Morning, everyone. Welcome to our latest market update webcast. As always, this is Kevin McCreadie, AGF's CEO and Chief Investment Officer, and Greg Valliere is with us again, AGF's Chief U.S. Policy Strategist in Washington, D.C. I'm David Pett, editor of the AGF Perspectives blog and your moderator for today's discussion. As always, I need to cover off a few administrative items related to our virtual event platform. Today's presentation will last no longer than 60 minutes. Those joining us live can submit questions any time during the presentation by opening the Q&A icon found along the side of the presentation screen, and questions will be addressed near the end of the webcast. Additional resources for this session can be accessed in your attendee hub at the top of the page, under the Resources tab. Finally, please note, CE credits may be available for members of our Canadian audience. Okay, Kevin, Greg, thanks for being here. Greg, it's been a while. Hope you've enjoyed your summer and had a bit of time off. Let's get right into things and go through a bit of a market recap, if you will, Kevin, over the last month. There's been lots of action. We were joking yesterday that it's kind of been summer fireworks this year, not summer doldrums. Maybe you can just run us through what you've seen and how you interpret how markets have performed over the last little bit. Great, David, and thank you, everybody, for joining us this morning. Yeah, if you had taken a two-week break that started on August 1st and came back this Monday, like a two-and-a-half week break, you would've looked at the market when you left and looked at it when you got back, and if you hadn't looked at your phone over the time you're on vacation, you would've said nothing's gone on, 'cause we're about where we were when we left off. If you actually had not been on vacation, you saw this massive drawdown. Not massive, but, you know, depending on which market you're in, a 6%-10% kind of drawdown between that first week of August to where we're maybe halfway through this period. What was the driver of that? We had a strong start to the year. We get to July, we've had a really strong start, and even with the seasonal weakness we typically get in the summer, markets had hung in there. Markets hung in there over the spring into the summer, even though we've repriced out over that period of time a bunch of rate cuts, right? Then you get to July, and the end of July, and a couple of things have happened. One starts with the Powell testimony on July thirty-first, which was kind of dovish. The next morning, we get a manufacturing report in the U.S., which showed that things had started to weaken, and presumably, the Fed had that report, but they chose basically to say, "We're not cutting." But they did basically start to move you to a September as being a starting point, maybe, for that. Very dovish, and then you follow it up with that Friday, which was perceived by the markets as a weak job report, meaning we only added 108,000 jobs, not the 150-ish that we were looking for. Job report was actually pretty good. But you put that in, and people said, "Oh, man, we've been too late. The Fed is too late. They should have been cutting, and we're going into a recession." And you unravel a lot of risk trades. At the same time, and there's been a lot written about this, literally coinciding with that has been this yen carry trade unwind, which was where people had borrowed a lot of money in yen. They took their yen, sold it to buy dollars, which drove up the dollar, weakened the yen, and they took those dollars and bought everything risky. So Bitcoin, FANG stocks, NVIDIA, you name it, right? And when the Bank of Japan raised rates, folks basically got hit on the backup in the currency, and they basically unwound those trades, so they sold all their risky assets, sold their dollars, bought back yen, strengthened the yen, and it became self-fulfilling. So you throw that in the mix, and then you look at this recovery period, and it's been about the fact that the data has been not as weak as people thought. This idea that the recession is imminent has kind of faded a little bit, and with that, you've seen a pretty good rally in stocks, and back to where we started. Data was better on retail sales. Data on unemployment claims was kinda a little bit more benign than the week before. The week before, which was a bad number, meaning a lot more people claiming unemployment, a lot of that was weather. And so now that we're back to, okay, maybe we can navigate this, the soft landing. And so again, markets have fully recovered, highly volatile, and we expect it to be that way for quite some time. So that's kind of where we are today. So, Greg, maybe I just get you to weigh in on... You have, you did take a little bit of time off. So, just that idea of, you know, missing what's been going on, just your impressions of what you've seen throughout the summer in terms of markets themselves, and then we'll get in a little bit more about the U.S. political landscape and the U.S. election. First of all, I spent a week and a half looking at the wires every single day, looking at what's going on in the U.S. It's such an incredible story. You can't make this stuff up. Obviously, this has been one of the most significant momentum shifts that I've seen in all the many years I've covered politics. I think that the move by Kamala Harris from being down by three to being up by, I don't know, four, five, six right now, I think it's largely because some key factors have moved dramatically. Young people finally are enthused. African