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On-screen Text: Any comments or references to taxes herein are informational only. Truist and its representatives do not provide tax or legal advice. You should consult your individual tax or legal professional before taking any action that may have tax or legal consequences.

 

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On-screen Text: Election 2024: A conversation about policy, the economy, and market implications. October 2024. Securities and insurance products and services are not FDIC or any other government agency insured, are not bank guaranteed, and may lose value.

 

Visual Description: Oscarlyn Elder, Keith Lerner, Mike Skordeles, and Mark Oesterle sit at a news-style desk with papers in front of them.

 

Oscarlyn Elder: Hello and welcome to Truist Wealth’s Economic and Market Insights Quarterly livecast. We appreciate you joining us. I'm Oscarlyn Elder, Co-Chief Investment Officer for Truist Wealth.

 

On-screen Text: Oscarlyn Elder, CFA, CAIA | Co-Chief Investment Officer

 

Oscarlyn Elder: My team is responsible for selecting and analyzing the investment solutions and strategy that your Truist Advisor uses in creating your portfolio. Before we start our discussion today, we want to acknowledge the historic and widespread devastation that Hurricane Helene left across Florida, Georgia, the Carolinas, Tennessee, and Virginia. Our hearts go out to all who have been affected. The importance of Truist purpose to inspire and build better lives and communities is never clearer than when disaster strikes. Our thoughts are also with those in Florida affected by Hurricane Milton. Like our approach with Hurricane Helene, we will be there to support our teammates, clients, and communities.

 

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On-screen Text: Keith Lerner, CFA, CMT® | Co-Chief Investment Officer, Chief Market Strategist

 

Oscarlyn Elder: Joining me today is Keith Lerner, our Co-Chief Investment Officer and Chief Market Strategist. Keith and his team provide timely investment advice and guide Truist Advisors and clients through all types of market environments. They are responsible for Truist Wealth strategic and tactical asset allocation guidance, Truist tactical and ETF portfolios, as well as equity and fixed-income strategies. Keith’s prolific writing is highlighted regularly in financial press, and you'll often see him on Bloomberg TV, CNBC and Yahoo! Finance.

 

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On-screen Text: Michael Skordeles, AIF® | Head of U.S. Economics, Senior Vice President

 

Oscarlyn Elder: Also joining the discussion is Mike Skordeles, Head of U.S. Economics. He is responsible for analyzing U.S. and global economies and financial markets. Mike contributes to our investment guidance, and he also appears and is cited frequently in national media.

 

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On-screen Text: Mark Oesterle | Deputy General Counsel, Head of Regulatory & Government Affairs

 

Oscarlyn Elder: And today we have a special guest, Mark Oesterle. Mark is our Deputy General Counsel and Head of Regulatory and Government Affairs for Truist. He leads the Truist team that handles regulatory policy as well as federal and state government relations. We consider Mark our Washington insider, and he gives us a unique firsthand perspective into what's going on in D.C. and how that may affect our clients. With only 26 days to go, U.S. elections continue to dominate our conversations with clients. So today, we're going to take some time and explore the status of the presidential and congressional races. We're also going to talk about potential electoral outcomes and the possible policy and economic impacts, all from a nonpartisan perspective. We're also going to discuss the relationship between elections and market behavior and highlight our current thinking on market opportunity. So with all of that, Mark, it's great to have you here. And let's start off with your assessment of the presidential race.

 

On-screen text: Mark Oesterle, Deputy General Counsel & Head of Regulatory and Government Affairs. Leads the Truist team handling regulatory policy, federal and state government relations. More than 25 years of experience in financial services policy and legislative practice. Served as Chief Counsel for the Senate Committee on Banking, Housing, and Urban Affairs.

 

Mark Oesterle: Thanks, Oscarlyn. Well, we've actually started the election. Some states have begun early voting. The process is moving forward. So for folks who are hoping it'll end, we're at the beginning of the end. And what we know right now is that — notwithstanding the fact it's really hard to poll, it's hard to find people, it’s hard to really get them to answer directly or stick on a call for the five minutes it may take — we're still seeing from what we've been able to pull together that it's really, really close, which I think everybody knows and understands. And a little bit of a guidepost at this point is: Don't look at any national polls from now to the end. Start looking at the state polls and where it's close and what all the polls aggregated together say. It's not going to be easy to figure out exactly what's going on beforehand, but we're trying to figure it out by looking at those averages and looking at some key states.

 

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Oscarlyn Elder: So, Mark, since the election is here, polling is inaccurate, look at the state level polls and aggregate poll information as well. Those are kind of two key areas to start off with.

 

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Mark Oesterle: If you're trying to figure out the impossible to figure out, that's a good place to start. Yes.

 

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Oscarlyn Elder: All right. Let's also talk about which races or geographies are you really focused on as bellwethers to help us, you know, make our best estimate as to how the race is going to fall?

