Closing Bell - Closing Bell Overtime: Worst Day For Stocks Since Pandemic Lows After Shock Trump Tariffs 4/3/25

Episode Date: April 3, 2025

A global rout in stocks after President Trump’s tariffs announcement. We have you covered from every angle, including tech’s sell off with Wedbush’s Dan Ives and positioning from here with Morgan Stanley Wealth Management CIO Lisa Shalett . Plus, White House advisor Peter Navarro on the math behind the rates for different countries. 

TURMOIL ON WALL STREET TODAY AS INVESTORS REACT TO A NEW GLOBAL TRADE ORDER FOLLOWING PRESIDENT TRUMP'S TERRAF ANNOUNCEMENT THAT HAPPENED HERE 24 HOURS AGO. STOCKS GOING OUT AT THE LOWS, THE DAO FALLING MORE THAN 1,600 POINTS, ALMOST 1,700 POINTS. THE S&P AND NASDAQ JUST FINISHED THEIR WORST SESSIONS SINCE 2020. ALL THE MAJOR AVERAGES NOW IN CORRECTION TERRITORY OR WORSE IN THE CASE OF THE RUSSEL 2000 IN BARE MARKET TERRITORY. since 2020. All the major averages now in correction territory or worse in the case of the Russell 2000 in bear market territory. That is the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Fort. And we will be all over this massive sell-off and what comes next for your money throughout the hour from all angles, including new recession odds, the impact on tech, geopolitics, and more.

And in just a moment, White House senior counselor for trade and manufacturing, Peter Navarro, will join us to talk about the tariff announcement. Well, President Trump called yesterday's tariff announcement Liberation Day. Today's market reaction looks more like liquidation day. So we begin with the sell-off and what comes next. Joining us now is Barbara Duran from BD8 Capital Partners,

Sam Stovall from CFRA, along with CNBC's Courtney Reagan, looking at the pain in retail, and our Leslie Picker, tracking the plunge for the big banks. Welcome, Barb. You say the scope of the tariff announcement was worse than the market's worst-case scenarios, which was also my reaction yesterday. You also say this transforms terrorists from an uncertainty before yesterday to now an

ongoing, hard to calculate risk. So what, if anything, can you buy? Well, usually these kinds of opportunities are a time to really sort among the wreckage and pick out your favorites. And I've been doing that up until this time, but I'm not doing it today because I think the unknowns are too great, both in what the costs will be.

I mean, you look at a Nike who has like almost 100% of their production coming from Southeast Asia and China. Their gross margins are lower than their peers. What's that gonna mean for them? So you don't know what the costs are gonna be and who they're gonna pass it on to, but prices in various industries and companies will be coming up. And that's going to be,

that's going to nick growth, it's going to hurt the lowest income. And also I think the high income consumer is going to do a stutter step back. They're seeing their portfolios looking at this and going, oh my God, you know, so they're going to be on pause. And I think you're going to see demand problems from abroad. You see already in Canada, some 50 plus percent of Canadians are saying that they're not buying American goods. What will happen in China and other countries? And also, you know, it's been mentioned, Mike said, totally mentioned about travel into the US is down.

Well, pre-pandemic, travel was about 1.1% of GDP, foreign visitors coming here. And right now, with 40% of those being Canadians. Canadians and right now that's down 70 percent and from the EU down 25 percent so I think we're seeing a lot of unfolding ramifications that have yet to be factored in and so we start earnings next Friday with Wells Fargo, JP Morgan, Morgan Stanley and it's gonna be very interesting to see what companies are doing but I think right now they're trying to incorporate worst case because I don't think we can assume that these, you know, that Trump will bring down terrorists. I think we have to assume this is what they're gonna be, even if he has indicated otherwise.

Well, well, let's see if we can find a silver lining, Sam. Next week, you think another moment of truth comes because you think other countries will wait until the Trump administration's tariffs actually come on before they retaliate. Do you think it's likely that the EU and China do what Treasury Secretary Besant suggests and just swallow these tariffs as they've been outlined without retaliating? I don't think they're going to swallow the tariffs without retaliating. I think they are going to bide

their time because they realize that the president is more of a negotiator, not a punisher, if you will. And the expectation, according to CFRA's Washington Analysis Strategy Group, is that the base case is actually the base case and that we're more likely to see a modification of these tariffs above the base case that should take place over time. Barb, I want to go back to the point you just made because it sounded like what you're saying is you just have to factor in the fact that these tariffs are just going to be here now and whether that changes or not. Like don't even think about it as an investor. Just plan on these tariffs. Plan on

the worst case scenario around these tariffs that we just got being factored into the Q1 results we're about to start getting in earnings season. So if that's the case, can we say that peak uncertainty has come and gone? And if so, on a day like today where, for example, consumer staples sector actually finished higher and we saw some of the more defensive parts of the market outperform, are those good places to be as an investor not to mention the rally in bonds. Yeah no Morgan I you know it's a very interesting point and I've been thinking about that because if this is the worst case the market is rapidly discounting as we saw today but I think he can discount a bit more and that's why I'm not leaping in here and clearly I think you'll see more action

in the defenses whether it was utilities, consumer staples, the names that did well today, and there will be cherry picking. Like, you know, in the MAG-7, they are down even more. And I think somewhere in here, you know, the bottom is reached, but I think they could go lower. And I think that possibility is there. And the question is, you know, where's the upside?

