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Hello and welcome to Truist’s wealth,

 

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Economic and Market Insights

Quarterly livecast.

 

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Thank you for joining us today.

 

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I'm Oscarlyn Elder, co-chief

investment officer for Truist Wealth.

 

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My team is responsible for selecting

and analyzing the investment strategies

 

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that your Truist Advisor uses

in creating your portfolio.

 

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Before we begin, our hearts go out to

 

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all of those impacted

by the horrific flooding in Texas.

 

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The Truist Foundation is supporting

relief and recovery efforts.

 

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Joining me is Keith Lerner,

 

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co chief investment officer and chief

market strategist.

 

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Keith and his team got Truist

 

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Advisors and clients

through all types of market environments.

 

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They provide timely investment advice

with the objective

 

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of helping our clients

achieve their long term wealth goals.

 

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His work is highlighted

regularly in financial press,

 

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and you'll often see him on CNBC,

Bloomberg TV and Yahoo Finance.

 

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Joining the discussion

today is Mike Skordeles head of U.S.

 

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economics.

 

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He's responsible for analyzing U.S.

 

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and global economies

as well as financial markets.

 

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Chip Hughey, managing director of fixed

income also joins us today.

 

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Chip's responsible

for our analysis of fixed income markets

 

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and leads our fixed income guidance.

 

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Both Mike and Chip

 

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are seasoned investment strategists

and they appear frequently in the media.

 

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Also joining us today

 

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is Mike Frost, senior vice president,

 

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wealth strategist with Truist Wealth

Advice and Planning Group.

 

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Mike is joining us to discuss

the tax changes that may be important

 

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for wealth clients

from the one big, beautiful bill act.

 

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Truist and our advisors,

this is just a disclaimer,

 

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Do not provide specific tax advice,

and we recommend consulting your tax

 

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and or legal advisor prior

to making a tax or legal decision.

 

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Welcome to the livecast, Mike.

 

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Thank you Oscarlyn.

 

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Let's turn to the markets and the economy.

 

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It's been a fast moving year.

 

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Tariffs,

deficits and geopolitical tensions

 

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have all contributed

to ongoing investor concern.

 

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Yet despite all of the noise,

many of you may be surprised to learn

 

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that the S&P 500 is up over

 

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7% year to date on a total return basis.

 

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So even after falling nearly 19%

from February highs

 

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to early April lows,

we have a positive return on the year.

 

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Meanwhile, the MSCI All Country World

Index has gained more than 10%,

 

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with both international developed

and emerging markets outperforming U.S.

 

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markets.

 

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Bond markets have also been on a ride.

 

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The ten year Treasury

yield peaked at 4.8% in January,

 

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dropped to around 4% in April

 

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and now sits near 4.5%.

 

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Through it all, the U.S.

 

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economy and corporate earnings

have shown remarkable resilience.

 

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As always, we have a full agenda today,

and we'll focus on key takeaways

 

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to help you navigate

the current environment with confidence.

 

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If you want to go more in depth

on a specific topic,

 

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we encourage you to connect

with your advisor for a conversation

 

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and to also request

the full market navigator.

 

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So with that, Keith, are 2025 outlook

 

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was entitled A bull in a China Shop.

 

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So how how have things gone

relative to our expectations a year to-date?

 

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So we'll first Oscarlyn, terrific

to be back with you and the team again.

 

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I mean, what a year we've seen so far.

 

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And I think that title was very apt.

 

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And we certainly saw some things break.

 

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But the reality is

that bull kept charging.

 

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And as you mentioned,

if you were off the grid and try

 

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to reconcile this carousel of concerns,

tariffs, inflation, geopolitical risk,

 

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it would probably be hard

to reconcile the returns with that.

 

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But I also think what happened.

 

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There was so much focus on this new thing

which is tariffs.

 

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You know one of the T’s,

that during that time,

 

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the dominant theme of this bull market up

until that point had been technology.

 

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The other T, and AI that that pushed aside

 

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at the end of the last quarter

we saw that AI thing came back in vogue.

 

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And people are becoming a little bit

more accustomed to the tariffs as well.

 

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So, you know, businesses are,

you know, adjusting.

 

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And we've also seen corporate resilience

continue, especially on the earnings side,

 

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which we've seen over and over again

for the last couple of years.

 

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So it really was a first half of the Ts.

 

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We've got tariffs.

 

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We've got taxes and we've got technology.

 

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We've got 3 Ts The 3 Ts

 

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dominated the first half as we

look at the rest of the year.

 

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What's the big picture market outlook ?

 

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I think that at least two

 

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Ts are going to still stay in vogue

and Tariffs and Technology.

 

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But the big picture, in our view, up

front, using our weight of the evidence

 

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approach, is that we still want to stick

with the primary trend, which is up.

 

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As we move into the second half.

 

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So we still think we'll see further gains,

but we also think there'll be some more

 

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broken glass and setbacks along the way.

 

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But again,

the primary trend is somewhat higher.

 

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I do think as after

this move up, we've had

 

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we're likely to see a bit of a choppier

market into the summer months.

 

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Why don't you walk us through the factors

that are really driving that outlook?

 

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So we've been talking about this a lot.

 

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The weight of the evidence

 

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and just to help our clients

kind of bucket how we think about markets.

 

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The weight of the evidence approach

really looks at four different components.

 

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The first one is a historical lens.

 

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The second component is the economy.

 

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Third is fundamentals.

 

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And then lastly is the the market signal.

 

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So we put all that together

to come with a more informed view as well.

 

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So let's start

with the historical analysis.

 

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One thing is I meet with clients, talk

with some of the media is, hey,

 

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this market has come so far so fast

 

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and so almost a bit concerning.

 

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And that is true.

 

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Maybe we are a bit

stretched on a short term basis.

 

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But I would also say zoom out a bit.

 

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Right.

And this is what this chart is showing.

 

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The S&P 500.

 

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The big picture is for the last

seven months

 

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we've been really moving sideways,

notwithstanding that one big overshoot

 

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to the downside in April and more recently

we just broke to the upside of that.

 

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Just for context wise,

since the day after the election,

 

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the S&P is up about 5%.

 

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The other point I would bring up

is going for that historical lens.

 

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We can test and say, okay, the market's

moved up more than 20% in two months.

 

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As a starting point,

what does that mean for markets.

 

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Because I think sometimes people say,

you know,

 

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they have an automatic assumption

when we test the data.

 

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And this is what we're looking at right

now, a table that shows we've

 

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only seen this type

of kind of V-shaped move.

 

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Ten times since the 1950s.

 

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So it doesn't happen very often.

 

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The good news from a starting point

 

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is when we test this out a year later,

that's what that last column looks at.

 

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The S&P has had additional gains

all ten times.

 

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Now of course that's not guaranteed.

 

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But as a starting point, it tells us,

 

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you know,

this is not necessarily a negative.

 

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In fact, it tends to be a positive signal.

 

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Now the average gain

after that has been about 24%.

 

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We think that's too high

based on our starting points today.

 

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Some of the uncertainty

that still lingers out there.

 

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We think gains will be much more modest

relative to that historical average.

 

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So you've gone into the historical view,

and I think this is really important

 

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because we've gotten a lot of questions

 

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from clients around...There's

been such a sharp rebound.

 

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What does that mean?

 

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And so you're starting with historically

this is what

 

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that type of movement

has meant for the market.

 

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Later down the road.

 

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Exactly. And again,

I would focus more on the one year

 

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because of a short term basis.

 

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I would expect that to be

a little bit of a pause

 

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and let things kind of catch up

as far as the fundamental side.

 

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The second factor,

from an economic perspective,

 

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evaluate that force at a high level.

 

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At a high level, Mike, I’m

 

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not going to take too much of your thunder

right off the bat?

 

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But the way we think about the economy

 

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from an investment

standpoint is with our process,

 

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you tend to want to be more on offense

early into an economic cycle

 

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and more defensively as recession

risk rise.

 

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Right now, we're basically somewhere

in the middle that our baseline view

 

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that Mike will discuss

is more of a muddle through economy.

 

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The consumer, you know, cooling

but not collapsing.

 

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Again,

Mike, will talk more about that as well.

 

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So somewhere more neutral

in our overall work today.

 

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And let's move to the third factor.

 

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So from a fundamental valuation

perspective what are you seeing?

 

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We're seeing tension.

 

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And you're going to hear this

somewhat a bit.

 

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So Another T by the way Another key

tension I guess I didn't include that.

 

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So the 4 Ts is now 4 Ts So on

 

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one side valuations are rich

by almost any historical metric.

 

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And partly that is because technology

is such a bigger part

 

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of the overall stock market

than it had been historically.

 

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So valuations are rich.

 

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That means expectations

are somewhat higher now after the rebound.

 

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The good news is on the chart

on the right hand

 

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side shows forward

earnings estimates for the overall market.

 

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And after kind of moving down

during that March April uncertainty period

 

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around the tariffs,

we've seen them come back to new highs.

 

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So again

maybe that kind of nets out a bit.

 

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But I do think it's a positive that we're

seeing earnings continue to move higher.

 

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Yeah absolutely.

 

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So Keith

when we look at those four factors,

 

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you know, overall or those three factors,

let's talk about the fourth factor.

 

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Let's talk about the market

signal element.

 

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So it's important that we think about

the market signals in a couple of ways.

 

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But one is

what is that primary market trend?

 

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Right now the primary market trend,

especially after that breakout in our view

 

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that is still is still up.

 

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So it deserves that benefit of the doubt.

 

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Sentiment we look at

is kind of a contrarian indicator.

 

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You know what's baked in.

 

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And I would say

expectations have reset higher

 

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so that that that bar from positive

surprises also somewhat higher.

 

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But going back to the overall trend.

 

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More than 80% of global

markets are in uptrend.

 

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So again on a net basis I would say that's

somewhat you know, positive.

 

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And if we take all this together

you know the historical the economy

 

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fundamentals, the market I would say that

leaves us slightly positive.

 

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It's not something that we want to be

max bullishness or max

 

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you know, negative or bearish on.

 

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But on a it all comes back to

I said before, the weight of the evidence

 

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suggests the underlying trend is somewhat

still positive.

 

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Expect

some more broken glass along the way

 

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and we'll look for some opportunities

if that happens.

 

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And certainly that weight of the evidence

that you've talked about, that balance,

 

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if you will, that the tug of war,

 

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the tension is also reflected

in our tactical guidance.

 

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And we'll talk about that

in in a few minutes.

 

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Right now I'm gonna arc though, over Mike,

 

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to you to talk about the economy.

 

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There's a lot going on

from an economic perspective.

 

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Even today, there's a lot of discussion

about tariffs,

 

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inflation, geopolitics, payrolls,

you name it.

 

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Right?

 

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It's it's

all in the potpourri of the moment,

 

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if you will,

and a number of crosscurrents.

 

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So with that,

why don't you share with the folks

 

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who are online today

who are watching this live cast.

 

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What is our base case economic outlook.

 

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And what are the factors

that have led you to that outlook?

 

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Yeah.

 

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So unlike Keith,

I don't have all my things lined up

 

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to all have Ts, but I do have one T,

which is muddle through.

 

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So that's the only T I got.

 

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Nonetheless, that's been the ongoing theme

that we developed

 

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midway through the first half.

 

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Coming into the year,

we expected about 2.5% growth.

 

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We were expecting a much stronger year,

especially with animal spirits

 

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and a lot of things that were discussed.

