Recession?

0:00 Welcome to something more with Chris Boyd. Chris Boyd is a certified financial planner, practitioner, and senior vice president, financial advisor at wealth enhancement group. One of the nation's largest registered investment advisors. We call it something more because we'd like to talk not only about those important dollar and cents issues, but also the quality of life issues that make the money matters matter. Here he is your fulfillment facilitator, your partner in prosperity, advising clients on Cape Cod and across the country. Here's your host, Jay, Christopher Boyd. Welcome everybody to another podcast of something more. I'm here with Jeff Perry and Brian Regan. All of us are from the AMR team at wealth enhancement group and glad to have you with us.

0:44 Uh, today we're going to talk a little bit about recession, the topic of recession, the concern. I find this keeps popping up in conversations and, uh, uh, things I'm, uh, hearing, watching, you know, people have been more prone to talk about this in light of recent topics like tariffs and the like there's concerns of like, oh, is this going to slow the economy to some extent? And when people start having those kinds of anxieties, we've seen the market have some, uh, volatility because of anxieties around, I think, particularly related to tariff, uh, uh, policy and, or questions of what's policy, you know, that kind of thing.

1:28 Um, it, it comes up on people's minds of, uh, should I be more defensive? Should I be worried? Is there something that's going to change? And, you know, it wasn't long ago, just, uh, the turn of the year, we were talking about how earnings were really solid and things were really going well, and there's a lot of optimism around the prospects of, um, extended, uh, tax cuts and things of that sort. So, um, so I thought this might be a topic for us to revisit for people to give thought to and understand, uh, what is a recession and what defines it? What are the signs of it? Is this something we should be focused on today?

2:10 Or is it something to put off to be, you know, mindful of, but maybe not imminent. So, um, we're going to talk about that and, you know, Jeff, one of the things that, um, I remember as sort of a rule of thumb, it used to be that, uh, we talked about a recession as two, uh, consecutive quarters of negative GDP. You know, the, the growth was declining, you know, was negative, uh, judged by, um, the GDP, and that was sort of our, our standard for expectation of whether we had a recession. And I remember it wasn't that long ago that we actually had that happen. It was very slight and barely negative, but there was some, uh, I think it was around that time.

2:57 I'm trying to remember now when it was, but I think it was in COVID and then it turned out, oh, there, there, yeah, it was 2020. There wasn't a deemed a recession by, it turns out there's an organization, the national bureau of economic research that, uh, is actually, they get, they get to rule, they get to overrule the definition. Well, they, they actually have a more complex, I guess, assess, you know, let's face it, that's a shorthand, maybe write a rule of thumb, but when you look at, um, uh, uh, more involved, you know, group of data, you might find that, well, some things are one thing, but another says something else, right?

3:42 And it's this combination of, is it, is it, uh, the, uh, the combination of things, the main factors, this was, uh, off of the website and so forth. Um, the NBER looks at three main factors. How deep is the decline? How widespread is it? And how long is it lasts? And of course you can only tell if a recession has occurred in hindsight, right, we don't know in advance, but there are things we can pay attention to. And, uh, that's, I think what we want to do today is talk to Brian a little bit about, before we do, there is another definition that we should outline.

4:22 What is that? If your neighbor loses their job, it's a recession. If you lose your job, it's the depression, right? Right. Is it affecting you? Yeah, how personally, but that's a good example though, with you, you hear about, um, people being laid off a lot of government, you know, focus on, you know, government workers being paid off and that can precipitate sometimes, um, that sentiment that, uh, Oh, I know someone who is affected by this. And therefore you start to think, Oh, well maybe my job could be affected too, and maybe it affects your behavior and your spending behavior. And, um, there can be this whole psychology that's a self-fulfilling no element to this of, does it, uh, does it, you know, kind of feed on itself to create some of the, uh, concerns that we have.

