Sunday, Feb 09

👋 Good morning! Here's what our Executive Editor, Brian Sozzi, is thinking about.    

The C-suite is usually the one holding all the cards.

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At conferences, these are the folks with the best outfits, education, contacts, and watches. They then head out of said exclusive conference on a corporate private jet or helicopter. At home, their enormous pay packages afford them vast freedoms.

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So I am finding it more fascinating than ever to interact with the C-suite in various venues as they collectively try to live — and profit — in the second Trump era.

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One month into the year and hundreds of conversations logged, I can tell you this usually ultra-powerful club feels powerless. It's a position these people aren't used to being in. These are the shot callers. The moneymakers.

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Not in the second Trump era, where it looks like the president is going to go for broke to achieve his most hawkish policy objectives.

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Sure, a CEO can dispatch an underling to hire a lobbyist to talk with some lower-level Trump administration member (and they have). And yes, some have a quasi-direct line to the president.

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But by and large, this is a group beginning to get really frustrated by the new administration's ramping levels of policy chaos. They were promised tax cuts, regulatory rollbacks, and everything else under the sun that could jack up stock prices and profits (and bonuses).

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And nowhere is this frustration materializing more than on the topic of the year: tariffs. (Behind that: AI and DEI).

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"I mean, we have to be extremely agile and have multiple scenarios," PepsiCo chair and CEO Ramon Laguarta told me this week after earnings. "I think we have become better at scenario planning. We have become better at having plan Bs and plan Cs in every market, and at a corporate level, we have to have very strong government relations."

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Laguarta was answering my question about how his teams are managing through the current policy volatility. He said the company wouldn't be immune to tariffs.

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Two weeks ago at the World Economic Forum, Laguarta told me he was "hopeful" about the new administration.

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Ideally, Laguarta and his teams would be spending time concocting a new drink that pummels rival Coca-Cola rather than cooking up dozens of scenarios tied to Trump policies.

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PepsiCo's full-year guidance was more conservative than normal because of, you guessed it, policy uncertainty.

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Ditto General Motors this earnings season.

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"We've done a lot of scenario planning and we know the levers that we can pull to minimize any impact [of tariffs]," GM chair and CEO Mary Barra told me last week.

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GM produces highly profitable pickup trucks in Mexico and relies on plants there to make EVs such as the Chevy Blazer and Cadillac Optiq. It has five large assembly plants in Canada and Mexico. Ford manufactures 12% of its products in the two countries.

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Ford CEO Jim Farley said on his earnings call this week tariffs would hammer profits.

The number of S&P 500 firms mentioning tariffs on their earnings calls has exceeded 220 and hit an all-time high for the fourth quarter, according to data from Fundstrat. This eclipsed the peak seen during the previous trade war triggered by Trump in 2018.

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S&P 500 companies' earnings estimates for the next 12 months have begun to trend lower as analysts bake in policy uncertainty, data from Truist showed.

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"Regarding tariffs on earnings calls: One is to be ready. This is going to be top of mind, competing with the pickup in AI deployment questions," Truist co-chief investment officer Keith Lerner told me.

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Chipotle's new CFO Adam Rymer stopped short of calling the past week chaotic, but his description of navigating tariff drama makes it seem like he has been busier than the norm.

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It appeared last weekend that avocados from Mexico would be hit with a tariff. Then those tariffs were delayed. Note: delayed, not halted completely.

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"There are definitely a lot of ups and downs, especially preparing for our earnings. And luckily we have an unbelievable finance team and supply chain team that we had all the scenarios mapped out," Rymer told me on Yahoo Finance's Morning Brief.

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Rymer said Chipotle won't raise prices immediately should tariffs be fully enacted.

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I read all of this as execs are being made toothless by the Trump White House.

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The lone exec I've talked to who's seemingly navigating Trump 2.0 well? Disney CFO Hugh Johnston.

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I asked Johnston how Trump policy chaos would impact Shanghai Disney — he said it won't. I asked if China could make it tougher for Disney to get approval for movies — he said it won't.

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"Well obviously, we're in a rapidly evolving macroeconomic environment. But frankly, in so many ways at Walt Disney Company, our job is to bring joy to people. Our job is to bring families together. Our job is to create smiles. And as a result of that we tend to be a little bit immune to these types of things," Johnston said.

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Unfortunately for most C-suites, they aren't in the smile-creating business. They are in the moneymaking business. And that can't be done effectively if policy chaos continues, especially on tariffs.