 

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Unfortunately, with the tariffs

and the uncertainty, along with the,

 

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uncertainty about tax policy,

as well as where rates work.

 

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We've seen that essentially cut in half.

 

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So we're still expecting about 1.3

but 3% growth year over year.

 

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But that is still this muddle

through environment,

 

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unfortunately, from a big picture.

 

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Additionally, we're starting to see

and we saw that

 

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yesterday with some of the numbers

that we got on the inflation side,

 

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is that there are,

some of the tariff, implications.

 

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And those price increases

that are happened

 

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that are coming through

into the inflation number.

 

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So they're creeping in.

 

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We think that's going to continue

as we move through the summer.

 

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That unfortunately

puts the Federal Reserve in a box.

 

00;12;47;18 - 00;12;49;11

And I know

we're going to talk about the fed.

 

00;12;49;11 - 00;12;51;05

And there's been even some news today.

 

00;12;51;05 - 00;12;52;18

But again big picture.

 

00;12;52;18 - 00;12;55;20

We're still in this muddle

through environment as far as the economy.

 

00;12;55;22 - 00;12;58;12

Yeah. So muddle through remains. Yes.

 

00;12;58;12 - 00;13;02;09

In essence, the pause that we were talking

about kind of in April,

 

00;13;02;21 - 00;13;06;19

we're kind of seeing that come through

in some ways in this in the growth

 

00;13;07;07 - 00;13;08;11

growth profile.

 

00;13;08;11 - 00;13;09;19

This muddle through-ness Yeah.

 

00;13;09;19 - 00;13;12;29

Although I would say much like Keith's

point of like if you were off the grid

 

00;13;12;29 - 00;13;15;21

and you didn't know

and you looked at some of the data,

 

00;13;15;21 - 00;13;19;28

especially things like freight

and railroads and other things where they

 

00;13;19;28 - 00;13;22;03

they're actually moving

some of these goods.

 

00;13;22;03 - 00;13;25;20

We had this massive tariff

run front running that happened

 

00;13;25;20 - 00;13;27;04

in the first part of the year.

 

00;13;27;04 - 00;13;29;22

And we've seen that pause

that you're alluding to that,

 

00;13;29;22 - 00;13;32;15

but talked about in a lot

of the different commentary

 

00;13;32;15 - 00;13;35;14

and this air pocket

that we've seen in demand,

 

00;13;35;14 - 00;13;38;15

because it's in the case of autos, people

 

00;13;38;15 - 00;13;41;20

ran in March to buy autos.

 

00;13;41;20 - 00;13;44;10

We had a massive spike up in sales.

 

00;13;44;10 - 00;13;45;00

We've been down

 

00;13;45;00 - 00;13;48;17

three months since then, and we're hitting

that other side of that air pocket.

 

00;13;48;22 - 00;13;50;27

We think it's going to pick back up

as we move forward,

 

00;13;50;27 - 00;13;55;07

but again, a lot of the lumpy data

that's happening, you know,

 

00;13;55;07 - 00;13;58;07

I think it's a lot more noise

for people to sift through in that,

 

00;13;58;20 - 00;14;01;06

you know, carousel of concerns

that Keith talked about. Right.

 

00;14;01;06 - 00;14;04;11

So for right now, Muddle

Through continues to dominate.

 

00;14;04;20 - 00;14;07;28

That continues to be the base

economic case, if you will.

 

00;14;08;23 - 00;14;13;04

Let's turn to talk about one of the Ts,

the tax the tax bill if you will.

 

00;14;13;04 - 00;14;14;13

It's now passed.

 

00;14;14;13 - 00;14;17;12

And a number of our clients are asking

what what's

 

00;14;17;12 - 00;14;21;14

the impact of that bill's

passage for economic growth.

 

00;14;21;20 - 00;14;21;27

Yeah.

 

00;14;21;27 - 00;14;25;22

So the good news is we've gotten

some clarity on a lot of the tax policy.

 

00;14;25;22 - 00;14;27;03

That's great.

 

00;14;27;03 - 00;14;30;03

And I think going forward

that's a a bit of a tailwind.

 

00;14;30;16 - 00;14;33;23

But as people plan,

they now understand where things,

 

00;14;33;24 - 00;14;37;01

especially individuals

but also businesses.

 

00;14;37;01 - 00;14;41;02

And I would pull out a couple pieces, 

not the least of which is farmers

 

00;14;41;15 - 00;14;46;07

and being able to under the new tax

code, write off crop insurance

 

00;14;46;07 - 00;14;48;02

and some of that sort of stuff

 

00;14;48;02 - 00;14;51;06

that they weren't able to do before,

that's going to be a big benefit.

 

00;14;51;06 - 00;14;54;18

But on the whole big picture,

which is what your question was.

 

00;14;54;24 - 00;14;58;05

Big picture, Yeah Unfortunately,

there's not a whole lot of additive

 

00;14;58;05 - 00;15;02;12

that happens within the

the tax bill, especially in the near term.

 

00;15;03;04 - 00;15;05;16

Unfortunately, most of what was passed

 

00;15;05;16 - 00;15;08;16

was an extension of the 2017 tax cuts.

 

00;15;08;16 - 00;15;11;27

And had it not been passed,

it would have been a big drop off

 

00;15;12;05 - 00;15;14;18

next year in 2026.

 

00;15;14;18 - 00;15;18;06

Unfortunately, for 2025,

keeping what you already had

 

00;15;18;06 - 00;15;22;04

as far as tax cuts for most people

doesn't add a whole lot of growth.

 

00;15;22;05 - 00;15;26;00

That said, there are definitely winners

and losers within the tax bill and I would

 

00;15;26;00 - 00;15;30;07

point out some others, including, 

tipped employees as a for instance.

 

00;15;30;22 - 00;15;33;08

But again, that's a narrow slice.

 

00;15;33;08 - 00;15;36;08

It's about 2.6% of total workers.

 

00;15;36;15 - 00;15;38;03

That's about 4 million people.

 

00;15;38;03 - 00;15;41;03

For those 4 million people,

it's definitely meaningful.

 

00;15;41;15 - 00;15;45;03

Unfortunately, 4

million workers out of 160 million

 

00;15;45;06 - 00;15;48;10

and the total workforce

just not enough to move the needle.

 

00;15;48;10 - 00;15;50;21

So again, there's incremental,

 

00;15;51;21 - 00;15;53;06

winners and losers.

 

00;15;53;06 - 00;15;55;25

And overall, getting that clarity is good.

 

00;15;55;25 - 00;15;59;17

But from a how much is it add to growth,

especially in the near term?

 

00;15;59;17 - 00;16;00;10

Not much.

 

00;16;00;10 - 00;16;05;10

I will say as a final putting a bow on the

tax discussion from economic standpoint,

 

00;16;05;23 - 00;16;09;15

it is a positive for next year

and we're bumping up our number.

 

00;16;09;15 - 00;16;11;21

It's going to look a lot closer to 2%.

 

00;16;11;21 - 00;16;14;06

Not where we were coming into the year.

 

00;16;14;06 - 00;16;17;06

And and a little bit below

what the prior trend was.

 

00;16;17;10 - 00;16;21;10

But if we're expecting 1.3

this year, 2% is definitely

 

00;16;21;10 - 00;16;24;05

a better backdrop for stocks.

And the economy generally.

 

00;16;24;05 - 00;16;29;29

Okay, Mike, let's move from that area

from taxes over the tariffs.

 

00;16;30;04 - 00;16;32;28

So we're going to hit yet another T right.

 

00;16;32;28 - 00;16;36;11

The other T tariffs

have really dominated the news cycle.

 

00;16;36;11 - 00;16;39;22

And look even this even this week

even this morning again

 

00;16;39;23 - 00;16;43;18

there was talk about pharmaceutical

tariffs and chips tariffs

 

00;16;43;18 - 00;16;47;01

and frankly that it looks like

it could be a year from now.

 

00;16;47;01 - 00;16;49;14

We could still be talking about tariffs.

 

00;16;49;14 - 00;16;54;02

Folks are wanting to understand

how are we assessing the expected

 

00;16;54;02 - 00;17;00;08

economic impact in this tariff

focused, world that we're in right now?

 

00;17;00;11 - 00;17;03;11

This T is not our friend economically.

 

00;17;03;15 - 00;17;06;03

And the difficulty

and we have a chart up there

 

00;17;06;03 - 00;17;10;09

showing how much it's moved around,

unfortunately, in the near term.

 

00;17;10;27 - 00;17;11;26

And I alluded to that

 

00;17;11;26 - 00;17;15;05

in the big picture discussion about what

the overall growth is going to be.

 

00;17;15;24 - 00;17;17;10

This is ongoing uncertainty.

 

00;17;17;10 - 00;17;21;15

Unfortunately for many businesses, this is

something that is a drag on growth.

 

00;17;21;15 - 00;17;25;04

So the benefits that you might have gotten

incrementally

 

00;17;25;11 - 00;17;29;06

from the tax bill are offset

and probably more than offset

 

00;17;29;06 - 00;17;32;17

in the near-term

from what's going on in the tariff front.

 

00;17;32;17 - 00;17;35;17

So it's more noise than news

for most people.

 

00;17;35;17 - 00;17;37;19

That's the that's the bad news.

 

00;17;37;19 - 00;17;41;00

The good news is that it does sound like

there's been some movement

 

00;17;41;00 - 00;17;43;15

and that there's some changes coming.

 

00;17;43;15 - 00;17;46;05

Indonesia was one of the deals.

 

00;17;46;05 - 00;17;49;04

Certainly

the UK has, offered another deal.

 

00;17;49;04 - 00;17;51;24

The EU sounds like it's close.

 

00;17;51;24 - 00;17;54;07

Europe is a large trading partner.

 

00;17;54;07 - 00;17;56;08

Canada and Mexico, unfortunately

 

00;17;57;13 - 00;17;58;19

much more uncertainty.

 

00;17;58;19 - 00;18;03;02

So there's a lot of clouds

hanging over the economy from a,

 

00;18;03;13 - 00;18;07;00

you know, again,

planning perspective for businesses.

 

00;18;07;12 - 00;18;10;08

And unfortunately,

we're getting so far late into the year

 

00;18;10;08 - 00;18;14;26

that if you're a retailer as a

for instance, and you want to buy goods

 

00;18;14;26 - 00;18;19;05

to have for the holiday season,

those already should be on the water.

 

00;18;19;08 - 00;18;22;14

So as those things are hitting our shores

and hitting our ports,

 

00;18;22;19 - 00;18;24;15

they're going to get those higher tariffs.

 

00;18;24;15 - 00;18;27;25

And if they get lowered later,

you don't get to come back and say, hey,

 

00;18;28;04 - 00;18;29;19

but the the tariff,

 

00;18;29;19 - 00;18;32;21

there's a rebate or what have you,

especially if something's already sold.

 

00;18;33;13 - 00;18;36;29

So that that makes it really difficult

for a from a planning perspective.

 

00;18;36;29 - 00;18;40;26

But businesses, you know, big and small

need to navigate through this.

 

00;18;40;26 - 00;18;44;04

And I will say, larger businesses,

 

00;18;44;13 - 00;18;46;24

they have a whole lot more resources

and consultants

 

00;18;46;24 - 00;18;49;24

and other people that they can talk to,

and they can get creative.

 

00;18;49;28 - 00;18;51;17

I'll take one that's in our backyard.

 

00;18;51;17 - 00;18;54;16

So we're based in Atlanta,

at least our group.