What is gonna trigger the upside? Now, if the president does ease off on some of these tariffs, that will be a trigger. We've certainly seen that in the last few weeks. But we also know there's more coming. You know, whether it's sector-specific, they talked about pharma, about chips. What's that going to be?

So there's more shoes to drop here. And I just think it's such a volatile, uncertain time. It's hard to see where the, I don't think there can be a sharp bounce back here. There's just too much uncertainty with what earnings will actually be and what demand will be. Sam, I want to get the technicals a little bit here because you did see that

spike in the VIX. We hadn't really seen that in a meaningful way. Uh, when we sort of first went into correction territory with the S and P a couple of weeks ago, you had a lot of technical levels that were not only breached, but just blown through. And then some S&P 500 a good example We finished it looks like at fifty three ninety six people were looking at fifty five hundred as Support here. So how much how much technical damage has been done? And how much should investors be paying attention to some of these new key levels as we get a reset?

well, I think actually we ended, closed the day on a pretty important level at 5,400 or thereabouts, because that's where the support was back in September of 2024. And so if we looked and say, well, let's expect that to be cut even further, well, then I think we look to maybe 5,200 or so.

But a lot of the prior support levels combined with Fibonacci levels actually point to an increasing degree of a correction rather than the beginning of a new bear market. And I think that because we have seen now what about 30% of the stocks trading below their 50 day, the equivalent number below their 200 day. While today might not be the end, I think we are getting close to the end. And as the old saying goes, stocks tend to pop after a drop. Going back to World War II, of the 900 plus days in which we had an advance or decline of 2% or more. It was pretty

evenly distributed between advances and declines. All right. Barbara and Sam, thank you both for kicking off the hour with us and what was a very ugly day for the markets. The biggest drops for the S&P and the Nasdaq and it looks like from the Dow from a point perspective since really the heart of the pandemic back in 2020, we've got a 10 year treasury yields basically kissing 4% now and the Dow

transports which obviously a proxy for trade and also for consumer appetite in the midst of all of this trade policy actually down 9% just today. Let's get to Courtney Reagan now for more on the plunge we saw in retail specifically and consumer stocks court huge moves for some of the biggest names. I'm extreme real real extremes here Morgan the XRT retail ETF down almost 8 percent in just one session. R.H.

Wayfair gaps so many others in the discretionary sector particularly and apparel and footwear down more than 20 percent or more in the session VF Corp down 28 percent. I mean frankly retailers just have a lot of work to get through now that we know what we know.

And they're letting a lot of the lobby groups do the talking for them, at least right now in aggregate. So I asked Steve Lamar, he's the CEO of American Apparel and Footwear Association, what are retail executives doing? What are they feeling? And he says, quote, they're feeling stress and frustration,

some anger, some feeling helpless. Lamar adds, retailers are looking for certainty and stability and it's all chaos and confusion. Nothing stops business planning faster than the uncertain environment that we have. Now the actual tariff levels we should note are higher in some cases than what President Trump unveiled yesterday because the new tariffs are being added to existing tariffs. Here are some examples from

Morgan Stanley for the biggest apparel exporters to the US. 21% of US apparel is imported from China. We already had a 31% tariff on that. After yesterday's announcement it becomes 65% in aggregate. The U.S. had a 4% tariff on imported apparel from the second biggest exporter to the U.S., Vietnam. It's now 50%. And Jeffries analyst, Randy Konick, tells me retailers are really most concerned about demand destruction from higher prices rather than compressed margins. In other words, they're more worried about the impact

that tariffs will have on consumers' willingness to spend than the cost of doing business. John? Yeah, court, thank you. Well now from the cash register to the vault, bank stocks getting beaten up today. Leslie Picker looks at how much tariff fallout could be felt in bank earnings, which begin next week.

Leslie? Yeah, quite the timing there, John. Bank earnings kick off one week from tomorrow. It will be too soon for a direct effect. But the overall uncertainty around tariffs is expected to impact investment banking, consumer spending, as Court was just talking about, loan growth, and potentially some issues around credit quality or at least some expectations around those issues.

Now, just today, JP Morgan analysts cut their bank estimates and said there's, quote, the potential for further cuts based on the full impact of tariffs. These are the businesses that generate revenue from their clients' big corporate decisions, undergoing an M&A transaction, opting for new financing, funneling assets into wealth management platforms. Tariffs and economic volatility create a chill on those types of activities. So take a look, no surprise here, at how the big bank stocks perform today down significantly. Worth noting though, there's still optimism in the sector on the deregulatory front, as

well as the market volatility, especially in effects, commodities, and equities, that should all provide a boost to trading revenue in the quarter. And we should get a sense of how the tariffs are factoring into the way banks are managing their risks. Evercore ISI writing in a note, quote, we think it'll be interesting to see if someone

like a JP Morgan decides to assign a higher probability to an adverse outcome for the economy and up reserves and or slow buybacks guys. So it's in part what they say on the conference calls and the likes, but it's also their activity is what they do with their capital return programs, what it means for how much they're setting aside in the event of losses in the future. All right, bank earnings just got even spicier. Looking to next week, Leslie Picker, thank you.

