be that long. We have a big problem that we've done. I think I'll ask Pete to maybe talk about it for a second, because a lot of people are

asking the Houthis. We've been very tough and very successful militarily. We've really damaged them badly. These were people shooting down ships and other things, by the way, flying objects like airplanes. And we've put a major hurt on the hoodies, which nobody's been able to do. We've really hit them hard, and they know it,

and they don't know what to do and it's every night, night after night and we've gotten many of their leaders and their experts, their experts on missiles. I mean they actually make missiles, nobody thought that, but they make missiles. It's highly sophisticated and they're very tough, but they've been very badly damaged. Nobody else was able to do that. But Pete, do you want to discuss that, please? Yes, sir.

It's been a bad three weeks for the Houthis, and it's about to get worse. It's been a devastating campaign, whether it's underground facilities, weapons manufacturing, bunkers, troops in the open, air defense assets. We are not going to relent. And it's only to get more unrelenting until the Houthis declare they will stop shooting at our ships.

And we've been very clear with the Iranians as well. They should not continue to provide support to the Houthis, and that message has been made very clear. So we have a lot more options. Okay, we're going to continue to monitor those events taking place now in the Oval Office, as you see as the defense secretary makes his own remarks. But I want to recap for you what the president just said alongside the Israeli prime minister

when President Trump really delivered a familiar refrain on his belief in tariffs. He talked about Iran, of course, but I think the most important line for all of you, all of us, and certainly these markets is when the president was asked about a potential pause in the tariffs and said, quote, we're not looking at that. We continue to see the market almost in a bit of a holding pattern. He was also asked about the prospect of deals before the April 9th deadline didn't really give a complete enough answer to bring to all of you. But we'll continue to monitor, as I said, the president and the prime minister in the

Oval Office. Any headlines you need to know about, we'll certainly bring them to you. We'll keep our eye on the market. Dow is still down about 500. The S&P 500 is off about one half of 1 percent. So we're still pretty much hanging around that area. Bruce Richards of Marathon is still with me. Let's just wrap this up.

And forgive me, and I appreciate your patience on all this. We talked about credit spreads widening. The fear, of course, and the prospect is that if economic conditions deteriorate further from here, that you have spreads widen even further, which could cause other issues within the credit market that could make this a much more serious market situation than just watching equities fall? Certainly. Default rates will go up based upon what we've seen here because economic activity is going to slow. If we're in this period of stagflation, we're slow economic growth with higher inflation. That's a direct hit to corporate earnings and a direct hit to

companies free cash flow. So you'll see default rates go up. So that's number one. Number two, we like the fact that spreads are widening, not necessarily because of what's happening in the market, but because of the opportunity to be able to invest with wider spreads. And that's a healthy lending environment to have wider spreads. And so as high-yield spreads widen, as broadly syndicated loans spreads widen, that's a buying opportunity for us in non-cyclical businesses, top of the capital structure, companies that have little leverage, companies that aren't held hostage

to exports and import markets. And so, whether it's direct lending or whether it's asset-based lending where you have plant equipment inventory that you're lending against, hard equipment that you have, inflation, that you're definitely gonna see that is gonna allow you to lend

at a much more conservative attachment point where you're lending versus hard assets. And of course, opportunistically, dislocation, distress leads to really good opportunistic opportunities for credit lenders. Welcome to Wall Street. One person's problem is another's opportunity. I appreciate you being with us.

Thank you, Scott. Bruce, thank you. That's Bruce Richards joining. Here with more on what is happening, in fact, in credit markets and the markets overall. Double Line Capital CEO, CIO and founder, Jeffrey Gundlach. I so much appreciate you being here as well. Jeffrey, thank you. Nice to be here, Scott.

It's hard to believe that it's less than three weeks ago that we had Fed Day. It's amazing how much has changed. Certainly is. Some changes, frankly, you talked about expecting, like a widening of spreads within credit markets. You talked about high yield just from your perspective. What are you thinking about now as you see what you talked about come true?

