2025 Day with the Stars

Event Recap

On Thursday, March 6, Investment Solutions hosted the fourth annual Day with the Stars event, this year taking place at the Rainbow Room in New York City. Across seven unique panels, we heard insights from CNBC’s leading commentators discussing the different topics affecting markets today. Common themes included normalizing growth, reinflation not being a concern, an emerging theme in housing, artificial intelligence and data centers, and the importance of private markets. However, panelists had differing opinions about the Federal Reserve; many expect the Fed to take a slower approach to rate cuts, while others foresee a quicker move to neutral, with rate cuts coming as soon as May. We break down the topics from the event below.

Growth is Normalizing

Stephanie Link kicked off the event with the belief that growth is slowing. Across the panels, this was a common idea; growth is slowing, but a recession is not the consensus. We will not see the +3% GDP growth we have seen over the last two years. Instead, growth will be closer to 2% going forward. The Atlanta Fed GDPNow tracker was projecting 3.8% growth in the current quarter three weeks ago. Now, the model is projecting -2.3% growth. Karen Finerman said that the quick change in projection is mostly due to tariffs and the trade deficit. U.S. companies are pulling forward imports ahead of potential tariff implementation, and since net exports (exports minus imports) are a factor in GDP, GDP is being negatively affected. Shannon Saccocia had a similar view, stating that there is seasonality in first-quarter data. A spate of bad weather and wildfires across the U.S. negatively affected spending, which should revert in the coming quarters.

Dan Greenhaus views current economic data in the same frame. There is a lot of noise around the growth scare – export/import imbalance, gold imports, weather, and a volatile Atlanta Fed GDP model. He sees the economy growing 1-1.5% in the first quarter and is not concerned about the long-term picture. In his opinion, the recent slowdown is due to declines in soft data, not hard data. Soft data is survey-based, while hard data is what is statistically happening in the economy; soft data is weakening (models, surveys, sentiment), while hard data is holding up (employment, industrial production).

Putting it all together, the U.S. economy will likely grow around 2% in 2025. The consumer remains in a good spot with 5% wage growth and muted initial jobless claims. Additionally, we have seen a turnaround in U.S. manufacturing. Last month, ISM Manufacturing printed its first expansionary reading in 26 months, a good sign that manufacturing spending and investments are returning. Dennis DeBusschere thinks U.S. manufacturing has more room to improve. He noted that direct tariff impacts can be contained, and durable goods (industrials, manufacturing) should perform well over the short- to medium-term.

Tariffs, Inflation, and the Consumer

As mentioned, the Stars held the opinion that tariffs will mostly be old news by the end of this year. Jason Trennert was not as optimistic about the U.S. economy as other panelists. Jason mentioned that across 24 countries over the last 100 years, when a country saw one wave of inflation, 90% of the time, a second wave of inflation returns in the coming years. Naturally, central banks prefer to ease rather than tighten and usually tend to take early victory laps after inflation falls. Following the first wave, the labor market tends to be left behind. Wage increases do not keep up with price increases, and workers tend to push for salary increases following the first wave, similar to what we have seen with Boeing and the longshoremen.

Josh Brown believes that we are seeing the tail end of the post-pandemic spending splurge, which is ultimately playing a role in the slowing economic data. We are hearing commentary regarding a “value-seeking” consumer from Walmart (WMT) and Target (TGT), with many of the consumer staples lowering guidance. Josh noted that consumers focus on the economy and job security. The labor market is holding up, and the economy is normalizing.

Barry Knapp was more bearish on the economy in the first half of 2025. He stated that Trump is trying to restructure the economy and the U.S.’s trade policies. Spending cuts are needed to stabilize the long end of the yield curve, and it seems that investors believe the administration is serious about trying to fix the deficit. Medicaid outlays have increased 51% since 2019, and it is important to get spending back to 20% of GDP from the current levels of nearly 25%. Growth is more likely to come in around 1% in subsequent quarters, in Barry’s view.

