Levisohn, carlton english and al root. So, ben, the market started off the week fairly happy about some comments by Jerome Powell, about this possibly great news from no no moderna on a vaccine to, and it managed to stay resilient through the week. Yeah, it really was. The news on some fronts wasnt great. Economic data was bad, new tension with china. But then you look at this other stuff, you have the vaccine from moderna, the data was from a very small subset, but it does look like vaccine is working. At least in this small group of people. Its going to take a long time, but it sends the message that the science out there to at some point get a vaccine, get more treatment, get the coronavirus under control. Were also seeing reopenings of economies across the country. New york is supposed to open in june now, connecticut is going to do some reopening this weekend with restaurants, and its a big thing. And even where there have been some hiccups along the way, were not seeing economies have to close up. Cities and states arent shutting things down again, and the president has said that he doesnt want to shut things down again even if there is a second wave. Finally, you had Jerome Powell on 60 minutes, and it was a very optimistic tone from him, different than last week. And that, i think, gave the market a boost too. But even with this gain and the market up well more than 2 , were really just up 1 in may, and its been quite rangebound for most of the month. I think that reflects a lot of risk that are still out there. Jack yeah. As investors its very important not to be 100 on optimistic. So what could go wrong at this point . I think, first of all, we have to worry about the economic risks. Theres a lot of hope that the economy will start to pick up very quickly. But then you look at Something Like the base stocks that had a very good week, but theyre still down 40 this year. And you just have to wonder what kind of message is that saying . Jack ben, i want to unpack that bank issue a little bit. Is it concern about Interest Rates . Is it bankruptcies . Is it some other signal that the stock markets sending us with lousy bank numbers . Well, i think when you look at the finishing omc minutes that were released fomc, it pretty much tells you what you need to know. Banks are well capitalized, but their customers are really struggling. Then you throw in the low Interest Rates, and theyre just not going anywhere. At the same time, you have this kind of economic risk reflected in the bank stocks, you also have earnings risk. First quarter earnings are basically over now. Companies like apple and netflix really delivered some decent numbers, but now were heading into second, heading into the sec quarter, were going to be seeing Second Quarter numbers. At the start of First Quarter earnings season, Second Quarter earnings were supposed to drop 25 . Now theyre expected to drop 43 . Investors are looking through that right now. I think they expect Earnings Growth to get back to 46 , and for margins to hold steady, rates remain low and dividend yields for the s p 500 to stay around 2 , but thats a lot of stuff that has to go right. If any of it goes wrong, we could be in trouble. And that doesnt mention other things like tensions with china. Jack yeah, that could be a big deal. Al, so remember precovid when we used to worry about something called the trade war . Is that back on the table now . Right. I think ben is exactly right. You know, some of these things that are popping up are being ignored probably for good reason, right . Because covid sort of trumps everything. But to your point, a lot happened in china this week, and one of it was necessarily good. If you look at hong kongs stock market, its down 5. 5 on friday. Because chinas Central Government wants to pass new security laws that will crimp personal freedoms on the island. The u. S. Wont like that. That was thursday. Wednesday President Trump tweet out about tweeted out about chinas handling of the coronavirus pandemic. Before that the u. S. Senate passed a bill that could delist some chinese securities because of concerns over accounting and foreign ownership. And so theres a lot to digest. And the market basically just said, you know what . I got other things to worry about, im not even going to worry about the mounting trade tensions. But youve got to remember the trade war, you know, back in 2018ing was supposed to be what was going to send the u. S. Economy into a recession. The market sol off very steeply sold off very steeply. A big part of that was fear over the trade war, and as the u. S. Election approach, you know, were going to have to deal with that sort of volatility again. Jack i want to talk about another part of the economy that has less to do with problems overseas but is a big deal. Small business, carlton, thats the cover story of barrons this weekend, what that means for the economy. Tell us what you know. Yeah. So you have to realize that, you know, the economic recovery really depends on the rebound in Small Business. Half of u. S. Employment, half of gdp and about 40 of total