Yeah, you know, spreads always start widening gradually, and then it accelerates. And that's what we talked about on Fed Day. I don't remember exactly where high-yield spreads, I'll just use them as a proxy, were on Fed Day. But first, they widened by 10 basis points, and it was 30. And then you blinked, and it was 75. And now it's 177 off of the lowest on high-yield bonds. And that's true pretty much across the sectors, the safer sectors like the old legacy, non-guaranteed

mortgage-backed securities have widened out the least. But emerging markets, high yield, the most, both about 170 basis points. And what's happening under the surface is getting it to be a little bit disconcerting because what we're seeing is appears to be deleveraging is going on. It seems that there's a lot of leverage in the system. Spreads were narrow. And when spreads are narrow, like high yield at 250 basis points over treasuries, what a lot of investors do is they foolishly, this is exactly the opposite of what we do at DoubleLine, but a

lot of investors do is they leverage more. The tighter spreads get, they leverage more, because they still want the same after leverage gross yield. And so leverage starts to pile up. And what we're seeing appears to be deleveraging in the bond market. And what starts out is they sell what is down the least. So you see the top part of the capital structure, like AAA things are widening as well, even though they're safe, it's just because they need to sell to de-leverage. And what we're seeing is a lot of trading at short maturities, so they're not down very much, and higher parts of the capital structure, which are starting to go down.

But the lower stuff, which I've been strongly recommending investors avoid, isn't really trading is the problem. There's a real lack of price discovery. And so the issue here is if these leverage investors run out of their low-risk stuff, which is down a little bit to sell, then they're going to have to, if they still need to de-leverage, they're going to have to start selling the riskier stuff. That hasn't happened yet, but it is starting to get sloppy below a double B land in fixed income.

I'm worried that this spread widening is not going to stop. I thought this morning was really the big tell when we saw treasuries drop a lot. I mean, the long bond at one point was down almost 3 and 1 half points, and the 10-year was down a couple of points. And in spite of that, spreads were widening. So the narrative that was potentially somewhat comforting last week, which was, sure, spreads are widening, but it's really just because treasuries are going down in yield, up in price, and the credit markets, the credit sectors can't keep up with that. They're kind of staying the same in terms of their yield. But that's not today's story, at least at the open today, which leads me to believe that there's some force selling going on.

And that probably is not ending. So we went from some of the highest valuations, the lowest incremental spread on junk bonds versus Treasuries. And now we're down to about 50th percentile. So we're not cheap yet, but we're way off of where we were. I mean, you widen out 177. Obviously, that's not an insignificant move. So you've got like high yield down about 4% or 5% year to date. Obviously, that's better than some pockets of the stock market. But I think when you get a move like this, when the widening starts,

in my experience, I've got more of it than I like to remember. You don't stop at average. You have to get to cheap. And so I think there's more to go here on spread widening. Thankfully, for our situation at DoubleLine, we've been anticipating this as I've spoken to you on numerous occasions going back a couple of years. We've been upgrading in the credit portfolios systematically for a couple of years and really increasing our non-credit portfolios to levels that are unusually high for us.

And in the funds that we have leverage, we have the lowest leverage in the history of DoubleL line. So we have a lot of dry powder. And I talked about cash as a recommendation on Fed days for the past few Fed days, as much as 25% or 30% cash, I would not be deploying that cash yet. I think you're kind of in the middle innings of this thing, although certainly the market going down so much on Thursday and Friday, you know, it's a little bit disconcerting that we don't have more of a bounce in the market.

I mean, I'm looking at this at your table on screen right now and I have to laugh because it looks like nothing's happening. You know, the Dow Jones flat. Yeah, it's been quite a day. You know, I know you're in front of the screen all day. I said at the outset here that if you just look at that, it doesn't begin to tell the story.

You obviously need to look at an intraday. Let me ask you this, you use the word disconcerting a couple of times. When does disconcerting become highly problematic? And how far are we away from a scenario in which you worry about we could head to but are not yet there? I think somebody is going to go bankrupt here.

You know, with this kind of volatility in the mag seven going straight up and straight down. And I look at I look at a one year scoreboard and everything is flat or down except for gold and Bitcoin. And maybe the Dix everything is flat or down except for gold and Bitcoin, and maybe the Dixie is flat too. But when you have these types of moves, usually somebody goes bankrupt before the thing ends. And that's probably a leveraged investor. I don't have any candidates or anything like that.

This type of thing usually ends with forced liquidations. And I think they started last week and certainly there was indications of that this morning. So there's going to be a lot, there's going to be more deleveraging, I think. And the Fed is really not in a position to reverse course or resume rate cuts because the inflationary consequences of what we've seen in recent data, soft data admittedly,

but things like the University of Michigan inflation expectations for the next one year and the break evens from tips market and some other indications, people are looking for inflation of kind of very opposite of what the Fed is hoping for. I mean, the University of Michigan wants up at around 4% or 5% for the next year. You can't have this tension in the dual mandates is causing a problem.