For more on President Trump's tariffs and the market reaction, let's bring in Peter Navarro. He is the White House Senior Counselor on Trade and Manufacturing. Peter, it's great to have you back on the show. Lots to get to with you here. But first I just want to start with, this is me putting my social science degree hat on here,

the methodology, because it's been a big talking point both on Wall Street and Main Street today. And that is how you arrived, how the administration arrived at these numbers that were on the boards that President Trump put forward yesterday. I have the reciprocal tariff calculations here. It's a very fancy

looking formula. But a number of economists and media pointing to a much simpler mathematical equation. They say that it looks like the administration took the trade deficit for the U.S. in goods with a particular country, divided that by the total goods imports from that country, and then took that number and divided it by two to get to what the US plans to implement on these 60 different countries. Is that the case? All right, let me explain what the reciprocal tariffs are. What you have is an issue where the rest of the world by the very rules of the World Trade Organization cheats us through significantly higher tariffs and massive non-tariff barriers.

So the significantly higher tariffs we face is an easy calculation, which all you need to do is look at the differential between what's called the most favored nation tariff rate for us, which is around 3.5%, and the MFN for other countries which varies pretty widely. Generally other countries have higher tariffs on us two, three, four times or higher and we're talking about the EU, we're talking about India, Japan, Korea. So we're in a world of unfair trade institutionalized by the WTO. So the issue is how do you capture all of the cheating that takes place in the non-tariff barriers. And let me just say what those are so people understand how you go about thinking about

this. You've got currency manipulation, you've got VAT tax discursions, you've got export subsidies, you've got dumping, you've got counterfeiting, you've got intellectual property theft, you've got these phony technical standards, you got these phony agricultural standards, and when you add all that up you get weird things like Japan, 95% of the cars on the road in Japan are made in Japan. They have relatively low tariffs, but it's almost impossible to sell a car there. Germany, autos, they sell six to everyone we buy.

Their tariffs are four times higher. Plus they have the VAT and the non-tariff barriers. So here's the thing, punchline bottom line, each trade deficit we have with each country based on the flow of imports and exports and how much we actually trade for them represents the sum of all cheating. The trade deficit is the sum of all cheating and what you simply do is calculate the tariff rate which would be required to eliminate the trade deficit. And this is a national emergency based on chronic massive trade deficits, which cost our jobs, our factories,

and transfer our wealth to other foreign nations and therefore threaten our national security, economic security. So that's the way to think about it. It's actually quite simple. Now, the calculation itself is based on very sophisticated analysis in the trade literature for decades and it relates to what's the various import, the elasticity, things like that, coupled with what happens to the currency. And when you get that out, you get a formula, you get a rate. And I want to stress here that the rates we got from that are basically represented based on the sum of all cheating done against the American people. There's no dispute that we get cheated.

And then the president was very kind and lenient. He took half of that. But they are customized to each country. So that's exactly what happened. I don't think anybody's arguing that there that there's unfair trade practices or to use your term cheating happening. But there are question marks about VAT tax which is not necessarily a non you know tariff trade barrier. I realize you can start getting into the argument around what VAT the money they raise to go towards domestic subsidies but it's not actually considered a non-tariff barrier so so it raises the question it raises

the question. Hang on let's focus on the VAT for a minute. You raised an interesting point and I love by the way I was watching CNBC this morning and and there was this fascinating debate between Steve Leishman and Rick Santelli about precisely this issue. Now I'll tell you historically that the United States going back to the 1970s in the GATT area has repeatedly tried to get relief from the WTO. The problem is that our income tax system is treated very differently under the rules of the WTO and that leads to massive distortions in terms of flows of trade and where companies go and things like that. So when you say that the VAT doesn't matter, we have tried repeatedly at the WTO.

They've said no relief for you and that's part of the bigger problem. The WTO screws us every time we try to resolve a dispute over these non-tariff barriers. So please don't tell us that the VAT doesn't matter because there's 30 years of history that says it does and 30 years of history that says these people refuse to give us any relief. And here's the problem.

Peter, I hear you. Go ahead, John. I wanna go back to the trade deficit issue because that's a big one. You call this a national emergency associated with chronic and massive trade deficits. Indeed it is. Meaning that we buy more stuff from these other countries than they buy from us. We're a rich country. We got people who can afford to buy just about anything. We also have companies here that make expensive things. Why is it reasonable to expect that poorer countries, poorer people in a developing country should

be buying expensive things from us in perfect balance with the cheap things we buy from them? Okay, let's first observe that our trade deficits are not with the poor nations of the world. We have them. But almost everybody's poor. The nations of the world, we have China, the 27 countries of the EU, Japan, Korea, Thailand, Vietnam, India. But we're doing better than Vietnam, though.