 

Mark Oesterle: Yeah. Like most of the last few elections, presidential elections, it's not really a national race. Now it's down to a few key states. I, at least think right now, as voting started, it's four, Pennsylvania, North Carolina, Georgia and Michigan. And we're trying to figure out from those races, looking at the back, looking backwards, looking at the past, you know, where are the key counties in Pennsylvania, say? It's the collar counties around Philadelphia, Chester County, which has been a strong Democratic county. But what's really important is that they need the Democrats. Vice President Harris needs a lot of turnout there to make sure she can carry forward, what she needs to get to overcome some areas where she has weakness. And on the other hand, places like Erie County in western Pennsylvania, which has been a bellwether, and has gone with the winner in, I think, at least the last 4 or 5 presidential races, President Trump's team needs to get his folks out as much as possible. But if you're watching and you hear results, from Pennsylvania, pay most attention, say, to Erie County. And then with like, North Carolina, we're actually now trying to figure out what the post-hurricane environment's going to mean for voting. There are more than a million people who are affected, and I know they are much more important things than the election. But just trying to figure out the way forward, looking at how or if they can vote is, is going to be important. Georgia is a state where the dynamic is: Atlanta kind of versus the rest of the state. And we're tracking as to who's doing the better job. Atlanta being more Democratic, the rest of the state being more Republican, who's doing the job getting their folks to the polls. And then finally, Michigan's become a key state, where I think a lot of folks thought it was clearly in the Harris camp. It's moved a lot. It's probably the state that's moving the most right now. And we're tracking like Wayne County. It's a big county where Democrats need a lot of turnout because it helps them deal with the rest of the state, areas where they don't have a strong showing. And then Saginaw County, which much like Erie County, is a true bellwether. It too has gone with the eventual winner multiple times. So, on election night, if you want a little nod to maybe some early insight, it's places like Erie and it's places like Saginaw that are going to give you kind of the sense because they've been pretty good at this the last few years.

 

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Oscarlyn Elder: So you've talked about those specific districts that folks should keep an eye on. You also mentioned, I believe, two of, the three blue wall states. So you talk specifically about Pennsylvania and Michigan. You throw Wisconsin in kind of have your blue wall. There's been some change in tone just in the last few days. And I think you noted it talking about some of the polling and in Michigan. Maybe, give us your perspective on what you think is happening in the race at this moment.

 

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Mark Oesterle: Well, I think things have gotten a lot tighter. And now it becomes a question of, the reality is that the vice president has a much stronger infrastructure in those three states. She has the ability to reach a lot more voters but, there does seem to be an element of her losing some momentum there. So, the question becomes, is that real? The other issue with polling is it's not always easy to figure out where the Trump voters are. We have not really seen, a pre-election poll that's accurately grabbed Trump numbers in the election. So we're trying to figure out, you know, in those three states in particular, is there a real move on? Could her infrastructure make a difference? You know, it used to be that you couldn't win without winning Pennsylvania. I have seen a couple of things recently that said, if Michigan and Wisconsin go for President Trump and he's up in the latest polls, including a Quinnipiac poll where he's never been near being up, he could win the presidency without winning Pennsylvania. But the bottom line is Pennsylvania still really matters. Something's going on. We'll have to see in these 26 days how that plays out.

 

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Oscarlyn Elder: And I think I saw an estimate today that maybe $350 million is being spent within Pennsylvania alone. And to your point, a lot of that is voter turnout.

 

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Mark Oesterle: It's mostly at this point that the messaging is done. They're still running ads. And we're all going to see the ads or people in the most, contested states are going to see the ads. But it's the infrastructure, it's the offices. It's knocking on doors. It's asking people, how can we help get you to the polls? That's going to be crucial. And, you know, $350 million in Pennsylvania is on top of probably $200 million previously. I just saw that Vice President Harris has raised over $1 billion, herself for this race. So the money is real and the effort is now on.

 

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Oscarlyn Elder: So, margin of error, race is super tight. It's changing daily. And you know, what we're trying to do here is give folks some guideposts that they can watch for on election night to help, to help, I guess, preview where things may go, which leads into my next question, which is: How likely is it that we will know November 5th or November 6th who's actually won this race?

 

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Mark Oesterle: Unfortunately, I have to say it's not very likely. I think with the way early balloting and absentee balloting has been changed, there's a lot of work that needs to be done to tabulate ballots. State election officials are not allowed to do that tabulation until after the polls close on election day. So they can't, you know, kind of preset things. Everything starts at those closure points. And if you've got hundreds of thousands of votes or more, it's just a lot of work. So that delays things to some degree.

 

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Oscarlyn Elder: So we're not going to know more than likely on election night, which means folks need to be patient. But there's also going to be some increased uncertainty for a period of time after the election. Keith, what do you think about that uncertainty in markets?

 

On-screen text: Keith Lerner, CFA, CMT®, Co-Chief Investment Officer, Chief Marketing Strategist. Leads the portfolio and market strategy, equity, and fixed income teams. Combines fundamental research and technical analysis in macro market forecasting. Regular guest on CNBC, Bloomberg TV, and Yahoo! Finance.

 

Keith Lerner: Yeah, well, first, great to be with all of you. And Mark and I have been on the road a lot. So it's great to be in the studio with you as well. I think going to your question, if we don't have a certainty and there's a period of even maybe contested elections, that would certainly drive some uncertainty for the market. Markets don't like uncertainty. But here's the important part: That will not last forever. Maybe it's a couple of days. Maybe it's a couple of weeks likely. Hopefully, it's not going to be a couple of months. And whatever movement we have, we think the market will then just revert back to its prior trend. So just keep that in mind. And by the way, if we sold off as a result of this, in our view that could be an opportunity as well.

 

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Oscarlyn Elder: Well, let's move to the congressional races. How likely is it that the House stays Republican and the Senate stays Democratic? What's happening with those races?