Americans, who love her, and they have gotten her a huge lead now in North Carolina. Women do not love him. Women have been quite harsh in their assessment of Trump, and especially his juvenile, sophomoric insults, calling Kamala Harris a communist, saying that she's a lunatic. This doesn't help, and I've talked to a lot of Republicans since I've gotten back, who have said, "This is not the way you win the White House, to insult your opponent, a female opponent." So things have changed dramatically. However, nothing lasts permanently, and I would say after watching the first couple of nights of the Democrats' convention, they have to be careful about getting too cocky. I think they feel that they have this wrapped up, that they are going to win easily, and I don't buy that. I think things will level off, maybe with a lead of five, six points going into the debate on September tenth. Then it gets really serious. If Trump can't come back, I think he has to worry, and the Republicans have to worry about problems in the Senate and in the House. Final point I'd make on this is as follows: The markets have done fairly well, as Kevin knows, and we've seen in the last 10 days, as the Harris numbers have improved, the markets have improved as well. I think there's probably a feeling within the markets that there's a situation where if there were to be a victory by Kamala Harris, I don't think the Democrats are necessarily gonna do that well in the House and in the Senate, so she could win the White House, but she's not gonna get a radical agenda through, and I think the markets are beginning to feel that's a more likely but acceptable scenario. Yeah, one of the things, Greg, to touch on that, if you remember the Republican convention, right? And this is post the attempted assassination of Trump, the big boost he had going into that, the market started to say, "Wow, this..." And this was before Biden had stepped aside. We talked about things that seem- Mm-hmm. So far ago, but it was only a few weeks ago. Yep. And the lead was significantly in Trump's favor, and I think 70, 30, if it would've been Biden and Trump. And the market had started to look at very specific sector bets that would be favorable to a Trump candidacy, or certainly one that would be Trump and carrying both those houses. I think, to your point now, that with this being back to almost tied, and flipped, actually, the markets have repriced. The markets themselves are up at a level again, but the sector differences have actually started to dissipate that we saw. You know, it's not obvious that the Trump, quote-unquote, trade will prevail. Yeah, I think that's right, and I think there's still great anxiety on the part of the public over the state of the economy. The economy looks like it's softening a bit. You probably have a better feel for that than I do, Kevin, but I think that the Fed is probably gonna have to apply some medicine. People are worried about the labor market getting soft, so these are all things you would think would help Trump quite a bit, yet Trump wants to just talk about Kamala Harris being a lunatic. It makes no sense, in my opinion, for Trump not to go after real issues: immigration, inflation. Things like that are what could get him back in the race. So maybe let's get into some of those real issues here right now and talk about, you know, beyond that mudslinging that we're seeing. You know, what are some of the things that investors need to be aware of as we get closer to the date? Maybe let's start with the economy. You know, how important is the economy and its strength in the U.S. to the outcome of the U.S. election? Yeah, so let me, let me give a framing of where we are, and then maybe I'll turn that to Greg to, you know, how the significance of it. Things are clearly softening, and while I said that the data has come in a little better recently, it's coming in better than people anticipated, but the anticipation was at a pretty weak level, so whether it be the jobs market, which the Fed is obviously concerned about, which the labor market had been too tight, you're getting evidence this morning, and again, it's a revision of the past year through March, but the economy over-counted about eight hundred thousand jobs, so clearly, there's gonna be an argument made here that the Fed is behind the curve, and they should be cutting immediately. But if you look at most of the data, it is clearly softening. And we know, and we've talked about it on this call for two years, there is about an 18-24-month lag effect to when you start raising rates, to starts to bite. And you're starting to see that, and you're seeing it in just anecdotal evidence. We can look at retailers. Think of things like Home Depot and Lowe's, which are big-ticket items, typically. You remodel your house. Those sales, comparatively, year over year, down almost 5%. And you contrast that to places like Walmart and Target, which are selling groceries today and real necessities, food on the table, and you're seeing the consumer shift down into a lower price point on things. Discretionary items are being basically pulled back on, and necessities are basically what is driving sales. So again, another evidence of weakness. We could see it in the credit card data with delinquencies. We could see it starting to build past levels of 2019. And it's gonna be a little different everywhere in the world. Canada is gonna be different than Europe, than the U.S., but by and large, all of those economies are now starting to soften. And so whether... The question is really, can recessions be avoided? But there is clearly a