5:17 And it's all about a word that I believe Brian doesn't like. So I may as well put it out there and get it out of the way. Uncertainty, right? So nobody likes uncertainty, right? Uh, especially as investors, we all want, didn't I, uh, didn't I use that word on the call and you were tired of the word. Do you think it's like an overused term out there? Well, let's bring Brian in. Yeah. Yeah. Thanks guys. Thanks for having me. Um, enjoy being with you, having these, uh, fun conversations, at least to me, they're fun stuff from probably, probably to our listeners too, if they're, they're this, uh, yeah, I, I, you know, I have pet peeves as you guys know, and one of them is overused terms, um, that try to simplify what's, you know, going on or scare people or predict things that, you know, aren't really predictable, right.

6:09 And these, a lot of these terms get thrown out casually. Um, and I guess the, you know, the easily, easily brought from the frontal cortex of the brain or something, because they seem to get repeated over and over and over again. And, you know, uncertainty is one of those words. Um, and of course, you know, uncertainty exists, but the reason why I don't like it is it exists all the time. I mean, the function of being invested in the capital markets is having an expectation of the future, um, which is uncertain, right. We don't have any idea what's going to happen in the future. We might not even know what's really going to happen to us later on this afternoon or this evening. Right. Um, so, you know, there's the reason why the main reason I don't like it is because it's, it's always uncertain.

6:54 Sometimes there's heightened uncertainty. Um, you know, I would say that when we have a guessing game on where we're going to go with this tariff and trade war, sure, you know, there's, there's more uncertainty and that creates a more volatility in the market. Um, but just because there's volatility in the market, uh, doesn't necessarily mean, um, we should be concerned or feel like things are more up in the air than they usually are. Um, I think things are, you know, often, you know, subject to change. We, we know that, uh, many of the stocks in the, in the, in the stock universe will go bankrupt, right? Uh, we know that a very small percentage of the stocks drive overall returns over time.

7:34 Um, you know, these are things that are innately uncertain. So it's not that I necessarily disagree that uncertainty is a thing or, um, it's just that it's over, it's overused during certain times. It's almost like a euphemism for the VIX increasing or consumer sentiment or, you know, investor sentiment, which, you know, to me are all bologna sauce, um, you know, investor sentiment should be a fun show. It's nonsense, bologna sauce. I like that, but it's fun. So, um, you know, I was holding back that word. I thought you guys would enjoy that. Um, so investor sentiment to me is just, it just tells you what the market has done recently, right?

8:16 It's like the definition of recency bias. It's not that helpful. Consumer sentiment is very political. It's done like on a landline phone call. It's, it's been incredibly, you know, inconsistent and unreliable over time. So I don't know why we keep saying these things as, as a put stock into them. Um, you know, I sent you guys some charts this morning and the first chart that I sent you was just us personal consumption over time. It goes back all the way to 1950 and it's an exponential line, um, rising from the lower left to the top, right. And it's smooth. Okay. There's basically all I'm saying is that it takes a lot for the U S consumer to stop spending.

8:57 So if you're looking for certainty in the market, I think you could probably hang your hat on that. Say for two pretty extraordinary situations, the pandemic, um, and the financial crisis, which, you know, uh, the financial crisis was a credit event. And we can talk more about that in the pandemic, I think was kind of a one-off event. Right. Um, it was, I hope it was a one-off event and, uh, you know, in the, in the, in the history books, we can kind of discount that as a non -economic event, if you will. Right. And it was a pandemic, but that's also a great example of uncertainty, right? Was there any time that was more uncertain to the March of 2020? Um, the reason why I point out March of 2020 is because that was the height of the pandemic, but it was also the bottom of the stock market, the stock market fell dramatically.

9:43 And I believe it was March 23rd where it, it bottomed. Um, there was no, uh, shortage of uncertainty and the market, uh, marched on very significantly since then. So, um, I hope that gives you guys, uh, an idea of why, you know, I think this quote unquote term uncertainty is, uh, you know, overused and unreliable. And, you know, quite frankly, I'm not sure what you're supposed to do with it. Um, if it means that the stock market's going to be more volatile, that's okay. I think that's probably going to give you more opportunities than, than, um, you might otherwise have. So Brian, um, I thought it might be helpful to talk about some of the kinds of things people look at when trying to assess whether or not, um, a recession may be, uh, imminent or, you know, we might be evolving into recession.

