What Lies Ahead in the Next 100 Days?

John Moninger: Hello, and welcome to a special edition of SpringTalk, brought to you by Allspring Global Investments. I'm John Moninger, managing director and head of U.S. Distribution here at Allspring. Today, we're taking a closer look at the markets in the next 100 days and discussing key factors shaping global economies while looking ahead with insight and strategy. Joining me are two incredible experts from Allspring’s investment teams. First, we have Bryant VanCronkhite, senior portfolio manager and co-head of our Allspring Special Global Equity team. Alongside him is Noah Wise, our senior portfolio manager for the Plus Fixed Income team. Bryant, Noah, thanks for being here.

Noah Wise: Thanks for having us.

Bryant VanCronkhite: I'm excited to be here.

John: We have a lot to cover. We're going to get into it. As I mentioned, we're going to talk about tariffs. We're going to talk about deficit spending. We're going to talk about impacts on markets. And, most importantly, we want to talk about the impact on investors and what should folks be thinking about and, as I mentioned in my opening, focusing on the next 100 days. All right, Bryant, I'm going to start with you on deficit spending. Talk a little bit about how you see this evolving over the next 100 days.

Bryant: Yeah. The market has chewed through so much uncertainty—whether it's tariffs or the tax bill or just the economy in general. And the next thing that seems to be on the list is where do we go with the budget—with the fiscal plan—and one of the biggest potential risks out there is that we just lose control of the fiscal discipline, which puts upward pressure on rates, which puts downward pressure on all risk assets, including equities. And so, what I look at right now is an unsustainable situation. 6% or 7% deficit spending during non-war, non-recessionary time periods is really high deficit spending, and that's not going to be sustainable. So, we're trying to find ways to resolve that. But ultimately, who has the discipline and the will to do so is the question. We're beginning to see the bond market, which Noah will weigh in on in a minute on this, to start to push back a little bit. And the House—with the version of the bill they passed, reconciliation—isn't doing us a lot of favors here, but the Senate hawks, fiscal hawks are saying maybe that's too much. So, I see a situation where that is probably the biggest potential new risk out there.

John: Speaking of which, Noah, what are your thoughts on how the bond market is reacting? You've already hit it, I think, pretty well. What do you see going forward?

Noah: Absolutely. So, Bryant hit the nail on the head. We're looking at deficits that are 6% to 7% in a time of relative peace for the U.S. A non-recessionary time, incredibly unusual. And what we've seen so far in 2025 is even some of the deficit spending looking like it's ticking a little bit higher. So, the government is trying to figure out what to do with the Tax Cuts and Jobs Act from the first Trump administration. And as it's been working its way through Congress, we've been seeing the estimates actually start to increase. I think the market was hoping that we would start from there and then end up in a slightly better place. Instead, the adjustments that we've seen thus far have actually been looking like they're going to increase the deficit, even from where we were coming into this year. I think our best-case scenario is more of the same and more of the same means a few different things. We'll get into tariffs because it ties directly into this because it's a question of how do you finance these deficits, right? But there's risk to supply. We're seeing the curve steepen. And we think that makes sense because as far as the eye can see, we're going to see the government needing to borrow more and more. And when we talk about trade, the question is, how is that going to get funded?

John: So, why don’t we pivot to tariffs? Let's talk about that for a minute. Obviously, we're going in. We’re leaning out. There are fits and starts. We throw 50% out. Now, we're going to come back off that. Talk about where you see tariffs going—Bryant, I'll come back to you in a minute—and how do you see that impacting your decision-making as well?

Noah: Yeah. Similarly, you can look back over the last 80-plus years and get an idea of where we're going and say we haven't seen this type of thing in multiple generations. On the tariff front, you look at where we think the effective tariff rate is going to end up when this all shakes out. Probably mid-teens. Is it 12? Is it 15? Is it 18? We're not quite sure, but we think it's probably somewhere in the mid-teens after you get through all these negotiations. What does that mean? That means it's going to cost more to import goods. These are levels we haven't seen since the 1930s, maybe 1940s. Then, that starts to impact the question of how do you fund these deficits? Because a lot of the demand for U.S. assets and U.S. Treasuries in particular has come from foreign investors. Where have they gotten the capital? Well, we've imported goods. We've exported dollars. They've taken those dollars and they bought U.S. dollar assets, including U.S. Treasuries. So, if those deficits are starting to come down, there're going to be fewer dollars internationally to help support those deficits. So, it gets to some other interesting questions, but it creates some risk, particularly to the long end of the curve that we see in the Treasury market. But these are two sides of the same coin—the tariffs and the deficit question. They impact each other.

