Facts vs Feelings with Ryan Detrick & Sonu Varghese

Is The Recession Imminent? (Ep. 131)

• Carson Investment Research • Episode 131

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In the latest episode of Facts vs Feelings, Ryan Detrick, Chief Market Strategist, and Sonu Varghese, VP, Global Macro Strategist, dissect the ripple effects of tariffs, high interest rates, and a wavering investment environment on the U.S. and global economies.

With companies freezing investment plans and government spending cooling off, the duo explores how the consumer remains the last line of economic defense—so long as the labor market holds. They also explore why the Fed might be making a mistake by keeping rates elevated, the possibility of a white-flag moment from President Trump, and how diversification remains the smartest play during times of uncertainty.

Key Takeaways

  • Tariffs Are Already Reshaping Corporate Behavior
     
  • GDP Growth is Vulnerable
     
  • Labor Market is the Tipping Point
     
  • Fed Policy May Be Too Tight for Too Long
     
  • The Market’s Bull Case? Trump Waves the White Flag
     

Next Week's Guest: Cathie Wood
Our next episode will feature Ark Invest’s Cathie Wood, as we’ll dive into tech and recession perspectives.

Connect with Ryan: 

Connect with Sonu: 

Music Credit: 


Questions about the show? We’d love to hear from you! factsvsfeelings@carsongroup.com


#FactsVsFeelings #Markets #Tariffs #FedPolicy #GDP #LaborMarket #Investing #Diversification #InterestRates #TrumpEconomy #CathieWood #EconomicOutlook #ConsumerSpending