Market Dynamics and Equity Market Positioning

One of Brian Belski’s favorite sayings is “stocks lead earnings which lead the economy.” He sees 2025 as a year for resetting expectations, where we compartmentalize the new administration’s goals and understand what the next four years will look like. The Mag 7 are 20-30% below their all-time highs with declining earnings growth, while the other 493 are doing the exact opposite. He thinks investors will be kicking themselves for not owning enough value, mid-cap, and small-cap companies in the coming years. His current strategy is a barbell – being neutral weight on the Mag 7 while being overweight on the companies playing catch-up across each sector. On the flip side, Brian is not a fan of consumer staples, which was a similar thought to Adam Parker. Adam likes industrials over staples, as the industrial economy was in a recession last year, which is starting to turn upward. At the same time, it appears that the consumer may be turning downward.

Jason Snipe believes that this is a stock pickers market and holds a positive outlook. Earnings are doing well this quarter, up 16% year-over-year, with a broadening of earnings growth across sectors. The last two years have been all about artificial intelligence and growth, which is starting to change with new market leadership in health care and consumer staples. Financials are his favorite part of the market; earnings are positive, the yield curve has steepened, and M&A should pick up later in the year. Cybersecurity is also a favorite theme of his, as further technological innovation will need to be met with protection.

Bryn Talkington likes Robinhood (HOOD) and Uber (UBER). She thinks legacy custodians are asleep at the wheel and HOOD is gaining market share with strong international growth and has opportunities to win institutional business in the future. UBER is a free cash flow juggernaut with one of the best CEOs in the market today. Uber 1 subscriptions are up 60% y/y, and Uber Eats is taking share from DoorDash.

Ryan Grabinski and Rich Farr both noted opportunities in international markets. Ryan prefers taking a broad approach through diversified exposure, while Rich likes the idea of buying international bonds, such as Brazil, with a 15% yield. Kevin Simpson is focused on dividend payers – with a 10% expectation for equity returns, 40% of that can be driven from dividends and income, providing protection in a selloff. Bob Lang thinks markets will trade sideways through the summer and prefers using covered call strategies to generate income in the interim until market unknowns subside.

Artificial Intelligence and Technology

According to Tom Lee, the market bottom may have come this week. The average stock is 30% off its all-time high, and many of the most popular stocks have fallen a lot more than the index. Additionally, Tom believes bitcoin is one of the most important asset classes today. Bitcoin is currently 10% the value of gold; if bitcoin had the same market cap as gold, it would be $1 million per coin. Cryptocurrency is a top goal for the U.S. government, and the technology has been shown to be a great way to store information.

Dan Ives, Alex Kantrowitz, and Bill Baruch provided great insights into the AI race. Dan recently took a trip to Asia and said the demand/supply ratio for Nvidia (NVDA) chips is 15:1. The recent selloff has opened immense opportunity to add to these names. Alex has yet to see a killer AI app outside of Chat GPT. Last May, Chat GPT released its voice capabilities, which saw page views jump from two to four billion per month and from 100 to 400 million active users. This new technology will empower customer service and productivity across the economy. Bill noted that Secretary of Commerce Howard Lutnick wants U.S. jobs to be fueled by AI and robotics. For this to be accomplished, NVDA chips are a necessity. As AI becomes cheaper and more accessible, demand for the products will increase, which will drive further demand for the chips and infrastructure.

A question on a lot of investors’ minds is when will we see monetization come into effect from the massive investments hyperscalers have been making into AI. Dan thinks we are seeing it from the software companies – Palantir, Salesforce, ServiceNow, and others. He called 2025 the year of monetization for enterprise.

Private Markets in a Diversified Portfolio

Anastasia Amoroso thinks that private equity, private credit, and infrastructure gives investors an opportunity to be paid while waiting out volatility. In a 60/40 portfolio, a 60% equity allocation should have investments in mid-market buyout strategies and replace public small-caps that have not been working with private small-caps. With the 40% fixed income allocation, private credit can be used in achieving 8-10% returns, if not higher, if the Fed holds rates higher for longer.

Paula Campbell Roberts thinks private markets are strategically important for individual investors. Private markets can offer more diversification compared to the highly concentrated S&P 500 and public equity markets. Her favorite parts of the alternative investment universe are collateral-based cash flows: real estate and infrastructure. These asset classes are correlated with inflation and provide protection in an inflationary environment. Her preferred allocation is a 40/30/30 public equity, public fixed income, and private markets split.

Disclosures

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