John: Bryant, we've seen the impact on the equity market has been pretty profound as well. A lot of volatility. Volatility spiked. How are you seeing the tariffs impacting equity markets and your relative value companies even today? How are you thinking about that?

Bryant: Yeah, let me start with I don't know. I don't know what tariffs are going to look like when this is all said and done. I have no idea. It's a hard starting point, so we've got to go to what we do know. What I do know is that 80%-plus of the companies in the U.S. marketplace did not guide to tariffs impacting their cost of goods sold. So, that's not in the numbers right now. So, if nothing changes and we stop the clock here and this is what we're going to have for tariffs, whether it’s mid-teens, that's got to hit the earnings numbers. And even if you can pass through tariff costs through pricing or you can adjust your cost structure, that will take time. So, the equity markets where they are today, given that we've bounced back—valuations up again and sentiment’s improving—they're not pricing in even what I think is now the status quo for tariffs. That's an issue. Now, on the other side of that, though, I think it's going to catalyze faster change, whether it's changing your supply chains faster, whether it's advancing AI implementation faster, companies are going to move quickly to adjust to this. So, I'm not worried about it as a long-term investor, but I do recognize that these issues are probably going to create more volatility, not less, over the next 100 days, which we're focused on. We can't lose sight of that. It's an issue. We don't know the end state, but I can tell you right now, markets are not pricing in a negative scenario at all.

John: Interesting. Yeah, it seems optimistic in many ways. Noah, you mentioned Treasuries. Let's spend a little bit on Treasuries. Where do you see the Treasury market going, and what is the impact there on all of this? You read a lot about that China has been a big buyer. Japan's been a big buyer. Obviously, a lot going on in those countries. What do you think happens, and how does it influence their future as well?

Noah: So, we do see tariff rates going higher. We don't know where they're going to end up, but we think they're going to ultimately be higher than they are today. We anticipate that will put downward pressure on imports and, again, I think ultimately will change the demand dynamics in the Treasury market. But the Treasury market does not operate in isolation, right? It is a global market. There are still global investors. And you do have to compare yields and the value in U.S. securities compared with other options globally. The reality is that there are not any other great alternatives. So, there are very good fundamental reasons to have all sorts of concern. When you look at sentiment surveys and you talk to investors, there is a lot of pessimism, a lot of negativity out there. And you also look at how much cash is in money market instruments or how people are allocated. There is some argument that investors are relatively conservatively positioned. But the overall level of interest rates is actually pretty reasonable. Real yields at this level are some of the highest that we've seen in the last couple of decades. So, investors are getting compensated in the fixed income market for these risks and investor sentiment is very, very negative. Those are two pretty powerful tailwinds, despite some of the negative fundamentals that we've talked about.

John: We've seen a weakening of the dollar. How does that influence that look ahead as well, right? So, the next 100 days, what do you think about currencies and, specifically, the strength of the dollar, and does that help us or hurt us going forward?

Noah: Yeah, I think this is one of the most fascinating aspects of the first half of this year. Bryant talked about how we've already had this round trip, right? In equities, we had the sell-off, but they came back in. In fixed income and credit, we had a sell-off and credit came back. Yields have kind of gone back and forth, but they're still in the middle of their range overall. What has not gone completely round trip is the dollar. And oftentimes, when you come through one of these events and you've had all of this different policy uncertainty and some of the changes in signals that we’re moving in a different direction, take a step back and see what has changed and what has not changed. And what has changed is the dollar. And we think it comes down to the reality that a lot of global investors are looking at this and saying we do not have the same level of certainty in terms of our economic relationship with the U.S. I think that ultimately means that we're seeing more investors—and this is true in Asia as well as in Europe—that are looking domestically and saying maybe we've been allocating a little bit too much to the U.S., right? The U.S. has been the place to generate returns. It's where the large successful companies have been. It’s where the large liquid fixed income markets have been. And I think there's the opportunity for foreign investors to kind of look at their overall allocations and tilt a little bit closer to home. And I think that's part of the reason why you're seeing the dollar has not bounced back like we've seen in some of these other markets.