Welcome to the facts versus feelings podcast. I'm your host, Ryan Dietrich, and I'm joined by my co host, Sonu Varghese. Cutting through the noise in thirty minutes each week with Ryan Dietrich, chief market strategist, and Sona Vardis, VP global macro strategist, taking out the boring and helping investors focus on what really matters. A quick note before we start the show, investment advisory services offered through CWM LLC, an SEC registered investment advisor. Carson Partners, a vision of CWM LLC, is a nationwide partnership of advisers. Hi, everybody. Welcome back to episode one thirty one of Carson's facts versus feelings. Ryan and Sonu here. We're titling this one, is the recession imminent? And I was glad because imminent is like a hard word to spell. I don't wanna spell it, but I can I can say it, Sonu? But we're gonna do something a little different where Don't make me spell it. No. I know. Instead of instead of banter, we're just gonna dive right in. So and then we'll do some banter later. Sonu, the US dollar has been crashing. Did we just lose reserve currency status? See how I start he didn't know this was coming. Right off the bat. Right off the bat, man. I'm coming. Wow. It's good. I come back from travel and YouTube. I know. Not not not a good friend, am I? Not a good friend. But I will say so for well, for this question, I'm gonna wear my Easter bunny glasses because it's Easter. There you go. On the YouTube channel, I have my Nice. And my bunny glasses. So just for this answer, I will wear the bunny on the YouTube channel, then I'll take this off. Yeah. I'd say no. Not yet, at least. I'm gonna qualify it by saying not yet. Mhmm. Right? But are we in danger of it? I don't think so. But let's say last week was a shock. Yeah. We had a crisis. Alright? And let's be clear. It was a crisis. Things were crashing. Right? Yes. It came back. The S and P five hundred gained note nine and a half percent on Wednesday. Yeah. But during the crisis and we're still down relative to, you know, where things were, you know, for the market, for the equity market relative to where things were on Liberation Day, April second. It's still down from there. Right? The market's down about, what, three, four percent something? That's to be right on this. Down. Down. Down. Down. Down. Down. Down. Down. Down. Down. Yeah. About four percent down. Normally, what would you say? You say, okay. Bonds should be a diversifier. Oh, yes. I know there's inflation's a problem. So you're like, okay. Maybe there's a chance this could be different because tariffs are going to raise prices, and maybe bonds don't do as well. Yes. Interest rates went up twenty five, twenty six basis points, the ten year yield. Right? You say, okay. Fine. Maybe this is a replica of what happened in twenty twenty two. If US interest rates go up, what does that mean? That means if you put money into the US, you get more. Right? Instead of getting, what, four twenty five or four twenty, something like that, Now you're getting close something closer to four forty, four fifty. Four point five percent. That's what I mean. Right? That would mean the US is more attractive. There should be more flows into the US, and the US dollar goes up just from the fact that interest rates went up. It's more attractive. Not to mention the fact that historically, at least in history as far as you and I are concerned during our professional careers, anytime you have a crisis, what happens? The dollar goes up. Yep. We saw the opposite. The dollar went down about four percent during this crisis. Big, big move. The dollar since January, the dollar is down nine percent. Right? I remember when you came into this year, I think you were sharing numbers that the dollar looks too stretched. Mhmm. Yeah. By fine. And they thought, okay, maybe, you know, the dollar continuing to go up was a risk. Right? Because that's a risk for multinational profits, all of that. Let's say that maybe the dollar doesn't go up. Maybe it comes down. Maybe it comes down a little bit. It's flat. Whatever. Right? But nine percent lower relative to mid January is a big move. Four percent lower during a massive crisis is a big, big, big move. And the question is and we can share the chart. Right? During a crisis, what happens? Stocks fell. Bond yields rose. The dollar fell. Mhmm. I haven't seen this before. Does that mean we've lost reserve currency status? I don't think so, but we've lost something here. Well, no. Well, since I'm thinking things we've lost, we've lost a little bit there. Listen. In twenty two, terrible bear market, twenty five percent bear market. Yields were higher. It was a horrible year for a diversified portfolio because stocks and bonds both did poorly. The first ten months twenty two, the dollar had, like, one of its best ten month rallies we've seen in a long time. March of two thousand twenty, COVID. Stocks sold off, bonds sold off, gold sold off. Initially, after everything started, go look that up. The dollar was a cleaner shirt and dirty laundry and soared higher. So now here we are in another crisis, and the dollar is not acting the way we would have assumed. So that is a big, big question. But so no. I love this quote by James Carville. A lot of people have shared it. Nineteen ninety three, he said this. I used to think that if there was a rear that if there was reincarnation oh, I just had a thing pop up here. Oh, sorry. That was me. I was just telling Josh to Josh, our the Josh is the producer for every other listening. I was showing the chart showing the falling stock market, rising bond deals, falling dollar during this time. So you'll see it on the screen if you're looking at YouTube. Perfect. On the YouTube channel. It's great. So, Carville said this. He was, well, what was he? Like, a strategist for Clinton? He did For Clinton. Yeah. He did something Adviser. Adviser. Strategist guru. Whatever. Raging Cajun. Anyway, I used to think that if there was reincarnation, I wanted to come back as the president or a pope or a four hundred baseball hitter. But now I'd like to come back as the bond market because you can intimidate everyone. So let me rewind for a second. On Tuesday night last week, we're all going to bed. We know those tariffs are gonna come in at midnight. Right? Eastern time, at least. And, the ten year was soaring up over five percent. There was panic in the air. Futures are crashing. There was a lot of worry, Sonu. And then less than thirteen hours later, president Trump said, not so sure. And we're gonna we're gonna stay ninety days and ten percent across the board. China, you get a little more because we're not getting along with you. But everybody else, you get ninety days. And then you see the Wall Street Journal wrote an amazing article. Like I said, inside sources said, you know, the the gist of it was president Trump could have taken maybe a minor recession. He could have accepted maybe, a bear market, but he did not wanna mess around with the bond market. Right? Fifty trillion dollar bond market, it was saying, we don't like what you're doing. And when the bond market crashes along with everything else, that's a really, really bad scenario. So did president Trump blink, I guess? I'm only for oh, one more thing. One more thing. I I didn't know this. But, apparently, the first time he started talk president Trump well, he's Donald Trump back then. So we're really talking about tariffs. Okay? He wanted to buy the piano that was in the movie Casablanca. Famous, famous piano. Wanted to buy it. Okay. He was like I don't know if it's on held there was no online back then. So it wasn't online. Maybe it was in person. Whatever it was. He was about to buy it. At the last second, a billionaire from Japan. It's the late Yeah. Yeah. It's the late eighties. A lot of money in Japan, the late eighties. Someone swooped in and bought that piano. Two days later, he goes on Diane Sawyer Sawyer's, night time show or whatever and just starts ripping everybody, ripping policy. He was mad. He didn't get the piano that he wanted. And he's been talking about