Ariel Investments Founder John Rogers Talks US Economy

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John Rodgers, Founder, chairman and co chief executive officer of Aerial Investments, joining us here at Bloomberg Investor.

Thank you so much.

We've got a lot going on.

We appreciate your patience.

I want to go back to something. How are you, first of all.

Doing okay dealing with all this potility craziness? Well? Is it crazy? John?

I love talking to folks like you. You guys have been investing for a long time. You've seen a lot of market cycles like there are you know, how do you kind of factor in this one and the stuff that feels like every morning we can wake up and there can either be something out of Washington that really impacts the trade, and then there are days it doesn't.

So how do you.

Kind of work all that into strategy?

Well, I think of the forty three years noise if you will, Yeah, I mean the forty three is of aeril.

How do you trade that?

Well, I think, on.

The one hand, you trade it is that we know that President Trump cares about the markets. He sees that as a scorecard. So the one positive thing you can pluck out is that eventually he figures out a way to adjust to get things back to a calm state eventually. But you just hope he doesn't go too far, you know, one more time, and stretch and do something that really he can't pull it back.

You know, I'm curious about your view on this that as it does not relate to markets. It sounded like you were saying that we've entered a new paradigm, at least with the decisions that this administration is making. I'm wondering how you're looking at that. We understand that what the President wants to achieve with tariffs, I would not say I understand what he wants to achieve Right now with Iran, we're still waiting to hear exactly what the

Well, what I worry about is that.

I ran to something that's extraordinarily painful for America or another part of the world, as they fight back and feel like they have to defend their honor, buildies do something that will be we'll all have a hard hard.

Time living with over the long run.

So we all saw what happened when the World Trade Center collapsed, and all the trauma and drama and extraordinary heartbreak from that situation, and you just hope that nothing like that happens again ever in the United States or in our friendly countries.

Got to say, I went right there after this happened, and that's what I thought about retaliation. Any of us who were here in New York during nine to eleven remember it like it was yesterday, and it does make me a little scared. And I'm not an alarmist, but it did make me think, Okay, what's the retaliation of all of this. We're going to set that aside.

I can we can shift back to markets, Carol, we can shift back to market.

I want to go back to something you said actually in January and I was doing some read in on this, and you said the US will likely slide into a small recession at the end of the year. Stock market will drop as average income consumers struggle with high living costs. And this was I think at the Executive's Club of Chicago's annual Outlook event, and you talked about the down maybe declining fifteen to twenty percent this year. But it and it also got into this dichotomy which I think

I still do. I've never seen anything quite like it. I know a lot of people have been talking about this, but we're You're right when people are still going and spending money on cruise ships or going to Las Vegas for experiences, doing things that are really the wealthy people can do, right, But the average American is really really struggling.

It's the so called K shaped economy. Is something that we talk about a lot, and we think about a lot. Are there policy proposals or are their policies that the US government could enact that would make the gap between the very wealthy and the poor, or that would bring back the middle class? I think is something that we talk about a lot too. Is it something that you think the free market can solve? How do we get out of this?

I think the free market will will solve it. You know, we America always goes to extremes and things ultimately get back to back to normal. Warren Buffett says, you know, our capuist democracy is the best system ever invented, and so we'll ultimately put the right pace people in place. Governmental shift and change and people will be able to get to a place that I think will bring back a better life for folks from Middle America. And I

So you're optimistic.

I'm optimistic that we will create the wealth gap in our country will start to diminish over time.

So when I look at I'm going to talk a little bit about the investment environment. We saw broadening out certainly in terms of where investors were placing some bets here. Where do you see some mispricing within the market where you think that that presents some opportunities for investors.

I think right now the financial services companies are what I think have gotten may be extremely cheap. They've gotten, you know, very very worrisome about what's happening with private credit, as we all know what you guys are reporting on and talking about all the time. But I think it's over done. I saw David rubens Sein speak last week.

Even though they have a small.

Exposure to private credit, there's also been this huge concern around private equity that people won't come back, that you know, it's gonna be and harder to raise funds. I think its interest rates get lower. Companies that have the kind of brand that Carlisle has will be able to do extremely extremely well. And then secondarily, a company like Lizard, you know, one of the world's best investment banking firms. Peter Orzag has done a great job and getting that

It's really kind of refreshing. I haven't heard you say AI. Where does that fit in?