10:35 You just talked about consumer spending, which is, we often hear is what, something like 70 % of what drives the U S economy. So, um, the, the fact that that looks strong still is, um, a good sign and encouraging. And so, uh, all right, we can check that one off as not really a particular concern today. Right. Uh, another one oftentimes is concerns around employment, uh, or unemployment. Um, we're at pretty low levels of, of, uh, unemployment, uh, you know, historically I'd say we're still in a really attractive place for unemployment levels, but we do hear about a lot of layoffs happening in government.

11:20 And, um, perhaps some related, uh, impacted, um, industries that might, uh, might rely on government spending. Uh, how, how's unemployment data looking at this point? What's your take on that part of it? Sure. So the unemployment rate right now is 4 .1%. The long-term average is 5.56%. Um, the high during the pandemic was nearly 15%. So, you know, we're still pretty low. It's, it's higher off the lows of 3 .4%. Uh, you know, 70 basis points higher. It's not an insignificant number, but you know, it's a, it's a very low unemployment rate still.

12:00 It's nothing to be overly concerned about at the moment. The prime age labor force ages 25 to 54 is close to all time highs. So that's also a very good, uh, in terms of employment, the, the, the number of people employed in the, or the percentage of people employed in that demographic, you're saying. The percentage of people either employed or looking for work. That's what the labor force is. So, um, it, it, the higher, the better, right? We want more people working. We want more people looking for work. Uh, the labor force as a whole, again, near all time highs. So, you know, from that vantage point, things are, things are pretty good. Um, we have seen a little bit of an uptick in initial claims, but nothing too significant.

12:44 Now, this is another opportunity, I think, to point out another way where I think, um, you know, market participants, media participants, they, they, your short-term investors might, uh, overlook some important things. So let's think about what the unemployment is really telling us. Like the, the, the Bureau of Labor Statistics at first Friday of every month comes out with a labor report. Right. And there's, there's, there's nonstop coverage of it on CNBC until the data is released at 8 30 AM. And then for at least an hour and a half after that, there's no nonstop chatter about what it means to be higher or lower by $10,000, 10,000 jobs from the estimate.

13:26 So there's about 4 million jobs that are either lost or quit every month. And there's about 4.1 million jobs because the unemployment rate is going up by about a hundred thousand, a hundred thousand jobs a month. Um, that are added. So, you know, this, this, this margin of a hundred thousand from that vantage point, when we're talking about 350 million Americans and 180 million people in the labor force almost feels insignificant, right? When we're talking about a hundred thousand, a hundred and 50,000. Unless as Jeff said, it's your job or, you know, the next door, but, but yes, in reality and objectively, right.

14:07 This is, this is modest percentage movements. Yeah. It's kind of interesting, right? Like if you were to define the economy, I think of the economy as the goods that you could think about it from your own personal economy, the goods and services that you provide and consume, and the overall economy is the goods and services that all the people provide and consume. Right. And that's my simple definition. Now, you know, somebody wants to ask me and I, I said that off the top of my head. I think it was pretty good. So I've been sticking with it. Um, you know, it works pretty good, pretty well. Um, so where was it going that, so, you know, you could make the argument that we overreact to the unemployment report every single month. I mean, four or five hours of coverage on it, you know, every day on, on CNBC, um, might be too much, you know, the stock market moving 1% because we missed the jobs report by 30,000 or, or, or beat it by 30,000 might be overdone to changes in interest rates might be overdone when you put it in from that lens, right?

15:02 What you really want to look for is violent changes in the trend. Um, and one data point does not make a trend. Multiple data points make a trend. Uh, you know, Chris started off the show by talking about the NEBR or NBER, the national bureau of economic research. They don't look at, you know, one month, two months, three months, they're looking at a series of data points to determine whether there is a severity in depth necessary to call a recession. I mean, that makes sense to me, right? So we want to look for dramatic changes. We want to see if it's going to be, is that negative a hundred thousand, um, jobs lost is that at the start of a new trend, are we, are we going to go to one 50, 200 the next month, or are we going to revert positive?