tariffs ever since, and he had his great chance to do it. And it took thirteen hours, and he changed his mind. I don't know. I don't know. It's Can somebody send that piano to the White House right now, please? Where is where is that piano? That'd be just something to ask, If that solves the problem. Give miss Fish just air drop a piano in the in the row. Next time he's doing something to the Rose Garden. By the way, my Ohio State Buckeyes are at the, the area today. And JD Vance at Ohio boy rep Broke him. He dropped. He dropped. I don't know if he broke it, but he dropped it. He dropped it. But, yeah, that was a that was a good JD. He's actually my neighbor. He didn't live that far away. I've never seen him because you can't get close to JD's house. But, anyway, he lives in Cincinnati, although he's always going somewhere. I don't know where I was going with this. Oh, did the bot did president show him? That's where we're going. Yeah. I'll put it this way. The bond market made him blink. Mhmm. Yeah. That's, like, connecting literally what we were just talking about. Well, I think it all seems so far away. I mean, so much has happened over the last two weeks. But I don't know. That's like, maybe it was last Sunday or something. Scott Besson was on TV, and he was like, oh, no. The market pulling back is just, you know, because of the Mag seven, and we are not worried about that. Right? Like, I I honestly think they were, like, ready. They would have been willing to, I think, take some pain, maybe a lot of pain in the stock market. Yeah. Twenty percent down, maybe even twenty five, maybe even thirty. I think forty would be a problem. It was pretty painful. It was pretty painful. Yeah. Yeah. Thirty percent, I think they would have taken and said, you know what? No. Stocks come back. I mean, you and I know the numbers. Right? Stocks come back. I don't think they were ready to take pain in the bond market. Nobody is ready to take pain in the bond market, especially because when Besson came in, remember what he said? He was like Oh, yeah. We want lower interest rates. You want the lower lower ten year yield. And, yes, I mean, you and I have been talking about it. I've been telling I've been saying for several months now, the Fed should cut. The Fed should cut because inflation is no longer a problem, and we need to boost the housing market. Housing's struggling with, you know, six and a half, seven percent mortgage rates. So you have to get that ten year yield to come down. Now the easy way to do it is well, not the easy way. It is just put the economy through recession. Oh, yeah. And then you get that. We'll talk about that recession odds, things like that. But and and that's why I think the administration was like, maybe if you have a little bit of a slowdown, we engineer a slowdown. Maybe ten year bond yields have come down. Well, they engineered a slowdown, but the bond yield went the other way. And now they're like, uh-oh. We need to we need to blink. And they did. And they and they did. I know one of the thing I sent, Josh was president Trump's tweet. And on Mhmm. I guess it was Wednesday the ninth. It was Wednesday the ninth. President Trump let me make sure I read it correctly. I've got it here somewhere. I love it. Okay. All caps because why would you not have all caps? This is a great time to buy with I don't know what is that. It's like three or four exclamation points and then you sign it. D j t. And that was in the morning. Right? That was in the morning. Morning. And a couple hours later, we had a nine and a half percent rally, by the end of the day, the third largest rally in the history or at least back to World War two on the S and P five hundred. Truly, truly amazing. You know, we're not we're not sorry to Josh, you can go ahead and put up the, advanced decline one about the volume. So how rare was Wednesday? Yeah. It was a huge update. But ninety eight point six percent of all the volume on the NOSC was up that day. Okay? We've got data back to nineteen eighty from my friends over at Ned Davis. And I love Ned Davis. I'm curious. What didn't go up that day? Like Well, that's a good point. We should look that up. But, apparently, there was about one percent of the volume went down. I don't I don't know. That's not a good day there. But that's the most we've ever seen. And, historically, when you see pre some previous dates that were ballpark that strong was the lows in August of eighty two, the lows in March of two thousand three, a couple times in two thousand eleven, twelve, some major lows. So, yeah, I mean, you know, everyone's saying this is a bear market rally. That's how all these start. You know? And I tell you, our our friend Scott Brown over at, oh, what's it called? Brown? Oh, I should know. Brown Technical Research? Brown Research? But Scott Brown. Just look up Scott. Sorry Scott. We're not known. But Scott Scott pointed out, you know, we were about as oversold as you can get. Less than two percent of all the stocks above the two twenty day moving average, about five percent fifty day, less than twenty percent two hundred day. That is in washout territory. And then you get this huge bounce. But what you tend to have is what we call a bang and whimper. So the the bang was that big drop that we saw into last Monday when the VIX spiked to sixty. Everything going crazy. Then we bounce. So we bounce pretty nicely, honestly. And then you kinda whimper back down. Maybe retest it, maybe not, but you whimper back down, but you see better internals, less stocks making new lows, some some positive things under the surface. So we had the bang. We're in the local area, maybe a potential low, but then we go back and maybe potentially retest it with some better news, out there. One other thing from Scott, and so I'll let you go. You pointed this out on Monday. We came in last Monday, so just two Mondays ago. Obviously, just just I mean, futures are down. Everything was looking bad. So we opened This is Monday the seventh? Monday the seventh. Yes. That's exactly right. We opened down on the S and P more than two percent. So we opened way red way red. And then you close your eyes till the close on Friday, and we're up on the week more than five percent. So that's a pretty significant flush out and wash out when we call it. Scott noted, I think, was May of nineteen seventy, the only other or the most recent time. We've seen something like that on a weekly basis from Monday to Friday. That big of a selling in the beginning and then strength at the end of the day. And the S and P was up, like, forty six percent multiyear, a couple years later in a really strong bull market. Who knows? Who knows? I get it. But, you know, we we've got some extreme, extreme negativity. So, Sunu, what else do you wanna talk about with kind of the market action, and then maybe we'll finish with, the economy? Yeah. So let's talk let's go back to bonds and why because there was a lot of things about, you know, bond yields arising and why it was going up. Mhmm. Right? Because, you know, I think stocks are just straight out, especially if you look at small caps, for example. Right? From Liberation Day, the Russell two thousand is down about eight percent. So small caps, I think, if you look at the especially a differential between small cap, large caps, I think there's, you know, the market's pricing a high probability of recession. Right? Whatever that probability is. It it which is not to say there will be one or won't be one. Market pricing can always change. But bonds are the question of, wait, why were bond yields going up? Right? And I think a lot of people like, oh, maybe China's retaliating. Right? Maybe maybe China's selling treasuries. Yeah. Right? And let's say the US so just to clarify the numbers here. Right? The US treasury market is about, you you know, marketable securities anywhere twenty to thirty trillion. I mean, Social Security has a lot of treasuries, things like that. So it could be totally about thirty five trillion dollars China owns about seven hundred and fifty billion dollars worth of