 

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Mark Oesterle: Well, much like the presidential race, it's really close. Also like the presidential race, it's limited geographically. There are specific places that are going to matter. And I'll start with the House. It's different than the presidential race. But where the House races that matter are largely located are blue states like California and New York, where Republicans have been able to get elected. Some of them got elected when President Biden got elected in 2020 and have won, you know, at least another race since, but now they're facing what always happens in an election year, which is a much larger turnout. So we’ll probably have a good insight early in the night, looking at some of the Hudson Valley Republican-held seats in New York. If they go red, they go blue, you'll probably get a sense as to how the rest of the House is going to go. But the numbers are really tight right now. It's my expectation, though, that the House is more likely to flip to the Democrats, which would lead to Hakeem Jeffries from New York being the next speaker. And then flipping over to the Senate, the dynamics there kind of work the exact opposite. The Democrats in this cycle, there's always either 33 or 34 seats up. The Democrats in this cycle are defending 23 out of 33. So that means they have more work to do. And there's a large number of states where they're defending seats that President Trump won, either in ‘16 or ’20 or both. So they're kind of playing on tough ground. And they've already had Senator Manchin from West Virginia retire. So losing West Virginia because that's an inevitability at this point, puts the Senate already at 50/50. And then having a number of key seats in states where President Trump will do well, just means it's going to be hard for the Democrats to run the table they need to not lose one more seat to be able to hold on to the Senate. So if I had to make a prediction, it looks like, ironically, the Senate will flip. We won't know who the majority leader is because that person will have to be elected by the newly elected senators after the election. But lots of turnover in government in the House and Senate. But one thing to note, things are so close, it's not impossible that either the House and Senate go both all R or all D, and it wouldn't happen—it doesn't take a ton of votes. We're talking maybe hundreds of thousands, maybe a little more than that. But it's so close, you could have sweeps, but they wouldn't be sweeps in the classic sense. Because notwithstanding, if the House went all blue—or the House and Senate went all blue and the House and Senate went all red, in both cases, these margins are going to be so tight that they would be majorities without real good governing authority, because it would be a vote or two in the Senate and, you know, 3 to 5 votes in the House. So we're looking at divided government. Even if it's unified, it's still going to be very tough going forward because the numbers are going to be so close.

 

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Oscarlyn Elder: So your message is that divided government is the likely outcome. But you want folks to be aware that because this is a margin-of-error race, the potential for an all-Democratic or all-Republican Congress is there. But it's not a mandate election. The margins are so thin there will not be a mandate for significant change.

 

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Mark Oesterle: Very difficult governing numbers like photo finishes, but photo finishes that could all break to one party, and then they get the fun of running the country with a vote or three votes. And we've seen the last few years, there can be circumstances where one person determines the fate of a policy. One-person situations like that mean you're not getting huge shifts or big-picture items coming down the pike.

 

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Oscarlyn Elder: Keith, your thoughts on divided government and markets?

 

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Keith Lerner: Historically, markets have done just fine under a divided government, so I think that will be okay. You mentioned already it's probably not going to be transformational. So that's probably actually a good thing in some ways from a market perspective. I will say, as you move into next year when you have some things that should be normal, like raising the debt ceiling, you probably will have, you know, even bigger battles, and that will inject some market volatility, maybe some periods of being uncomfortable. But overall, a divided government for the market has actually been somewhat positive.

 

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Oscarlyn Elder: Let's shift for a minute. Now that we understand the current landscape and talked about policy differentials, where I'd like us to focus first is the responses that we've gotten from clients: Tax policy is probably the number one thing that they're asking about. So, Mark, I'm going to start with you. Help us understand again the landscape, given the dynamics that you've just articulated, kind of: How do you see tax policy evolving?

 

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Mark Oesterle: Tax policy, like most of the things and the things Keith highlighted, is going to move forward via scrum. I mean, there'll be lots of fights, there'll be close numbers. People will be looking to build coalitions in the House and Senate to narrowly push whatever they're looking for. We know that the Trump tax cuts expire. We know there are limits to what expires, but there is also a need for revenue. There's also an interest particularly in Vice President Harris having a strong economy. I mean, President Trump will want it too. But Vice President Harris, when she does have the ability to stand for re-election again. So a straight partisan, “We're just going to take every tax rate and raise it” thing is not as likely because she's going to want to pick and choose to find the right revenue balance, the right growth balance, and those kinds of things. So, tax policy, big scrum. I would suspect everything's on the table, even corporate rates because they're going to need to balance growth, revenue, and the policy provisions they were pushing. They're not going to be able to get them all out there, but they're going to want to try to do something that reflects what they campaigned on.

 

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Oscarlyn Elder: And I just want to know, you mentioned what we've been talking about here for several quarters. And actually, I think our first communication was on I've Been Meaning To Do That, episode number ten, which was tax planning for a year-end last year. So we've talked repeatedly about the sunset that's coming for tax policy. And specifically calling out to a number of our clients that the estate tax exemption, if no action has been taken, the estate tax exemption is going to move from $14 million — around $14 million — I think it's $13.61 million for an individual -- to around $7 million. And then for a couple from $28 million down to $14 million. And we want folks to have an awareness of this so that they can start to plan ahead for what's likely to be kind of given the potential dysfunction, the margin of error that you're talking about. Given all of that, we would like for them to be engaging with advisors early now versus waiting towards later in ‘25, when they may not be able to get done what you want to get done. And I'll also point out that, if you'll talk to your advisor, our 2024 year-end tax planning guide is out. It's really good and can help you just understand, I think, these issues on a deeper level. So I want to make sure we talk about that. Mark, I want to turn to a second—for our, or turn to the uncapping, or to the potential uncapping of state and local tax deductions. And what do you think happens with that SALT tax provision, which really impacts a lot of folks in the northeast and I would say probably Maryland and higher? From a geography perspective, how do you see SALT playing into the dialogue?

 

Mark Oesterle: Who wins really matters. It's possible you could have a Democrat from New York and a Democrat from New York running the House and Senate, and I think they'll feel the local pressure on that significantly. But, you know, as we noted, the revenue chase is going to be huge in how this fits in with everything else. And you're talking about a state tax. One of the big things Vice President Harris is talking about is small businesses. There is a correlation or an impact there. So everybody's got little things they want to get done. I think salt will be on the table, like I said, especially if the Democrats from New York are in charge. But nothing's going to be easy to get a massive win on. I think everybody's going to have to give a little to get a little. So my expectation is incremental changes are the things that people can hope for the most. And it will still be a fight to get there.