weakening path. If you wait too long, and that will be the hysteria that the market is going to start to demand, is that you are gonna push it into recession. If you go back to my opening comments, the drawdown that we saw in those first couple of weeks was things are really softening quick, and the Feds are doing nothing. We're about to potentially have that same narrative play out here. You're seeing a massive rally in the bond market today since this revision of those payrolls came out. Again, we added too many jobs, or we thought we added 800,000 more jobs than we did, therefore, the Fed's still late. Bond market is becoming a safe haven, and it won't surprise me if the equity market flips over by the end of the day a little bit. So again, things are weakening around us. It will have impacts on the market. I guess the question for Greg, though, in histories, in the past, where do recessions count when it comes to presidential elections? ... It's a crucial question, Kevin. I think in the old days, when news didn't travel as quickly, in the old days, usually by the Fourth of July, or certainly by Labor Day, opinions had hardened and didn't change that much. There have been a couple of exceptions. Hubert Humphrey in nineteen sixty-eight is one. But I would say that the American consumer is not going to change that much. Here we are now getting into late August, and I think these attitudes have hardened. So you could have Harris winning and taking office with an economy that's very weak, and I think she would then have to put quite a bit of pressure on the Fed. I think that Jerome Powell then becomes a crucial player, but it looks to me as if these attitudes on the part of consumers have definitely hardened, and there are other issues that are not economic or market issues. Abortion, for example, will continue to be a very, very big story in the U.S., and the whole issue of alleged illegalities by Trump will be an issue as well, but I think in terms of the economy, it's gonna be really hard to change attitudes. And so, David, let me pick up on what some of the events that will lead us into September, and this idea of where the Fed has to cut rates, and what the implications of that are. Obviously, if the Fed... The market is saying to the Fed today, not only you need to do 25 basis points in September, you need to do more than that. So there's a fair probability built in that they should go to 50 basis points. We're gonna get a reading of the July 31 meeting this afternoon. It's called the FOMC Minutes. They come back and tell you what, how the deliberations went. But that will occur this afternoon. In that, you'll have to look for, did they really think that they should be cutting in July? That'll be question one. That will spook some people, if there's a debate that some members said they should. And the second is, if the other side of that, if they truly discount that, they have to go 50 basis points. I think 50, if you think about this, Bank of Canada has gone 25, 25, and looks to be that they'll cut 25 in September. Bank of England has taken 25 and said, "Pause." The ECB has taken 25 and paused. If the U.S. is to jump out and do 50 right out of the gate, yeah, we'll spook some people, I think. Mm-hmm. And I think leading into that, you have this meeting that starts tomorrow in Jackson Hole, where the central bankers around the world will get together. Powell will speak on Friday. He's got two data points that he has to worry about, that he doesn't know, that are in front of him between here, Jackson Hole, and when the Fed meets, which is the CPI report for August and the jobs report for August. So it's hard for you, anyone to say that he is going to change tone on Friday. He may signal that, "Yeah, we're probably getting ready to cut," but the debate around how big and how many and how, if they're consecutive, I think he's got very little room to change the tone here. And so I think that will create some market volatility. Let me put the third thing into this, which is, if he does cut rates, even 25 basis points in September, the Trump campaign is going to howl that they're trying to help the Democrats. Mm-hmm. Yep. If they don't do 50, parts of the Democratic Party are gonna howl that they're behind the curve, and they're trying to not doing enough to help the economy. So the Fed is, and Greg and I have talked a lot about it on this call and other places, the Fed is not a political animal. But whatever they do will be perceived by some as being playing to one hand or the other. And I would just add, Kevin, this sugar high that we're seeing in Chicago right now, the sense of jubilation, is gonna maybe hit hard reality this fall when they do see economic data not looking all that good. I think that it's a dichotomy. I think a lot of American voters will say, "I don't get it. The economy is clearly, to me, softening, and you guys are jubilant." So I... If I were advising the Democrats for the next two nights, I would tell them to cool it. I would tell them not to be quite as euphoric, because you know, being euphoric, to me, is not valid. Okay, in addition to the, or beyond the broader economy obviously being a big issue and perhaps a wedge issue for the election, hoping that you both can articulate what other issues that maybe, again, aren't being talked about because of all the mudslinging. What other issues will have a potentially large impact on investors and markets, going forward? And whether this is the deficit or, Yeah ... potential tariffs, so that kind of line of thinking. So, maybe, Kevin, I'll start with you, and I'll go to you after that, Greg. I'm