Is that it's not a value playing right.

Where how does that factor in?

Like?

Because I do think the AI trade has evolved over the last two three years in terms of where investors want to place their bets and now we're talking a lot more about inference and agentic AI and kind of where that's going. But I think we still don't know a lot.

We still don't and we're working really really hard on it. At Ariel. We're using some of the top academic minds at the University of Chicago to help guide us as we think through which industries will be the most disrupted, which ones will not be disrupted, and where the maybe the fear is overdone. So like for us, one of our favorite stocks is Jones Lange Lassalle JLLL. You know, real estate broker, which is still an important business. It's

So much of the concentration literally and when it comes to coverage of the market has been makea caap tech names and I'm wondering if it's possible in your view, I think I know what you're gonna say, but if it's possible in your view to outperform make a cap tech or the S and P five hundred by excluding those from a portfolio, by finding those value names.

Well, I think so as we. You know, I've been very public. I think the large cap growth stocks have gotten way, way, way too expensive. Everyone's fallen in love with that trade for quite a long time. But I've seen this happen time and time again in my forty three years in Ariel, but also saw it throughout history. You know, the nifty fifties, you know during the seventy the nifty fifty stocks, you saw it during what.

Happened in the Go go twenties.

People just fall in love with the sector and think it's just going to go up and up forever. And the small stocks neglected, they get misunderstood, they're not as well followed, and so opportunities it gets created because everyone's falling in love with this hot, shiny, shiny.

Dollar out there, and you think that's happening right now, I really really do. Up until most recently.

I mean, I've seen now that the Palanteers of the world and others have finally started to have some of their come up, and it reminds me of what happened during the turn of the century when the Internet bubble finally burst. So you start to see some signs that the world is coming back to rationality and people are realizing some opportunities in their smaller names.

When it comes to the investment environment, are you anticipating that investors need to be thinking about it's going to be a higher rate environment going forward, and so you've got to think about that and what it means in terms of evaluations.

Well, I think I'm more optimistic about rates. I think they they they'll go lower, they they go lower, I really do. I think that the new FED chairman is clearly someone who's going to want to make the president happy. He's going to do everything he can to ben the will of the federal reserved.

Doesn't that make you nervous though, if it's not fundamentally.

Based long term, it makes me nervous, Okay, But I do think of the short to intermediate term. If it keep rates lower, it's always good. Low rates are always positive for the markets, And of course there's some some things will come back to haunt us because of it. Yeah, but I think that's more longer term and the short term. I think this will be something that will be a help the market's day where it needs to be and be sort of a tailwind for the markets.

It doesn't sound like when we you know, one of the narratives it felt like we were coming into was I mean, think about Biden before President Biden, before President Trump won the election, like the US was the best place to invest. When President Trump came in a year ago, again, like the US market was the place to invest, and then we were just thinking about the US being uninvestable like that became a narrative, and.

To a certain extent, even though the US markets did well last year, there was a lot of underperformance compared to global markets for twenty twenty five.

Is that is that something you think a lot about, or that we are seeing investors start to diversify away from the US market or that's impossible because of how deep and how liquid the US market is.

I think it's really really hard to divers file away from the US markets in any meaningful way. We still have the deepest economic system, the most successful economic system,

I think that America is the best. So this is just a blip, I think.

So it's just it's because it's interesting. I think we try to figure out the lasting impact of the last year or so. Well.

One thing that we're trying to figure out is the impact that integration or a lack thereof, we'll have on the economy.

Here.

If we think about in recent years Americans not having enough babies, and one of the ways that has been supplemented and we've been able to avoid turning into a Japan for example, is because we have had people come to the United States and increase economic activity that.

We wouldn't have had had we not had that.

And I'm wondering how we have to adjust our expectations for a world that is increasingly I was gonna say isolationists, but we're not necessarily saying that right now, but one that looks inward toward itself more than looking outwards.

And you only have thirty seconds.

I'm sorry, that was that was my bag.

Well, I just think in this business, the ability to see the future is the most important thing, and so if you look out two to three or four years, we will be past this crisis, this isolationism, the challenges that we face. One way or another, you're going to have a new president, you're going to have a new government, and I think America will still be in a strong, strong place.

I kind of love this, John, Thank you so much, really appreciate it. John Rogers of course founder, chairman and Cosey you have aerial investments