 

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Oscarlyn Elder: And so with your sentiments there, the incremental change, I'm going to ask one other one about one other element, unrealized capital gains, the potential to tax unrealized capital gains. It's gotten some attention this race. How are you seeing that potential?

 

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Mark Oesterle: I think it's been talked about because it plays into the talking point that, firefighters pay a higher rate than billionaires and things like that. But logistically, it's just so difficult to implement something like that. And it wouldn't just be for like the first year. As you went through multiple years and the unrealized gain actually is followed by an unrealized loss or whatever the paperwork and the back and forth and the difficulty in establishing a steady stream of income, I think over time would probably prove too difficult to keep that kind of provision. So it's something folks are going to talk about. But when you sit down and try to figure out, could we implement this? I think folks would realize this is nearly impossible. So it's not likely.

 

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Oscarlyn Elder: Okay. Very good. Mike, I'm going to turn to you. So again we're talking about tax policy. How do you see that potential evolution in tax policy impacting the economy or not.

 

On-screen text: Mike Skordeles, AIF®, Head of U.S. Economics. Shapes Truist Wealth’s macro outlook on the U.S. economy, helping clients make sense of complex economic trends. Authors Truist’s Economic Commentary and Economic Data Tracker. Regularly is shown with a title card introducing him.

 

Mike Skordeles: So taxes obviously are a big gauge for both businesses and individuals. Mark brought up the fact that we're likely not to have a mandate from either side. That's going to factor into things. The biggest thing I think, though, is deficits are definitely going to be a challenge. No matter which team wins, the red team or the blue team, they're going to have to navigate that. So on the campaign trail, both sides have talked a lot about “We're going to give this tax break and that tax break.” It's going to be really difficult to put that into place in practice because of these massive deficits. So that's something that they're both going to have to deal with. That said, I would also call out one of the pieces. So, the sunset, the sunset on most of those provisions of the 2017 tax cuts, it's at the end of 2025, not the beginning. That said, they are going to have to deal with the debt ceiling and other things right inside the new year in January 2025. They're going to have to deal with that. So they're going to fight probably early and often. That's something that they're gonna have to deal with.

 

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Oscarlyn Elder: And Mike kind of your thought is that the shape of the deficit and the overall debt burden is such that that too, limits the potential for transformative tax policy, especially on the tax break side?

 

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Mike Skordeles: Absolutely. It's going to be difficult to implement additional tax breaks. That said, it does sound like there's some bipartisan support for extending many of the provisions of the 2017, tax changes, to Mark's point. Both sides want to get re-elected, there are midterms, etc. they're going to want to maintain some of those tax breaks. So it's highly likely that some of those pieces are going to get reenacted, which means from an economic standpoint, extending the good times that we've seen in the economy.

 

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Oscarlyn Elder: And Keith, what about your work and the relationship between tax policy and markets?

 

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Keith Lerner: Yeah. Well, the first thing, it does matter. It matters on a personal basis. It matters from, you know, a small business standpoint. It can matter for corporations. But we've done a lot of work to try to say, “Okay, if tax rates change, what does that mean for the market?” And we cannot find a consistent relationship. And just as the most recent example, over the last decade or so, you can think about 2013 when we raised taxes and a lot of our clients were concerned that the market was going to go down. It actually was up over 20%. And then you fast-forward to 2018, and we had significant corporate tax rate cuts and the market was flat. And why was the market flat? Well, it was because those corporate tax rates came down. But then the economy started to pick up a little bit, which is a good thing. But then interest rates started to move up. And guess what the Fed did. They started to raise rates. So there was an offset. And that's one of the main messages today. Like all this stuff matters. But you can look at it in isolation.

 

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Oscarlyn Elder: Good discussion on taxes. Let's move quickly to trade and tariffs. And Mark I'm going to start with you. Help us understand how both Harris and Trump are approaching this particular policy area.

 

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Mark Oesterle: Well, I think at least in particular as relates to the president, former President Trump, he's using it to kind of push to get the labor vote and to attract votes. But I also think he's using it as a negotiating ploy with Europe and China and a bunch of our big trading partners. I'm not sure the specifics will ever come into reality. Vice President Harris, interestingly, has found a way to pivot off Trump's comments on tariffs to say he would raise inflation, trying to deflect the inflation argument that that that she is having to deal with. But I think the bottom line is a lot of what we've seen done stays, but a lot more will be really hard because of economic issues or because of the fact that it might trigger trade wars. And, you know, President Trump, if he were to be reelected, I think would push, but he would find ways to get some of what he wanted done, not the big headlines we're seeing right now.

 

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Oscarlyn Elder: And, Mike, how about from an economic perspective, what should folks be thinking about as it relates to this?

 

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Mike Skordeles: Yeah. So Mark's point about retaliation and and trade wars is important insofar as we can enact something. But the other side's allowed to enact something as well. So whether it's Europe or China and other places, increased tariffs by our trading partners mean it's bad for US exports. So ultimately it would be bad for for U.S. producers and ultimately bad for the US economy. So you again, can't look at things in isolation. Additionally, we've seen certainly in the Trump 1.0 administration where they proposed a number of tariffs, and those tariffs were never enacted because our trading partners went to the World Trade Organization or the WTO and immediately filed suit. And so we had to back down. So it's important to understand that these things aren't done and the US gets to make a decision and everyone else just has to live with it. That might be the case on the campaign trail, but there's a different reality when you actually have to trade and participate in the global economy.

