This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:
I know you are feeling fabulous going into the weekend.
The warm summer weather is starting to take hold.
There is a new UK trade deal, though 10% tariffs will remain in place on most goods from our British friends.
Various Trump administration figures are doing the media rounds to talk up a potential China trade deal soon.
Though similar to the UK transaction, tariffs will likely still be in effect. Trump floated a rate of 80%, down from 145%, on social media.
And your portfolio is looking much better compared to the week after “Liberation Day.” You also have hope the good vibes will continue — am I right?
Against this backdrop, I want to highlight two things about investing I was reminded of at the Milken conference this past week.
Let them be a sanity check on the bullishness you are feeling at the moment, which to me is a little too much given the uncertain environment and the facts corporate America is bringing to the table this earnings season.
The first comes from billionaire hedge fund manager Bill Ackman of Pershing Square fame.
Ackman offered this up (video above) when I asked him about tariffs impacting the businesses he owns a piece of, such as Nike (NKE) and Chipotle (CMG): “So we care about the value of a business. The value of a business is the present value of the future cash flows. What’s going on now certainly could be disruptive in the short term. I don’t think it’s likely to have permanent effects.”
I think you can read this from Ackman in a few different ways.
Most of you will likely view it favorably, as it implies future cash flows of companies will be just fine even if tariffs stay in place. I, however, believe Ackman is signaling investors may be too optimistic in the short term, given how disruptive to profits and cash flows tariffs could be.
Read more: What Trump’s tariffs mean for the economy and your wallet
Keep in mind, we are getting zero indication that tariffs will be completely removed on countries, just that they may be lowered. That means more unplanned costs for a business to contend with.
The next investing reminder comes from Nuveen chief investment officer Saira Malik, who oversees $1 trillion at the giant asset manager:
“I think confusion is probably a word to describe it [the investing backdrop],” Malik said. “Investors want clarity here, and that would be helpful. You can do calculations if you know where the tariffs are going to end up. So, as an example, our calculations show that if tariffs were at about 10% for the rest of the world, it would hit GDP by 1.5%. You just skirt a recession there.”