15:45 Um, I think all that makes a big difference, which is why, you know, we emphasize as a group, as a team, uh, that we want long-term investors that will find the risk profile that fits for them, um, and stick with it because, uh, this short -term game is unpredictable. The data is almost too fast. It would be great if everybody slowed down, um, and started to look at things that were, uh, you know, maybe more important than, uh, what it might seem like on any given day. We've a good point. We've talked about this. I think, uh, I don't know if it's been on the show or just, um, in our own conversations, but the, uh, the percentage of, uh, people that work for the federal government and, you know, how that fits into perspective and whether or not that shows up in data, um, is that something you can, uh, just share a little bit with the audience about, uh, as we talk about this, uh, you know, if so a little, uh, I framed some of the unemployment with this whole notion of, uh, people getting laid off.

16:47 Uh, we see in the news when it comes to, um, uh, government workers and, and sometimes, you know, ancillary, uh, contractors and things like that being affected by that. Uh, is this going to show up in the data? And is it something that you think is going to move that needle in any way that's significant? Well, it's definitely going to show up in the data. Um, so whether it's people just leaving their government job, uh, at beginning ahead of possibly being fired or actually being fired, or, you know, we're going to have this back and forth where judges are forcing them to rehire them or they realize they need to re there's going to be noise in the data over the next couple of months.

17:28 Um, and whether you want to take that seriously or not is entirely up to you as an investor, but I would stand by what I just said. Um, we know this noise is going to be in there. Uh, consider it when you're looking at the, a possible change in trend. Um, and consider what, what it really means now, Chris, I asked you this question for a few weeks ago, so please don't answer it. I'm going to ask Jeff, uh, Jeff, how many workers do you think the federal government employs versus how many workers do you think that state and local government employs? Well, I don't know the numbers, but I would guess a state and local government far surpasses the federal number. Well, you're right.

18:08 Um, you know, I think, I think me and Chris were a little, um, a little bit more surprised about the, the new I worked in, I worked in local and state government. So, uh, you know, when we talk about doge and, and, and, and cuts and things of that nature, you know, there's 3 million people that work in the federal government that does not include contractors. And there's about 20 million people that work in state and local government. Um, I'm doing that from memory. So, uh, you know, if I'm off by a million here or there, give me a break. Um, so my point is in an economy that has about 180 million workers. It, we might be overreacting to a five, 10,000 jobs here or there.

18:50 And, uh, but that doesn't mean that that five, $10,000 isn't, uh, I keep saying dollars jobs isn't going to, uh, show up in that unemployment, uh, report, uh, that the BLS shows shows every, every month. So, um, there's going to be noise and it's up to you as an investor, what do you want to keep your eye on the longterm or react to, um, you know, short-term, uh, noise, I guess. Sensitive to that. I mean, it's, it's certainly, again, we're, you know, to bring it to the personal level, um, you know, if you're one of those 5,000 or whatever it happens to be, uh, you know, it's certainly relevant and, you know, we're not insensitive to that, we're just simply trying to point this out from a. A macro view.

19:31 How, how big a move is this impacting the economy and therefore how investors might think about it. Part of the problem when we talk about the macro economy in general is it sounds so insensitive. Yeah, exactly. Yeah. It's generally a problem. Um, lots of politicians have gotten in trouble about talking about the macro economy, right? Yeah. Yeah. Well, let's, let's talk about another component that sometimes people want to look at when thinking about is a recession on the horizon. So, so far it sounds like we've had strong consumer spending, unemployment's pretty low. How's business investment? Is there any data that's indicating anything really changing when it comes to business investment?

20:14 I haven't seen, I haven't seen anything of significance. Now I sent you guys a chart this morning about durable, durable goods orders, and I had two points that I wanted to make about durable goods orders, um, when it comes to, you know, uh, I think, I, I think I said your durable goods orders and I said your durable goods orders X defense because X defense is, you know, obviously a big portion of the durable goods that are going to happen in the economy. Some people, um, take out transportation in general. Um, I don't really like to do that because I think cars are important. Um, but airplanes take up a huge portion of that, uh, of that situation. So that's why people do that. But by, I had two points, one, it's very cyclical. So when consumer spending is not cyclical business spending on durable goods, consumer spending on durable goods does seem to be cyclical.