 

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Oscarlyn Elder: Yeah. Thank you, Mike. And I want to make sure folks know we're certainly aware that areas like foreign policy and immigration and regulatory policy are critical. We just don't have enough time to dive into all of those areas today. We probably would have needed a two-hour livecast, which is too much. So we wanted to focus our efforts on where clients have been asking the most questions. So with that, now we're going to pivot over to Mike to talk about the economy. Mike, we focused a lot on the election, but tell us your view on the current state of the economy.

 

Visual Description: Mike Skordeles is shown. A graph on-screen next to him entitled “U.S. economy -- cooling but resilient” displays the growth of US GDP each year from 2017 to 2023 with values projected for 2024 and 2025. A dotted line at 2.4% represents the 2010-2019 growth average. From 2017 to 2019, GDP grew 2.5%, 3%, and 2.6% respectively before decreasing 2.2% in 2020. It grew 6.1% in 2021 before settling back to 2.5% and 2.9% in 2022 and 2023. 2024 is projected 2.6% GDP growth and 2025 is projected 2%. Data sources: Truist IAG, Bureau of Economic Analysis. Change in real (inflation-adjusted) gross domestic product year over year, actual for 2010 through 2Q2024. f = Truist IAG forecast for the remainder of 2024 and 2025.

 

Mike Skordeles: Yeah. The biggest thing for people to understand is that the economy's probably doing a lot better than you think it is. Specifically getting to my kind of second point, which is jobs. Jobs have surprised, the upside, consistently over the past few years, even after we consider there were annual benchmark revisions that lowered the number of jobs over the prior couple of years. We're still surprising to the upside, even surprising compared to what we had expected from an economic growth perspective. We're doing better in 2024, better than double what we expected coming into the year. And the same thing for the kind of consensus numbers we do expect a little bit of a slowdown as we move into 2025, partially because that's what's expected based on where current policy is, especially tax policy and other things. But if those tax cuts get extended, it's likely that 2025 stays a lot closer to the longer-term trend. So again, the economy's somewhat cooling from the prior few years, but it remains very resilient. The other thing that I would point out is that looking ahead, the Federal Reserve started cutting rates. It's important for the economy, for the immediate, it's more of a sort of modest positive. But really, as we look out to the first quarter and second quarter of 2025, that's when those tax cuts today are a lot more important. That's because if you really think about it, companies that are borrowing are really thinking about building that building or, you know, building that piece of equipment that somebody's going to order today, it's really going to get done a couple of months after you get that financing in place, put the order in, etcetera, it takes a while for that. There's a lag, if you will—

 

Oscarlyn Elder: —long and varied results—

 

Mike Skordeles: —long and variable lag, so it's going to take a while for that to come through. But ultimately the U.S. economy is doing just fine. It's not all sunshine and unicorns, but it's staying along that long-term trend, that pre-pandemic trend somewhere around, you know, 2.5%-ish on an annual basis.

 

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Oscarlyn Elder: And importantly, when you mention the revisions, you're getting a lot of questions from folks who are asking about the 800,000 revision number. And your message is taking that into consideration, given all the data that we can see, we're still on firm footing.

 

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Mike Skordeles: Yeah, we are still surprised by the upside. So year-to-date 2024, we've averaged about 200,000 jobs per month compared to the pre-pandemic three-year trend. It was about 177,000. So again, even with those lower numbers that got revised lower, we're still surprising to the upside. So again, still on solid footing.

 

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Oscarlyn Elder: Let's talk now about the path of interest rates. A number of folks asked about that when they registered. So, Mike, I'm going to turn to you first. How do we see interest rates moving in the short to intermediate term, short-term interest rates?

 

Visual Description: Mike Skordeles is shown.

 

Mike Skordeles: Yeah, short-term interest rates, as far as what the Fed controls, those overnight rates, they've already cut a half a percent. We expect them to cut another half a percent by the end of the year, a quarter percent at the November meeting, and another quarter in December. So a full percentage point here in the last, you know, by the end of the year, last few months, that's a lot. As we move into 2025, we expect them to throttle that down a bit. It's likely to be about a quarter point per quarter. So another call it 1%, maybe a little bit more that by the end of 2025, interest rates are probably about 3.75%, maybe 3.5%, depending on how those numbers are. Again, they are data-dependent. They're going to see all the data coming in, including inflation data. This morning we got another batch of inflation data. It was pretty good. But there were still some areas where inflation is still hanging in there or is stickier if you will. So it's going to take a while for inflation to continue to ramp down. We think that does happen. But it's not going to be a straight line. It might be a bit of a bumpy path.

 

Visual Description: Oscarlyn Elder is shown.

 

Oscarlyn Elder: Yeah. It's a winding journey if you will. Keith, Mike's talked about short-term rates. What are we thinking about ten-year treasury rates?

 

Visual Description: Keith Lerner is shown.

 

Keith Lerner: Yeah. So as Mike mentioned the short-term rates are governed by the Fed. And the longer-term rates are governed by the market as far as economic and inflation outlook. And our fixed-income team, led by Chip Hughey, has done a really good job of navigating the ups and downs of the interest rate path. After the first rate cut, historically, when you look forward, 12-month rates tend to continue to move down. I will say, on a short-term basis, we think yields are closer to fair value right now. So as Mike mentioned maybe a little bumpier path. But as the economy is cooling and inflation comes down, they should go down over it over time. But again it's going to be a bit of a bumpy, bumpy path in a way actually. One more thing is that part of this is also dependent on what happens with the election and how much deficit spending we actually see because that could actually obviously change things quite a bit.

