you@foxbusiness.com. i'll be back next week right here on "the wall street journal at large." have a safe, safe, healthy and enjoyable memorial day weekend. ♪ ♪ >> barron's roundtable sponsored by: ♪ ♪ jack: welcome to barron's round thame where we get behind the headlines and prepare you for the week ahead. i'm jack otter. the three most important things investors should be thinking about right now. the markets are optimistic about development of a covid-19 vaccine and efforts to reopen the economy, but there are still risks ahead. small businesses are responsible for about half of employment in gross domestic product. the outlook for their revival coming out of the crisis, and the latest round of escalated tensions between the u.s. and china. what are the implications for the market? on the virtual roundtable, ben

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 wasn't 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. it's 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. we're 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 it's a big thing. and even where there have been some hiccups along the way,

we're not seeing economies have to close up. cities and states aren't shutting things down again, and the president has said that he doesn't 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%, we're really just up 1% in may, and it's been quite range-bound for most of the month. i think that reflects a lot of risk that are still out there. jack: yeah. as investors it's 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. there's 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 they're 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 market's 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 they're 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 we're heading into second, heading into the sec quarter, we're going to be seeing second quarter numbers. at the start of first quarter earnings season, second quarter earnings were supposed to drop

25%. now they're expected to drop 43%. investors are looking through that right now. i think they expect earnings growth to get back to 4-6%, and for margins to hold steady, rates remain low and dividend yields for the s&p 500 to stay around 2%, but that's a lot of stuff that has to go right. if any of it goes wrong, we could be in trouble. and that doesn't mention other things like tensions with china. jack: yeah, that could be a big deal. al, so remember pre-covid 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 kong's stock market, it's down 5.5% on friday. because china's central government wants to pass new security laws that will crimp personal freedoms on the island.

the u.s. won't like that. that was thursday. wednesday president trump tweet out about -- tweeted out about china's 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 there's a lot to digest. and the market basically just said, you know what? i got other things to worry about, i'm not even going to worry about the mounting trade tensions. but you've 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, we're 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, that's the cover story of barron's 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 two-thirds of the jobs we've lost have been in the small business community. that's 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 we're still going to see it's 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.

i am totally blind. and non-24 can throw my days and nights out of sync, keeping me from the things i love to do. talk to your doctor, and call 844-214-2424.

me too. me too. and if you're a small business, we're with you. standing by you every step of the way. bye bye.

♪ 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 china's wrath. joining me now, qualcomm's 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 world's 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. we're in a majority of the phones. but as you said, we've been expanding our business, you can find us in your car, in your wi-fi router, and as mobile technology grows beyond phones, we have been growing with it. jack: with 5g there's 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.? >> it's 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. it's going the take time, you know? we're happy to see that the carriers are accelerating their plans. but, you know, it's being designed so you have, you know, fiber-like speeds in your phone, unlimited data, basically the ability for you to deal with congestion, and you have new services especially some that we're experimenting with right now as we're 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. >> it's one of the largest, i think, expansion opportunities for qualcomm, and it's 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. we're 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, it's really, you know, underscoring the importance of technology. almost like we don't have to explain anymore some of the use cases for 5g. people just get it. jack: that is true, although these days i'm on wi-fi, but someday i'll be back on that train wishing i had faster service, and maybe you'll provide it. how else has the coronavirus crisis affected things for your business? >> look, it's, it's kind of a

privilege and we're very fortunate to be in telecom these days. i think telecom, as i said, is keeping everyone connected, and we're 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. we'll 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, we're 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 we're kind of -- we're

very fortunate to be in telecom and, you know, we're 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, we're 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, we'll see even more demand for qualcomm product. we're 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 when you think of a bank, you think of people in a place. but when you have the chase mobile app, your bank can be virtually any place. so, when you get a check...

you can deposit it from here. and you can see your transactions and check your balance from here. you can detect suspicious activity on your account from here. and you can pay your friends back from here. so when someone asks you, "where's your bank?" you can tell them: here's my bank. or here's my bank. or, here's my bank. because if you download and use the chase mobile app, your bank is virtually any place. so visit chase.com/mobile. my age-related macular degenso today i made a plan with my doctor, which includes preservision... because he said a multi- vitamin alone may not be enough. and it's my vision, my morning walk, my sunday drive, my grandson's 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. it's how i see my life. because it's my vision... preservision. staying connected your way you're just a tap away from personalized support on xfinity.com. get faster internet speeds with a click.