So okay, but here's the point, sir. And this is basic economics as well. Every economist will tell you that under the rules of free trade, it's impossible for a country to run chronic trade deficits for so long. What's supposed to happen is market adjustments and currency adjustments. Yet we do that because they cheat us. Do you know how much money we have transferred since China joined the WTO in 2001 to the rest of the world in terms of our assets, $18 trillion. That's 60% of our last year's annual GDP of land, farmland, buildings, apartment buildings,

assets, companies that have gone to the people who take that debt. So I mean, the beauty of this is everything's on our side on this. There's no dispute that they have higher tariffs than non-tariff barriers. There's no dispute that we should not have chronic trade deficits. And there's no dispute that what we're doing is fair as reasonable. Now, in terms of how the market, I'd love to talk a little bit about the markets because I see, look, folks just so folks know watching this show, I was a CNBC contributor, right, going on 10 years and my specialty

was macro and talking about technical and fundamental trading and how you had to use the two. And you look at the market, the technicians are saying we're probably at or near bottom, they're probably right. But fundamentally, I mean, let's think about, let's talk fundamentals. Yeah, let's talk about the fundamentals. Let's see what we're looking at here.

We've had already, and we're just getting started, three trillion dollars of investment promised to come into this country. That's 10% of our GDP, more or less. And we're just getting started on that, so that's 10% of our GDP more or less, that's good, and we're just getting started on that. So that's happening. Now yields are going down today. What does that mean?

Mortgage rates are gonna come down. That's gonna have a nice bounce for our housing sector. It could mean people are afraid of recession. Gas prices are coming down. And by the way, I would be remiss in saying to you this, sir, every single dollar that we're gonna gather from the tariff revenues from foreign nations exploiting us is going to benefit the American people and American companies in the form of tax cuts and debt reduction.

And that in and of itself is going to be beautiful. On this, especially when it comes to our traditional allies. Now, in your explanation of why these tariffs are necessary you do talk about IP theft currency manipulation dumping other non-tariff barriers being worse than tariffs I don't think you would argue that for example Israel is guilty of those things so if the goal is to correct those things I would administration inflicting economic pain across the board, including on our closest allies who otherwise might have been partners in addressing these issues?

I would argue that Israel is part of that. They steal a tremendous amount of intellectual property from our pharmaceutical companies and there's a tremendous amount of disputes. They have enormous tariffs on our agricultural products. So when it comes to trade, we have no friends. We have people who are trying to exploit our markets. And if you just go through some of the lists, I mean Japan, look, Japan's a great ally in terms of geopolitics and strategy. But why is it that 95% of the cars in Japan are made in Japan? And meanwhile they sell us 100 cars for every one we sell them. It's because of their non-tariff

barriers. We try to sell some nice Louisiana rice to Japan, there's a 700% tariff on that. Same with South Korea. Vietnam. I love Vietnam. It's a great economy, but it's become a colony of Communist China. They sell us $14 of stuff for every one they sell. And it's because they've got warehouses full of Communist Chinese products that they strip off the China labels, put on the Vietnam labels, and then comes here to avoid the tariffs. In Germany, look, Germany, they came over here to build cars, BMWs and Mercedes. What do we do? We're their colony. We assemble them in Spartansburg, but every engine and transmission comes from Bavaria.

Think about that. So this is what President Trump sees and this is what the American people Elected him to do. Yes. Look and when it's when we get to the other side of this and it's gonna happen very quickly It's gonna be beautiful that the guy who almost stole the show yesterday in the speech Nobody ever steals it from Trump but Brian the UAW worker came close when he explained there's Factories before we let you go before we let you go given everything you just laid out and this work that came close when he explained there's all these empty factories. Before we let you go, given everything you just laid out and this restructuring of supply chains and basically the global world order and America's role in it, how negotiable

are these tariffs? What does it take for countries to actually negotiate the tariffs that were just announced yesterday? Let me make this very clear. This is not a negotiation. This is very clear. This is not a negotiation. This is not that. This is a national emergency. And I watched a commentator today on another network

who came from South Carolina who said very clearly, well, if we're gonna have somebody come here and invest in a textile plant or an auto plant or whatever, they're not gonna do that if they think the tariffs are gonna go away tomorrow. And the reason they can't go away tomorrow is because the bigger problem, the bigger problem is the non-tariff barriers. You think that the European Union is going to give up their protections for farmers,

their protections for the tech companies, their VAT tax tomorrow, that's impossible. So these tariffs are here to protect America. They'll raise revenues for the external revenue service. They'll restructure not just our economy, but our tax system. And Americans will benefit from every single dollar we raise. They will have more jobs. We will have more factories.

And the stock market, by the way, last thing I'll say in the Biden regime the S&P 500 went up but it went up because of seven companies and 80% of the companies in the S&P 500 stagnated in the Trump bullish market which is beginning now it's going to be a lot of companies. It's going to be all the companies in the S&P who invest here, produce here, and prosper here. And it's going to be a golden age. You had the gold rush in the 1880s. This is the golden age rush. So come on down and do it. Peter Navarro, thank you for joining us. Yes ma'am.

Sounds like he just called the market bottom. Well tech stocks posting their worst day in more than five years. The Nasdaq closing 6% lower today. Joining us now Dan Ives, Red Bush Securities Global Head of Technology Research. Dan, you look pretty ugly out there today. You're usually bullish on the potential for technology, but this picture is complicated, not just by the dollar impact of the tariffs, but by what happens to brand America around the globe where even the software has to be sold, no?