They can't loosen up because of inflation concerns and tariff concerns, obviously compound that. And yet, you have what looks to be rising probabilities of recession across all of Wall Street's predictions. Under three weeks ago on Fed Day, day after Fed Day is when we spoke, I told you that I thought there was a 60% chance of recession. I thought that was way out of line with consensus. I think it was more like around 30 or 30 maybe 35 for the consensus But I just saw on the screen today on your on your your network that I think the consensus is up to 55%

And I I think I can only raise my 60% so it doesn't really matter It's just the odds favor a recession at this point It's kind of hard to see how we avoid it. And that will lead to, we have this herd mentality or kind of human nature thing from what might happen when earnings come in, we might start to get these, it's okay to miss with a crowd of people that are missing. It's bad if everybody else is beating and you're missing, but if everybody else is missing or lowering, then it's okay for you to lower, which means you get a kind of a psychological

circle going around where it's okay to say that we're having difficulties. We might be laying some people off. It's kind of like when we had supply chain problems during COVID, it was okay to bring that up. Supply chain problems are hurting our company and causing us to raise prices and things like that. That could happen with tariffs being substituted for supply chain problems. So I've been saying that the market was just ridiculously overvalued going into 2025.

The CAPE ratio on the S&P 500 PE was something like 38, which is just unheard of. It's only happened once or twice before, and it was the second highest CAPE ratio ever. And we're still at around 35. It just started so overvalued on jump bonds. The spreads were so tight, and the CAPE ratio was so high. There's just a lot of room for this to normalize. We've already seen, as I said moments ago, we've already seen junk bonds versus Treasuries go to normal valuations from very overvalued. And I would expect that since junk bond behavior and equity

behavior tend to be very highly correlated, it might be a tell that we could see valuations on equities become more normalized, which is a long way down from 35 capes ratio. So I've been looking for $4,500 on the S&P. I've been looking for that ever since we broke down back earlier in the year. And I'm sort of looking for $4,500. I think we should be able to get a durable counter trade off of $4,500. But that looks to me where the support really lies if you go back five years. And, you know, it's telling when you have a horrible couple of days like we did last week. And a day like today feels like a good day. And yet you're not making any money. So this is-

Let me ask you- Go ahead. like today feels like a good day, and yet you're not making any money. So this is- Go ahead. Let me ask you a couple things regarding the Fed. The toolbox, I know they're in a box about what they may be able to do, or certainly what they want to do in terms of rate cuts in the current environment, at least to this point.

What sort of flexibility do they have though to use the balance sheet? And will that, could that be an effective tool in an environment like this where they have to do something but they don't wanna actually cut rates? Well, it could, it would be kind of embarrassing. I mean, they just went from 30 billion to 5 billion less than three weeks ago in terms of-

And over the game changed. Right? Yeah, I know. But that's going to be Mr. Magoo all over again, going around not being able to see well and bumping into dumpsters and trees. But yes, I think the Fed will use their balance sheet if things get worse. And I think they would do that before cutting, because the inflation picture has worsened a lot since January when they were talking about being in such a good place. So it really is a problem having a dual mandate, because there

can be long periods of time where the two sides of the mandate aren't really much of a tension, where you have stable inflation and relatively stable unemployment without a lot of volatility. And so if one moves a little bit against what you're hoping for, you can cheat on that side of the dual mandate. But now you have rising inflation expectations and clearly rising recession predictions. So what are you supposed to do? I've been using the dock and canoe analogy for about seven, eight months now.

The Fed's got one side of their mandate. They got the foot on the dock. The other side of the mandate, they got their foot in the canoe, and the canoe keeps drifting further away from the dock. And so you know what's going to happen. It's going to fall into the lake. And so the Fed is in a really tough spot right here. And it's amazing how quickly they got into a tough spot for being in purportedly such a good place. So this is going

to be something where I would expect that if long rates start rising in spite of recessionary But if long rates start rising in spite of recessionary projections going up, then the Fed's really going to be thinking about that balance sheet again. And it's still quite elevated. It's $6.7 trillion or something. At least it's down from where it was. But we have this really big problem. It started back in the 80s and 90s. We used to talk all the time about the twin deficits, the trade deficit and the budget

deficit. And it's interesting how we're trying to attack both of them, one, the trade deficit through tariffs and the other, the budget deficit through cutting. And we're having real big pushback. We haven't done anything in terms of cutting spending. What was it, $100 billion maybe that they cut out of government spending even if it's 200 200 it doesn't matter. It's nothing You know, we need to cut two trillion dollars not not a small amount We got to get we got it off of this this twin deficit situation. And so it's going to be difficult