John: So, Bryant, I want to pivot a little because we talked a lot about fiscal policy. We talked about the impact of a lot of what's going on around the world. We have the Fed (Federal Reserve), and what are the Fed's next moves? It seems like they have a bit of a quandary here, right? We have growth slowing down, it appears. I mean everything looks a little bit twisted from what we normally see. How does the Fed react now? What do they do?

Bryant: They can't do anything. They're stuck. They're in a box, right? I mean, you have two sides of their mandate. And it looks like the hard data on the full employment side isn't changing. We're not seeing unemployment skyrocket now. I think it could still go up from here, but today there's no reason to act on that side. Inflation looks controlled, but what I would worry about if I was the Fed would be expectations for inflation. And the survey data shows 5%-plus inflation rates are what consumers are expecting. That's a big number. You can't do anything as a Fed governor to spark that even higher because then it will be self-fulfilling in a way where consumers begin to price in that expectation, so they're stuck. Now, luckily for them, it's OK to be stuck right now. There's really very little evidence that a recession is in the next 100 days. They can be patient. What I think is interesting is that there's a non-zero chance that the next move is higher with rates. Everyone's looking lower. I'm thinking, look, we need to price in some probability that the next move is higher. In the event we do have full-on tariffs, in the event we do have inflation move higher, I think that carries the day more so than unemployment. If unemployment was going up but inflation is going higher, the Fed's got to focus on inflation, in my mind. So, non-zero chance of the next move being higher. More likely, we just wait and we see and we'll react accordingly. Because the Fed is always reactive. Very rarely are they proactive.

John: Yeah, very different view on the rates going higher perspective. Certainly, the market's not pricing that at all. And so, Noah, for you, do you have a different view from Bryant? How do you look at the Fed's reaction from here?

Noah: Yeah, so interest rates get a lot of attention. They're incredibly important. Treasury yields—a lot of times, the 10-year Treasuries—are used for a proxy for yields in general. But it's important for investors to understand and recognize there isn't an interest rate or a level of interest rates. There are a lot of different types of interest rates. And when we look at the market, we see a lot of this risk on the long end of the curve, right? Investors have to make a decision. Do I want to lock up capital for 10, 20, 30 years? Right now, if you look at historical relationships, they're getting compensated less for taking that risk than they normally do on average over the long run. At a time of elevated policy uncertainty, we think investors should be getting compensated more than they usually do. So, the Fed wants to reduce rates. I think they're in a box a little bit right now because inflation's above target. If anything over the next 100 days, it's going to be moving further away from target. So, they're going to be pretty constrained in what they can actually do. But when we look a little bit further—the 100 days after that 100 days—that's when we think things get really interesting in the back half of this year. The story, we think, is really going to focus a lot on the Fed. This is one of those unusual times where the Fed is actually not at the top of the headlines right now. They usually are. They aren't right now. And I think that's going to change because what we'll likely start to see is actually some of the growth impact of these policy changes starting to come into play. Growth expectations have come down about a percent and a half. Yes, inflation has moved up a little bit less than a percent, but growth has been the bigger factor. So, some rates could go up. Other rates could come down. But it's not uniform across the spectrum. We think that's where there's value in really diversifying your exposure across the curve rather than kind of taking one bet.

John: You set up a really interesting next part of the conversation I want to have that is really the impact on investments. And maybe, like you said, that next 100 days, how are you setting yourself up? Where do you see opportunities, and what should investors be thinking about as they kind of go through that process?

Noah: So, it’s always important for investors to recognize what's priced into the market. We've talked about valuation—some of the challenges in valuations—and what we've seen in credit is this round trip back to historically tight levels, really modest amounts of incremental income and yield that investors are getting for taking credit risk. There are opportunities. And then, we'd also agree globally, looking more broadly, there are select opportunities in emerging markets. There are opportunities in Europe and in European credit. I don't think you just want to diversify your interest rate exposure across the curve, but you want to diversify your exposure across sectors, but also globally as well. And that, we think, can lead to just a better portfolio for investors and one that is more resilient during these times of uncertainty and volatility.