gonna start with the thing that Greg has talked a lot about, which is the thing that I worry the most about, which is we're now three-plus months away, ninety-some odd days, right? You got, I don't know, Greg, hundred and eighty million people will go to vote on- Yep ... November 5th. Sure. Three, four states, and maybe 50,000 people will determine who wins. The policies for the rest of the world, depending upon the winner, we can come back to this, because I don't want to belabor it now, David, but we should talk about Ukraine, we should talk about the Middle East. Those are real issues that are still bubbling and burning, and we're kind of distracted from them, but if this stays this close, and it's truly a handful of states and not a lot of people, as Greg says, the next day, which coincidentally is when the Fed next meets after September, by the way, is the day after the election. You could see people pointing fingers on both sides about recounts. You could see people talking about irregularities. And as we've said many times, the market does just not like that kind of uncertainty. And especially if you can't find a winner, and it ends up in courts, and in court cases in multiple states that lasts another week or so many days, it will not be good for this market. So that's the biggest... When I say the election risk, I can come back down to the things that will matter once we have an outcome- Mm-hmm. which is deficits, Ukraine and others. I think that, for me, the path to Harris in November is if this does not widen out, where you can actually see that a contested outcome is off the table, I think is going to create a lot of volatility. And I would say that you've got to look at two or three really crucial states, Pennsylvania, Michigan, Wisconsin, to see if we do have something close to a tie. And I agree with Kevin. I think a tie or something very close to a tie is not gonna be well received, with all sorts of charges of illegalities. Couple other things I would throw out that would worry me a bit. In all the euphoria, in both parties' conventions, the Republicans in Milwaukee and the Democrats now in Chicago, no one's even mentioned the word budget deficit. No one's talked about the enormity of our debt, which is up to about $34 trillion right now. Neither party has any appetite to cut spending or certainly not to raise taxes. In fact, we'll have a debate this fall about extending the Trump tax cuts, which for a lot of our American friends, is the big, big story that you could see, a huge fight over taxes, and there's another fight as well coming, and that's continued protectionism. I don't see much sentiment in either party to lighten up on tariffs, so you've got deficits, a possible tie, protectionism. The one wild card, and maybe we can spend a little bit of time on this, David, is the one wild card, as you mentioned, I think is Ukraine. The fact that Ukrainian drones got close to Moscow last night, that's an incredible story. I mean, the Russians shot them all down, but Zelenskyy is showing an appetite to go right into western Russia. I think that with all the other news, this story has been overlooked. Yeah, and Greg, let me touch on that. I think that there's a view here, the fact that this... Never mind the drones, but the Ukrainians have now taken a fair amount of land in Russia- Yeah ... and did not tell the West, apparently, from what we have heard and you've reported. Mm-hmm. And if you think about that, it really feels like if it's about this election. You know, if you're Zelenskyy and you fear that Trump was going to win when you were planning this idea, you wanted to have some land to trade, if in fact, you were gonna be forced into a deal. There's a lot of this that if we sit here come February, when there's a new president seated, that will determine the fate of what that negotiation, I think, looks like, so I think that plays into some of the aggressiveness that's going on in the Ukraine, right, at this point. I think also it would be naive to think we're gonna get a genuine breakthrough in Gaza. It seems like whenever we get close, our Secretary of State, Blinken, realizes that the cabinet, the Netanyahu cabinet is so radical and so opposed to any kind of a deal, that we just keep spinning our wheels. I do but worry about that, and I also worry about continued reports that the Iranians are stirring the pot, you know, funding, obviously, Hamas, funding the Houthis, funding Hezbollah. Sorry, let me turn my phone off. I would say that the fact that the Iranians are working frantically on a crude nuclear bomb is another story as well. So I would think geopolitics is gonna be a rude awakening for Kamala Harris, if she actually does win. Maybe we can just go back to the U.S. election again. Greg, you really summarized some of the issues that are out there for investors. I'll start with you, and maybe Kevin, you can weigh in on this, but just curious to know if you compare what the Democrats are saying and the Republicans are saying, is there any common ground at all in terms of what they're saying, in terms of issues or policy that they might enact? Or is it really, you know, we'll do this and they're not gonna do this? Like, how divisive is it on that front? Right, right now, three months out, you, you're just gonna get red meat from both sides. But both sides are gonna flail at each other and claim the other side is corrupt and no good and rotten, and that's, that's to be expected. The issue, as you allude to, would come after the election. Could we start to see some kind of rapprochement between the parties? I would not at all