Jenny laid out a lot of different scenarios. How are you guys thinking about it?
Carol Massar
Jim Karen
We're managing a lot of noise. Initial conditions were strong economy, fiscal stimulus, inflation coming down. Consumer can absorb higher energy prices near-term. Key question is duration and tipping point.
We are in a period of negotiated escalation. Expect amplification of bombings as part of end-game settlement process.
Doesn't seem like the market is taking Trump's threat of massive attack seriously. Is that fair?
Tim Stenovec
Jim Karen
Market pricing finds the midpoint of a probability distribution. There's a left tail (things go badly) and right tail (things get better). Markets may not fully account for left tail, but tails are far apart meaning more volatility.
What's the longer-term impact? Increased defense spending, growing deficits, national security costs.
Carol Massar
Jim Karen
Second and third order effects: raw materials, agriculture, fertilizer, food, PVC pipes, used car prices going up. Inflation conversation is more like 2022.
GDP growth expectations must be lower. Market is discounting earnings growth around 10-11%.
How do affordability issues and midterms affect markets?
Tim Stenovec
Jim Karen
Midterms will be tough due to gas prices, but ultimate question is choice between nuclear-armed Iran or taking pain now.
What should investors do? I know you like US over Europe.
Carol Massar
Jim Karen
Value opportunities in value sector dividends, quality and defensive sectors. Healthcare benefits most from AI long-term. Technology, AI and defense-related will see exceptional growth.