 

00;18;54;16 - 00;18;59;06

And, Delta is there, and they've legally

this is a legal thing.

 

00;18;59;06 - 00;19;00;17

They're not skirting the law,

 

00;19;00;17 - 00;19;04;08

but they are sidestepping the tariffs

by taking possession

 

00;19;04;27 - 00;19;09;13

of, airplanes in Europe

and then taking the engines off

 

00;19;09;22 - 00;19;12;22

and putting them on their own cargo

carriers and,

 

00;19;13;04 - 00;19;15;15

flying them to the US to use

for in other cases.

 

00;19;15;15 - 00;19;17;26

Again,

this is legal , it’s what’s being told.

 

00;19;17;26 - 00;19;18;01

But they’re being flexible,

and they’re being smart

 

00;19;18;01 - 00;19;22;16

But the point being, they're flexible

and they're sidestep in the tariffs.

 

00;19;22;20 - 00;19;25;20

And that's an example of big companies

that are able to do that.

 

00;19;25;23 - 00;19;29;24

Small cab companies mom and pop, main

Street company, they don't get that cycle.

 

00;19;29;28 - 00;19;31;13

They don't get that benefit of the doubt.

 

00;19;31;13 - 00;19;34;28

And they don't have their own cargo planes

that they can throw things on.

 

00;19;34;28 - 00;19;36;23

And, oh, I'll ship it within my, you know,

 

00;19;38;01 - 00;19;40;12

Oscarlyn, One

thing, just to piggyback on Mike's point,

 

00;19;40;12 - 00;19;41;11

when you look at the stock market,

 

00;19;41;11 - 00;19;45;06

I talked about new all time

highs, small caps, mid-caps.

 

00;19;45;06 - 00;19;47;22

They're not at all time highs.

And they've been lagging.

 

00;19;47;22 - 00;19;49;26

And it's partly the reason Mike mentioned.

 

00;19;49;26 - 00;19;53;04

And that's also until we start to see

maybe more of an acceleration

 

00;19;53;04 - 00;19;54;05

which could be a positive.

 

00;19;54;05 - 00;19;57;08

As you mentioned next year we're still

sticking with the large cap side.

 

00;19;57;09 - 00;19;58;03

Yeah. Yeah.

 

00;19;58;03 - 00;20;01;03

And you know

just put a final wrapper on it as look

 

00;20;02;01 - 00;20;06;12

the it looks like I think

from Keith's perspective and the you know,

 

00;20;06;28 - 00;20;10;01

what's going on in

markets is certainly underline

 

00;20;10;01 - 00;20;13;15

and highlight the fact that the economy

and the markets are different

 

00;20;13;15 - 00;20;14;28

and there's different timing.

 

00;20;14;28 - 00;20;18;22

It takes a whole lot longer

for things to get priced in economically.

 

00;20;18;22 - 00;20;21;11

That's not necessarily

the case for markets,

 

00;20;22;10 - 00;20;25;16

but it does look

like tariffs are going to be higher right.

 

00;20;25;18 - 00;20;28;18

You know they're going to be multiples

of what they were coming into the year.

 

00;20;28;18 - 00;20;34;02

But from big picture macro in that 1.3%

we are factoring in those higher tariff.

 

00;20;34;06 - 00;20;39;04

We think the high levels have been put in

at least at what was announced on,

 

00;20;39;04 - 00;20;44;01

Liberation Day in some of those other,

increases that were there.

 

00;20;44;01 - 00;20;48;05

We don't think we're going to go beyond

that, but that in between is it 15%?

 

00;20;48;05 - 00;20;49;16

Is it 12%?

 

00;20;49;16 - 00;20;52;04

Whatever that blended average

rate is going to be it,

 

00;20;52;04 - 00;20;54;00

it's going to be considerably higher.

 

00;20;54;00 - 00;20;55;06

We'll be able to work through it.

 

00;20;55;06 - 00;20;57;21

And I don't think the economy's going

to, you know,

 

00;20;57;21 - 00;20;59;05

fall into recession because of it.

 

00;21;00;06 - 00;21;01;19

But much like the tax

 

00;21;01;19 - 00;21;04;14

discussion, there's

definitely winners and losers there.

 

00;21;04;14 - 00;21;06;26

And there's some parts of the economy

and some sectors

 

00;21;06;26 - 00;21;09;14

that aren't going to be able to sidestep

that.

 

00;21;09;14 - 00;21;12;18

Steel and aluminum

being at 50%, that's not going away

 

00;21;12;18 - 00;21;15;06

and that's not going to be renegotiated

anytime soon.

 

00;21;15;06 - 00;21;16;19

Right Right.

 

00;21;16;19 - 00;21;19;07

Mike, you've done a good job of speaking

 

00;21;19;07 - 00;21;23;20

to really the uncertainty that's

still hanging over us relative to tariffs.

 

00;21;23;20 - 00;21;27;03

So kind of bottom line is

we know it's going to be higher. Yep.

 

00;21;27;05 - 00;21;32;27

Markets probably orienting like 12 to 15%

perhaps as as where where it lands.

 

00;21;33;08 - 00;21;36;25

And maybe that helps bridge us

into my next question

 

00;21;36;25 - 00;21;42;16

which is what could provide

some upside to our base case?

 

00;21;42;16 - 00;21;44;26

So you've kind of talked about our base

case.

 

00;21;44;26 - 00;21;46;10

Muddle through continues.

 

00;21;46;10 - 00;21;49;17

We've talked about tariffs

specifically like

 

00;21;49;24 - 00;21;53;13

what could make our number conservative.

 

00;21;53;26 - 00;21;56;19

Yes. So again back to Keith.

 

00;21;56;19 - 00;21;58;00

Bunch of Ts.

 

00;21;58;00 - 00;22;02;01

The tariff one is the by far

the biggest implication.

 

00;22;02;08 - 00;22;06;17

And I would say within that tariff piece

it's really about a half a dozen.

 

00;22;06;17 - 00;22;11;14

But really the big three Canada

Mexico and China.

 

00;22;11;24 - 00;22;14;24

Yeah I would say secondarily Europe.

 

00;22;15;02 - 00;22;18;06

But that big three is well over

 

00;22;18;12 - 00;22;21;23

60% of our total imports

are coming from those,

 

00;22;22;02 - 00;22;26;25

those three and hammering those through

and making sure that we're aligned.

 

00;22;26;28 - 00;22;28;01

And it does sound like there's

 

00;22;28;01 - 00;22;31;15

some give and take there that, you know,

we might be able to make a deal

 

00;22;31;24 - 00;22;34;24

that would be very helpful

and provide some upside.

 

00;22;35;04 - 00;22;38;12

I'm skeptical that it might be,

you know, a little too late

 

00;22;38;12 - 00;22;39;12

as we're moving through the year.

 

00;22;39;12 - 00;22;40;09

But again,

 

00;22;40;09 - 00;22;44;02

as we look out farther in, businesses

aren't just looking at the next six months

 

00;22;44;10 - 00;22;47;05

and to Keith’s point, they earnings

and what have you,

 

00;22;47;05 - 00;22;50;26

they're extending that horizon

this looking to 2026.

 

00;22;51;10 - 00;22;53;29

Those are definitely positives for 2026.

 

00;22;53;29 - 00;22;56;26

The other one there's a kind of

a grab bag of other things.

 

00;22;56;26 - 00;22;59;18

I would say more mergers and acquisitions

 

00;22;59;18 - 00;23;03;04

because of the tax policy

being providing a lot more clarity.

 

00;23;04;00 - 00;23;08;03

But I would layer on the tariff

uncertainty for cross-border deals.

 

00;23;08;03 - 00;23;11;18

But domestically,

I think that, provides a roadmap.

 

00;23;11;24 - 00;23;14;12

The other one would be reduced

regulations.

 

00;23;14;12 - 00;23;17;16

That hasn't been a focus

for the administration thus far.

 

00;23;17;20 - 00;23;21;25

But the Trump 1.0 administration, it was

and I think that they're going to

 

00;23;21;29 - 00;23;24;29

as we move through the rest of the year

and into 2026,

 

00;23;24;29 - 00;23;26;09

that's going to be more of a focus.

 

00;23;26;09 - 00;23;29;09

And that's literally

all upside for the most part.

 

00;23;29;10 - 00;23;29;23

Is that

 

00;23;31;02 - 00;23;34;20

reducing relaxing

and, you know, making more sensible

 

00;23;34;20 - 00;23;37;13

some of these regulations

is helpful for businesses.

 

00;23;37;13 - 00;23;40;07

Let's talk about the flip side.

 

00;23;40;07 - 00;23;43;22

What could create some downside

risk to our scenarios.

 

00;23;43;22 - 00;23;45;00

Yeah, that was a

 

00;23;45;00 - 00;23;48;24

actually a really quick discussion

because it's the opposite of those.

 

00;23;49;01 - 00;23;54;24

So tariffs taking much longer

Much higher And ratcheting up

 

00;23;54;24 - 00;23;57;14

you know the uncertainty

because let's say China

 

00;23;57;14 - 00;24;00;15

or somebody digs in their heels

or we dig in our heels,

 

00;24;00;16 - 00;24;04;06

you know ratcheting up

tariffs is not good for either side.

 

00;24;04;11 - 00;24;10;04

So certainly those rivet pieces 

deteriorating the geopolitical.

 

00;24;10;04 - 00;24;13;04

And we've seen that it impacts

I get come back to freight.

 

00;24;13;04 - 00;24;17;29

But the Red sea essentially being closed

not being able to use the Suez Canal.

 

00;24;18;01 - 00;24;20;11

If there were just something that happened

with the Panama Canal,

 

00;24;20;11 - 00;24;25;09

those geopolitical sort of issues,

a hot war somewhere that those are,

 

00;24;26;22 - 00;24;27;01

those are

 

00;24;27;01 - 00;24;30;23

issues that would definitely, you know,

put a damper on things economically.

 

00;24;30;27 - 00;24;34;21

And then I would I would also add

kind of the other place we might see

 

00;24;34;21 - 00;24;38;20

some downside risk is, would be

if the muddle through continues

 

00;24;39;04 - 00;24;43;18

and CEOs and leaders feel like they need

actually to cut jobs in some way.

 

00;24;43;18 - 00;24;47;03

And you've kind of alluded to like

payrolls right now are in good shape.

 

00;24;47;04 - 00;24;47;11

Yeah.

 

00;24;47;11 - 00;24;50;27

But like if something caused

kind of payrolls to be paired

 

00;24;50;27 - 00;24;53;27

back, that would be potentially a negative

for the consumer.

 

00;24;53;29 - 00;24;55;13

For the consumer. Absolutely.

 

00;24;55;13 - 00;25;00;08

Because consumers are now

squarely dependent on jobs.

 

00;25;00;20 - 00;25;03;12

And it comes back to

and it's a little more nuanced.

 

00;25;03;12 - 00;25;07;11

But this notion of the higher

tariffs are for certain industries,

 

00;25;07;15 - 00;25;09;21

going to bite into profits.

 

00;25;09;21 - 00;25;12;17

And when you bite into profits,

that's what you're talking about

 

00;25;12;17 - 00;25;15;17

is, hey,

I might need to do some belt tightening.

 

00;25;15;24 - 00;25;19;04

I think the offset generally,

as far as we see it, and that's why

 

00;25;19;04 - 00;25;23;28

the base case is pretty constructive,

is that the labor market is pretty tight.