It's going to be messy and that's why I don't think this is going to be a high money-making market for risk assets. And bonds are certainly outperforming stocks, and this is why I talked about in our meetings over the past few months having lower than normal stock weightings, maybe only 40% or so, and having more in bonds. Even stocks, maybe even only 25% or so, but maybe 40% in bonds. And then the other thing that I want to point out is we talked about gold as being good, going up above 3,000, but that's falling as well from its highs. And I think that's also a sign that leverage is being unwound. Because in this environment, it just doesn't seem sensible for me to be people shying away

from gold or selling gold. Maybe they're selling it because it's one thing that's up. It's that same thing again. They want to deleverage with things that are up. So I really want to impress upon the viewers that this looks like a deleveraging scenario, which can take on a life of its own. And with the spreads having widened 177 basis points on jump bonds in just several weeks, this probably is not the end of the line here for this volatility.

Let me ask you, when you look at the fact that bond yields are up today, there's obviously a bunch of speculation in in certainly among market watchers as to why this is happening. Do you worry about foreigners selling our treasuries? Why do you think yields are up today? In fact,

well, I'm glad you brought up the foreigners thing because that's a point that I've been making in my recent speeches that the net foreign investment position in the United States has really changed over the past, say, 15, 20 years. That while ago, the foreigners had a net position in the United States of $2 trillion, $3 trillion. So there was $3 trillion more foreigners were investing in the US than the US was investing, Americans US was investing in other countries.

That foreign position has gone from of $2 or $3 trillion to $24 trillion today. And so there is an awful lot of foreign investment in the United States. That's one of the reasons, that is the reason primarily, I think, that the US market has sustainably outperformed non-US markets, really going back 10 years even versus some markets, 15, 20 years. Why is that? Well, it's because they're pouring money into the United States. It's one of these virtuous cycles. There's more buyers than sellers, there's more foreigners pouring money in. But now with all the rancor that's happening and the tariffs and the pushback, I think

you have to believe that foreigners on the margin are going to invest less or perhaps divest of the US. So that's one of the reasons why foreign markets are outperforming more recently, and I believe that this is going to be a trend as long as these tariff wars continue. So the other reason I think that treasuries went up in yield early today by a lot on the long end is I think people are starting to realize the budget problem I've been harping on.

I'm sure people are tired of me talking about it, but it's absolutely one of the most important issues in the markets. We have a massive interest expense problem, and the budget deficit is at $2.2 trillion, if you want to be honest about it and not use the official numbers that understate things, is $2.2 trillion. And the amount of bonds that are being issued so far in fiscal 2025, which started October 1st, is greater than the number of bonds that were issued by the treasury in fiscal 2022.

I mean, this is just unbelievable that we have the same number of bonds being issued that we did during that massive stimulus that involved altogether $7 trillion of money that caused the inflation. So in the next recession, I strongly believe that long yields will go up after an initial decline, which may have already happened. So people are starting to realize that it's dangerous potentially to own long dated treasuries going into recession because if the budget is 2.2 trillion in the hole right now, if there's a recession coming in the near term, it could easily go to $3 trillion or more.

And so you can understand why people are leery of owning bonds. And with countries not getting along, the funding of the Treasury market by foreigners is not likely to increase. So I believe rates will go up in the next recession at the long end. That's why, Scott, I've been telling you the last several appearances, I wanna be in twos, threes, fives in the bond market.

That's where we've been. And that's really, that's the area that's doing well. And I think that's going to continue as long end almost doesn't have a good case from but from this starting point of yield being, you know, in the 4% category. I want to ask you lastly, if I could, the criticism that has now developed around the rollout of the tariffs,

not just in the math making process, which was highly suspect to be kind. But now that you have some people, high level Wall Street types speaking out against the methodology, the rollout, the severity, and what they would think is a better approach moving forward. There's also the lack of understanding, I think it's fair to say, from investors about what the end game really is here. Is it about negotiating better deals?

Is it about drawing revenue to deal with the deficit and the interest payments and the like that you mentioned are a problem as well? I'd like to hear from you directly what you think about this process, how it's played out, and whether you join the critics who are becoming louder about these issues. I think the process, if you can call it that, is standard Trump. I mean, he's keeping people off off balance. And I think he's doing it to a greater extent than even a normal Trumpian process would be because he was short circuited instantly in his first term. You know, they were doing it to him.

They were keeping him off guard with all of these hoaxes and all of these lawfare and all this stuff. And now he's saying, I can play that game too. I can be one step ahead of you and keep you off balance. And he's doing that with his political adversaries domestically. He's doing it with the counterparties in other countries. And I would expect that this is not going to calm down. You know, that tweet, I guess, this morning

people talked about the tariffs were going to be delayed. I just said there is no way that's going to happen. I think Trump is going to keep this going. And I don't understand exactly how he calculates or the administration calculates the strange formula to set these tariffs. It just doesn't seem to make much sense to me mathematically, but at least it's a formula, whether it's logical or not.