treasuries. So in the big scheme of things, they don't own a lot. In fact, they haven't been buying a lot of treasuries for about a decade now. Oh, we've had a trade war with them since at least twenty eighteen. So And and they've started to diversify outside. And, you know, gold has been going up. They are. The Chinese central bank has been buying gold as well. Mhmm. That's one of the, you know, reasons one of the many reasons I think gold has gotten obeyed over the last two years, not just, you know, last three months or anything like that. Right? Right. Gold has done well through this crisis as well. So the question is, like, oh, wait. Is China selling? Mhmm. Right? Are they selling treasuries? When you think about it, if they sell treasuries, what needs to happen? They're selling US dollars. They have to buy something with it. What are they they have to buy their own currency, in which case their currency actually has to go up. It has to appreciate. They don't like that. Yeah. They don't like that. That is something they are They don't they don't like a higher currency. Yeah. No. Exactly. Right? They don't like a higher in fact, over the last week, since the you know, over the last month, they we've seen the Chinese currency depreciate slowly. That's because the central bank controls it. Right? They have capital controls, things like that. They engineered a decline. So we literally saw the opposite of what you would expect if China was selling and dumping US treasuries. Right? So I I think there was a lot going on. Like, is it China? And then there was, like, is it something called the basis trade, hedge funds that are very levered, betting on interest rates going down, but instead it went up? There was a whole thing about regulations as well. Scott Besson, when he came in, he said he's going to ease regulations for the banks, which means they can hold they can buy more treasuries, which means yields you know, there's more demand for treasuries, and so prices will go up. Yields will go down because it's opposite for bonds. Right? And I think I got that right. Yeah. And but that hasn't happened, obviously. So things have gone the other way, and these trades are enormously leveraged, like, fifty times, hundred times levered. Right? Because usually you pick up roughly pennies on the dollar. You can't really make a big profit unless you're really levered up. So there are a lot of things going on with respect to, like, why did, you know, bond yields go up last Tuesday night. Mhmm. Right? I I think it's it's still unclear, but I think we can I'm pretty confident in saying, look. The data is going to come out only two months from now. Like, China's holding a treasury bond. I don't think it was them. In fact, I don't think it was anyone else. Right? It it was just market structure, what was happening, you know, as funds delevered, things like that. I think that that's more of the story rather than anything else. Very interesting. Let's not forget the flash crash. And I guess there were some flash crash back in the sixties, but the one I know because I went through it was May tenth two thousand ten, I believe, was the date. Pretty sure that was the date. Definitely May of two thousand ten. We still can't agree on what caused the flash crash. We still can't agree on what caused eighty seven crash. So listen. These things happen. There's not always a clean answer is the honest answer, but that's something to remember. You mentioned banks just high level, and so far, banks have had pretty good earnings. Our banks kinda kick off Delta, technically, and remember how coal used to kick off earnings season. Apparently, it's like Delta now. Delta came out on Wednesday and said, never mind. We don't have a guidance anymore, and the stock went up twenty three percent. A lot of that was yes because, obviously, what happened with tariffs. But, they'll be gonna see this earning season. We'll talk a lot more about it. But so far, earning season's early, and these banks have actually done pretty well relative to expectations. Now, Josh, one chart I know I sent you was kind of all the bear markets. And the idea so we'll share this on YouTube. We've had Sonu some what we call near bear markets since nineteen ninety. Nineteen percent peak to trough fractions in nineteen ninety, nineteen ninety eight, two thousand eleven, and twenty eighteen. And I know two thousand eleven and twenty eighteen hit intraday down twenty percenters. Didn't on a closing basis, but close enough for government work. This one hit twenty percent, I think, a couple times. Intraday never officially did. Now we bounce well over ten percent from the lows. We'll see by time you listen to this where we are. But I just think it's interesting that we've had these near bears. And when you have a recession, this isn't probably rocket science, but your bear market goes down, like, thirty four percent. When in a nonrecessionary bear market, which absolutely can happen, down about twenty four percent. Does that sound familiar? Two thousand twenty two was down about twenty five percent. We shared this data back then saying, listen. We still don't see recession. People hated that call, but looking back, it was accurate. And we had an I'm I'm gonna say normal run of the mill bear, but if you were in the market for those ten months, that was really, really painful. So what didn't feel normal? But, actually, it happens. Right? So that's where we were. So, again, if we can avoid a recession, which is kind of a segue to where we're gonna go, maybe we were ballpark where we were, but the market's all about expectations. The last thing I'll point out, Josh, you can point up the, chart about the, all the expectations on recessions. Right? The Bank of America global fund manager survey came out this morning, Sonu. So maybe you had a chance to look, maybe haven't. I'm gonna point out some highlights. I'd love your takeaway here. Not surprisingly, I mean, just global these are the people that manage real money, hundreds of billions of dollars. There's a lot of fear out there. Cash had its largest two month spike since April of two thousand twenty. Global investors expect to cut US allocations the most ever. Alright? And then recession expectations, so I believe we're sharing on the screen here, had, let me read it here, is the highest is the highest it's ever or the highest, the fourth highest it's ever been. That's what that word is on my these paper. Fourth highest it's ever been. Only March of two thousand nine, April two thousand twenty, and November of twenty three were higher. Now all of those times were not the worst time. You sorry. November twenty two. Apologies. November twenty two. But those three times were after rough markets, were after rough economies. Yes. But once everyone got all recessioned up, you know, the market did actually do pretty well from those points of view. So I don't know. And trust me, you could say, well, five weeks ago, we said sentiment was negative, and I would agreed. And now here we are. So I get those parts of it. But what's your take on some of those, concepts we just talked about there, Sonny? Let's go back to Josh, if you wanna put up Ryan's chart, which I love, like, the one where he says, there have been many near bears lately. The near bear chart. Yep. Yeah. Near bear charts. I like how you've you know, if you're looking at this on YouTube, you know, Ryan's highlighted in bold the near bears. Right? You got nineteen ninety, nineteen ninety eight, two thousand eleven, twenty eighteen. Right? And twenty twenty five, like But now We don't know what. Yeah. Maybe. Maybe. Hold on. Let's take those four times. Right? Nineteen ninety. And this is what, you know, you think about as markets start to go down, you need some catalyst. You and I always talk about this. You need some catalyst to stop it. Right? And, you know, it's interesting. It usually stops around twenty percent, but maybe that's when real panic sets it. Yeah. Right? And for whatever reason, maybe, you know, like, oh my god. Because once you get to twenty, the question