 

00;25;23;28 - 00;25;26;22

Still unemployment rate at 4.1%.

 

00;25;26;22 - 00;25;28;01

It's rather low.

 

00;25;28;01 - 00;25;31;23

It does depend about the industry

in the region of the country.

 

00;25;31;23 - 00;25;33;15

But for the most part,

 

00;25;33;15 - 00;25;36;28

job losses, you know, should be able

to be made up in other areas.

 

00;25;37;11 - 00;25;39;03

That's not perfect. Don't get me wrong.

 

00;25;39;03 - 00;25;42;21

We know that, like If you’re

the person searching for the job.

 

00;25;44;04 - 00;25;45;24

Federal workers, that are

 

00;25;45;24 - 00;25;49;22

working in DC can't go to work for

a, you know, Iowa farm.

 

00;25;49;22 - 00;25;50;28

It's not a thing. Right.

 

00;25;50;28 - 00;25;52;02

That's right, that's right.

 

00;25;52;02 - 00;25;55;02

That the other T The other T Yeah.

 

00;25;55;18 - 00;25;57;14

All right. Let me move over to Chip.

 

00;25;57;14 - 00;26;00;06

Let's talk about,

let's start with the fed.

 

00;26;00;06 - 00;26;03;16

So our expectation is that

 

00;26;04;08 - 00;26;06;23

the fed is going to be taking some action

this year.

 

00;26;06;23 - 00;26;10;07

Maybe talk to us

about what exactly we're expecting.

 

00;26;10;16 - 00;26;14;03

And, you know, are we finally going

to see them make that move?

 

00;26;14;04 - 00;26;14;25

Right.

 

00;26;14;25 - 00;26;17;23

We do expect to see, the fed lower

interest rates,

 

00;26;17;23 - 00;26;21;15

roughly twice by 25

basis points by the end of the year.

 

00;26;21;15 - 00;26;22;17

And that's honestly similar

 

00;26;22;17 - 00;26;25;00

to the market's expectations

as the year is progressing.

 

00;26;25;00 - 00;26;28;26

But actually has we've become more aligned

with, market expectations.

 

00;26;28;26 - 00;26;34;18

And so it's slower growth a cooler labor

market than we've seen will allow the fed,

 

00;26;34;18 - 00;26;38;01

we think, to go ahead to, to go ahead

and get started with rate cuts.

 

00;26;38;08 - 00;26;42;17

It's probably not going to start

any earlier than September in our view.

 

00;26;42;26 - 00;26;48;01

And I think that the reality is that

without without tariff and policy

 

00;26;48;01 - 00;26;48;24

uncertainty,

 

00;26;48;24 - 00;26;52;23

the fed would at least be talking about

right now going ahead and lowering rates.

 

00;26;52;23 - 00;26;55;18

If not have have

already has already started.

 

00;26;55;18 - 00;26;56;14

Exactly.

 

00;26;56;14 - 00;27;01;14

But I think it's important to

to to also say that the Fed's endgame

 

00;27;01;24 - 00;27;05;07

remains the same,

barring some economic setback.

 

00;27;05;20 - 00;27;08;28

We think that the fed really

wants to lower the fed funds rate by 100

 

00;27;08;28 - 00;27;12;28

to 125 basis points throughout this year

and next year.

 

00;27;12;28 - 00;27;16;22

It's just that this uncertainty

is delaying that resumption of those,

 

00;27;16;27 - 00;27;18;23

those rate cuts right now.

 

00;27;18;23 - 00;27;20;16

All right.

I'm going to ask another question.

 

00;27;20;16 - 00;27;22;08

I think it's a very timely question.

 

00;27;22;08 - 00;27;28;00

So the the folks who registered today,

a number of them had specific questions

 

00;27;28;00 - 00;27;33;12

around the fed Federal Reserve

that the Fed's leadership our composition.

 

00;27;33;24 - 00;27;36;13

And I think we've had some news

even today on that.

 

00;27;36;13 - 00;27;38;29

So, Mike, let me start with you first.

 

00;27;38;29 - 00;27;43;11

How should folks be thinking

about fed leadership in its composition?

 

00;27;43;20 - 00;27;43;26

Yeah.

 

00;27;43;26 - 00;27;46;14

So wrote a piece, this past week.

 

00;27;46;14 - 00;27;49;14

So they should talk to their advisor

 

00;27;49;15 - 00;27;52;02

to get

that is is a client piece talking about

 

00;27;53;05 - 00;27;54;14

primarily the structure.

 

00;27;54;14 - 00;27;57;04

So understanding the structure very basic.

 

00;27;57;04 - 00;27;59;24

There's 12 members of the rate

setting committee.

 

00;27;59;24 - 00;28;03;28

Five of them are the regional fed

presidents of the district banks.

 

00;28;04;08 - 00;28;06;23

They cycle through on an annual basis.

 

00;28;06;23 - 00;28;11;23

Those five are not approved by Congress,

have nothing to do with the president.

 

00;28;11;23 - 00;28;13;08

The president can't change them.

 

00;28;13;08 - 00;28;14;22

They're not political positions.

 

00;28;14;22 - 00;28;17;17

They are appointed by local boards.

 

00;28;17;17 - 00;28;18;22

So it's an independent.

 

00;28;18;22 - 00;28;20;28

It's a very elegant process.

 

00;28;20;28 - 00;28;23;29

The other seven

that are the board of governors

 

00;28;23;29 - 00;28;26;29

that are based in DC, that are approved,

 

00;28;27;18 - 00;28;30;02

the appointed by the president

and approved, you know,

 

00;28;30;02 - 00;28;33;02

by the Senate.

 

00;28;34;03 - 00;28;36;05

Those also have very long terms,

 

00;28;36;05 - 00;28;39;09

and you can't push them out

the way that the FDA and some of these

 

00;28;39;09 - 00;28;42;25

other panels, where it's

completely discretionary and essentially,

 

00;28;43;04 - 00;28;46;04

the cabinet secretary can push out

 

00;28;46;07 - 00;28;49;12

or replace, or have or have shorter term,

 

00;28;49;29 - 00;28;52;11

and the case of the fed,

the Board of governors,

 

00;28;52;11 - 00;28;55;23

they have a 14 year term,

they are staggered and what have you.

 

00;28;55;23 - 00;29;00;12

But only two of them, Chair Powell and,

Elena Kugel.

 

00;29;00;19 - 00;29;04;06

Are the only two

that are coming up in the next year+.

 

00;29;04;06 - 00;29;08;05

So even if and there's this discussion

about pushing out Powell

 

00;29;08;05 - 00;29;12;02

or firing them for cause and some of these

other things is at the end of the day,

 

00;29;12;23 - 00;29;16;19

the chair is just one vote on that 12

and then the other,

 

00;29;16;22 - 00;29;19;20

while they are influential

and markets listen to them.

 

00;29;20;20 - 00;29;23;13

Markets

also know they're only one of 12 votes.

 

00;29;23;13 - 00;29;26;28

So even if somebody were to come in

Kevin Hassett or somebody else

 

00;29;27;08 - 00;29;31;21

that the president appoints

and that the Senate were able to, approve,

 

00;29;32;18 - 00;29;36;15

that's just one vote out of that 12

and so you're not going to have...

 

00;29;36;16 - 00;29;36;25

Yeah.

 

00;29;36;25 - 00;29;41;09

That that elegant structure means you're

also not going to make massive changes

 

00;29;41;16 - 00;29;44;15

all of a sudden

because, oh, new person's in

 

00;29;44;15 - 00;29;47;02

they want to make

a whole whole bunch of changes.

 

00;29;47;02 - 00;29;48;04

They can't work.

 

00;29;48;04 - 00;29;49;25

They can't move unilaterally.

 

00;29;49;25 - 00;29;52;02

So there's a structural mechanism.

 

00;29;52;02 - 00;29;52;08

Yeah.

 

00;29;52;08 - 00;29;56;03

Kind of impacts

the speed at which that change can occur.

 

00;29;56;03 - 00;29;56;20

Absolutely.

 

00;29;56;20 - 00;29;57;10

If you will.

 

00;29;57;10 - 00;29;59;08

And Chip, let me ask you,

 

00;29;59;08 - 00;30;03;06

we've got Mike's kind of view

on the composition of the committee.

 

00;30;03;06 - 00;30;07;29

Today's news is really around

the potential for an abrupt change.

 

00;30;08;17 - 00;30;09;22

To the chair.

 

00;30;09;22 - 00;30;13;25

How should folks

think about how the market might interpret

 

00;30;13;25 - 00;30;17;13

or react if that were to actually happen?

 

00;30;17;23 - 00;30;20;14

Today's reaction is probably

a bit of a microcosm

 

00;30;20;14 - 00;30;24;09

of what the reaction

would likely be over the longer term,

 

00;30;24;09 - 00;30;28;05

and that would be short dated yields

front end of the yield curve coming down

 

00;30;28;13 - 00;30;32;06

in expectation that new leadership

would likely be pushing for lower

 

00;30;32;06 - 00;30;35;29

interest rates much, much earlier

and potentially more quickly.

 

00;30;35;29 - 00;30;39;00

And so that that could have an

that is having impact today.

 

00;30;39;00 - 00;30;41;16

Just the headline on the front

of the yield curve that would likely...

 

00;30;41;16 - 00;30;43;16

...the front end, just so that folks...

 

00;30;43;16 - 00;30;47;14

First two years, three years maturities,

they tend to be the most policy sensitive.

 

00;30;47;27 - 00;30;48;20

And then I think

 

00;30;48;20 - 00;30;51;19

on the on the further end,

if you go to the intermediate long portion

 

00;30;51;22 - 00;30;56;24

of the yield curve right out to 30 years,

we'd likely see inflation expectations

 

00;30;56;27 - 00;31;00;12

rise, that there would be upward pressure

in the in the long end of the curve.

 

00;31;00;18 - 00;31;03;18

So what does that mean a steepening right

I think where you've got

 

00;31;03;26 - 00;31;07;07

you've got lower front end rates, higher

long end rates, a steeper yield curve.

 

00;31;07;24 - 00;31;11;02

I would also expect to see interest

rate volatility

 

00;31;11;02 - 00;31;14;15

pick up just in response

to that disruption to the status quo.

 

00;31;15;13 - 00;31;16;00

If I could add

 

00;31;16;00 - 00;31;19;00

to I think it's almost like in terms like

 

00;31;19;04 - 00;31;22;09

historically the fed have been

really consensus driven mind more

 

00;31;22;11 - 00;31;26;04

see more division and different people

from the fed saying different things.

 

00;31;26;04 - 00;31;27;26

So maybe a little bit

confusing for the market.

 

00;31;27;26 - 00;31;29;23

I eventually think for the equity market

 

00;31;29;23 - 00;31;31;29

it would

it would learn that this is different.

 

00;31;31;29 - 00;31;32;28

It would adjust.

 

00;31;32;28 - 00;31;36;09

But initially the knee jerk reaction is

I don't know how to discount this, Right.

 

00;31;36;11 - 00;31;38;10

And maybe a little bit of a knee jerk,

Perhaps

 

00;31;38;10 - 00;31;41;03

that would become the new status quo,

but it would be a change.

 

00;31;41;03 - 00;31;44;00

To what We've gotten used to. Yes.

 

00;31;44;00 - 00;31;46;11

Let's also talk about the ten year

Treasury.

 

00;31;46;11 - 00;31;46;19

All right.