Yeah. I mean, look, it's essentially an economic Armageddon. You know, if these tariffs stayed in place, and the reality is talking in front of a microphone in the 202 area code is a lot different than the reality of moving the supply chain. And I think it speaks to our point that when you look at China exposed names from Nvidia to Apple to any of the semi names, I mean, this is as nervous as I've seen investors going back to COVID March 2020.

So what do investors need to listen for on these earnings calls? What are the fundamental numbers to watch? Perhaps when it comes to margins getting squeezed, to understand what the real dynamics are gonna be throughout the rest of 25 and where you can continue to get evaluation premium. So I think there's three things I think you have to look at.

One, I mean Navarro talked on negotiations. You have to assume that these tariffs don't hold in their current form. If they hold in their current form, then essentially you have 15 to 20% demand destruction across the board in terms of costs that are actually gonna have to come through. And to that point, I don't think a lot of companies

even give guidance on their one-queue conference calls, given what we've seen in terms of the head-scratching tariffs. The thing that you really have to focus on in terms of what demand destruction looks like in terms of when it comes to AI revolution, data center build-out, inventory, and then of course you start looking at consumer focus,

names like Apple, in terms of what that means for iPhones. The reality is If you want if you want an iPhone made in the US and you want that for $3,500 We should make in the US if you want it for a thousand hours you keep in China So I think that these are all the issues that investors are trying to sort of game out So in light of that, I'll just use Apple as an example There's just this automatic assumption that any kind of price increase tied to 54% tariffs on goods imported that have been made in China, iPhones perhaps included in that, is going to be pushed out to consumers.

Is that actually going to be the case, especially if you look at an Apple that has pretty robust margins and maybe is going to absorb some of that cost? Yeah, more if it was a smaller tariff, that's something that maybe that they can absorb. But these are numbers, I mean, that are, I view as absurd and I think many view across tech. So there's only whoever's going to pay it, it's the consumer. And that's the reality. You can throw out tariffs all you want.

Consumers are going to pay it on iPhones. They're going to pay it on electronics. They're going to pay it across the board. And that's really what you're seeing in terms of self. I think right now tech stocks, you look at name like Apple, essentially baking in numbers cuts, 12, 15 percent. And margin erosion, that could be more. So our view in terms of how we're navigating this, very similar financial crisis days, COVID 2020 is that you have to look on the other side, assuming some sort of normalized earnings into 2025 and even 2026.

And those are the names, whether it's Microsoft, Apple, and some others, that's how you navigate in some, you know, looking at the scenarios in terms of how these play out. That's interesting, because we did get exemptions on semiconductors in the midst of these tariff announcements. But the other area, another area of the market that was very defensive today and held up relatively well were defense contractors themselves. Now I realize not necessarily the case

for the Palantir's of the world, but in general, when you're talking about some of these types of companies that are exposed to government revenues that maybe are a little more domestically focused in terms of the stacks they've built out, is that a place to be investing right now? Yeah, I mean, and I think Palantir and others, but if you would focused in terms of the stacks they've built out? Is that a place to be investing right now? Yeah, and I think Palantir and others,

probably if you look at Lockheed and some of the primary, yeah, no doubt, those are the ones that held up, I think, a lot better in terms of defensive, but I think devil's in the details, because the reality is when you look at the implementations, you look what comes from foreign perspective. You're talking 40, 50%, a lot of these invitation from a hardware perspective and others. So that's why our view is like what and to your point John, is like what are the second,

third derivatives? What's the ripple effect? What the demand destruction is? I think investors, if you look here, these stocks are baking in recession into these stocks. If you think it's anything better and you're basically saying some sort of game of high stakes poker and there will be negotiation Then you know, these are the names that you ultimately buy but look it continues to be if these tariffs stay we've said in tech It's an economic Armageddon. All right economic Armageddon Dan Ives, Wedbush. Thank you Well now let's bring in senior markets commentator Mike Santoli for a look at the damage done in the market today. Mike? Yeah, John pretty significant and actually it was building up even before today. That's one of the issues This is a two-year chart of the S&P 500 with its 200 day average

You see we're spending kind of a lot of time under there This was a brief little met a couple of weeks in the fall of 2023 It was a 10% correction. We kind of quickly though got back above that 200 day trend. So it's gonna have to rebuild itself here, 5,500. It felt like it was a tentative floor. We tested it once. Now we're talking about 54 trying to hold.

