Companies will not continue to eat the cost of tariffs, says Centerview Partners' Blair Effron

Economic Outlook & Monetary Policy - Recent data strengthens the case for future interest rate cuts, contingent on controlled inflation and potential labor market weakening [1][2] - The market widely anticipates interest rate cuts [2] - Concerns arise that President Trump's rationale for rate cuts, aiming to lower the cost of US debt, could compromise the Fed's independence [3][4] Current Economic State - The economy is currently in a "pretty good" state [7] - Initial GDP estimates for the year were 1.5%-2% growth [7] - S&P 500 companies experienced 6.5% revenue growth, with 80% exceeding estimates for the quarter [8] - Companies are increasing capital expenditure at a robust pace of 5% compared to last year [8] - The consumer remains strong, supported by positive consumer confidence indices [8][9] - AI is positively impacting company earnings [9] Future Economic Challenges & Opportunities - Tariffs pose a significant headwind, potentially impacting company margins as they may not continue to absorb increased costs [10][11] - Companies initially avoided immediate price increases, learning from the pandemic experience where aggressive pricing led to volume declines [12][13] - AI is already contributing positively to GDP, estimated at 0.25%-0.5% [14] - M&A activity is currently on the upswing and expected to continue in the next two quarters, potentially reaching $3.3 trillion this year [14][15] - Regulatory environment remains closer to the Biden administration [17] Banking & Media Sectors - The regulatory environment may improve for certain industries, particularly financial institutions, potentially leading to banking deals [17][18][19] - The banking sector is fragmented, with a compelling reason to responsibly have another 1 or 2 big banks [18] - Media industry consolidation will continue due to the impact of non-traditional players [19][20]