 

00;31;46;19 - 00;31;48;19

So you're talking about the curve overall.

 

00;31;48;19 - 00;31;51;07

Let's zero in on it. On the ten year.

 

00;31;51;07 - 00;31;54;00

It's been rangebound

for the last few months,

 

00;31;54;00 - 00;31;57;09

which means it's been in a fairly tight,

tight range.

 

00;31;57;19 - 00;32;02;18

What's our view around the potential range

for the rest of the year?

 

00;32;02;18 - 00;32;04;22

How were we thinking about that? Sure.

 

00;32;04;22 - 00;32;08;20

The ten year Treasury yield, it's slightly

higher than our current assessment

 

00;32;08;20 - 00;32;10;05

of fair value for the ten year.

 

00;32;10;05 - 00;32;13;25

So as you mentioned, we were trading

around 4.5% on the ten year

 

00;32;14;01 - 00;32;16;02

based on today's current

economic environment.

 

00;32;16;02 - 00;32;17;00

In the framework

 

00;32;17;00 - 00;32;21;00

that we used, it would suggest that fair

value is closer to 4 and a quarter.

 

00;32;21;05 - 00;32;23;25

Not super far from it, but we are

we are a little bit,

 

00;32;23;25 - 00;32;26;02

a little bit higher than that.

 

00;32;26;02 - 00;32;27;21

But you mentioned it.

And that's exactly right.

 

00;32;27;21 - 00;32;31;23

Since mid April, the ten year has been

has been kind of trapped in a pretty

 

00;32;31;23 - 00;32;37;10

tight range

between 420 and, and 460, yield.

 

00;32;37;10 - 00;32;41;17

And in that time we've actually seen

interest rate volatility really come down

 

00;32;41;17 - 00;32;45;04

a lot from what we were experiencing

back in in March, in March and April.

 

00;32;45;04 - 00;32;50;02

Some stability has come back

and we've been caught in this tug of war

 

00;32;50;02 - 00;32;53;26

inside of this range with a slowing

economy, some better inflation.

 

00;32;53;26 - 00;32;56;06

That's downward pressure on yields.

 

00;32;56;06 - 00;32;58;09

But we've seen some tariff concerns.

 

00;32;58;09 - 00;33;00;25

Deficit concerns

periodically push them back up.

 

00;33;00;25 - 00;33;05;10

But but ultimately they've found this

equilibrium thus far between 420 and 460.

 

00;33;05;16 - 00;33;09;18

I think that sideways chop

is ultimately going to continue here for

 

00;33;09;22 - 00;33;14;18

for a little while until at least

the fed can, can resume rate cuts.

 

00;33;14;18 - 00;33;15;03

Right.

 

00;33;15;03 - 00;33;16;26

I think that it's likely

 

00;33;16;26 - 00;33;18;27

that those short dated yields

we talked about

 

00;33;18;27 - 00;33;20;20

were called the first two years

maturities.

 

00;33;20;20 - 00;33;25;04

And in fixed income they probably fall

to a more pronounced degree

 

00;33;25;13 - 00;33;28;02

then do the longer

I think the longer yields out there.

 

00;33;28;02 - 00;33;30;24

The ten year, 30 year,

I think that's a little stickier,

 

00;33;30;24 - 00;33;33;10

but they should trend lower

from current levels.

 

00;33;33;10 - 00;33;36;27

But I think that the bigger move will be

concentrated short dated fixed income.

 

00;33;37;06 - 00;33;38;05

Very good.

 

00;33;38;05 - 00;33;41;11

Where are you seeing

opportunities as well as risks.

 

00;33;42;00 - 00;33;44;06

Sure. So I'll start with duration.

 

00;33;44;06 - 00;33;47;00

We do recommend

a neutral duration posture.

 

00;33;47;00 - 00;33;48;08

Right now that just means

 

00;33;48;08 - 00;33;51;25

don't be overly concentrated in the very,

very short dated fixed income.

 

00;33;52;00 - 00;33;54;08

Don't be overly concentrated

way, way out the yield curve.

 

00;33;54;08 - 00;33;57;05

We know there's a lot of volatility

out there right now.

 

00;33;57;05 - 00;34;00;02

We see a lot of value in

what's called the belly of the curve.

 

00;34;00;02 - 00;34;03;11

That three to ten-ish year

portion of the yield curve.

 

00;34;03;11 - 00;34;05;15

And the reason for that is

is for several things.

 

00;34;05;15 - 00;34;08;13

One we're seeing really productive yields

there. Right.

 

00;34;08;13 - 00;34;09;19

Compared to the past 20 years.

 

00;34;09;19 - 00;34;12;21

Yield yields are very productive

for fixed income investors.

 

00;34;13;06 - 00;34;16;17

Two in that portion of the curve

a little bit more modest or moderate

 

00;34;16;17 - 00;34;19;23

interest rate exposure there,

which is to avoid

 

00;34;19;23 - 00;34;22;29

some of the most extreme

levels of volatility that we've seen.

 

00;34;23;09 - 00;34;27;28

And also what's been really encouraging

to 2025 is we've seen fixed income

 

00;34;27;28 - 00;34;31;21

provide that portfolio

stability again, much more consistently.

 

00;34;31;21 - 00;34;33;22

There's diversified benefits.

 

00;34;33;22 - 00;34;35;28

So that's been that's

been a big positive as well.

 

00;34;35;28 - 00;34;40;00

So for taking that risk reward framework

that we do see a lot of value.

 

00;34;40;00 - 00;34;41;13

So fixed income right right there.

 

00;34;42;12 - 00;34;43;23

Next up though is I would say

 

00;34;43;23 - 00;34;48;00

right now we emphasize higher quality

fixed income things like US treasuries

 

00;34;48;10 - 00;34;51;22

investor grade munis are offering

a significant relative value.

 

00;34;51;29 - 00;34;56;10

We upgraded investor grade corporates back

in mid April to kind of neutral stance.

 

00;34;56;28 - 00;35;00;09

In mid April we saw some of

we saw investor grade corporates.

 

00;35;00;09 - 00;35;03;09

And I'll talk about the riskier areas

as well really cheapen

 

00;35;03;23 - 00;35;07;03

a little a little bit more

than we had seen in about 12 to 18 months.

 

00;35;07;03 - 00;35;07;25

There is more value.

 

00;35;07;25 - 00;35;10;14

There's a better entry point,

there's a better entry point there.

 

00;35;10;14 - 00;35;13;20

So investment grade corporates

also in a better spot as well.

 

00;35;13;28 - 00;35;17;14

What I will say this is particularly true

when we're talking about riskiest

 

00;35;17;14 - 00;35;18;05

fixed income.

 

00;35;18;05 - 00;35;20;23

Whether it's high yield corporates

leveraged loans.

 

00;35;20;23 - 00;35;23;17

They too cheapen in in mid April.

 

00;35;23;17 - 00;35;26;20

But we've actually seen that area

get really expensive again

 

00;35;26;27 - 00;35;28;24

is there is a short way.

That is the short way to say it.

 

00;35;28;24 - 00;35;31;15

So where we

where we became a bit more favorable.

 

00;35;31;15 - 00;35;33;04

Now I think it is more appropriate

 

00;35;33;04 - 00;35;35;01

to take a little bit

more patient approach there.

 

00;35;35;01 - 00;35;38;26

Let those yields adjust to, to better

reflect the slowing economic environment.

 

00;35;39;12 - 00;35;41;02

And then that risk reward improves.

 

00;35;41;02 - 00;35;44;07

Of course, if that happens

we'll be communicating that regularly.

 

00;35;44;19 - 00;35;47;09

So Keith, to some-- sorry,

I just called you Keith.

 

00;35;47;09 - 00;35;49;10

Chip. Sorry. I think it's a little

 

00;35;51;06 - 00;35;52;27

chip.

 

00;35;52;27 - 00;35;54;00

Sorry about that.

 

00;35;54;00 - 00;35;56;08

Three points really stick out to me.

 

00;35;56;08 - 00;36;01;09

One kind of the belly of the curve

that 3 to 10 year space.

 

00;36;01;09 - 00;36;03;17

You're saying we're finding value there.

 

00;36;03;17 - 00;36;05;27

And that's a place where

if I was a client,

 

00;36;05;27 - 00;36;08;27

that's a great conversation

to have with my advisor.

 

00;36;08;27 - 00;36;09;09

Absolutely.

 

00;36;09;09 - 00;36;10;22

So I want to encourage people

 

00;36;10;22 - 00;36;14;17

to reach out to their advisor

and have that conversation kind of,

 

00;36;14;17 - 00;36;19;21

the other thing that sticks out to me

is that high quality,

 

00;36;19;21 - 00;36;24;25

we're continuing to arc to high quality

and kind of does the partner to that.

 

00;36;24;25 - 00;36;28;20

The third element is

we saw some appealing moves

 

00;36;28;20 - 00;36;31;20

within the riskier

part of fixed income in April.

 

00;36;31;24 - 00;36;34;15

And now that space

has gotten expensive again.

 

00;36;34;15 - 00;36;36;09

So we're a little more patient, right,

 

00;36;36;09 - 00;36;39;01

when it comes to the riskier areas

within fixed income.

 

00;36;39;01 - 00;36;40;13

That's exactly right. Yeah.

 

00;36;40;13 - 00;36;43;13

Keith, I am going to turn to you next

and you are Keith..

 

00;36;43;20 - 00;36;46;12

Yeah. I should know

Yeah. Sorry about that.

 

00;36;46;12 - 00;36;51;15

The man with the Ts Yes our T person

of the of the day Ten year Yeah.

 

00;36;51;15 - 00;36;54;02

Exactly. Ten year. Another T.

 

00;36;54;02 - 00;36;58;03

Look when we looked at the clients

questions that came in,

 

00;36;58;14 - 00;37;03;06

there was a whole cohort of questions

that read something like this.

 

00;37;04;08 - 00;37;07;08

Is the market pricing risk appropriately?

 

00;37;07;10 - 00;37;10;10

Has the market become too complacent?

 

00;37;10;15 - 00;37;15;26

Kind of this, this, constant question

around what is the market pricing in?

 

00;37;16;05 - 00;37;19;07

Is the market,

you know, again, like too complacent,

 

00;37;19;07 - 00;37;22;07

not taking tariffs seriously?

 

00;37;23;02 - 00;37;24;26

Again, the overriding theme.

 

00;37;24;26 - 00;37;26;09

So what's our view on that?

 

00;37;26;09 - 00;37;29;07

What really is the market pricing in

right now?

 

00;37;29;07 - 00;37;32;15

It's a good question because markets

are all about how things come in

 

00;37;32;20 - 00;37;34;06

relative to expectations.

 

00;37;34;06 - 00;37;37;22

And maybe another way to tackle this is,

you know, what is the market embedding?

 

00;37;37;22 - 00;37;41;17

I would say right off the bat

it's embedding good news to continue.

 

00;37;41;25 - 00;37;46;21

And some of these open questions

on tariffs, on inflation, on the fed,

 

00;37;47;13 - 00;37;50;16

on the economy that that, you know,

things will continue to move forward

 

00;37;50;16 - 00;37;54;03

in a more of a positive way,

not non-linear but in a positive way.

 

00;37;54;03 - 00;37;57;06

So and market pricing in

but at this point no recession

 

00;37;57;20 - 00;38;01;03

is pricing in

that as Mike talked about maybe tariffs

 

00;38;01;03 - 00;38;05;03

in the maybe mid-teens,

but not much higher than that as well.