is, are we going to thirty then? Well, everybody and their mother knew we were in a bear market a week ago. Right? Because we knew all we were new. So Right. Right. That brings the panic out. Out. Mhmm. But then, usually, what happens, nineteen ninety, ninety eight, two thousand eleven, twenty eighteen, policy makers step in. The Fed steps in. There we go. Mhmm. Fed, Embark, they were cutting rates in nineteen ninety. Greenspan cutting rates in nineteen ninety eight. Two thousand eleven, rates are already zero, but then they started doing QE again. Yep. Right? Then, you know, a couple of a year later, we got QE we we got QE Twist. Yeah. Right? They started buying long term. Like, there's a bunch of stuff watching there. Bunch of those out there. Right? And in twenty eighteen, yes, we bought them on December twenty fourth. The Fed was raising rates amid the trade war, and then the market is basically sending the message to policymakers, stop. Mhmm. January third of twenty nineteen, Powell came out and Yeah. Changed tune. Done. Right. Yep. Right? So that was, I think, this time, the Fed is on the sidelines. And we did it some catalyst, and that's the catalyst we got on Wednesday. It was a policy catalyst from played. Exactly. Exactly. It was a policy that's what took things out. Look. Tomorrow, if he comes and says I'm done, you know, there there is some damage. I'm not saying there's there's there's there's damage here. Right? Like Yep. And there's maybe instead of and and one way to think about, okay, how does this damage get quantified in the markets? I think one way to think about it is, you know, do US equities deserve the same valuation premium they did at the beginning of the year? Right? Beginning of the year, valuations forward based on forward forward PEs, forward price earnings multiples, or about twenty one, twenty two, something like that. Right? Do they still deserve it because of the extra risk now? Right? Like, yes. Maybe president Trump says, you know what? I'm taking everything out, even the ten percent baseline tariffs. That that that would spark my You got me smile all of a sudden. But that there is still the risk that six months from now, he could change his tune. Oh, okay. So we may not quite get back, like, in the beginning of the year, we say ten to fifteen percent. I'm not saying, you know, we who knows? We could end up in the same place. Right? Like, if but I don't think, like, the risk premium, you know, goes down from here. I think there's still some risk, and that's the effect of everything that's happened. Right? So I think policymakers have to step in. In this case, it wasn't the Fed. Trump just blinked in. He said, oh, you know what? Ninety day pause. Right? And then it's same thing over the weekend, by the way. We haven't even touched on the weekend. Right? I don't know. So we've been change. It'll change by time people China tariffs hundred and forty five percent. Our friend Dan Ives is losing his, you know, By the way, we'll we'll be live with Dan Ives, in Omaha in May at our partner summit. Honestly, if you wanna join, become a Carson partner. You cannot come to this one. We'll probably share some of it, and and it'll probably be a backslash feelings after the fact. But, yeah, the third week of May, we've got Dan Ives live. And I'm tell I am so excited about what I'm gonna wear. You and I need to call you because you know what Dan's gonna wear. It's something crazy. We're gonna we're gonna go all out. We're gonna look like Dan Ives. There you go. Yeah. So what did Dan say over the weekend? Yeah. Dan was like, this is crazy. Like, Apple cannot function Mhmm. With these tariffs on. No way. And guess what happened? Like, I'm not saying this is because of Dan. Who knows? I'm sure he's gotta, you know, hotline into the White House probably. Yeah. He does, ma'am. So does, you know, Tim Cook probably. Right? And Yeah. Trump answers his phone call on the golf course. I think he answers Tim Cook when he calls on the golf course. Yeah. So I'm sure the calls are coming in. The calls are coming from everyone and everybody. Right? It's like, you cannot do this. I mean, think of all those people sitting next to Trump during his inauguration. They all were there. They were all Mag seven was there. Mag seven was there in full force. Yes. They were. Front row. Front row. Yeah. Yeah. And then what? They they they depend you know, you can't have four hundred and forty five percent tariffs in China. Again, he blinked again on Sunday. Right? What was interesting is the US is now you know, everyone keeps asking, like, who holds the cards. Right? Like, don't we have more? And and the general thing is, oh, we import from them, so they're dependent on us. And there is an aspect to that. Right? So maybe we hold all the cards, and I think the Trump administration kinda tested that. But the problem is trade is the other side of profits. Okay. Right? It's the other side of profits. I mean, if you're making profits on your iPhones, if you're making profits on all this stuff that is made in China, suddenly you have a trade war that's looking to break all these linkages. That means all the linkages through how you make profits is also torn up. Right? And I think that's what essentially the that was a fear on Sunday night and, you know, and that's why the administration, like, oh, we're gonna pause that. We're not gonna put the, tariffs on consumer electronics. The irony is that they still have tariffs on intermediate and capital goods. So in a sense, you're kinda screwing over US manufacturing Right. And still getting all this stuff from China without tariffs. So I don't know where all this ends up. But Right. It. Okay. Yeah. It is not like, we haven't sorted any of this out. Which comes to the question then? Recession. Well, let me let me jump in before we go there. Yeah. I mean, I think that's why we just had a pretty much a virtual bear mar or bear market because there is so much uncertainty in fusion. Now you mentioned risk. One risk you have is when you have a hundred and five pound crazy, Great Dane like I do. I was on the floor the other day. She jumped up, and she scratched my face. Alright? Oh. And then I go upstairs. This is Sunday. This is on Sunday. I go upstairs. Just get Is she mad at you, or is she excited? She playing. She's she loves everybody. She's playing. Anyway, so I go upstairs to see my son, Gus. He looks at me. He goes, why are you bleeding all over the place? I go look at the whole so I don't know. In the YouTube channel, if you can tell, I got a scratch. My dog scratched me right on my chin. Or no. Sorry. Sorry. My my cheek my cheek. And, yeah, those are some risks. Now I will also say this. There we go. Facts versus feelings, at karson group dot com is versus v s is our email. One of our great listeners, Jake, sent this song, and I'm gonna play just, like, a minute of it. Maybe a few people play the whole song, but and this is we have approval because Jake made this song. So he made a song about me and the stock market. And this is kind of our little intermission maybe before we talk about the economy. I'll just play a little bit of it. You wanna list the whole thing. We'll probably play at the end of the podcast. But it's called Ryan, the savior of stocks. Thanks to our friend, John Gutman. Here we go. It's got a good beat. Trust me. Watch Sodo's head's with Sarbanin' Mythical. Crushing it to scenes so wild. Bulls turn to bears in just a short while. Ryan steps in with that confident grin. Wall Street's chaos let the game begin. Oh, Ryan's got the golden touch, making numbers Alright. Alright. Alright. So Wow. The first forty eight seconds. It's four minutes long. And and this is the beauty of AI. You could just say make a song or write a new trick in the stock market. And, apparently, a few seconds later, it spits that out. So it's got a real catchy beat. The words are pretty funny. So, again, maybe, again, well, I'll get this to Josh, and we'll play the whole song in the video. CNBC. You should just play that. And Ryan the save I thought we should title