be surprised if Kamala Harris went on, in late winter, she won, went on a trip to China or Japan to talk to countries about a wide range of issues. Frankly, I think she first may go to Canada, where she spent much of her teenage years, and she reportedly has very warm feelings about Canada. And I think that is going to be a very feel-good story. But I think on a lot of other things, yeah, there'll be an attempt by both parties to get along, but I'm a cynic, and I look at things like, do we get a new Supreme Court fight? Do we get a new tax fight? I mean, everywhere you look, you see huge fights without any likely compromise. Yeah, so let me touch on that. I think there is one thing, and it's a word, it's China. There has been probably the only place that I've seen unity around these two parties is around China, in various degrees of antipathy toward it. Yep. You know, if the Trump administration is elected, they're talking about a massive hike in these tariffs that are in place. Mm-hmm. There's a debate about whether those will truly be inflationary. Half of the things we import from China end up as an intermediary good in something else that we produce in the US. So if that's the case, and you put a massive tariff on that goods producer is either gonna have to raise his prices, which would be inflationary at the first instance, or two, eat that increased cost in his profits, which would be bad for profits, therefore bad for stocks. There's a debate about that, 'cause they put those tariffs in place the first time. But then if you think about it, they were a much lower level. We're talking about big numbers in terms of what is being thrown around for the Trump team. On the Harris-Biden side, you know, what will be Harris, there's been no willingness to take off the existing tariffs. Right. So I think there's that, and to the degree that they move higher, it's going to have an impact on the economy. I'd say the second one is the Trump team wants a weak dollar. Mm-hmm. Be careful what you wish for. If your dollar is weaker and you have to buy things around the world, with a weaker dollar, it's gonna cost you more, right? And that cost, again, could be inflationary. So if you're thinking about an economy that is weakening as we head into this, some of these will exacerbate some of the mandates that the Fed has to deal with, which is, again, two things: full employment and, you know, a level of inflation at 2%. So I, I'd say that there are some similarities with things like trade, but there are gonna be very big differences as well. Yep. I'd say the last one, Greg, which I touched on, is just I think there is going to be a waning, and there has been a waning view of support for Ukraine. And to the extreme level, with Trump saying, "Day one, I'm gonna basically force it to end." And at the other end, there's probably not a big aid package coming again, if this is continuing on. So there will probably be some kind of brokered settlement next year because of, again, no real agreement that we should continue or can afford to continue supporting at the same level. And that's consistent with not just the U.S., but frankly, the ECB as well. I think there's always a fascinating angle right before an election about a surprise. We used to call it the October surprise. We could get one again. Maybe Vladimir Putin decides he's got to find himself an exit strategy or find an intermediary, like maybe Erdogan of Turkey or somebody, to be an intermediary to see if they can bring this horrible war to an end. There could be some domestic or regional stories. I worry a little bit about a rail strike that could start in Canada and last for quite some time. So there's always a twist and a turn that nobody has predicted. Maybe there's a big hurricane in South Florida, which is not uncommon in September. So there will be wild cards, which is a major reason why I'm reluctant to make a flat-out prediction that she's going to win. I've got a lot of friends here in Washington who are making the prediction that she's a shoo-in, and that she'll take the House and Senate with her. My attitude is: beware of the wild cards. For everybody who doesn't have a subscription to Capitol Insights and Greg's daily musings, that's where you're gonna find out about these wild cards. Subscribe. With that, let's get to some questions from everybody who's listening in. First question here is about seasonal weakness. The question is, August and September are usually kind of a rough time for markets, not so much so far in August, now that we've got this sort of rebound. The question is: Might we see some roughness, some volatility in September, October, so a little later than usual? The follow-up to that is, you know, kind of how do you position yourself within that, if that is the scenario that might unfold? So, Kevin, I'll go to you with this one. Yeah, I think. Listen, as I've said, if you went away and didn't look at your phone for two weeks, things look like they've been benign, and they have not been. We've had incredible volatility. The VIX, which is a measure of forward-looking, where people think how volatile things are gonna be in the immediate future, right? It broke through levels that we hadn't seen in decades, in two days, on this fear of a recession. There are other fears out there, right? The AI trade, which has been a great trade, and we've talked about the productivity that will come from generative AI and other things. The hype always comes first before the productivity shows up, and we had talked about this on this podcast that we did yesterday, David, right? So there's some questioning