Fed is split almost 50/50 on rate cuts, says Ariel Investments' Charlie Bobrinskoy

Tariffs and Market Risk - The market is largely discounting the risk of higher tariffs, viewing President's threats as saber rattling [2][3] - There is a risk that tariffs, with an effective rate of 13-14%, will start to impact second quarter earnings, as they began to kick in during May [4] - Mega cap tech companies are relatively invulnerable to tariffs [12] Interest Rates and Fed Policy - The Fed is split on interest rate policy, with approximately 50% favoring rate cuts due to concerns about unemployment and 50% worried about the inflationary effects of tariffs [6] - Chicago Fed chairman Goulsby is considered dovish and signals potential rate cuts [5] Yield Curve and Banking Sector - A steepening yield curve is generally considered positive for the overall economy and is beneficial for banks, as they borrow short and lend long [8] - The banking sector is fundamentally benefiting from the current yield curve [9] - Mega cap banks like JP Morgan are trading at high valuations (250% of book value), but regional banks may still offer attractive opportunities [10] Tech Sector - Tech names are showing strong positive indications pre-earnings, with approximately 60% of positive pre-announcements coming from the tech sector, compared to about 14% for industrials [13] - Mega cap tech companies still have room to grow, driven by long-term growth pathways, despite recent pullbacks for profit taking [12]