 

00;38;05;16 - 00;38;08;28

And it's also factored

in that this corporate earnings

 

00;38;08;28 - 00;38;10;25

resilience will continue.

 

00;38;10;25 - 00;38;12;18

And in some ways I will say though,

 

00;38;13;17 - 00;38;15;02

the one positive is, you know,

 

00;38;15;02 - 00;38;20;11

our companies have been battle tested

multiple times over the last decade

 

00;38;20;26 - 00;38;23;17

thinking about the Covid,

come out of Covid.

 

00;38;23;17 - 00;38;27;04

If you think of how, you know,

how much inflation rose,

 

00;38;27;05 - 00;38;31;13

if you think about the fastest rate

hiking cycle, that we've seen

 

00;38;31;24 - 00;38;36;01

since the 80s, each time, 

companies have come out somewhat stronger.

 

00;38;36;01 - 00;38;37;25

So I think there is a,

 

00;38;37;25 - 00;38;40;25

you know, it's given these companies

the benefit of the doubt,

 

00;38;40;26 - 00;38;43;24

but that also...part of the reason

why we think there'll be hiccups

 

00;38;43;24 - 00;38;46;08

along the way

as markets aren’t going to be that smooth.

 

00;38;46;08 - 00;38;48;01

There'll be some things that disappoint,

 

00;38;48;01 - 00;38;50;20

you know, 

relative to these expectations...

 

00;38;50;20 - 00;38;52;00

provide some some hiccups.

 

00;38;52;00 - 00;38;55;05

But again, I do think

a somewhat of a higher valuation

 

00;38;55;05 - 00;38;58;09

is warranted given

these companies have been battle tested.

 

00;38;58;13 - 00;39;01;15

Keith, it sounds like

and I think I've heard you say this

 

00;39;01;15 - 00;39;04;15

before, the market's pricing in good news,

 

00;39;04;21 - 00;39;07;21

it's not priced to perfection

because I think like

 

00;39;07;23 - 00;39;11;27

inherent in that question is like

the undertone is it priced to perfection?

 

00;39;12;04 - 00;39;14;08

And you're saying

it's pricing in good news.

 

00;39;14;08 - 00;39;15;18

Yes. Pricing and good news.

 

00;39;15;18 - 00;39;17;18

So I wouldn't say perfection,

but it's pricing good news.

 

00;39;17;18 - 00;39;21;22

But I will also say from a broader asset

allocation perspective, that's also

 

00;39;21;22 - 00;39;25;15

why we're preaching more balance today

and why we're saying,

 

00;39;25;28 - 00;39;27;11

hey, it's not time to be max bullish

 

00;39;27;11 - 00;39;29;21

or max defensive

because you are pricing in good news.

 

00;39;29;21 - 00;39;32;14

And for this market

to continue to rise in the second half,

 

00;39;32;14 - 00;39;33;29

you're going to need to see

that earnings come through

 

00;39;33;29 - 00;39;37;23

and some of this uncertainty subside,

even if it's, you know,

 

00;39;37;23 - 00;39;40;23

even if we have a few more months,

where it doesn't.

 

00;39;40;27 - 00;39;43;12

Well, you've opened the door

with the word balance.

 

00;39;43;12 - 00;39;46;16

Let's go ahead and move

to our tactical portfolio positioning.

 

00;39;46;24 - 00;39;51;01

Why don't you share with us

at a high level what we're recommending?

 

00;39;51;03 - 00;39;51;10

Sure.

 

00;39;51;10 - 00;39;53;17

And I would just say up front,

this is our high level

 

00;39;53;17 - 00;39;55;14

view of the next 3 to 12 months.

 

00;39;55;14 - 00;39;58;25

Your advisor knows you best

and you know they can help

 

00;39;58;25 - 00;40;02;19

you understand

how this may influence, your portfolio.

 

00;40;02;28 - 00;40;03;25

But the big picture

 

00;40;03;25 - 00;40;07;18

going back to categories, stocks, bonds

and cash were basically saying

 

00;40;08;03 - 00;40;12;10

be more aligned with your long term target

as far as, on each of these,

 

00;40;12;18 - 00;40;15;17

and then and what we think about equity

is global equities.

 

00;40;15;17 - 00;40;16;20

We're still team USA.

 

00;40;16;20 - 00;40;18;22

We've been team USA for some time.

 

00;40;18;22 - 00;40;20;01

We think that's where the innovation is.

 

00;40;20;01 - 00;40;23;05

We're focused on US large caps,

especially because they're

 

00;40;23;05 - 00;40;26;03

more concentrated in the technology

and the growth sectors.

 

00;40;26;03 - 00;40;29;00

But we also have relative to where

we've been the last couple of years,

 

00;40;29;00 - 00;40;32;19

we have boosted our international

developed market exposure.

 

00;40;33;00 - 00;40;35;25

And the three main reasons for that

now it's more of a neutral exposure.

 

00;40;35;25 - 00;40;39;01

First, relative to the past

So we went from an underweight

 

00;40;39;01 - 00;40;40;18

to more of a neutral posture.

 

00;40;40;18 - 00;40;43;06

Right. But the three main reasons

we've seen better price action.

 

00;40;43;06 - 00;40;44;17

So that's a positive.

 

00;40;44;17 - 00;40;47;10

Two 

a lot of questions around the US dollar.

 

00;40;47;10 - 00;40;50;10

So that provides a bit of a hedge

against the US dollar.

 

00;40;50;12 - 00;40;54;05

And on the margin

they have more fiscal and monetary

 

00;40;54;05 - 00;40;57;09

stimulus that we're seeing this year

relative to the US.

 

00;40;57;09 - 00;40;59;01

So that all tells us on the margin

 

00;40;59;01 - 00;41;01;15

relative to where we've been in the past,

to be a little bit,

 

00;41;01;15 - 00;41;02;22

you know, more positive.

 

00;41;02;22 - 00;41;05;17

You all did a great job already

talking about fixed income, that focus

 

00;41;05;17 - 00;41;08;17

on high quality

and being patient for opportunities.

 

00;41;08;28 - 00;41;12;11

And then lastly, you know,

we've been positive on gold all year long.

 

00;41;12;11 - 00;41;13;10

We're still positive.

 

00;41;13;10 - 00;41;15;14

It's taking a little bit of of a rest

right now.

 

00;41;15;14 - 00;41;18;26

One thing we've seen within

portfolios, on days where stocks and bonds

 

00;41;19;12 - 00;41;22;29

go down together, gold has had a tendency

to actually go up.

 

00;41;22;29 - 00;41;24;26

So it's combined

that portfolio diversifier

 

00;41;24;26 - 00;41;28;14

and we're doing that in smaller,

exposure is relatively small.

 

00;41;28;14 - 00;41;31;14

But we still think it's additive

to an overall portfolio construct.

 

00;41;31;24 - 00;41;37;18

You noted the kind of the U.S orientation

within large caps and the tilt to growth.

 

00;41;37;18 - 00;41;40;19

Yep. Again,

a question that comes up repeatedly from

 

00;41;40;19 - 00;41;43;22

our clients

is, is technology overextended?

 

00;41;44;04 - 00;41;46;22

And then what is it going to take

for the market to broaden out?

 

00;41;46;22 - 00;41;51;28

Sure, you did highlight we are overweight

the growth part of of of of large caps.

 

00;41;52;13 - 00;41;55;06

So right now

I just want to go back to what I said

 

00;41;55;06 - 00;41;58;07

earlier,

the dominant theme of this bull market

 

00;41;58;07 - 00;42;01;08

and there's always a dominant

theme is still AI and technology.

 

00;42;01;09 - 00;42;06;01

And in the midst of all this uncertainty,

investors are gravitating towards areas

 

00;42;06;01 - 00;42;09;01

where there's more sustainable

or what I would call a secular growth.

 

00;42;09;09 - 00;42;10;14

And that's still technology.

 

00;42;10;14 - 00;42;13;14

So we still

I think at this point that is leadership.

 

00;42;13;14 - 00;42;15;05

And we would stick with that.

 

00;42;15;05 - 00;42;19;02

What you're looking at in the chart right

now is the earning trends

 

00;42;19;02 - 00;42;22;15

and the forward earning estimates

for large caps, mid-caps and small caps.

 

00;42;22;15 - 00;42;27;04

And what stands out is large caps are new

all time highs, mid-cap small caps.

 

00;42;27;04 - 00;42;30;03

They haven't even returned to

where they were in past earnings

 

00;42;30;07 - 00;42;31;13

back a few years ago.

 

00;42;31;13 - 00;42;33;18

So for for us

this really see a broadening.

 

00;42;33;18 - 00;42;36;21

I think you have to see: One,

the uncertainty come down.

 

00;42;36;21 - 00;42;39;09

So when we always have uncertainty

just coming down from the level

 

00;42;39;09 - 00;42;41;18

and then more of a re acceleration

in the economy.

 

00;42;41;18 - 00;42;43;05

Mike talked about potential for next year.

 

00;42;43;05 - 00;42;45;04

So I'll keep an eye on that as well.

 

00;42;45;04 - 00;42;48;13

And then also for those rates

that are coming down,

 

00;42;48;13 - 00;42;51;12

because a lot of these smaller

cap companies have more leverage.

 

00;42;51;12 - 00;42;51;22

That's right.

 

00;42;51;22 - 00;42;55;01

They're more sensitive to the short

term short term rates.

 

00;42;55;10 - 00;42;56;25

So those are all things we're watching.

 

00;42;56;25 - 00;42;59;25

But at this point, until that evidence

shifts in a more meaningful way,

 

00;43;00;07 - 00;43;03;13

we still think that the large cap driven

by growth in tech

 

00;43;03;18 - 00;43;06;18

still is where

we want to have a more more of a bias.

 

00;43;06;26 - 00;43;09;26

Are there sectors in addition

to technology

 

00;43;09;26 - 00;43;12;23

that you expect to have,

 

00;43;12;23 - 00;43;15;22

you know, a pretty good few months ahead?

 

00;43;15;22 - 00;43;17;19

Well, we would still stick with tech.

 

00;43;17;19 - 00;43;21;05

We also like kind of a derivative play of

that is communication services,

 

00;43;21;05 - 00;43;23;16

which also is, you know,

where some of the innovation,

 

00;43;23;16 - 00;43;25;10

the digital side,

how you're interacting with

 

00;43;25;10 - 00;43;28;25

some of the AI chat bots is also an area

that we've liked all year long.

 

00;43;28;25 - 00;43;30;07

We continue like that.

 

00;43;30;07 - 00;43;33;05

And then a third area

was maybe surprising in a year

 

00;43;33;05 - 00;43;36;11

when tariff is the main

headline is industrials right?

 

00;43;36;23 - 00;43;40;13

Industrials 

have a couple of positive traits going one

 

00;43;40;27 - 00;43;43;25

to the pick up in defense

spending globally is a positive.

 

00;43;43;25 - 00;43;47;12

The defense area of industrials is doing

really, really well.

 

00;43;47;20 - 00;43;51;16

And then also it's an indirect AI play

because these old-line

 

00;43;51;16 - 00;43;55;22

industrial companies are really vital

for the infrastructure bill

 

00;43;55;22 - 00;43;59;14

and also the cooling systems as well

with all that heat and so forth

 

00;43;59;14 - 00;44;01;25

that's generated from these chips

and so forth.