Business Revenue comes from Small Businesses. Now, these companies, of course, have been under pressure. Roughly twothirds of the jobs weve lost have been in the Small Business community. Thats about 60 billion in lost income each month. So in order to get our economy back on track, we need to get these Companies Back open, you know, back doing what they do best. Jack and importantly, their employees are the customers of everyone else, so they keep the country going. I do want to ask you, we saw a bounce in a lot of smaller retailers this week, l brands and some others. Is that good news or maybe just what they call a dead cat bounce on wall street . Yeah, i think we have to be careful with of that bounce that we saw. I think were still going to see its going to be the big box companies, targets, wall a marts, etc. , that are going to have the momentum to go forward walmarts. Whereas the l brands, things like that, this might be a time to take any profits you can. Jack thanks very much, carlton. Coming up, more on the rising tensions with china. My agerelated Macular Degeneration could lead to vision loss. So today i made a plan with my doctor, which includes preservision. Because he said a multi vitamin alone may not be enough. And its my vision, my morning walk, my sunday drive, my grandsons beautiful face. Only preservision areds2 contains the exact nutrient formula recommended by the National Eye Institute to help reduce the risk of moderate to advanced amd progression. Its how i see my life. Because its my vision. Preservision. 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Are staying at home, we know times are hard and were here for you. At carvana, we understand that, for some, getting a car just cant wait. To help, were giving our customers up to 90 days to make their first payment. Shop online from the comfort of your couch, and get your car with touchless delivery to keep you safe. And for even Greater Peace of mind, all carvana cars come with a sevenday return policy. So, if you need to keep moving, were here for you. At carvana the safer way to buy a car. Show me what youre made of. So we showed it our people, sourcing and distributing more fresh food than anyone. Our drivers helping grocers restock their shelves. How were helping restaurants open popup markets. And encouraging all americans to take out to give back. Adversity came to town. So we looked it in the eye. And it wont be us. That blinks first. Jack the u. S. Has increased restrictions on the Chinese Telecom giant what a way, and now u. S. Tech Companies May take the bankrupt of chinas wrath. Joining me now, qualcomms president christian know amono. I want to talk about china, but can you just give us a quick overview of qualcomm . Your license designs, obviously, have a huge share of the cell phone market, but they also show up in places that might surprise viewers. Yes. Oh, happy to be here. Qualcomm is the worlds leading Wireless Telecommunications innovator company. We are, you know, in every single smart phone to our Technology Starting with when we invented 3g, 4g, now 5g, one of the key creators of the technology, but we also do processers for the phones. Were in a majority of the phones. But as you said, weve been expanding our business, you can find us in your car, in your wifi router, and as mobile Technology Grows beyond phones, we have been growing with it. Jack with 5g theres been a lot of talk about it. I wonder if you can just explain how viewers will see a difference in their lives and how quickly. When will that happen in the u. S. . Its happening. It is being in all develop economies, japan, korea, europe, in china, coverage is being built. So some of us starting to get service. Its going the take time, you know . Were happy to see that the carriers are accelerating their plans. But, you know, its being designed so you have, you know, fiberlike speeds in your phone, unlimited data, basically the ability for you to deal with congestion, and you have new services especially some that were experimenting with right now as were trying to work remotely are. So i think 5g will be the future of the internet and not only for phones, but for everything around us. Jack i think the jump from 4g to 5g will be a lot bigger than it was from 3g to 4g at least in the user experience. Tells us also what it means for qualcomm. Its one of the largest, i think, expansion opportunities for qualcomm, and its going to be, you know, a Significant Growth in revenue and earnings. Just on the phone alone, we see probably about 1. 