 

Visual Description: Oscarlyn Elder is shown.

 

Oscarlyn Elder: All right. I'm going to ask you a question that you get asked a lot. We're going to ask it again because folks continue to want to know. How does the political uncertainty that we're talking about and really those margin of error races and the lack of a mandate, the potential lack of a mandate outcome, how does that feed into our market outlook?

 

Visual Description: Keith Lerner is shown. A chart on-screen entitled “Markets have done fine under a wide range of party control scenarios” with ‘Truist Advisory Services, Inc.’ text on the top right displays average annual S&P 500 returns from 1933 to 2023 under different partisan controls as a bar chart. With a Democratic Senate, Republican House, and Democratic president, the S&P has returned 15.7%. With a Republican Senate, Democratic House, and Republican president, the S&P has returned 13.7%. With a Republican Congress and a Democratic president, the S&P has returned 13%. With a Republican Congress and a Republican president, the S&P has returned 12.9%. With a Democratic Congress and Democratic president, the S&P has returned 9%. With a Democratic Congress and a Republican president, the S&P has returned 4.9%. Data sources: Truist IAG, Strategas. Past performance does not guarantee future results.

 

Keith Lerner: I think you know the answer to this. We've talked about this on a livecast, and we've talked about this in one-on-one meetings. The main message from our group all year long is the elections matter, but they're not the only thing that matters. And, you know, one thing to keep in mind is we are having the strongest year-to-date gains of any election year going back to the 1950s, despite all this craziness that we've seen this year. So keep that in mind. That's partly because of what Mike talked about, the economy and corporate profits as well. The chart you're looking at now that's coming up also shows historically whether we have had divided government or not, you've tended to have a good overall market. That doesn't mean you're not going to have pullbacks or you're not going to have more challenging times. But in general, other factors tend to matter more for the state of the overall stock market.

 

Visual Description: The entire desk is shown.

 

Oscarlyn Elder: So other factors matter more. Elections matter, but other factors matter more. Walk us through those factors. Let's start with the first one that you think is mostly the most important.

 

Visual Description: Keith Lerner is shown. A line chart on-screen entitled “Other factors matter -- Business cycle has significant influence on stocks” with ‘Truist Advisory Services, Inc.’ text on the top right displays the growth of the S&P 500 from 1950 to today with recessions marked as vertical gray bars. The value begins around twenty and consistently climbs despite recessions to the 2024 value of around six thousand. Data source: Truist IAG, S&P, Haver. Shaded areas represent recessions. Logarithmic scale used. Past performance does not guarantee future results.

 

Keith Lerner: Yeah, my message hasn't changed that much, but the trick for me is how do I change the message and provide maybe a different way of looking at it, but I think the first one is the business cycle by far. And, you know, if you think about the stock market historically, it tends to move higher when the economy's expanding. And why is that? Because corporate profits are moving higher. And when you're buying the stocks you're buying profits. So I think just keep that in mind. Mike just discussed that kind of the base case is that we still show some resiliency into next year. And the other thing with this first rate cut that we've just had from the Fed historically, after they've cut rates a year later, as long as the economy avoids recession, which is our most likely scenario, in our view, the market tends to move higher. And that is a continued base case today. We follow the weight of the evidence and we will adjust if the data changes, but that's how we see things today.

 

Visual Description: Oscarlyn Elder is shown.

 

Oscarlyn Elder: Keith, how about monetary policy? How does that impact from an other-factors perspective?

 

Visual Description: Keith Lerner is shown. A bar chart on-screen entitled “Other factors matter -- Most aggressive global easing cycle underway since pandemic” displays the number of central banks hiking minus easing from 2018 to 2024, split into categories of emerging and developed. In 2018, more banks were hiking than easing, before the opposite was true in 2019 and 2020 when the value reached its minimum of about -28. From 2021 through 2023 banks began to hike again, increasing significantly to a maximum value of about 27. During 2023, the value began to decrease, which continued into 2024 until reaching the current value of about -15. Data sources: Truist IAG, Haver. Series constructed using predominantly countries in the MSCII All Country World Index. Data through September 2024.

 

Keith Lerner: Well, what's notable is -- there's a couple of old adages on Wall Street and one is, don't fight the trend, so the price trend on the market, and don't fight the Fed. And what's really important to understand is today, not only are the US and the Fed cutting rates, but we also have more stimulus action from the European Central Bank as far as monetary cuts. And also more recently we saw big announcements out of China. So you can say don't fight the Fed, but don't fight the ECB, and don't fight China as well. So those two things are still working for us collectively. And the chart we're looking at just shows the net amount of central bank cuts is now at the most aggressive level since the pandemic.

 

Oscarlyn Elder: What other factors would you have folks think about as well?

 

Visual Description: A line chart on-screen entitled “Profits drive markets and companies adapt and innovate” with ‘Truist Advisory Services, Inc.’ text on the top right displays S&P 500 trailing earnings from 1950 to today, with a dotted trend line. The S&P shows consistent growth throughout the period of the chart, beginning around a value of four and finishing near two hundred. Data sources: Truist IAG, Haver. Series constructed using predominantly countries in the MSCII All Country World Index. Data through September 2024.

 

Keith Lerner: It goes back to profits, right? I mean, you know, we can talk about Washington. We can talk about all the changes in Washington. But at the end of the day, again, we're buying companies for their profits. And, you know, we thought another way of talking about this or showing this is zooming out, and the chart we're looking at now looks at corporate profits back to the 1950s. And we've had all different types of Washington regimes during that period of time. But what do you see? A nice steady trend. That doesn’t mean we don't have some blips along the way, but look how steady corporate profits have been over time. And you know, the one thing I always say is that once corporations understand the rules of the game or engagement, they will adjust. We saw that coming out of the pandemic. Once-in-a-generation pandemic, we've seen corporate profits hold up during this really high inflation environment, and they will adjust again regardless of what happens in Washington. Washington can make it easier or more difficult to do business, but our companies will adjust.