That's not only the September lows, as was mentioned earlier, we first got there June 12th of last year. And that was on a very benign inflation number when the Fed first put into rate cuts into its outlook So that was a soft landing celebration We need a new bull case here Take a look at the dollar index a lot of talk about how

Textbook says tariffs mean your currency goes up in this case dollar index is actually shuttling lower here That's mostly because of expectations of your potential economic weakness here and rates going much lower expectations of your potential economic weakness here and rates going much lower to your treasury led us down here. Now we have been lower not that long ago in the one or one to one hundred area. So watch those

levels as well. Finally credit it did finally give way corporate credit was hanging in there was saying there was no real macro problem. This is the ratio of the high yield ETF to the intermediate term treasury ETF. You see kind of pretty far down

not quite back to where we were last summer or so, but still kind of a critical macro message we're getting here, Morgan. All right, Mike Santoli, thank you for bringing us the message. Well, joining us now to talk more about the possible economic fallout from the tariffs is Torsten Slock,

chief economist at Apollo Global Management. Torsten, it's good to have you on. We just heard it from Dan Ives. He's talking about the idea that if these tariffs stay in place at these current levels, it's Armageddon in technology. How are you gaming this out right now? Especially given the fact that,

look at like Vietnam for example, 46% tariff. I realize there's a trans shipment argument to be made when it comes to something like China, but these are just huge numbers. Yeah, because Morgan, that's absolutely right. A very important part of this discussion is that 40% of the revenue in S&P 500 companies comes from abroad. And for the tech companies, the Magnificent 7, it's 50%. So there is a significant dependency, especially among the Magnificent 7 on the rest of the world. So given that terms are having a bigger impact on the rest of the world,

at least in GDP terms than on the US, that does mean that there is some trouble, especially for the tech stocks as a result of tariffs. Has the risk of recession risen here in the last 24 hours? Absolutely, because we already came into yesterday with negative corporate sentiment. CapEx planning among corporates in Fed service was showing that corporates were planning to do less CapEx over the next six months.

For consumers, we saw sentiment decline, both for households making more than $100,000 and households making less than $100,000. And consumers also are more worried about their jobs. And consumers are also saying that business conditions in the next 12 months will be worse than what they have been at any point in the last 40 years. So the conclusion is that consumer sentiment has been weakening, corporate sentiment has been weakening and now over the next several quarters, most important thing that the Maru

just said is that there is no negotiation and if that is true, then we should plan that this will have negative indications for earnings for the S&P 500, again, especially for the Magnificent Seven over the next several quarters. So this does indeed raise the likelihood of a recession, especially combined with now more than a 10% sell-off in the S&P 500. Well, Torsten, you just mentioned it. Let's hear it. Here's what Trump administration senior counselor, Peter Navarro said about whether the tariffs are negotiable.

Let me make this very clear. This is not a negotiation. This is not that. This is a national emergency. So with that in mind, Torsten, I'm looking ahead to the jobs report and here's how I'm thinking of it. I'm not an economist.

So I'm looking for your insights and correction here. If it's a really good report Well, then maybe that helps folks Imagine that the consumer can hold out for a while if there's some negotiation Despite what Navarro just said if it's a really bad report well Maybe that makes people think well the Fed has to cut because of that part of the mandate But if it's just a mediocre to slightly bad report, might that be the worst scenario tomorrow for the market?

Well, I think this is a very important debate, John, because let's say that this number is good, meaning 150,000 jobs created in the month of March, then the market will say, well, this is stale information because we just learned a few days ago about a significant increase coming in tariffs and therefore a significant negative hit to corporate earnings because of the required structural change for the US economy. If on the other hand we do get a really bad number, then that tells us that well the numbers were bad even before the news of this week. So in that sense it's a very asymmetric setup when it comes to the employment report for tomorrow. We've already seen including today from the challenge of gray and Christmas, that there's

more layoffs, especially in the federal government. So the fear, of course, you can have is that slowly over the next several weeks and months, we will begin to see the unemployment rate begin to creep higher. And combining that with the decline in the stock market, negative sentiment for consumers, negative sentiment for corporates, and also the negative impact of tariffs on earnings. It does look like the picture here for the economy is like there's more downside risk going forward. All right, more downside than upside.

Torsten, thank you. Torsten Slak. When we come back, geopolitics expert Marco Papic says we are on the cusp of a multi-year shift away from U.S. assets. He's going to join us next to explain why when overtime returns. Welcome back. Check out the move in the dollar index falling sharply today and

down more than 2 percent in a week. Joining us now to explain that move and the geopolitical impact of the Trump tariff announcements is Marco Papich, his's chief strategist at BCA research. Marco, it's great to have you back on the show. Let's start right there because historically, at least traditionally, it's always my understanding that that was the case traditionally. You would see a dollar strengthen

amidst talkish trade policy like this. Instead, the opposite has happened. Why? Yeah, so I think that there's a second order effect that's very important, which is that when America is, you know, mean to the rest of the world, it forces the rest of the world to kind of clean up their house.

You can think of President Trump like a spoonful of that kind of a stinky, very poorly tasting fish oil that the rest of the world now has to ingest and actually stimulate domestically. China has to deal with its problem with its consumers. Europe has to integrate further. And I think that the markets are pricing that in. But I would also go beyond that and say that if you look at when the dollar peaked, it

actually peaked well before anyone thought that tariffs would be as harsh as they are. The dollar peaked well before recession probability increased. And it really peaked well before recession probability increased, and it really peaked because of fiscal policy. Fiscal policy in Congress, which no one's paying attention to right now, is not coming out the way that most investors expected. We've got Mr. Pump Prime back in the White House, Mr. Economic Populist, nominal GDP growth. And what we're getting is kind of paltry, you know, 2017 tax cuts extended. And I think that fundamentally what's underpinned US exceptionalism is quite frankly nothing

exceptional. It's been fiscal orgy of the last five years, and that's coming to an end. So American assets have actually been reacting to this, not the trade war. How else do you explain that NASDAQ is down double, 6% relative to some of the countries that have been actually targeted? Well, what would you what would you say to the argument Marco that? US either austerity or fiscal attention is medium and long-term healthy and that European spending On investment in this kind of thing is probably only for the short term, they won't actually do it for the medium and long term.