5 multiplier in overall semiconductor content and value. But also as 5g goes to other industries, any kind of changes, you know, the workplace, change manufacturing, change, you know, the power grid, it creates a lot of opportunity for us actually to grow beyond phones into other markets. Were very excited about that. And, you know, trying to look at the silver lining, this current environment that people are trying to stay, you know, connected and working, you know, remotely, its really, you know, underscoring the importance of technology. Almost like we dont have to explain anymore some of the use cases for 5g. People just get it. Jack that is true, although these days im on wifi, but someday ill be back on that train wishing i had faster service, and maybe youll provide it. How else has the Coronavirus Crisis affected things for your business . Look, its, its kind of a privilege and were very fortunate to be in telecom these days. I think telecom, as i said, is keeping everyone connected, and were lucky that we kind of ate our own dog food, if i can say that way. We connected many of our labs and our test equipment, our locations, so we add had more than 90 of our employee population working remotely. But, you know, productivity is up. Well be able to, you know, measure all the kpis, people are collaborating, have access to labs, have access to, you know, critical devices. Both our manufacturing and advanced Research Labs will be able to keep them working. And in some cases, you know, were actually happy to report in case of ip, you know, intellectual property disclosures and software development, we actually increased productivity. And in the middle of this whole thing, we actually hired 500 people so were kind of were very fortunate to be in telecom and, you know, were just keeping moving forward. Jack i do want to ask you about china, so the trump move against huawei could have some repercussions. Reports is say they might even do something about qualcomm. How is sentiment in china about your company, and any thoughts on how this could be deescalated . No. Look, yeah, i you know, were in the mobile, in a mobile industry. And the mobile industry is a global industry. Actually, we have a global standard. And we have been supporting customers around the world. We actually are in a very good position because many of our customers in china want our technology, and it provides, you know, Growth Opportunity i think not only for them, but for the United States in the export of semiconductors. And we feel kind of fortunate to be in a position that our Business Model may be a stabilizing force between the two countries and, hopefully, you know, bring people to the table to find a win win solution. But, you know, with all of this i will say that our business in china is strong, and as china deploys 5g, well see even more demand for qualcomm product. Were not that exposed to huawei, so the impact is not that great versus other companies. Jack sometimes commerce the can actually can actually smooth geopolitics. Cristiano amon, thanks very much. Next thursday, 11 a. M. , accept your video questions to invested in you foxbusiness. Com. Coming up, has the market rebounded too i just love hitting the open road and telling people that Liberty Mutual customizes your insurance, so you only pay for what you need [squawks] only pay for what you need. Liberty. Liberty. Liberty. Liberty. Of all the places youre looking forward to where will you go first . Wherever you may go lexus will welcome you back with exceptional offers on exceptional vehicles. Get zero percent financing and make no payments for up to 90 days on all 2020 lexus models. Experience amazing at your lexus dealer. For up to 90 days on all 2020 lexus models. I am totally blind. And non24 can throw my days and nights out of sync, keeping me from the things i love to do. Talk to your doctor, and call 8442142424. There are times when our need to connect really matters. To keep customers and employees in the know. To keep business moving. Comcast business is prepared for times like these. Powered by the nations largest gigspeed network. To help give you the speed, reliability, and security you need. Tools to manage your business from any device, anywhere. And a team of experts here for you 24 7. Weve always believed in the power of working together. Thats why, when every connection counts. You can count on us. Jack we have a bit of a scoop for barrons roundtable viewers, bostonbased investment manager gmo told me the firm was drastically reducing stock holdings. Ben inker joins the round table. You and your firms founder warned of the tech bubble, the housing bubble, and you told people to load up on stocks on the fist day of the tenyear bull market that started in 2009. This past week you reduced the stock allocation of your go anywhere fund to just 25 . Why is that . Well, we did that because we saw a real change from where the markets were in march. In march there was a tremendous amount of uncertainty about the Global Economy. The chance of a really bad economic outcome was much higher than normal. But stocks were priced fairly in most places around the world with, cheap in some places. And we thought they were priced where it made sense to take that risk. Weve now seen an extraordinary rally from there. Stocks around the world are up somewhere between 25a 35 depending 25 35 2535 , and we think theyre priced to be discounting only the most optimistic outcomes from here. Theres a tremendous amount of uncertainty, and were just not getting paid enough to want to take on that uncentifor our clients. Uncertainty for our climates. We prefer the stocks that have gotten hit