By coinnews 
00:00 Speaker A
let’s welcome in now Nancy Curtain Alti Tidderman, Global Chief Investment Officer. It is good to see you, Nancy, on set.
00:07 Nancy Curtin
Good to be here.
00:08 Speaker A
So we were just talking about this market, and I want to get your take on this, because it has been, Nancy, a wild ride. We had liberation day, and headlines and reports and drama, and blood on the streets. And then remarkable rebound. And as we were talking at top of the show, now the S&P 500 goes positive on the year. What do you make of it? What do you, how do you explain that to your clients?
00:48 Nancy Curtin
Well, first of all, we’re long-term investors, and so we have stayed put throughout this entire thing and told our clients not to panic. Don’t try to sell on the low and get back in again, and thank goodness because you can never predict when markets turn around. And they turn around on a dime. Now, I didn’t see this weekend, uh, quite amazing what Beth managed to accomplish, uh, in China now. Uh, obviously we have this 90-day pause. We’re a little cautious near term. Again, we’re not doing anything. Uh, we’re long-term investors. We think we’re well situated. We’re incredibly well diversified, uh, so our clients really navigated through the turbulence, uh, pretty fine. So, but I think, you know, we are cautious. Markets have moved a lot here. Uh, and trade deals, let’s just think about this. Trade deals versus LOIs, because what he got with the UK was a five-page agreement, letter of intent. What happened with the UK was a five-page little written agreement, more questions than answers. But I do think it sort of sets some of the framework. And what I mean by that is, don’t expect tariffs to go away. The 10% baseline tariffs, we think is going to remain enforced. China’s going to be higher, or we’ll have the negotiations with other countries. But don’t expect tariffs to go away. So, you know, tariffs do have a negative economic impact. So we do see a slowdown in the US economy as a result.
03:03 Speaker B
And do you think there’s also, especially as an international investor, um, do you think that there is also a, a more permanent hit to foreign investors’ interest in the United States even if there are these deals that are forged?
03:24 Nancy Curtin
So Walter Wriston once said, “Capital flows to where it is welcome and stays where it is well-treated.” So I’ll just put that out there as a little snippet. But look, uh, foreigners for the last two decades have been allocating huge amounts to the states. Why? It was rational. The US across pretty much every asset class outperformed, and the dollar outperformed on top of that. So today they have very, very large allocations, about $30 trillion. Foreigners have allocated to the United States. And a lot of that’s unhedged. So we believe at the margin, foreigners will allocate less, not going to sell all their securities. We’re still the most liquid market in the world. We still have great companies and all the rest of it. But at the margin, if they allocate slightly less and or hedge their exposure, our belief is we could see a lower dollar than we’ve seen and or a higher cost of capital. We have to finance a $2 trillion deficit. We have $8 trillion of rollover risk. Uh, and now we may have some foreigners less showing up at the auctions. So this is something. It’s one of the reasons we’re underweight duration, underweight government bonds as a result.
05:07 Speaker A
Let me ask you, as you mentioned a US economic slowdown, that means what for corporate profit growth this year?
05:16 Nancy Curtin
Do you know, I actually think that corporate profit growth will prove more resilient than people think.
05:22 Speaker A
Why do you say that?
05:23 Nancy Curtin
Well, look, it started the year at 12. Okay? We’re probably going to end up six or seven, something like that. So it will slow down, but take a look at the first quarter. You know, we’re 90% of the way through the first quarter. Uh, the profit growth is 13.4 versus expectations of seven. Pretty much, uh, you know, 10, 11 sectors in positive territory, margins have hung in there. Now, you can say, okay, that’s backward looking, which it is, because that all happened before, you know, April 2nd. Uh, but broadly we think there’s a lot of shock absorbers in the United States. There’s a very good wealth effect. Uh, you know, mid to upper end consumers account for 88% of consumption spending. The tariffs hit low-end consumers. They’re regressive tax. We’ve got that. We’ve got the tax bill, uh, widing its way through Congress. We think that’s encouraging. There’s a lot of goodies in there. We’ve had record buybacks and a lower dollar, by the way, means better earnings. So let’s just factor some of those things in. So our view is not that they won’t slow versus earlier expectations, but they might just be more resilient than people think.