21:01 So, um, you should expect less capital expenditures in a, in a recession. Right. Um, but two, the numbers in, as a percentage of the total economy are almost a footnote. Um, you know, they're, they're in the couple hundred billion when the economy is measured in trillions, especially on a nominal basis, we're well over 30 trillion, um, on an annual GDP basis. So, uh, yeah, there's going to be a lot to be made of that. Um, but in the end, it, it, it might be fairly benign. Um, I think the things that are cut first when businesses get in trouble or not really, I think it's been, my experience has seen this is, uh, sales, advertising, marketing, um, your SGA expenses, your cost centers, your HR, your accounting, um, those are the things that go first.

21:56 So, uh, you know, that's, that's something you might want to keep on an eye on, on, on, um, on income statements. You know, companies generally try to reduce that to increase their operating leverage. So there's kind of a natural progression of trying to increase margins and increase operating leverage. Um, but then there could be the abrupt, you know, we need to make changes because revenue is slowing down. Um, and you know, those are, might be things you want to look for on the business level. Um, but, uh, you know, I'll point to Darden restaurants, for example, Darden restaurants, it might be the ultimate consumer discretionary, uh, consumer spending company. And, you know, they're not really seeing much slowdown in consumer spending.

22:37 Um, you know, that could be one bellwether for you. And, you know, when I hear things like that, uh, I shrug my shoulders. I'm just feeling the U S consumer is going to consume. That's what they do. And then you hear something like Delta, who says they're seeing a slowdown in growth? They're not saying they're expecting a recession from growth, but what you might be seeing there is the business travel or slowing down a little bit. Uh, which I think, you know, that's cultural, right? It might be a reaction to the boom that we had after the pandemic. It might be, uh, companies reigning in based on a slowdown that they're seeing, seeing in revenue, but a slowdown isn't necessarily recessionary.

23:19 My point is, there's a lot of noise. Um, and what we want to concentrate on are the things that are important, which can really be tough to dial down. Right. And sometimes you need to like clear your head, shut it off and think, right. Just think through what's important. Think through reality, think through real life. Um, I think that that can be, especially now in the social media age, there can be an overwhelming amount of information thrown at you and it can all seem important and, uh, it's not necessarily all important, you know, we, we have an, uh, individual stock portfolio and we concentrate on consistency and growth. And the reason why we do that is because I understand there's an enormous amount of uncertainty, even in, even when you concentrate on things like consistency and growth, inevitably, there's going to be things that don't go the way you expected or that business expected.

24:10 Um, but, uh, in a, in a world of enormous amounts of uncertainty, if you can do a good job of maximizing that consistency, uh, you know, you're probably going to be in good shape over the long run. Good point. You know, Brian, during, uh, the COVID time, we talked a lot about government spending and what it was doing to inflation at the moment. Right. We talked that government spending is a stimulus to the economy and reducing government spending is restrictive. So this is something else that we haven't seen yet, including in the recent six month, uh, budget deal that was passed, there was no reduction in government spending. Um, how much is government spending really impacting our GDP and our, you know, our economic cycles here.

24:57 And if, if, if Congress actually restrains government spending and DOJ is successful at their efforts to really get rid of some agencies and really reduce the federal workforce, is that something that you would think could really impact the economy in a slowing way? Yes. I think, uh, deficit spending is stimulative, like deficit reduction or surpluses are restrictive. Um, you know, John Maynard Keynes, a famous economist, uh, he put forth and I ascribed to this idea that, uh, during a troughing economy, uh, you need, uh, and, and, uh, to stimulate demand, stimulate aggregate demand.

25:42 And part of the way that you do that is through government spending. And we saw this during the great depression. Uh, the, the new deal, uh, certainly helped increase aggregate demand in hindsight and world war II and the, the, the abundance of spending that we had there, uh, really got us out of the great depression. Um, but he also said that when the economy is humming along that the government should cut back, uh, so not to overstimulate the economy and cause, you know, an inflationary problem. So, um, there is that balance. Uh, we ran extra deficits during a booming economy, which was a mistake. And we had, you know, uh, inflation, the government did not get that balance right, uh, between, you know, 21 and 23.