 

00;44;01;25 - 00;44;04;00

So, you know, that's another part of it.

 

00;44;04;00 - 00;44;05;28

And then also the infrastructure

bill as well.

 

00;44;05;28 - 00;44;08;28

So we like again

tech communication services

 

00;44;08;28 - 00;44;12;27

and then industrials And the industrials

may be a surprise to folks.

 

00;44;13;07 - 00;44;16;17

They may not understand just how strong

that sector's been here today.

 

00;44;16;18 - 00;44;18;18

Exactly. Yeah that's good.

 

00;44;18;18 - 00;44;18;29

All right.

 

00;44;18;29 - 00;44;21;23

Well what we're going to do right now

is we're going to summarize

 

00;44;21;23 - 00;44;26;02

kind of where we are at this point

in the live cast, our key takeaways.

 

00;44;26;14 - 00;44;31;20

And so first and foremost, the bull market

continues to deserve the benefit of Dow.

 

00;44;31;27 - 00;44;35;29

That said Keith, going back to your bull

in a China shop.

 

00;44;36;00 - 00;44;39;07

Expect

some broken dishes the rest of the year.

 

00;44;39;07 - 00;44;42;06

It's it's

not going to be a small, smooth ride.

 

00;44;42;11 - 00;44;46;02

There could be, some moments

where some dishes are thrown on the floor,

 

00;44;46;02 - 00;44;46;16

if you will.

 

00;44;46;16 - 00;44;48;22

So just be prepared for that, Mike.

 

00;44;48;22 - 00;44;51;04

Our muddle through economy continues.

 

00;44;51;04 - 00;44;52;24

We talked a lot about that.

 

00;44;52;24 - 00;44;55;14

I think the positive news

that I heard from you is that looking out

 

00;44;55;14 - 00;44;59;05

to ‘26, though, there's the potential

for some acceleration.

 

00;44;59;23 - 00;45;03;00

So that's something we'll be focusing more

on, I'm sure, in October.

 

00;45;03;10 - 00;45;07;08

Chip, from a fixed income perspective,

beautiful words.

 

00;45;07;08 - 00;45;12;07

Fixed income right is providing balanced

and stability the diversification benefits

 

00;45;12;16 - 00;45;15;22

and also still very attractive

from an income perspective.

 

00;45;16;04 - 00;45;19;21

And with all of that, you know,

going back to our investment philosophy,

 

00;45;19;21 - 00;45;23;21

Keith, we think it's really important that

our clients continue to stay anchored,

 

00;45;23;21 - 00;45;27;28

that they stay true to their plan,

that we stay evidence based.

 

00;45;28;09 - 00;45;31;18

And so we heard very clearly from you

how we're thinking about

 

00;45;31;23 - 00;45;35;21

four specific areas when we're trying

to make some of our tactical calls.

 

00;45;36;01 - 00;45;37;01

And last,

 

00;45;37;01 - 00;45;41;08

but perhaps not least, stay open minded

because the situation is very fluid,

 

00;45;41;08 - 00;45;46;03

it can change quickly and will come to you

if it does with changes in our outlook.

 

00;45;46;03 - 00;45;48;13

Appropriately at that time.

 

00;45;48;13 - 00;45;49;28

Well said. So with that,

 

00;45;49;28 - 00;45;53;26

you've covered a lot of ground on markets

and economy fixed income.

 

00;45;54;02 - 00;45;55;12

Let me turn to you, Mike.

 

00;45;55;12 - 00;45;59;11

It is so great to have you as

our special guest and I know you're here

 

00;45;59;11 - 00;46;03;25

to share insights around the legislation

that was recently passed.

 

00;46;04;11 - 00;46;09;10

And again, I just have to say to folks,

we're not providing specific tax advice

 

00;46;09;20 - 00;46;13;06

and you've got to talk to your tax advisor

before you take any action.

 

00;46;13;24 - 00;46;17;00

Mike, we've had multiple conversations

on this Livecast.

 

00;46;17;00 - 00;46;18;25

These guys know what we've talked about.

 

00;46;18;25 - 00;46;21;03

The sunset over and over and over.

 

00;46;21;03 - 00;46;25;05

So the sunset,

it was a potential sunset at the 2017

 

00;46;25;11 - 00;46;28;11

Tax Cuts and Jobs Act.

 

00;46;28;16 - 00;46;33;23

And there was a specific focus

on the estate and gift tax exemption.

 

00;46;34;03 - 00;46;37;23

How did that play out in the legislation

that was just passed?

 

00;46;38;06 - 00;46;41;25

So Oscarlyn,

what ended up happening with the tax law

 

00;46;42;00 - 00;46;46;12

is that the gift and estate

tax exemption has been increased

 

00;46;46;19 - 00;46;50;11

to $15 million starting in 2026.

 

00;46;50;28 - 00;46;54;15

And this $15 million represents

just over $1

 

00;46;54;15 - 00;46;58;27

million increase

from where we sit today in 2025.

 

00;47;00;02 - 00;47;01;07

Going forward, after

 

00;47;01;07 - 00;47;05;16

that, 15 million, after we get to that $15

million, we're going to see that

 

00;47;06;01 - 00;47;10;09

an inflation adjustment is made

every single year following that,

 

00;47;10;17 - 00;47;13;22

which allows for our clients

to be able to do two things.

 

00;47;14;11 - 00;47;17;28

First and foremost,

they can continue to have these wealth

 

00;47;17;28 - 00;47;22;01

transfer conversations

with their advisory team

 

00;47;22;12 - 00;47;25;16

not having to worry

about the sunset in their future.

 

00;47;26;09 - 00;47;29;20

But the second thing is

that these conversations need to continue.

 

00;47;30;09 - 00;47;35;05

I serve in the greater Washington area,

where I have two states, Maryland

 

00;47;35;05 - 00;47;36;17

and the District of Columbia,

 

00;47;36;17 - 00;47;40;00

which is technically not a state

for all my friends in DC.

 

00;47;40;27 - 00;47;43;27

They have state estate taxes, 16%

 

00;47;44;10 - 00;47;47;03

on a different exemption amount.

 

00;47;47;03 - 00;47;50;18

So for those clients,

they need to continue to have these estate

 

00;47;50;18 - 00;47;52;12

planning conversations.

 

00;47;52;12 - 00;47;54;17

For business owner clients.

 

00;47;54;17 - 00;47;59;02

There are succession issues that need

to be considered as part of this overall.

 

00;47;59;13 - 00;48;03;29

So with all this coming about

with no more sunset,

 

00;48;04;09 - 00;48;07;12

we still are in a situation

where we still have to continue

 

00;48;07;12 - 00;48;09;12

these conversations with clients, Right?

 

00;48;09;12 - 00;48;13;08

So we had urgency

focusing on the end of 2025.

 

00;48;13;08 - 00;48;17;06

What you're saying

is the urgency of that specific date

 

00;48;17;06 - 00;48;20;24

has gone, gone away

because it was addressed in the bill.

 

00;48;21;01 - 00;48;21;28

However,

 

00;48;21;28 - 00;48;23;28

we still need to keep

the conversations going

 

00;48;23;28 - 00;48;27;11

because we know that

there's very important estate tax planning

 

00;48;27;11 - 00;48;30;15

that needs to happen with our clients

To steal Keith's line.

 

00;48;30;15 - 00;48;33;07

Other factors matter more. Absolutely.

 

00;48;33;07 - 00;48;36;07

So let's talk through what

other extensions

 

00;48;36;17 - 00;48;39;15

occurred through this bill. So

 

00;48;40;17 - 00;48;42;00

we're going to cover three.

 

00;48;42;00 - 00;48;45;08

But for the audience the bill had over

 

00;48;45;08 - 00;48;49;00

350 pages of tax provisions in it.

 

00;48;49;15 - 00;48;52;14

So we are just

barely scratching the surface right now.

 

00;48;53;09 - 00;48;55;19

The three biggest ones are one.

 

00;48;55;19 - 00;49;00;02

The highest marginal income

tax rate remains at 37%.

 

00;49;00;20 - 00;49;04;01

That would have gone up had we not not

 

00;49;04;01 - 00;49;07;01

had this change at the end of this year.

 

00;49;07;04 - 00;49;11;15

The second is that the higher standard

deductions remain in place.

 

00;49;11;28 - 00;49;14;15

That was a change from the 2017 act

 

00;49;14;15 - 00;49;19;01

that higher standard deduction

remains in place, which will influence

 

00;49;19;01 - 00;49;22;01

whether clients

itemize their deductions or not.

 

00;49;22;24 - 00;49;26;24

And then third, and finally,

for our business owner clients, the 20%

 

00;49;26;24 - 00;49;31;19

qualified business income deduction

remains in place, becomes permanent.

 

00;49;32;03 - 00;49;36;27

And for our business owners who have pass

through income from partnerships

 

00;49;36;27 - 00;49;40;10

S Corporations, LLCs,

even sole proprietorships,

 

00;49;40;24 - 00;49;43;09

this is a very valuable

option that they have.

 

00;49;45;06 - 00;49;47;20

What does

permanent mean in this context, Mike?

 

00;49;47;20 - 00;49;50;01

Because you've used the word

a couple of times.

 

00;49;50;01 - 00;49;52;23

So tell tell folks what that really means.

 

00;49;52;23 - 00;49;56;20

So when I use the word permanent,

I'm really referring to the fact that

 

00;49;56;20 - 00;49;59;29

these provisions, especially the three

that we just outlined,

 

00;50;00;11 - 00;50;04;04

are not going to change

based on a predetermined subject date.

 

00;50;04;17 - 00;50;08;24

That was the whole deal with the 2017 act,

it’s that we had this sunset.

 

00;50;08;24 - 00;50;11;05

It was not permanent.

 

00;50;11;05 - 00;50;14;10

What permanent doesn't mean

is that in 2029,

 

00;50;15;01 - 00;50;18;11

when we have a new legislation

or new legislation,

 

00;50;18;11 - 00;50;21;11

a new president, a new administration

and a new Congress,

 

00;50;22;16 - 00;50;25;22

there could be legislation at that point

that could change this law,

 

00;50;25;28 - 00;50;26;21

this law as well.

 

00;50;26;21 - 00;50;30;13

So again, going back to what

Keith and Mike talked about,

 

00;50;30;19 - 00;50;34;06

certainty for the next four years,

not expecting any big changes,

 

00;50;35;00 - 00;50;39;02

but a new administration could challenge

that No sunset date

 

00;50;39;02 - 00;50;40;20

that we have to worry about. Correct.

 

00;50;41;24 - 00;50;42;11

Let's talk

 

00;50;42;11 - 00;50;46;10

about the changes

to the state and local tax deductibility.

 

00;50;46;10 - 00;50;51;08

So a number of our clients live in

what is perceived

 

00;50;51;08 - 00;50;55;12

or called, you know, high state tax states

if you will.

 

00;50;55;12 - 00;50;59;29

So New York, new Jersey, California,

there are three that come to mind.

 

00;51;00;17 - 00;51;04;27

How did that legislation address

what is called SALT.

 

00;51;05;14 - 00;51;07;07

So for those of us

who have been following this

 

00;51;07;07 - 00;51;11;07

bill from its beginning, this was one of

the more controversial provisions

 

00;51;11;07 - 00;51;14;22

and one that had a lot on the negotiations

going on in the background.

 

00;51;15;12 - 00;51;17;22

The result was that the SALT

 

00;51;17;22 - 00;51;21;07

limitation has been increased for 2025.