hardest here. The Global Economy will eventually recover as will hotels and airlines and industrials and energy companies. So in the u. S. Stocks that were holding today, what were trying to do is hold some of the stocks in those beatendown industries but companies that are Strong Enough that even if it lasted a good deal of time, theyll be the survivors. So this is al root. You know, its a really interesting call, and theres almost a bit of a paradox because market breadth has been terrible and value has underperformed, and the high flyers are the one that are generating all these gains. You know, so if you see a little more risk in the market, should we be selling those high flyers and rotating into value, or will the divergence persist while things stay difficult . I wish i knew the answer. I will say this the spread between value stocks and growth stocks, the discount that value stocks are trading at is some of the highest we have ever seen in history. Outside of the u. S. It probably is the highest we have ever seen it in history, and in the u. S. It was only beaten by a few months around the peak of the bubble in 2000. So value stocks are priced for much worse outcomes. And normally that gets you much more excited or at least the us much more excited about owning them. One thing about value stocks is they are more vulnerable in a true economic disaster. In an event like the Great Depression, companies go bankrupt, and it is the Value Companies that go bankrupt more often than the growth companies. So theres always some risk of a really, really bad economic environment hurting the value stocks. But what id say today is at these discounts it would take something approaching the severity of the Great Depression to take a big chunk out of the outperformance that wed expect from them over the next 510 years. Emerging markets have benefited from globalization, and they always seem to be part of a riskon trade. So now were in a period where it seems investors are risk averse. Why are you a fan of emerging markets . Well, for the same reason were a fan of value stocks these days. They are priced for a really bad outcome. You can put together a decently high quality portfolio of emerging market stocks trading at about seven times trailing earnings, trading at about book value or so, maybe five to six times cash flow and a trailing dividend yield of over six. What i can say about a portfolio like this is its already pricing in a lot offed bad news. Of bad news. And in a world where the potential for significant bad news is real, we get a lot of comfort about buying stocks for whom that bad news doesnt seem like it would be a particular surprise. Jack up next, round table members give to everyone navigating these uncertain times. Whether youre caring for your family at home or those at work, principal is by your side. Were working hard to answer your questions. 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Gasx jack in barrons tradition, we want to leave each viewer with an actionable idea from our panellests. Al, lets start with you. Well, were going into the long weekend, its memorial day which is a Good Opportunity to reflect on the men and women who served the country. But in a strange transition, for barrons that means thinking about defense stocks. Defense should be moving. Military budgets are up, chinese tensions are rising, that tends to be a good backdrop ultimate for defense. However, the average defense stock is down about 2030 year to date, and thats really because of aerospace. But some of these probably deserve a better outcome, two that baer robs really likes, Raytheon Technologies and lockheed martin. Jack and, carlton, a different aspect of memorial today, a lot of picnics. Yeah, so, you know, were going into the summer season, and well have a story in the magazine this weekend about opportunities there. Yeuk looking at yeti coolers, thermos, you know, Outdoor Activities are going to be the only form of entertainment, so yeti had a bit of a runup, its pulled back and looking interesting. Jack if they can get people to pay that much for a cup, its pretty impressive. [laughter] that too. Jack ben . Im looking at campbells. This is a stock that carlton picked back at the end of february, and its done really well. It dropped 10 , i think this is where people are are turning a little bit away from the stay at home trade, but earn,ings are going to be on june 3rd. I think people are going to want to own this, especially if it keeps falling. Jack stock trading the less than ten times its earnings. Even ben inker might be able to love. Ben, karlton, al, great ideas. To read m check out barrons. Com and dont forget to follow us on twitter barrons online. Thats all for us. Wear your masks, see you knecht babe ruth lashing out 60 home runs, an alltime record are, the yankees finish first. They look capable of continuing their recordbreaking pace indefinitely. [cheers and applause] ing. Babe is arguably the greatest baseball player thats ever lived. But the journey to get there was filled with tough times and uncertainty. For babe, it all start on