Actually, no, I think that Europeans have finally figured out that they do need to spend more money. And many American investors have a very poor understanding of like fiscal space in Europe. No, Europe is not bankrupt. Germany has wallops of space. And because this is seen in Europe as an alien invasion, you know, this is an exogenous shock, kind of like the pandemic, they're going to likely use EU-wide bond issuance to finance

further infrastructure spending and defense spending. So I think that we will have a shift there. And I do agree with you, though, that some consolidation in the US is healthy. And just to be clear, we're not talking about austerity. We're talking about a rate of change difference in the US from what was five years of massive fiscal outlays to a lot less. And so the dollar sniffed that out before this. Every time we have a trade news, a trade tweet, tariffs, what happens?

Big tech sells off. Not the things that most investors thought should sell off, which is Europe and Asia. I do want to get your thoughts on the fact that we just had Peter Navarro, the White House Senior Trade and Manufacturing Advisor on a short while ago, and he said these tariffs are not up for negotiation.

If that's the case, what does that do to set the stage now for future trading dynamics, for economic impact, and also perhaps just as importantly, given how high some of these rates are and some of the commentary we've gotten from officials in the last 24 hours about the fact that they're ready to escalate the notion of retaliation

from other countries. You know, actually, I was actually surprised this morning by how many other countries did say they were open to negotiations. When I went to sleep last night with the tariffs as high as they were, I was like, well, I think most countries are going to walk away from this and say, OK, fine, let's have a trade war. But I would actually read it differently. I would actually read it differently. What happened over the course of the last 12 hours is Europe, Japan, even China said, okay, fine, we can resolve this through negotiations. Let's give that a chance before we put in.

Peter Navarro, you know, to me, if you wanna understand why I would dismiss Navarro's comments, read President Trump's quote in John Bolton and why he liked having him on the team. Because when you go into a negotiations, as Trump said, and I'm paraphrasing here, it's good to have John Bolton by your side because your opponent thinks immediately, well, I'm going to get bombed. So you like to have that kind of hawkish view.

So I think that what we need to really listen to is President Trump. And to be fair to Navarro is that President Trump has in the past kind of been on both sides, both the kind of the neo-McKinleyist side, which is like these tariffs are here to stay, but also on the side of negotiations. All right, Marco Papich, thank you. Speaking of the President, we have some breaking headlines from President Trump. Let's get to our Megan Casella at the White House with those, Megan. Hey guys, absolutely. We were just hearing from the President. Let's get to our Megan Casella at the White House with those, Megan. Hey guys, absolutely. We're just hearing from the president.

He is currently gaggling on Air Force One with reporters. So we are cutting these headlines from the wires. But the first one that I want to read to you, Trump says that he is open to tariff negotiations if other countries offer something phenomenal. No details there on what exactly phenomenal means, but obviously a big shift there from the rhetoric that we've been hearing from the administration all day, including from Navarro just earlier this hour on this show saying that this is not a negotiation. So far they've been saying that they are not open to deals for the first time now since these tariffs were announced 24

hours ago. The president is saying he would be open to negotiations, but again only if countries offer something phenomenal. Much more to watch there, but that should come at least as a little bit of relief or a sign for countries that maybe there is room there to strike some sort of a deal and to see these tariffs ultimately lowered at least somewhat. On a different topic, he also spoke about TikTok. Remember, Saturday is the deadline for a sale of TikTok to get it out of Chinese ownership. Trump saying that he would consider a deal where China approves a TikTok sale in exchange for tariff relief.

Another option there, another avenue for some deals on those tariffs, again, on China, as high as 54% added just during this term on top of what has already been in place. He also says that the U.S. is close-tock deal that multiple investors are involved guys again We know there have been a lot of meetings on tick-tock this week Including yesterday one that I was told was the first sit-down meeting where the president was going to have all of the options on The tick-tock tick-tock sale laid out in front of him and then was going to consider making a decision So expecting a lot more news on tick-tock in the next 24 to 48, now saying that they are close to a deal, guys.

Okay. Megan Casella, thank you. Marco Papich just got made an instant profit as well there. Listen to what President Trump has to say. Up next, Mike Santoli on whether a trade war could accelerate the rotation from growth stocks into value. And later, Morgan Stanley, Wealth Management Chief Investment Officer, Lisa Shallot, on whether she sees buying opportunities in this market sell-off