26:25 Um, you know, eventually it seems like the supply side of things caught up to the demand side of things. Um, but you know, naturally what we should have been doing is cutting back on government spending, uh, during those times. Uh, and so we, so we have firepower for, for the next trough. Um, that's not what we've done. Um, but inevitably, yes, uh, we, it will be depressive in my opinion. Okay. Um, doesn't mean recession too. It could be a slowdown. So, you know, I think people think there's like a binary situation here, but we were growing at 5% GDP for a long time, which is well, be well above potential.

27:07 You know, it could just go down a half percent or 1% or something like that, stay there for a while. Sorry, Chris. Oh, that's a good point. Um, so one other thing to look at sometimes when thinking about the concern of whether there's a recession coming or not, is to look at manufacturing output. Um, is there, has there been any material developments with regard to that? I actually disagree. I don't think it's that important. So the reason why I don't think it's that important is because we are more of a services economy than a goods economy. Um, and it's not even really close. I sent the chart to you guys, uh, again, that, that showed the differences between personal consumption expenditures on services and personal consumption expenditures on, um, manufacturing, it's not even close.

27:57 So, uh, you know, if we have a blip in the manufacturing surveys, I, you know, again, it's important, but not that important. What I think, what I think is what I think people struggle with sometimes is, you know, everybody reads, uh, their economics textbooks and all of it's based on the past, right. Um, for, for, for good reason. You know, I, when I was in school, I learned about inventory cycles and how inventory cycles can cause the business cycle to, um, you know, be in flux and sometimes cause a recession based on the ideas you have too much inventory, you have to discount your inventory, uh, if you discount your inventory, your margins go down and you have to fire people, if you fire people, they can't spend as much, you have to discount some more, you can't buy a new inventory and this cycle kind of perpetuates itself until, you know, interest rates come down and the government spends, um, you know, out of a recession, since we're mostly a services economy, there's not really an inventory cycle anymore.

28:55 Um, so, you know, we don't really have that great of a manufacturing, um, cycle, uh, to, to create this inventory. Uh, basically if we want it, we can get it. Uh, and that's how it's been for the vast majority of the last 25 years, save for the pandemic. Uh, and so, you know, for that reason, I discounted a little bit. I mean, China has been a huge slowdown and we get a lot of our manufacturing power from there. And it has not stopped anybody from getting anything from, you know, or Amazon or any of those, uh, any of those retailers or Walmart, for example. So, um, yeah, I discount that a little bit. Again, it's both like, what's, what's important to concentrate on and what's not.

29:39 And, you know, you guys can disagree with me on that. It's, uh, you know, perfectly up for discussion as far as I I'm concerned. I just think something has to be dramatic enough to slow down the $20 trillion consumer. I guess that leaves us with the question of the day is tariffs. If enacted as suggested, you know, broad-based tariffs, 25% here and there. Is that enough to really slow the economy down? Uh, I think it's certainly enough to slow the economy down. Um, whether it's enough to bring down tariff, bring down, um, that is the question, right? Bring down the, the economy. I do, I do not think I'll say that.

30:22 Not static, right? It's, um, well, is there a retaliation? Is that correct? Yeah. Ultimately I think that's the bigger problem, right? Our, our imaginations can run wild with how big these tariffs are going to be. And I think that's the uncertainty, Jeff, you're relating to. Yeah. So, um, you know, I did some math on this subject, uh, and we just pull it up. While you're pulling that up, I'm just going to point out two other things that I think are, uh, things that we may want to just weave into our comments that are sometimes also things people think about when trying to evaluate, oh, is there a recession happening is what's happening with investor sentiment in terms of the stock market and, and secondly, with housing, right?

31:08 You know, uh, uh, what's happening with home prices and things of that sort. So in any case, if it would complete your comment, but we might want to tie those things into. Yeah. So I, uh, the, this is all subject to change of course. And none of these have actually been enacted. I don't believe. And, uh, we're waiting on April 2nd to get more numbers when it comes to, uh, Europe and whether or not these Canada and Mexico tariffs are going to keep up. But I have 45% on China, 25 % on Canada, 25% on Mexico. Um, and to me that the, that will increase taxes by about $470 billion on the economy. Now, if, if spending habits didn't change, right.