John: Thank you. Bryant, so talk a little bit about how you see the equity markets again in the next 100 days, but maybe even beyond that as well. What are you thinking about, and how are you setting your teams up to navigate?

Bryant: There's a tremendously large number of paths to think about when it comes to equity markets. So, let's start with the very bottom. We talk about changes in growth rates like GDP (gross domestic product), changes in the costs that flow through your income statement like tariffs and interest rates. No one controls that. No company controls those things. So, when it comes to security selection, what we need to do during times of max uncertainty, like we have now in a macro world, is focus on balance sheets. Which companies have the balance sheet strength to see through that and invest through the cycle? So, a balance sheet mindset, I think, gives you the best protection and the best offensive tool to move forward. In the U.S., I think there are chances now to move within your category. So, think about sector rotations. As style factors go from beta and risk on to risk off, you're seeing sectors move. As policy changes, you're seeing sectors move. So, for example, right now, the health care sector has been under duress. The policy changes that are happening there are yet to come through and investors are being very shy. We think now we're getting very close to rotating capital into health care to take advantage of the uncertainty that's there, but it could be interesting in the future. We also see opportunity in pockets of industrials where the long tail of some of the bills that have been passed to the highways or in the tech space for the CHIPS Act that's all still flowing through in a big way. And that's going to give us a little bit of a buffer or ballast in the event the broader economy slows. So, we're looking for rotations right now in the event that Noah's right and the back half of this year gets exciting in a not-so-happy way and then we see growth slow. When it comes to the value-versus-growth conversation, you kind of want to go to growth. You want to go to the growth companies that have the most visible self-driven growth. So, the Mag 7 will look attractive in that situation. In the event that doesn't play out and you're more optimistic on the back half of this year, value is underappreciated today and value companies will benefit the most from economic tailwinds. So, one's view on the economy should tell you where you want to be growth versus value. And I could see it either way today. I prefer balance. Maybe stepping one step further out globally, the U.S. to me is pricing in some decently positive sentiment in many respects, looking through some of the risks we just talked about earlier. Outside the U.S., the international markets are a playground for stock selection right now. We are not in a synchronized world. Germany wants to spend more. France can't find the money to do it. The U.K. has interest rate and budget and inflation issues. Canada is dealing with tariff issues with the U.S. This is a playground for stock selection that active managers should be able to help navigate through. And then EM (emerging markets), which has been forgotten and unloved for so long, is beginning to look compelling again. Now they're tied to the global economy, no doubt about it. But there are unique individual drivers and there are some demographic opportunities there that matter.

John: What do you think can go wrong in that view? What do you worry about when you think about us? For both of you, when we think about the assessment of so much uncertainty, where does the risk lie and how are you managing those risks today?

Bryant: So, risk management is at every level of what we do as active managers. The top of that pyramid, though, is portfolio risk optimization. We use our Investment Analytics team here at Allspring, which is one of our biggest competitive advantages, to understand how all of our security selection on the bond side and the stock side works together to create a risk profile. We call that our tracking error. We call it our risk. And we want to understand how each piece of that creates risk from security selection, from style factors and sectors, from countries, from currency. And we want to squeeze that down to where we think we have the most insight and the biggest edge.

John: Yeah, that's great. Noah, for you, same thing on managing the risk of inside your portfolios. You're managing globally. You've got currency risk, rate risk, all sorts of risk facing your way. How are you overseeing and managing all of that in a thoughtful way?

Noah: So, I would echo Bryant's comments about the Investment Analytics group and the tools that are produced to help support that at the portfolio level. You want to be able to take those portfolios and look at them in as many different ways as you can to ensure that the exposures and the risks that you're taking are the intentional ones. When we think about risk management, it is embedded in every single part of our process or philosophy in how we think about investing. And the key is to avoid the unintentional exposure. It's not to avoid risk at all costs. Risks are part of investing. That's part of why you generate returns. You want to understand what risks you're taking and then you want to be sure that you're getting compensated for those.