We'll be right back Welcome back stocks finishing at the lows for the worst day since 2020 for the Nasdaq and the S&P 500 Let's bring back Mike Santoli for a look at the rotation from growth into value this year as markets adjust to a new reality Mike for sure Morgan I mean in addition to everything else we

know going on this year there has been this rotation a messy one from growth into value in fact before today the Russell 1000 value was up on the year you see the outperformance on a year to date basis about eleven or 12 percentage points, as most of the downside pressure to this point has been coming from those super cap growth

stocks. Take a look at where this relationship sits though on a longer-term basis, because there have been these false dawns. People have been calling for the value revival for a very long time, and we've actually seen some evidence of it. This is a 10-year chart of value performance relative to growth. You see this looks beautiful, this sort of double bottom, you almost had the big generational turn coming back at the depths of the 2022 bear market, didn't really take hold. There was another effort last year too. So you see we had the makings of

a bottoming process but it's just unclear how much amplitude we have there. One other wrinkle is foreign business exposure for value stocks versus growth stocks. Bank of America made something of this this week in looking at the non-US revenues in aggregate of the growth versus value. So you see obviously big growth companies as a group have much more exposure overseas, value less so, a little more domestic. Didn't help the Russell 2000 today. And obviously there's a wrinkle here because if you have non-US revenues that are not goods like their software, maybe that's a little more insulated. But it's another thing that they at B of A suggest maybe has value in favor for now, John. All right, Mike Santoli, thank you. Well up next, Morgan Stanley Wealth Management

Chief Investment Officer Lisa Shalit on how investors should be trading tomorrow after this massive sell-off. Be right back. Right back. Welcome back to Overtime. President Trump's tariffs announcement sparking the worst day for stocks

in the last few weeks. Welcome back to Overtime. President Trump's tariffs announcement sparking the worst day for stocks since the beginning of the pandemic. Let's bring in Morgan Stanley, Wealth Management Chief Investment Officer, Lisa Shalit. Lisa, welcome. I'm sure your folks are getting a lot of calls from wealthy individuals during and after today's market route saying, what do I do, tempted to go to cash. Are you telling them to shift into private markets and real estate, should they sell stocks

to do it if necessary? Absolutely not. As you know, we hate market timing. We fundamentally believe you should always be rebalancing back to a strategic asset allocation. But look in in times like these you really have to be honest with yourself and you

have to ask yourself- am I truly a long term investor am I deploying money into a- four one K. plan or Roth or or something that really I can't touch. In which case you know buying the dips buying on days like today- you know could be advisable- but

if you're like a lot of us who tend to watch markets every week every month every quarter- the reality is is that the odds of a recession have absolutely gone up- we in fact have taken our odds from about 25% to about 40% in the last 24 hours. The reality is GDP numbers are coming down, inflation forecasts are coming up, and corporate earnings expectations are going to come down. And that means it's going to be kind of a heavy slog for this market, I think, until

we get more clarity. I want to go back to the advice that you gave at the beginning of your answer to that question, because that sounds like the solid, steady hand advice that we tend to hear during rough periods in the market. But is this a shift in the global world order where diversification, rebalancing, just the whole idea that the market always comes back roughly the same way might be changing? So on the headlines, it certainly might be changing. And this is the problem I think that investors have with the current administration. If we knew that

these policies were in fact permanent and this was the end game- I think that we would you know be in the camp that says this is a structural shift and we need to revisit. Our portfolio construction- philosophy and decide what regime are we in.

The problem, I think, for investors is twofold. Number one, we don't know if some of these things are going to get renegotiated and halved or down to zero in the next few days, even before they're even implemented or the next few months. I think the second thing is it's very hard to understand what's going to happen to the economy when we don't really know what our goal is, right? And so we've been talking to clients all day today, you know, about this topic, you know, is the president's goal simply to

raise revenues, in which case he may have to implement these tariffs for long periods of time to generate half a trillion dollars or the $800 billion that's been bandied about that's possible, but that's gonna have to get paid by somebody, either corporate profits are gonna have to absorb the price or consumers are gonna have to absorb the price or consumers are gonna have to absorb the price.

Second, is this really about reshoring? Are we just trying to do all this to create incentives for investment in manufacturing jobs in America? Again, extraordinarily laudable goal, but one that may have two, three, four year timelines before those jobs are even created. And then my third option is, look, are we doing all of this basically to create an environment where we get other countries to come back to us and say, you know what, we're going

to go to zero. We're going to open our borders 100% to America. We're going to take to zero. We're going to open our borders 100% to America. We're going to take away our VATs. We're going to take away our tariffs. And that might be a great thing for companies like Apple and some of our dominant consumer franchises to have true access to markets like India. But look, getting there is going to be so hard politically for some of our counterparties and some of our allies. And that's the tough thing here, is trying to figure out timelines, magnitude, and permanence. And it certainly seems that is what everybody is trying to suss out right now as we had a steep sell-off in stocks today.

Lisa Shalit, thank you. We saw a steep rally, a dramatic rally in bonds with a 10-year treasury touching 4%. Now we saw a big sell-off in crude oil. We saw a big spike in the VIX. We see gold at all-time highs. And we saw a global sell-off in equity markets and major moves in currencies across the globe as well. Jobs number tomorrow.

That's, you know, ball game. How the market reacts to that, especially because it's the last day of the week, right? So how, because people are gonna wake up and see their 401k for the first time, you know, post midnight. And that's when folks at home are gonna realize what happened today.

Yeah, jobs market, Fed speak, including Powell, midday tomorrow, that's to be one to watch. A rough day for markets and almost 1700 point move for the Dow today into the close that does it for us here at overtime.