this Ryan the savior stocks, honestly, but I thought that was a little too extreme. Alright. That was got a little initial. I'm looking at the clock. Let's say maybe ten minutes or so. Let's go another ten minutes or so. Let's answer the question of this week's facts versus feelings episode thirty one. Is a recession imminent? Sonu, we're hearing it is. I know your odds are higher than it was a month ago because of everything going on. Let's, let's let's talk about the economy and recessions. Take it away. I'm looking at a poll, CNBC. This came on this was yesterday or something. They poll the surveys polls three hundred CEOs in April. Sixty two percent say they forecasted a recession or other economic downturn in the next six months. Right? And it was forty eight percent in March. So most CEOs, who you will think have an idea what's happening Mhmm. But, you know, I'll I'll I have a take on that too. They they think there's a recession in the next six months. So my one thing with CEOs, I'll say that, like, they're they're great. Like, Jamie Dimon, for example. Let's pick the you know, there's no question that he's a great CEO. Period. Right? Great CEO, he's been talking about he's talked in the past about economic hurricanes and market hurricanes and things like that. So I I think no offense to CEOs, but I think they have blinders as to what's happening in for their company, for their industry and sector. Right? It's they're not really looking at the aggregate picture, and you have to look at the aggregate picture. Right? And then you think when you think about a recession, most people are thinking about, oh, two quarters let's say two two quarters negative GDP growth sometimes. I mean, that's not even a technical definition. Right? It's just some sort of like, okay. That's a easy heuristic. I'll I'll put it as it. Not even a technical definition. In the US, it's the National Bureau of Economic Research, NBER, that defines a recession. The thing is, you know, there's you can't wait for them to declare a recession because by then, stocks are probably up ten, twenty percent. Our stocks are already rapidly, right, by the time Yeah. NBER declares a recession because, yes, they're looking at a variety of indicators. They're looking at consumption, income, production, and employment. Right? There's about six indicators that they look at across these things, and and they're trying to figure out, okay. Are these in contraction? And then six months later, a year later, they can say, oh, the recession started and so and so a month. Right? And then it's only after, you know, maybe a year or two years after the recession ends that they finally come out and say, because, remember, all of this data gets revised as well. Right? Even if you look at payroll data. Right? You cannot use payroll data in our business, the business you and I are in. NBER is in a different business. They can wait two years to say, oh, the recession's ended. You and I are in the business of, you know, figuring out how does economic risk translate to market risk. Right? And for that, you cannot wait for forget NBER. You can't even wait for GDP data. You have to think about what's happening in the economy today. We can't we're we're in April right now, April fifteenth. We're done with you know, your fifteen days removed from the last quarter. You still haven't gotten GDP data. And that GDP data q for q one is going to be revised. Happy tax day, everybody, by the way. April fifteenth, the day we're doing this. Yeah. Anyway, April fifteenth. But you won't have it until tomorrow, but nonetheless, happy tax day. Exactly. So you have to look at okay. You know, how is you know, so when I think about a recession, I'm not thinking about, you know, GDP growth coming down and bottoming and going up. By then, it's too late. Mhmm. We can't be in that business. So question is, okay. Is there are there risks to the economy where suddenly incomes are falling, layoffs are rising, things like that. Right? We don't have to wait till GDP data comes out to tell us that. Okay. Right? In fact, I would say GDP is NBER is really lagging. GDP is very lagging. Even earnings, right, we are just about starting to get earnings for q one, but that's, you know, late. That's delayed. You don't want to wait for earnings to bottom. Say, oh, yeah. Okay. Earnings are bottom. Now we're going to buy. Right? Like or earnings are starting to go down. Now we're going to sell. No. You try to act well before this stuff, and I think we have enough data for that. So then the question is, okay. From that perspective, you know, are we running into a place where all of these economic data all this economic data, whether it's retail sales, income, and especially labor market data, is that going the wrong way, right, where it creates a big risk for markets? It creates a big risk for profits. Right now, we're not there. And that's partly because, you know, we haven't gotten the data for March and April. But I don't think the unemployment rate is going to jump up to let's say, it's at four point one percent, four point one one five percent right now. I don't think it's gonna jump up to four point five percent in June. Okay. May and June. Maybe. I'm not saying it's out of the question. Suddenly, layoffs spike. We haven't seen that yet, by the way, in initial claims. Mhmm. If layoffs starts to spike, we should see it in initial claims. And continuing claims last week fell. I know you're out of the country, but continuing claims actually fell more than expected, and claims have spiked. So there's some positives out this evening. So my thing is I'm not so sure. I'm not saying this is zero percent chance of a recession. Right? I I am skeptical that we'll get into a recession over the next two, three months Mhmm. Or even four months. Let's say into July. July and August. Right? We're in April right now. Because partly, I think consumers are going to try to front front tariffs, especially now that we have a ninety day pause. Right? Well, you just bought three cars. Right? Didn't you? I am honest. No. I'm considering it. I know. I know. I know. I'm considering it. I know. Yeah. Right? I I just saw the news that Canada has also given a break for auto tariffs from their side, so for some time. Right? So all of the stuff is happening. We are on ninety day pause, which actually prolong I don't think that's a good thing in you know? Yes. It's good temporarily, but the very fact that it's temporary is not a good thing. Either do it all now or don't do it. I think I said last week, ninety days is about July fourth. So maybe we just have a big old July fourth party and say all the tariffs are over and away we go. Yeah. My my guess is we get to July sixth or whatever it is, and then we get another ninety day pause. None of the stuff is helping. Right? Like Oh, boy. Yeah. So I think that that's my guess. If I had to pick, like, what is my base case, I'm saying, this thing is just going to get prolonged and prolonged, but that prolongs uncertainty too. Mhmm. Right? But what's gonna happen is businesses are going to try and build up inventories as well, which means that's going to be in the in the interim. Right? Let's say April, May. You may actually see production pick up a little bit, inventories going up. Yeah. All these weird skewed data. I think that economic data is going to be very iffy, I mean, if that's a word, for the next two weeks. It it is on our podcast. We can say whatever we want. Right. We can say it. Yeah. Like, the one thing I think where the data that I'm really looking at and it's always like, it's it's labor market data. I don't think that look. If companies are worried, what do they do? They say, you know what? We are worried about cash flows. We gotta get rid of people. Yep. And you'll see layoffs. But we kinda start seeing that. Yes. We get we always get anecdotes, challenges, you know, layoffs in the tech industry. We saw that two years ago. We didn't get a recession. Oh, every January every January, we get tech layoffs, and everybody says, here it comes. And Yeah. Yeah. Not