By coinnews 
00:00 Brad Smith
We’re taking a look at major averages right now. They started off a little mixed this morning on the back of that CPI report and in the wake of tariff policy changes. Analysts are raising their year-end targets for the S&P 500 and pulling back their recession chances in probability. Yahoo Finance’s Josh Shafer joins us now for today’s strategy session. So, Josh, what is the overall kind of tenor post some of the pauses that we’ve seen initiate on the tariff policy front?
00:31 Josh Schafer
Yeah, Brad. So the overall tenor is that we’re seeing recession probabilities, as estimated by economists, coming down. And typically when you see recession probabilities come down after they came up as much as they did, that then makes a lot of equity strategy teams say, “Okay, maybe I now see more potential stock gains.” Right? So you had Goldman Sachs moving down their recession probability to 35% in the next 12 months from 45%. Subsequently, their equity strategy team moving up their S&P 500 year-end target from 5900 to 6100. And then you take a look at Yardini Research. Ed Yardini over there, him lowering his recession forecast to 25%, 25% probability in the next 12 months. He now sees the S&P 500 hitting 6500 by the end of the year. That’s up from 6,000. And so, again, overall sort of the takeaway being we had a lot of growth concerns, right? That was kind of the narrative over the last month with these tariffs. That’s what took hold, perhaps even more so than the inflation story, was worries about a looming recession, worries about a growth slowdown. That prompted a lot of these strategists to lower their S&P 500 targets for year end. Well, if the growth concerns start to abate, now people feel a little bit better about the market, especially after this big rally.
02:22 Seana Smith
Yeah, I think it’s really interesting how much we saw everybody rushing to potentially cut their S&P 500 targets off the back of the trade war kicking off. And now suddenly a negotiation and framework of a deal is potentially enough to have those price targets lifted again. What do you hear about that?
02:42 Josh Schafer
Yeah, I mean, there was double digit. I think it was either 11 or 13 at one point. I can’t remember exactly what my number was out of the 17 that we track, but they had cut their target in the last month or month and a half at this point, right? Basically since that tariff turmoil started. What I think is interesting is not all of it is just straight up, “Okay, the economy might be better off. So now I feel better.” If you look at Ed Yardini’s call, he had talked a lot about the wealth effect. And so you see this massive drawdown in the stock market, the S&P 500 peak to trough fell 18.9%. He was worried about the impact that would have on the American consumer. See, obviously, a lot of US consumers very exposed to the stock market. If you see a large drawdown, his concern was maybe that prompts a consumer slowdown. And then you sort of get a self-fulfilling recession in that sense. And then stocks would also go lower. He’s looking at this large gain you’re seeing in the benchmark index. I think it was up 3% since April 2nd. Now that includes your big move down. We’re well up above that now after yesterday. And he said, “Well, I think maybe consumers feel like they’re in an okay position right now.” Does seem like, of course, you still have the looming risk of what if these tariffs do spike inflation to some extent and then do consumers, are consumers able to continue to pay those higher prices? That risk is certainly still out there. But generally speaking, people feel a little bit better today than they did yesterday.
04:57 Brad Smith
I have a note here from Gargi Chaudhuri, a good friend of the show and chief investment and portfolio strategist of the Americas at BlackRock. And what they’re actually seeing after the read through on CPI here, even after the developments in recent tariff negotiations, minimum volatility strategies, they think make sense for investors who would otherwise sit in cash. What does that boil down to? Quality names. How is that also perhaps one of the prevailing sentiments that we’re hearing across investors?
05:32 Josh Schafer
Well, if you look at the rally over the last month and a half, I mean what led your rally? MAG 7, right? And I think maybe probably take out Tesla from that group, but if you ask someone that is a stock picker to tell you about what a quality stock is, most people would probably look at those other six big tech stocks, right? It’s stocks with high cash flow. It’s stocks that don’t have a lot of loans to pay off.
06:01 Brad Smith
Strong balance sheets.
06:02 Josh Schafer
Strong balance sheets that are in a good position for. You take a look at the move in the 10 year over the last couple days, right? You’re now back near 4.5%. That is an area where the 10 year gets above 4 and a half. We’ve seen large cap outperform over the last 18 months to 24 months, right? So that part starts to make sense to you. And then, Brad, it’s interesting though to think about you have some people calling for quality. Then you could have another strategist come on and tell you it’s time to buy small caps. And I think a lot of people would argue maybe that isn’t necessarily the highest quality area of the market. It’s
06:44 Brad Smith
A call that hasn’t really worked for like two years now.
06:49 Josh Schafer
Right. And so the other prevailing takeaway from the last day here is you have a lot of people now talking about the Fed not cutting, right? So you might have higher rates moving forward and what does that do to sort of your strategy?