 

Visual Description: Oscarlyn Elder is shown.

 

Oscarlyn Elder: Yeah. And then lastly we need to talk about deficits some more. I know that factors into how you're thinking about things. So talk about deficits.

 

Visual Description: Keith Lerner is shown.

 

Keith Lerner: Yeah it's probably the number one question. Mike, I know you're on the road a lot. I'm out there a lot and still probably the number one question, a lot of concern. Deficits do matter. Maybe Mike, maybe you talk from the economic standpoint. You mentioned it before.

 

Visual Description: Mike Skordeles is shown. A line chart on-screen entitled “Whomever is president will need to deal with surging deficits”  with ‘Truist Advisory Services, Inc.’ text on the top right displays interest payments on national debt as a percentage of total federal outlays beginning from 1940 and projected through 2029. The average is graphed at 9% with a dotted line. The value drops below 3% in the 1940s before climbing to a local maximum of 15% in the late 1940s. It then levels out around 6% until the 1970s, when it begins to climb to its maximum of 15.4% in 1996. It drops down to near 6% again before climbing to a 2024 value of 12.8%, projected to increase to 14.3% by 2029. Data source: Truist IAG, Office of Management & Budget (OMB). Right chart uses constant dollars, as of fiscal year 2017, for both outlays and net interest payments and OMB estimates for 2024 through 2029.

 

Mike Skordeles: Yeah. So when you have massive deficits the way they are, it crowds out a whole lot of other spending that the federal government can do. So the other question that I get right after that question is, “Well, is there a tipping point? When is it going to matter so we can pay our bills?” It's the prioritization of what kind of spending we're going to do based on everything else that you have to pay. So again, climbing deficits and that additional spending really isn't in the card especially you know, again we talked about mandates and other things is that it's going to be really difficult. And either side, blue or red, is going to have to navigate that going forward. So it's really going to constrain what they're able to do. That said, the one thing that there has been bipartisan support on for the last two and a half decades is to run up deficits. They really can't do that. As we move forward it's gotten to a point where bond markets really don't care at some point.

 

Visual Description: Keith Lerner is shown.

 

Keith Lerner: Yeah. And from a stock market perspective, which is the initial question, it's hard to invest based on the deficit. We have a lot of cash-rich companies. And Mark and I also joke around about that. It's not really a joke, but at some point, if the bond market gets uncomfortable with the deficits -- which, by the way, they've become a little bit uncomfortable, but, you know, at this point, yields are still around 4%, that's really below the long term average. Mark, what's the saying from the political strategist from the ‘90s talking about the bond market and kind of keeping the fiscal side in check?

 

Visual Description: Oscarlyn Elder and Mark Oesterle are shown.

 

Mark Oesterle: And how much it matters. James Carville said way back when that when he was a little kid in his next life, he wanted to come back as Mickey Mantle. Now, as he grew up, he wanted to come back as the bond market because they didn't have to answer to anyone. Well, no one was paying attention for the last 30 years, but now the bond market may be back.

 

Visual Description: Keith Lerner is shown.

 

Keith Lerner: And the point there is, if there is some big fiscal deficit spending that continues, at some point those years will come up. And that's where the risk is, right? Yields start to get unhinged and that will disrupt equities, fixed income and so forth. We're not there. We don't think we're likely there yet, but that is that is certainly a risk.

 

Visual Description: Oscarlyn Elder is shown.

 

Oscarlyn Elder: But the reality of the deficits, kind of going back to what you were talking about earlier, Mark, and you've mentioned it, Mike, those deficits will limit what whoever wins can do once they get into office. It is a reality that they are going to bump up against in a very meaningful way. No free lunches. All right. Keith, let's talk for a few minutes about tactical portfolio positioning because we always touch on that during this time. So what's your team recommending or how's your team seeing the investment landscape?

 

Visual Description: Keith Lerner is shown. A chart next to him entitled ‘Key positioning’ with ‘Truist Advisory Services, Inc.’ text on the top right displays Truist’s positioning on different investments rated on a five point scale, with 1 being less attractive and 5 being more attractive. Under asset classes, equity is 4, fixed income is 3, and cash is 2. Under global equities, U.S. large-cap is 4, U.S. small-cap is 3, and international developed markets and emerging markets are each rated 2. Under fixed income, U.S. government is 4, duration is 3, and U.S. investment grade corporates and U.S. high-yield corporates are each rated 2.

 

Keith Lerner: Yeah. And I'll keep this at a high level for today since we've focused so much on the election. If you want to go into more details, I would just say for our clients, reach out to your advisor. We have a lot of publications, but, you know, big picture, we still think we're in a bull market. So we have an emphasis on stocks. We’re still finding opportunities in fixed income, more focused on what we call high quality. Back in April, we downgraded our view of cash because our view was the Fed was going to start cutting rates. And as they cut rates, you know, people will start seeing lower returns on cash and money markets, that type of thing. As we think about the global equity side, we've been Team USA as far as bias for some time. We're still Team USA. We like large caps and part of the reason why we still like large caps is we're still positive on the technology sector. The technology sector has had a good year, it underperformed a little bit. Short term, we think that leadership is likely to reassert itself. We don't think we are in an AI bubble. The strongest profit trends are still in tech and that's the sector we still like. And that favors large caps. Small caps should do a little bit better with interest rates moving down because they're more leveraged, to interest rates, or they have more of what's called floating rate debt. We are underweight. In international markets, we did make a subtle shift here more recently. We have in emerging markets where China is over 25% of that index, all that stimulus has come out. We think they're committed to helping support that market and that economy near-term. So we did upgrade emerging markets slightly. We still have some structural concerns and demographics. Housing policy has been pretty erratic, but on the margin, things have improved somewhat with this recent stimulus announcement. And then, as I just mentioned before, within fixed income, we're really focused on high quality. The good thing about fixed income this year is that fixed income is acting like fixed income again, it’s providing income. And as the stock market has had some hiccups, the fixed-income market has done better to really buffer portfolios to help anchor portfolios as a whole.