yet. No. Exactly. We should see. But think of it. That's where you're differentiating between what's happening in certain pockets of the economy was the aggregate economy. Right? And we should see that in things like claims. And we should see that in the unemployment rate. Right? If the unemployment rate let's say, like, by July, if the unemployed unemployment rate gets to, say, four point five, four point six percent, I'm gonna say we're in big trouble here. Mhmm. Because once this thing starts moving, it'll keep moving. Yeah. Right? And but that gets back to the Fed as well. Normally, we just got inflation data last week. Right? Isn't that crazy? We didn't even talk about that. Yeah. Yeah. It was good. It was good. It was good inflation data. That was a year a year ago, what would the market would have done on that news. Yeah. Or even, like, three weeks ago. Right? That's true. You and I, we wrote about this on our outlook. We've been talking about this ad nauseam for, like, two years. Yeah. This was the normally, the blog we would have written is this is the inflation report. The Fed is going to cut forget June. They probably cut it in May. Yeah. We'd be talking rate cuts right now in May. And core PCE, personal consumption expenditures index, for what was that? March. For March. Yeah. Just yeah. For March is on track to run below ten basis point, below zero point one percent. Yeah. Wow. We'd be talking like, oh, maybe at least fifty, sixty percent odds of a rate cut in May, maybe hundred percent chance of a rate cut by June. And now the market's pricing in a rate cut by June, but they that's because the market thinks there's gonna be a recession. Right. Unemployment rate is going to go up. The bad types of cuts. The bad types of cuts. Exactly. Good cuts are if inflation is not a problem like the mid nineties. And, honestly, it look kinda like we saw last year, but now it's a new year. But now that that's what the I I I'm honestly in the camp that unless we see the unemployment rate spike, like I said, to a four point five five point four point six percent Right. Which I'm a little skeptical it will immediately. I'm not seeing that yet. Right? I don't think the Fed cuts. Okay. But I think that raises the risk. I'm more worried about a recession. Like, I I'm not gonna put a probability. I mean, like, that's subjective. Like, you know, who cares about someone's probability? I think the odds are high that we run into trouble by the end of the year or beginning of next year. That's because Well Look. If it is just tariffs, companies can deal with it. Right? If if Trump comes and said today, you know what? We are sticking to hundred and twenty five percent tariffs on China. Whatever. Twenty percent tariffs on the EU, forty six percent tariffs on the Viet on on Vietnam. Forget any deals. I'm not wasting my time. I wanna play golf. Scott Messon, you go play golf. Howard Lutnick. Whatever he does, you do, you do. He might be gone by then. I don't know. No. If he had to take a bet on who leaves first. Right? Yeah. But, like, companies who can figure that out. Mhmm. Given tariff rate, yes, it may be there may be a little pain, but okay, you adjust earnings for twenty twenty five. Twenty twenty six, maybe everything comes back or maybe by twenty twenty seven. Well You figure that out. Right? But now we are in a situation where we don't know what's happening. So then the question is, okay, are companies going to well, we know the answer to that. They're not going to really make investments. They're going to be sit back, build up inventories for now just so that they have non tariffed goods to push to consumers. Okay. Right? And but are you going to build a new factory right now? Right? Should if you're Nike, should you move your factories from Vietnam to the US? Who are you gonna hire? Like, do Americans wanna make sneakers? Or if you're a pharma company, do you move your, you know, your pharmaceutical production from Ireland back to the United States? Because now you have a twenty percent tariff. You may not have a twenty percent. It may make sense to move it if there is a twenty percent tariff, but there is not Right. Six months. It's not there July fourth. Exactly. So so so basically, what I'm getting at for GDP growth, if you think about what's in GDP, forget the volatile stuff. Net exports, exports minus imports, forget inventories. Right? It's not my final demand. Government? By the way, that's mostly state and local. It's not federal. Right? State and local government is twelve percent of the economy. That's slowing down because now they don't have the cushion of all the money they got from the COVID stuff. Mhmm. Right? The COVID stimulus from the federal government. So that's slowly falling away. Investment is another big part of it. Investment, I think, is, you know, is is is has just stopped. I mean, who's gonna invest right now? Who's gonna put up a new building, a new factory? Remember the chart you and I kept talking about over the last two years? Manufacturing, construction? Mhmm. Right? Boring. Yeah. That's done because, you know, who's gonna do that anymore? And then we were talking about we this would be the time we'd be looking for companies to buy equipment to populate those factories. But now you put hundred percent tariffs on the equipment that you need. So are you are they going to invest in that, or what are they gonna do? So you're not gonna see that, which leaves the consumer. Right? And for the for the consumer, I think it gets back to the key is the labor market. Okay. And I think for right now, hiring is eased a lot. Right? Sure. By if you just looked at hiring and say, oh, we may be in a little trouble here. And I think, like, our good friend Neil Dodd has been talking about this for a long time at Ren Mac Research. Right? The thing is what's sort of keeping net employment high or relatively okay is the fact that layoffs are low. So I I think it just comes back to keep an eye on claims. Like, if you ask me, what are you looking at? Claims? Yeah. You said claims is your favorite one. If layoffs start to go up, I think we're in big trouble. I don't see that yet. I don't see any signs of that. Like, you take all these six the sixty two percent of CEOs I forget sixty two percent of CEOs who said, you know, they forecast a recession in the next six months or so. What about Bert what about Bert says? We need a Bert on it. Yeah. I Bert White, our CEO. Yeah. Like yeah. Yeah. Yeah. Like Yeah. Yeah. But but if these CEOs are saying, you know, oh, we're going to get a recession in six months, would you think, okay. We need to raise cash flow. We need to let people go. Mhmm. But you like I said, you're gonna see that in claims. Right? And you'd already been saying but forty eight percent of CEOs started saying that in March. Sure. But that hasn't translated to layoffs. Not yet. So the my worry, but is the Fed keeps rates high for longer, and that starts to just suck on the economy. It just drains the economy slowly. Like, in a sense, I'm not I'm not wishing for this by any chance. We're almost better off. Like, you just go into a big recession right now, and then it's a you get a v shaped recovery as Trump says, you know what? I'm done with all this. The Fed cuts. Boom. It's over. Right? By the time you get to December of this year, we're not getting that. I I I think that's, like, very unlikely right now. But I'm worried we get to q four Okay. Q one of twenty twenty six. Rates are still high. Orchid rates are at seven percent. Right? The there's no, you know, there's no boost from the housing market. The housing market's dead. There's no boost from investment. The labor market is sort of, like, teetering on the edge. That's not a good situation, I think. No. And, to add to that next year is a midterm year. And, historically, midterm years can be a little dicey. Some things we've talked about internally get through this year. Next year, maybe we have to reevaluate some things. So we're No. Exactly. I mean, you and I, when we did our outlook, we talked what are the risks. And