John: Why don't we take it to a close here? Maybe one last final question is going to be maybe the two or three big takeaways investors should be thinking about over the next 100 days. Sum it up for me. Bryant, I'll start with you. What would be the two or three major things that would be most important for investors to consider?

Bryant: I would say that when we look at the data, the soft data was negative. The hard data is supposed to follow it and it didn't. And now, the soft data is inflecting positively again. And that soft data is survey data, sentiment data, and that to me tells us that the risk of a recession is getting lower. And so, those people who are very fearful of that in the next 100 days can probably temper that concern a little bit. But at the same time, we're not out of the woods. Noah talked about tariffs coming back through and talked about maybe upward pressure on interest rates. We still don't know if we're going to get a tax reconciliation bill or a debt ceiling increase. There are still things out there. But they're always out there. We just need to make sure we understand what those risks are. We build intelligent portfolios that protect us to a degree from those challenges and really focus on where you have a key competitive advantage, which is usually in security selection. So, those are the big takeaways. I don't think people should be scared right now. We have risk. But that's what happens. People get really scared and they make bad decisions. Wild markets like we've seen are the opportunity. People are making decisions based on a macro event that impacts the near-term income statement, which is our chance as long-term investors to get to the other side of that. Or they're emotionally reacting to something that ultimately is the wrong thing. That's not going to play out that way in the fundamentals. So, use the volatility. Use the emotional swings to continue to go down the right long-term path for you. Don't be fearful, just be controlled.

John: Really well said. I love the behavioral piece. I mean, we see it all the time. And the data will go back and show for decades that investors unfortunately make the wrong decisions at the wrong times. And these are those moments where you take advantage of it and not the other way. And I couldn't agree more with your sentiments. Noah, any final comments for you?

Noah: Just to highlight, I would agree that the short term, especially over the next 100 days, there has been a lot of negative sentiment, a lot of concerns. And as you work through kind of these walls of worry, there is an opportunity for investors to get engaged in the market. So, it's important to not be too negative. We know markets can perform quite well even in difficult times if you simply get an outcome that is not as bad as was previously feared. So, I think the next 100 days, you're more likely to see trade deals getting done. You're more likely to see a fiscal bill getting done. Some things that I think will make the markets a little bit more comfortable; again, the back half of this year, we talk about the Fed and the challenges and where they are and what this means for Fed policy. I think that is really going to be a big focus for the second half of the year. We have to start thinking about who's the next Fed governor going to be. So, this is not for the next 100 days, but in 6 months, that's going to be a big focus. What's the Fed doing, and then who is going to be leading the Fed by the middle of 2026?

John: So, we can have a whole other podcast on that one, I think. And I look at it timing-wise, I think the current administration has really got a limited window of time here, right? I mean, you have this window where if they want to be successful in driving positivity, you have to land this thing this year, right? Because you're going to be hitting midterms next year and you're already in a bad spot if you don't get a turn. So, to me, my optimism comes out of they have a limited time and any influence they can create over the next 100 days. 200 days is going to be critical to kind of hit the next mark that they're going to have to hit.

Bryant: And there's no desire from anyone involved to blow things up.

John: That's right.

Bryant: They have to act in a big way to get it done quickly.

John: Correct.

Bryant: But you can always pivot and you can always adjust.

John: And we've seen that.

Bryant: And we’re seeing that. So, again, there're definitely risks out there. But I think everyone's interests are aligned in growing the U.S. economy, growing equity markets, growing returns for investors. And so, I think you're right. I think we can look for pivots and we can hopefully see through all these potential risks.

John: Right. Opportunities abound.

Bryant: Yeah.

John: Bryant, Noah, thank you so much for taking the time and bringing your insights and thoughts on what's happening as we look ahead over the next 100 days.

Bryant: It was a pleasure.

Noah: Really enjoyed it.

John: To our audience, thank you for tuning in to this special edition of SpringTalk, brought to you by Allspring Global Investments. Don't forget to subscribe to our show for more expert insights on navigating today's complex financial landscapes. I'm John Moninger, and we'll catch you next time.