 

00;51;21;19 - 00;51;26;01

So effective now,

the new SALT limit is $40,000

 

00;51;27;05 - 00;51;30;05

from 2026 through 2029.

 

00;51;30;08 - 00;51;34;02

That $40,000 will increase by 1% per year.

 

00;51;35;04 - 00;51;37;16

And then if you're a taxpayer

 

00;51;37;16 - 00;51;41;11

with your income

falling between 500,000 and 600,000,

 

00;51;42;02 - 00;51;46;03

you will have that limit

that that limit will be scaled back.

 

00;51;46;06 - 00;51;49;06

Okay. It can't go lower than $10,000.

 

00;51;49;14 - 00;51;51;06

So that's your

that's your floor right there.

 

00;51;51;06 - 00;51;55;23

So for clients over $600,000

no less than $10,000 deductible.

 

00;51;56;25 - 00;51;58;14

But for a business owner client.

 

00;51;58;14 - 00;52;01;16

And this this was the big

the big deal for them

 

00;52;01;27 - 00;52;04;13

is that the pass through entity tax,

 

00;52;04;13 - 00;52;08;02

which allows them to take their state

 

00;52;08;02 - 00;52;12;06

and local income tax deduction

directly against their business income.

 

00;52;12;20 - 00;52;16;01

And so this is impacting our partner

income from partnerships

 

00;52;16;01 - 00;52;20;02

S Corporations

sole proprietorships LLCs being able

 

00;52;20;02 - 00;52;23;02

to take that deduction against that income

right there,

 

00;52;24;12 - 00;52;27;10

circumventing that $40,000 cap.

 

00;52;27;10 - 00;52;30;11

Because when you're deducting

those state taxes

 

00;52;30;11 - 00;52;33;11

against business income,

there is no limitation.

 

00;52;33;19 - 00;52;36;10

So for business owners,

a huge deal for them.

 

00;52;36;10 - 00;52;38;00

And a very good thing.

 

00;52;38;00 - 00;52;40;21

And unlike the permanent extensions,

 

00;52;40;21 - 00;52;43;24

this part of the legislation

does have a sunset.

 

00;52;43;24 - 00;52;44;14

Exactly.

 

00;52;44;14 - 00;52;47;23

You caught that when I was talking

about the 1% increase

 

00;52;48;01 - 00;52;51;10

in 2030, we go back to the $10,000 limit.

 

00;52;51;16 - 00;52;55;09

So this could be something that comes up

again with a new administration.

 

00;52;55;29 - 00;52;58;12

Let's talk for a moment about the changes

 

00;52;58;12 - 00;53;01;18

in the legislation

that might be most relevant.

 

00;53;01;18 - 00;53;04;20

Again, it's a 350 page, bill.

 

00;53;04;20 - 00;53;08;11

So we're not going to get into

all the details on the tax side,

 

00;53;08;20 - 00;53;12;21

but we want to make sure we touch on those

that you think might be most important

 

00;53;13;00 - 00;53;15;28

for businesses and or business owners.

 

00;53;15;28 - 00;53;20;03

So I think the three biggest ones

for our business owners are, number one,

 

00;53;20;06 - 00;53;21;19

the ability to

 

00;53;23;02 - 00;53;25;17

expense up to $2.5 million

 

00;53;25;17 - 00;53;28;20

using the section 179 expense election,

 

00;53;29;17 - 00;53;33;14

the second being the return of 100% bonus

depreciation.

 

00;53;34;01 - 00;53;39;01

Essentially that with a 100% bonus

depreciation, it's made permanent.

 

00;53;39;14 - 00;53;42;00

It doesn't decrease

over a period of years.

 

00;53;42;00 - 00;53;44;11

We're looking at this number

going forward.

 

00;53;44;11 - 00;53;47;28

So this will allow business owners

to invest in their companies

 

00;53;48;10 - 00;53;50;08

invest in expansion.

 

00;53;50;08 - 00;53;52;24

And then on top of that a change

 

00;53;52;24 - 00;53;55;24

in the way that interest expense

is deducted.

 

00;53;56;00 - 00;53;58;29

Changing that limitation calculation

and allowing

 

00;53;58;29 - 00;54;02;00

our business owners

to deduct more of that interest expense.

 

00;54;02;10 - 00;54;05;04

So when you take a step back

for a business owner,

 

00;54;05;04 - 00;54;10;04

they're able to invest in new equipment,

write that equipment off.

 

00;54;10;16 - 00;54;15;02

And if they finance the purchase deduct

more of the interest associated with that.

 

00;54;15;13 - 00;54;19;23

So really trying to encourage

that those additional investments

 

00;54;19;23 - 00;54;24;01

in the economy, There are also

some movement on the factory side as well.

 

00;54;24;01 - 00;54;25;02

Right. Yes.

 

00;54;25;02 - 00;54;29;16

So one of the interesting provisions

is that a business

 

00;54;29;16 - 00;54;33;12

that constructs a manufacturing facility,

so long as construction

 

00;54;33;12 - 00;54;39;05

begins between now and the end of 2029

and getting that facility up

 

00;54;39;05 - 00;54;44;23

and running by 2033, that entire facility

can be written off in its entirety.

 

00;54;45;13 - 00;54;49;08

And as opposed to having

to depreciate something over a

 

00;54;49;16 - 00;54;54;25

anywhere from like 27 to 39 year lifespan,

this is a an immediate write

 

00;54;54;25 - 00;54;58;13

off for a business for building a factory

here in the United States.

 

00;54;58;16 - 00;55;02;20

So a huge benefit, Mike,

all of the elements

 

00;55;02;20 - 00;55;04;20

that you've talked about are really,

I would say

 

00;55;04;20 - 00;55;08;20

friendly, especially for commercial

and industrial types of businesses

 

00;55;08;20 - 00;55;12;13

that have heavy investment in property,

plant and equipment.

 

00;55;12;13 - 00;55;14;04

So very, very heavy

 

00;55;15;03 - 00;55;17;01

for those types of businesses.

 

00;55;17;01 - 00;55;20;20

What's in the bill for more technology

oriented companies?

 

00;55;21;02 - 00;55;21;29

Well, you've

 

00;55;21;29 - 00;55;26;08

you've identified the theme of this

legislation is the focus on manufacturing,

 

00;55;26;08 - 00;55;28;15

the focus on the property,

plant and equipment.

 

00;55;28;15 - 00;55;31;14

But for the domestic research, research

 

00;55;32;18 - 00;55;34;14

expenses, you are now

 

00;55;34;14 - 00;55;37;13

companies

are now able to expense those immediately.

 

00;55;37;16 - 00;55;41;01

They no longer have to use the 15 year

amortization rules,

 

00;55;41;01 - 00;55;43;07

which have been in place

for the last couple of years.

 

00;55;43;07 - 00;55;49;00

So a huge boon to technology companies,

research companies, innovation companies,

 

00;55;49;07 - 00;55;52;19

even manufacturing companies that are

trying to improve products and processes.

 

00;55;52;23 - 00;55;55;23

Again, another huge benefit to them.

 

00;55;56;17 - 00;55;58;14

We're running a little short on time,

 

00;55;58;14 - 00;56;02;17

so we don't have time to explore fully

the clean energy provisions.

 

00;56;02;26 - 00;56;07;20

But kind of the short of what happened

with the bill around clean energy is that

 

00;56;07;20 - 00;56;11;14

if you want to buy, a vehicle,

 

00;56;11;14 - 00;56;14;14

an EV,

you need to do it by the end of September.

 

00;56;14;19 - 00;56;16;25

Correct. We want folks to know that.

 

00;56;16;25 - 00;56;22;07

And then also, if you want to invest

in a new Hvac or door or a window,

 

00;56;22;12 - 00;56;26;06

to take advantage of the home energy

efficiency credit,

 

00;56;26;12 - 00;56;28;17

you need to do that

by the end of the year. Correct.

 

00;56;28;17 - 00;56;30;19

Those are the two things

that came into play.

 

00;56;30;19 - 00;56;33;26

So if those are interested,

get working on that now.

 

00;56;33;26 - 00;56;34;24

Absolutely.

 

00;56;34;24 - 00;56;38;27

And folks can again reach out to their tax

advisor to go into those topics

 

00;56;39;05 - 00;56;40;28

on a greater detail. Absouttely..

 

00;56;40;28 - 00;56;43;28

We just want to make sure that that folks

have an awareness.

 

00;56;44;01 - 00;56;47;01

Well, Keith and Mike and Chip

and another Mike,

 

00;56;47;10 - 00;56;50;09

you guys are giving me more time

with two Mike's today.

 

00;56;50;09 - 00;56;51;18

Thank you.

 

00;56;51;18 - 00;56;54;26

Thank you, as always,

like, for your expertise and your guidance

 

00;56;55;05 - 00;56;58;26

and the care that you exhibit

to our, our advisors and our clients,

 

00;56;58;26 - 00;57;03;03

because ultimately, we really want to see

our clients achieve their goals.

 

00;57;03;13 - 00;57;08;11

So from markets, and economy, fixed

income, taxation, we've touched on

 

00;57;08;11 - 00;57;13;03

so many areas that we believe

are essential for your financial future.

 

00;57;13;18 - 00;57;17;07

If you want to view the charts

that we shared and explore other market

 

00;57;17;07 - 00;57;20;29

and economic content Truist

Wealth’s monthly publication,

 

00;57;20;29 - 00;57;25;01

the Market Navigator is available

through your advisor.

 

00;57;25;17 - 00;57;28;10

Our team wants to remind you

that regardless of the short

 

00;57;28;10 - 00;57;32;05

term market movements, regardless of

what's happening with fixed income today,

 

00;57;32;13 - 00;57;35;08

for instance, we believe in the benefits

 

00;57;35;08 - 00;57;40;20

of leaning into a diversified portfolio

built on a long term view of markets

 

00;57;40;20 - 00;57;43;20

and with an understanding of your unique

 

00;57;43;22 - 00;57;46;18

financial planning situation and goals.

 

00;57;46;18 - 00;57;48;18

This is the time that your Truist advisor

 

00;57;48;18 - 00;57;51;18

can support you on your investment

journey.

 

00;57;51;19 - 00;57;52;20

They'll listen to you.

 

00;57;52;20 - 00;57;54;08

They'll understand your goals

 

00;57;55;09 - 00;57;55;23

as well

 

00;57;55;23 - 00;57;59;16

as your concerns, and they'll help

you put all of this information

 

00;57;59;16 - 00;58;03;10

that we've talked about into long term

context,

 

00;58;03;22 - 00;58;08;08

helping you to make prudent adjustments

to your portfolio along the way.

 

00;58;08;28 - 00;58;13;12

Thank you for trusting your Truist team

to be part of your financial journey.

 

00;58;14;04 - 00;58;17;05

In a moment, a

survey is going to appear on your screen.

 

00;58;17;06 - 00;58;19;02

Please take the time to complete it.

 

00;58;19;02 - 00;58;23;20

We typically have a very high completion

rate and all of the feedback

 

00;58;23;20 - 00;58;24;24

that you give us,

 

00;58;24;24 - 00;58;29;00

we read it, we look at it and we use it to

hopefully drive improvement.

 

00;58;29;00 - 00;58;30;20

With this experience.

 

00;58;30;20 - 00;58;32;09

So thank you again.

 

00;58;32;09 - 00;58;35;02

We look forward to

talking with you in October.