the threats are tariffs. Now that threat is manifest. Okay. Put that aside. That is real as real can be. And I'll and I'll be honest. This is not what I expected. Mhmm. This is just not what I expected. This was not my worst case. My worst case was really bad. This is way beyond that. Right? But I thought, okay, You know, congress could write a tax bill. Maybe they do that first, and then we get into tariffs, and they do it slowly. And that would be, you know, by now we'd be talking about rate cuts. Yep. We'd be talking about tax cuts. We're talking about tariffs instead. Sounds a lot better. Good. Sounds a lot better. So rates are still a risk. And I think it was a risk at the rates staying high was always a risk. I was hopeful because the inflation numbers that would come down, but now we've gotten good inflation numbers doesn't matter. Mhmm. Because the Fed's like, you know, tariffs are a riskier. It could push up inflation even if it's transitory, by the way. Right? There's that word. Let's say let me ask you this. I'll I'll throw it back to you. If you don't get rate cuts this year by the way, that's still not my base case. I'm still expecting a rate cut or two. Mhmm. Yeah. Because I'm hoping this is this passes and Trump says, you know what? I'm done with this at some point. That's the upside. The what's the bull case? The bull case is Trump just completely white waves a white flag. Yeah. That's a that's a bull case. Right? So that like, tell if you tell me sort of what's your probability that, you know, everything just goes back to normal, you know, yes. There's some hurt. I think premium risk premiums, evaluations won't get back to where it was because there's some risk premium here. But I'll say I'll I'll ask you, what are the odds that Trump waves the white flag? That's that's my odds. I think I think pretty high. I I think I think it's pretty high. I think he liked seeing the stock market go up because it's something that he Yeah. Quote, unquote did. At least he views it that way. Yeah. So we'll see. I mean, I guess, you know, I think about what we're doing. Right? The money we run. I mean, we're we're really preaching to be diversified. Do we have an overweight equities? Yes. But we had a ninety one percent overweight equities or unconstrained models you know, back in twenty three, twenty four. We did a pretty big cut back on March third. We've done a little more. So, you know, we've done some things. We've talked in this very podcast. We added some more international exposure, specifically Europe, just last week. Okay? I mean, we still think, you know, stocks might do okay before this year's over so we can avoid some of these really bad things we're talking about, but we don't know. No one has a crystal ball, and that's why we're saying in in times of uncertainty to be diversified. Grant, great to be on our team. Yeah. Carson group dot com slash research talking about some of the concepts we're doing. We've talked before about one of our big, calls we've made this year has been fifty percent momentum, fifty percent, low vault. Right? And and and when you if you do something like that, you've got some offense and some defense. As it is simply buying SPY, that's a nice way to do. We've talked about this. I'm not gonna get too in the weeds at the end of our podcast, but these are some of the things that we're doing every day for our Carson Partners, every day for our Carson Partners, clients. We're doing special calls. We do all types of cool stuff. So some of the stuff we're talking about here, just teasing a little bit, if you will, sounds appealing. Go to Carson Group dot com. If you're looking for a really good adviser and you need a better adviser, we've got literally hundreds of them all over the United States. And if you're a current adviser who's not been, supported by your current shop as much as you think you should have been potentially, we would love to talk. We're growing. Mentioned Burt White before, so reach out to Burt and tell him you wanna come on over. You know? Or reach out to anybody. But Carson Group dot com, there's a lot of cool stuff that we're doing that we hopefully can help, of course. Go ahead. Our stuff, Carson Group dot com slash Research. I love the title of Grant's blog. When in doubt, diversify it out. There you go. That's yeah. Yeah. I do something. I love that. That's good. That's very good. I'm gonna use that. When in doubt, diversify it out. Mhmm. And Yeah. The I wrote a blog today about, taxes combining taxes since it's tax day, April fifteenth, with tariffs. And this gets to the whole thing about, oh, we're gonna have negotiations and stuff. Right? The thing is, like and, you know, Scott Bessens talked about maybe the first ones to the table will be South Korea and Japan. Mhmm. And I'm here, I'm thinking, wait. We already have free trade agreements with both countries. Hold on. Yeah. What are we going to negotiate? Can they do? Yeah. But Maybe maybe they have to give us their best baseball players. Maybe that's what this is. They give us yes. Get with and they come over for a good deal because yeah. Cheap. It's called the LA Dodgers keep buying them all. The Dodgers got all the money. They keep buying them all. We've gone pretty long. So any final words of wisdom? We probably need to shut her down here soon. No. I think there's a lot of uncertainty right now. I don't think we are out of the woods by any stretch of the imagine you know, any any stretch unless Mhmm. This can all end if one person decides this is over. I don't think he will for the reasons that you mentioned going back to the piano. Going back to the piano, but it all started with the piano. It's all because of that darn piano. But Mhmm. We'll say we'll stay on top of this. Right? And like I said, you know, make sure your portfolio is all diversified right now. Mhmm. Absolutely. You know, we've we've, we're doing all we can. We really appreciate tons of people listening to this. We've had a lot of downloads. We actually have a we can announce who's next week. Wanna announce it? Who do we have next week? You wanna give a little teaser just for the listeners? I think we should. We can. Cathy Wood. I mean Mhmm. You know, the I don't know if technologist is the word for it. You know? I I think Elon Musk is the technologist, but Cathie Wood is a big booster of technology as well. And I I thought I saw some headline. I could be wrong. So I'm conditioning on this that I could be very wrong. I thought she said, like, a recession is very likely. So maybe we could talk about Oh, we're she's doing in those portfolios as well. Like I'm looking forward to talking. We just listen because she's, she's great. So we we've got Kathy, next week. So, again, thank you to everyone. Let me make sure I read the oh, where'd it go? The little disclosure I say, Sonu, about reading or here we go. Here we go. Help us out here if you can. If you wanna hear the latest from us, don't forget to subscribe to our podcast. You can also leave a review. We love your feedback. So thank you for that. So with all that, we're gonna probably leave to the song that Jake put in there. Gonna say, we should, fade out. Yeah. We're gonna fade out to it. Oh, here. Yeah. Okay. I I I sent him a notice that, hey. Can you give us compliance? He's in writing news. I never thought you'd have to ask an AI song. Anyway, he gets permission he gets permission to use it, so I feel very safe, to say we can play the song. Yeah. Jake, Ryan, the savior of stocks, we will leave with the song. Ryan, a savior to stocks. We'll be back next week on the latest edition of facts versus feelings with Cathy Wood, which will be an awesome discussion. Everybody stay strong out there. Let's hope we can get a little more green. We'll see you next week. Here comes the song. Take care. Thank you. Bulls turn to bears in just a short while. Ryan steps in with that confident grin. Wall Street's chaos let the game begin. Screen. Traders whisper. He's got the knack. Ryan's here. Watch the market bounce back.

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