It's a formula. Otherwise, it's just going to be totally arbitrary. But he's keeping people guessing, and he's not going to back down. I don't think so. This is something that's going to have to play out, and we're going to be dealing with this, I would say, certainly for weeks or months, and not just days. I think investors need to stay on the defensive mode. We certainly had position for that.

And the extent to which investors hold cash, I would continue to do that until we get something more of a sustained bottom. As I said earlier, I'm looking for $4,500 on the S&P. Jeffery, we'll leave it there. It's a really important day to hear from you. Thank you for making time for us. We'll see you soon. Thanks, Jeff. Good luck, everybody. See it there. It's a really important day to hear from you. Thank you for making time for us. We'll see you soon.

Best of luck everybody. See you soon. All right, yep, you as well. That's Jeffrey Gunlock joining us exclusively here on Closing Bell. We're in the market zone, by the way. CNBC Senior Markets commentator Mike Santoli is here to break down these crucial moments

of this volatile trading day. What a day. Again, this doesn't tell the story. It's the intraday moves are just insane. 400 S&P points is what we span today, which is pretty hard to believe. You know, on Friday we talked about that crazy Friday Monday dynamic. You get highly stressed markets, you get washout readings. It looks like internally markets super, super oversold, both ready to rally hard, but also those are the dangerous conditions from which you sometimes

see a really messy spill lower, and we got both. Basically both of them. So everybody knows, if you look at the historical stats when you got so much downside skew in this direction over multiple days, usually you don't get hurt buying it if you have a multi-month, multi-year time frame. On the other hand, there's just nothing that really emboldens you to feel like we finally hit that point. Now the down 20% from the high, we got that.

It looked like a bit of a selling crescendo in the overnight futures into the early morning. So some of the things are lining up, but as long as we're going to be twitching with every headline, it doesn't really seem like there's much of a coherent message. You realize there's massive upside risk if we get something genuine that the market believes,

but at what cost if you're sitting here for it. So we don't really know on what basis we're making a fundamental case here. And I think that's the big thing that keeps real money a little bit sidelined. It's just like, look, we know the earnings are wrong. We don't know by how much at this point. If there's a quick, quick reversal on the policy front Which doesn't seem likely it could be no harm. No foul You still got 1300 board 1100 S&P points above you till the old highs

So it's kind of that much play in the system right now that we're dealing There's a tremendous amount of lobbying to your point. There's a tremendous amount of lobbying There's a tremendous amount of lobbying, to your point, there's a tremendous amount of lobbying underway from people in high levels on Wall Street who are telling the administration that you got to do something, that you got to pivot off of this seemingly no-pivot stance or you risk things getting pretty messy in the markets that you might not be able to contain in a minute. I know that for a fact because I've talked to people who are talking about it. Oh yeah.

That's why I called the billionaire backlash before you are saying look, the actual policy has described it's one of those things that reminds you of something that's unsustainable by definition will not continue. The problem is when we got the headline, the Treasury secretary is going to be leading these negotiations with Japan. If we're talking about country by country negotiations like the market's patience will run out unless you get some kind of a clear strategy behind that and you know until we get to that point what are we dealing with? We're dealing with seeing if the market just gets bled so dry in the

short term that it kind of doesn't matter for long-term money whether things work or not. The fear and greed index, the SBCN fear and greed, it closed last week at four on a one to one hundred scale. I mean, it's kind of pinned at the most negative you can be. So sometimes that's enough to just exhaust the selling and get a little bit of relief. Now is relief going to be good? Is relief meaning maybe policy makers don't think they have to move quickly to change something?

So that's a little bit of the feedback loop that we are in right now. At some point, maybe we can take comfort in the fact that mostly the US economy is inwardly focused and only 15% is trade dependent and it's not necessarily a make or break for the economy. But companies, I mean, look, we saw a decline in consumer credit.

That hit this afternoon. You almost never see revolving credit back off that sharply unless you have a real shock to consumers' mindsets and that's what we're going to be dealing with as we get through the earnings reports as everybody keeps acting up. It is a paralysis at the corporate level and deep concern at the consumer level, we know that. We'll ring the bell here, what a session we've had. A lot of tech is looking green, certainly the mega cap so the

Nasdaq looks to finish green today. We'll wrap it all up in overtime with Morgan I'll see you tomorrow.