31:51 If everything was constant, right. Yeah. So that's about a one and a half percent tax. Uh, and I think that number in China is definitely in flux. So this is kind of a problem, right? We, a one and a half percent tax is significant, right? We have inflation of, uh, you know, two, let's just call it two and a half percent, um, or that's around where the trend is. If you increase it by one and a half percent, we're closer to four again. Right now that's assuming nothing changes. We don't have a slow of what I'm sorry. I didn't follow. If they go up 25%, that's a 25 % tax, isn't it? It is. So for example, we, uh, we import $413 billion worth of goods from Canada at a 25% tax, that would be 103 billion, uh, in taxes per year against, uh, an economy that is, uh, uh, let's call it, call it 30 trillion.

32:48 Um, you know, that when you add up all those, it ends up being one and a half percent increase the economy you're saying of the economy. So of all prices, I would expect prices to increase one and a half percent. If the, if the tariffs go in, as, as, as mentioned, if they stay for in perpetuity, um, those are, those are a lot of ifs to, to, to, um, point. Yeah. Now the question is like, okay, let's say that happens, right? Let's say that's our baseline. What do you, what do you think will happen to earnings? Well, I think earnings will go down to $259 and 50 cents, but I'm not going to get into the math on how I got there, but you know, that's my rough estimate, um, for 2025.

33:31 Now that the initial earnings estimate coming into the year was $278. So that's a pretty big slowdown, right? That's that I'd say that cuts the, uh, earnings growth by about half of, of what we expect in an economy, which isn't great, therefore maybe that justifies the notion that, Oh, uh, Mark stark market prices have come down some, you know, that kind of like, Oh, if we're going to have an effect on earnings. So if we had earnings growth go down by half in a vacuum, then absolutely like stock prices to come down. The beautiful thing is none of this happens in a vacuum, right? Um, if that were to happen, what we have seen is growth expectations have come down and the 10 year treasury has come down, um, in relation to that.

34:16 So, you know, when we had a 5 % 10 year treasury, it should be a higher discount on stocks than when we have a 4.3, 4.4% 10 year treasury, which is around what we have today. Um, and when you put those two things together, you know, the stock market probably corrected too much in my opinion. You know, the, what the stock market is saying is we're, we're handicapping things we don't know. So if we just have a kind of a benign April 2nd, when the Trump administration comes out and says, it's not going to be, you know, as bad as we said, the, these countries kind of worked with us, then I think you'd see the stock market react. I don't think we're going to have any benign days actually. Well, what I think what we've seen is we've had a combination of benign days and crazy days, and you know, that causes the relative volatility.

35:04 Right. But if, again, if we want to take a sober look and not think about it day to day, and you want to think about the longer term, is there an opportunity here that today's price is to take advantage of opportunities that being a longterm, you know, of course there's no guarantee. I mean, they, they, they could make the tariffs way worse than we expect, but based on what they've proposed and enacted so far, I think there could be a bit of an opportunity here, which is why, you know, I've, I've mentioned to our clients in that call we had a couple of weeks ago that all things equal today, I would want to take more risk. Um, the beautiful thing is, you know, April 2nd, we're not going to be making any changes for another couple of weeks. So we're going to be able to, um, you know, input that information into our analysis to, to make decisions on asset allocation.

35:47 That sounds like we've, we've kind of run the course. I think, uh, listen, if, if you've been enjoying this conversation, you, you need to be sharing it with others. This is the kind of stuff that, uh, people are worried about. And, uh, we tried to give you some substantive way to think about this and understand how it is that you can approach this topic as you think about your portfolio and investing. But along the way, if you need a little bit of helping hand, uh, don't hesitate to reach out to us. We're happy to be a resource to you and assist you in your, uh, portfolio management or financial planning. Hope we can be that. Thanks everybody. Until next time keeps driving for something more.

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