 

Visual Description: Oscarlyn Elder is shown.

 

Oscarlyn Elder: Are there any parting thoughts that you want to leave folks with kind of combining election discussion, economic discussion, and market discussion all into one?

 

Visual Description: Keith Lerner is shown. A bar chart on-screen entitled “Staying invested regardless of the political party in power has been the right strategy over the long term” with ‘Truist Advisory Services, Inc.’ text on the top right displays the growth of one thousand dollars invested since 1946 based on the presidential party. Staying invested under only Democrats would have yielded $155,061. Staying invested under only Republicans would have yielded $28,926. Staying invested under both parties would have yielded $4,485,354. Data sources: Truist IAG, Bloomberg. Original concept Bespoke Investment Group. Assumes when stocks are sold, they are not invested in market. Past performance does not guarantee future results.

 

Keith Lerner: I can do that, hopefully succinctly just because we've gone over a lot of things today. So just to recap, I think Mark talked about the potential of the potential of divided government. Even if there was a sweep, it would be so tight. So keep that in mind. Not likely to see a transformational type of movement. Mike discussed a resilient economy that likely continues. That's important for the stock market and probably the lasting thought from everything we're talking about is, you know, a phrase I often use is “Don't mix portfolio and politics.” If you look at the graph we're showing, I think it's very powerful. It just says, would you be better off staying invested during all different political, regimes? Or if you just said, “Hey, the person in office who I wanted to win didn't win, let me sell assets and only invest whether there's a Democratic or Republican in office,” you can see that the buyers that only invest when one party is in office are low. The big bar is the one that is much higher. And that's just because there's the compounding effect. And as I mentioned earlier, companies adjust. So you're not buying Washington when you're investing. There are impacts from Washington, but at the end of the day, you're buying the ability of our companies to adapt. And they've done it for over 100 years. So I expect that to continue.

 

Visual Description: The entire desk is shown.

 

Oscarlyn Elder: Well, on that note, Keith and Mike and Mark, I want to thank you so much for being here today and for sharing your expertise with us. I very much appreciate that.

 

Visual Description: Oscarlyn Elder is shown.

 

Oscarlyn Elder: And in closing, if you want to view the charts that Keith and Mike shared and explore other market and economic visuals, Truist’s Wealth’s monthly publication, The Market Navigator, is available through your advisor. We last published it on October 2nd. And a quick reminder that our next livecast will be January 14th, 2025, and we will be covering our annual outlook for 2025 at that time. If you have questions about today's event or your unique situation, please reach out to your Truist Advisor or team. And lastly, we're here to help you stay anchored and filter out the noise while also using the weight of the evidence, which Keith talks about a lot to position for timely opportunities and to help you build your purposeful portfolios, all in support of helping you achieve your financial goals. Thank you for trusting the Truist team to be part of your financial journey. And as always, I have one more request. We want this live cast to continue to be a series that's meaningful for you. So if all goes well, when we finish this call in a few seconds, our survey is going to appear on your WebEx screen. Please take the time to complete it and give us your feedback. We read through every statement that's given to us and we look at all the numbers. So it really helps us shape future events and to make them better. Thank you again. We look forward to talking with you in January.

 

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The HFRI Macro (Total) Index includes managers with a broad range of strategies in which the investment process in predicated on movements in underlying economic variables and the impact these have on equity, fixed income, hard currency, and commodities markets. Investing in commodities is speculative and involves a high degree of risk and not suitable for all investors. Hedge funds often engage in leveraging and speculative investment practices that may increase the risk of investment loss, can be highly illiquid, and are not required to

provide periodic pricing or valuation information to investors. Hedge funds may involve complex tax structures and delays in distributing tax information. Hedge funds are not subject to the same regulatory requirements as mutual funds and often charge higher fees. Investing in commodities is speculative and involves a high degree of risk and not suitable for all investors. You could lose all or a substantial portion of your investment.

The Morningstar LSTA Leveraged Loan Index is a service mark of Morningstar, Inc. and has been licensed for certain purposes by Truist Bank. Morningstar and the Loan Syndications and Trading Association (LSTA) do not guarantee the accuracy and/or completeness of the <Insert name of Product> or any data included therein and shall have no liability for the use of such data. Alternative strategies are not suitable for all investors. Many alternative strategies use sophisticated and aggressive techniques. Certain alternative strategies may be tied to hard assets such as commodities, currencies and real estate and may be subject to greater volatility as they may be affected by overall market movements, changes in interest rates of factors affecting a particular or currency, and international economic, political, and regulatory developments. Investing in commodities is speculative and involves a high degree of risk and not suitable for all investors. Truist, TruistⓇ, GFO Advisory Services®, and Sterling Capital® are service marks of Truist Financial Corporation. All rights reserved. All other trademarks are the property of their respective owners. ©2024 Truist Financial Corporation. TruistⓇ, the Truist logo, and Truist purple are service marks of Truist Financial Corporation. All rights reserved.

CN:2024 xxxxx EXP 09-2025

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