00:00 Speaker A
Barclays is the latest bank to cut its S&P 500 price target as tariffs and weakening economic data weigh on markets. Our very own Josh Shafer just got off a call with the strategist behind Barclays’ target cut and he joins us now with the takeaways. Josh, Venue Krishna. What do you have to say?
00:18 Josh Shafer
Yeah, essentially, Venue’s take was that their earnings target is just a lot lower now, right? And so what, how do you get to lower earnings, right? What’s sort of weighing on it? You mentioned off the top there, Maddie. Definitely tariffs and sort of a higher expected tariff rate now than maybe what the firm thought coming into the year, right? And so you start to factor that in on how it’s going to weigh on different sectors. For example, they downgraded consumer discretionary, right? A sector that is obviously very exposed potentially to tariffs. You also tie in just a slower economic growth forecast there. She, their economics team now forecasting GDP at less than 1% at 0.7. It’s just a significant draw. Yeah, it’s pretty low, right? 0.7. Now, you did point out not necessarily there’s not a direct correlation there between, you can have a sluggish GDP environment and still a pretty solid earnings environment, but right now you certainly have that uncertainty overhang, and that seemed to be kind of the key takeaway for where we slide from. Does it go above 5,900 or below 5,900? Really kind of depends on A, they’re putting in about a 15% effective tariff rate. So if we get a higher effective tariff rate than that, then that’s probably worse for stocks, worse for the economy. Also, B, when do we actually know what the tariffs are and how long does that sort of last? And that’s something I’ve sort of been thinking about a lot. Market is just essentially, how much does how much does the tariff rate matter versus the uncertainty and us actually finding an answer? And I’m sort of curious how you’re digesting that difference, right? Is it the number that we want to know? Like, does the number matter the most, or is it just having some sort of answer that’s going to maybe help out the market here?
03:00 Venue Krishna
Yeah, that’s a great question. Again, right, it’s a little of both, right? So the uncertainty is definitely dictating where the market’s going and how we’re reacting today. Knowing the number is paramount, right? Because we all want to go back to our desks, we want to get the slide rules out and figure out, is it a 15% or is it 20% or is it 18%? Uh once we can do that, then we can actually handicap these these stocks and say, hey, is it is there value here? Are they above their target, below their target? So, yeah, if there’s volatility which makes it that much more difficult to get into the market and not knowing what that actual number is, uh is also a big factor. So, you know, if I had my brothers, I’d have no tariffs, right? Uh but if I ultimately got what I want, you know, just rip the band-aid off, tell us what it’s going to be, then let us go back and figure out what it what it is and who it’s going to impact and how we can, you know, adjust appropriately.
04:45 Josh Shafer
And I I think the one thing that stands out too is it just feels like we we got a date with April 2nd, right? We’re calling it, Trump is calling it liberation day. So we have like this fancy day to sort of peg all this to. I don’t know how you guys feel, but it feels like the more people I talk to, it doesn’t seem like we’re getting a lot of solution maybe next week, right? When you think about the tip for tat nature of tariffs, how do other countries reciprocate, it just feels like the uncertainty overhang isn’t really leaving the market next week or isn’t expected to leave the market next week. And sort of maybe it’s just continues to keep us in this tight trading range where it’s tough to figure out where we’re going for probably another month at least, right, a little bit longer.