order xfi pods to your home in a snap. or change your xfinity services with just a touch. all in one place. you're only seconds away from all of that on xfinity.com. faster than a call. easy as a tap. now that's simple, easy, awesome. that's it. i'm calling kohler about their walk-in bath. [ sigh ] not gonna happen. my name is ken. how may i help you? hi, i'm calling about kohler's walk-in bath. excellent! happy to help. huh? hold one moment please... [ finger snaps ] hmm. the kohler walk-in bath features an extra-wide opening and a low step-in at three inches, which is 25 to 60% lower than some leading competitors. the bath fills and drains quickly, while the heated seat soothes your back, neck and shoulders. kohler is an expert in bathing, so you can count on a deep soaking experience. are you seeing this? the kohler walk-in bath comes with fully adjustable hydrotherapy jets

and our exclusive bubblemassage. everything is installed in as little as a day by a kohler-certified installer. and it's made by kohler- america's leading plumbing brand. we need this bath. yes. yes you do. a kohler walk-in bath provides independence with peace of mind. ♪ ♪

jack: we have a bit of a scoop for barron's roundtable viewers, boston-based investment manager gmo told me the firm was drastically reducing stock holdings. ben inker joins the round table. you and your firm's founder warned of the tech bubble, the housing bubble, and you told people to load up on stocks on the fist day of the ten-year 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. we've now seen an extraordinary

rally from there. stocks around the world are up somewhere between 25-a 35% depending -- 25 35% -- 25-35%, and we think they're priced to be discounting only the most optimistic outcomes from here. there's a tremendous amount of uncertainty, and we're 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 we're holding today, what we're trying to do is hold some of the stocks in those beaten-down industries but companies that are strong enough that even if it lasted a good deal of time, they'll be the survivors. >> so this is al root.

you know, it's a really interesting call, and there's 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 there's always some risk of a really, really bad economic environment hurting the value stocks. but what i'd 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 we'd expect from them over the next 5-10 years. >> emerging markets have benefited from globalization, and they always seem to be part of a risk-on trade. so now we're in a period where it seems investors are risk

averse. why are you a fan of emerging markets? >> well, for the same reason we're 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 it's 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 doesn't seem like it would be a particular surprise. jack: up next, round table members give (vo) our communities need help like never before

and wells fargo employees are assisting millions of customers across america through fee waivers and payment deferrals, helping people stay in their homes through mortgage payment relief efforts and donating $175 million dollars to help hundreds of local organizations provide food and other critical needs... when you need us, wells fargo is here to help. where will you go first? will it be familiar streets? or perhaps unknown roads. wherever you may go lexus will welcome you back with exceptional offers. find a lexus for every road at lexus.com. get zero percent financing and make no payments for up to 90 days on all 2020 lexus models. experience amazing at your lexus dealer. on all 2020 lexus models. 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 nation's largest gig-speed 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. we've always believed in the power of working together. that's why, when every connection counts... you can count on us. from anyone else. so why accept it from your allergy pills? flonase relieves your worst symptoms which most pills don't. get all-in-one allergy relief for 24 hours, with flonase. it's my own thing that i can do for me.

since i don't have time to read, i mean i might as well listen. if i want to catch up on the news, or history, or learn what's going on in the world, i can download a book and listen to it. i listen to spanish lessons sometimes to and from work. yea, it makes me want to be better. audible reintroduced this whole world to me. it changes your perspective. it makes you a different person. see what listening to audible can do for you.

♪ ♪ jack: in barron's tradition, we want to leave each viewer with an actionable idea from our panellests. al, let's start with you. >> well, we're going into the long weekend, it's memorial day which is a good opportunity to reflect on the men and women who served the country. but in a strange transition, for barron's 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 20-30% year to date, and that's really because of aerospace. but some of these probably deserve a better outcome, two that baer rob's really likes, raytheon technologies and lockheed martin. jack: and, carlton, a different aspect of memorial today, a lot

of picnics. >> yeah, so, you know, we're going into the summer season, and we'll 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, it's pulled back and looking interesting. jack: if they can get people to pay that much for a cup, it's pretty impressive. [laughter] >> that too. jack: ben? >> i'm looking at campbell's. this is a stock that carlton picked back at the end of february, and it's 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 barron's.com and don't forget to follow us on twitter @barron's online. that's all for us. wear your masks, see you knecht wear your masks, see you knecht dr. youssef: blessed memorial day as we think of those who gave their all for the freedom that we now enjoy. may we never forget what they've done for this country. ♪ ♪ dr. youssef: we have been experiencing a nightmare scenario that is being accelerated.