around some of the big guys who've been the buyers. There's about five or six folks who buy the stuff that drives AI. We call them the hyperscalers, so think Microsoft, Google, Meta, et cetera, Amazon. You know, and one of them basically said, "Hey," on a conference call when their earnings came out, and said, "Hey... You know what? You guys are spending all this money, where's the, where's the return?" So we estimate there's been about $50 billion spent on buying things that will enable this, with about $3 billion of revenue. That will become a focus as we move through this NVIDIA earnings release next week, which could create volatility unrelated to the markets. You have these four data points, starting with Jackson Hole, CPI, jobs, and then the Fed meeting, which is gonna create. Everyone will look at every one of these data points now with a microscope to see, gee, is this a recession trade, or should we be thinking about a soft landing? So volatility, while it seems like it hasn't been there, has been there. And so I'd say a bit, be careful. What has propped up the market the last couple of weeks as well, as companies report earnings, they come out of the blackout, and they can buy back their stocks. When companies end their quarter, they go into a blackout, and their buybacks have to cease. So this is a little bit of an. The recent rally has been some of that as well. But I would tell you, the seasonality that we typically see will be with us certainly into September, as we have to deal with some of these data points around the Fed. And as Greg said, the honeymoon after this Democratic election will wane, and there's a lot of... There's just a lot of things that are gonna happen between here and November. So certainly August, while it feels benign, has not been. September, I don't expect will be either. Okay, next question for you, Greg. We've talked a lot about the presidential race. There's- Yep. other races going on, right? Yep. Just maybe a sum up on what you're seeing on that front and maybe how those outcomes may play. There are some cynics now who say we are in the permanent campaign. One campaign ends, the next day, the next campaign begins. So there are other campaigns, some very big ones. Let me take the Senate first. The Senate's 51-49 for the Democrats, a narrow majority for Schumer of New York. I think there's a decent chance, maybe 65%-70% chance, that the Republicans will regain control of the Senate. There are two or three seats that look almost certain to fall, Democratic seats. West Virginia, in particular, where I think Joe Manchin is almost certainly gonna lose. Montana, where a Democrat is probably gonna lose, and then there's two or three others. I'll be damned if I can find one Republican Senate seat that is vulnerable. You know, maybe Rick Scott of Florida, maybe Ted Cruz of Texas, but I wouldn't bet against them. So you've got the Republicans not losing any seats while picking up two, three, maybe even four. So I do think they have a very good chance of taking the Senate. The House is a tougher call. The new House Speaker, Mike Johnson, has had kind of a rough year. He's still a rookie. He has members who are catching tremendous heat back home on abortion. In state after state, voters are saying, "No, we have to have an exception for people who have suffered from rape or incest," these horrible conditions that should allow for an exception, but a lot of the Republicans are refusing to consider that. That may hurt them in the House. If I were forced to bet, I would bet that they only have a four-seat majority, unprecedented in its tightness. If I were to make a bet, I'd bet maybe the House flips, maybe the Democrats have a net gain of five or six or seven. But you get my point here, and that is, in both Houses, it is going to be razor, razor thin. And I think that's a major reason why I'm not losing sleep over Kamala Harris, because she's not gonna be able to get a radical agenda through, because she's not gonna have the votes in either the Senate or the House. Okay, great. Thanks for that, Greg. So, another question just came in. I'll give this to you, Kevin. So generally, overall thoughts on the equity market, do you see markets continuing to rally and rise through the remainder of the year? And then within that question, you know, we've talked a lot about that dynamic between growth and value that we've seen over the last, you know, couple of years now. Will that continue, or will we see more of a rotation that maybe favors value and smaller cap names going forward? Yeah, we're seeing... We've seen a massive rotation. If you actually stop the clock, kinda year to date, middle of July, before even this Fed meeting, right? The gap between the cap-weighted indices and equal-weighted indices, and use the S&P, was about 10%-12%, meaning the cap weight was that much higher than the average stock. Mm-hmm. July tenth to that August fifth, kinda middle of this drawdown, and July tenth I use is sorta when we started to see this first sign of a rotation. This was when big tech, this idea that Google was challenged on its spending and where the payback was, and you started to see people talk about the Fed to start to cut rates, right? This is before the data actually got weak, and you saw a massive rotation. From July tenth to, like, August sixth, the cap-weighted industry was down 7%. The S&P was down 7% in that period of time. The equal weighted was flat. You saw big cap tech, so I think the Nasdaq 100 over that same period of time was down 12.5%. Russell 2000, which is a small cap index, was flat. We've had periods of this rotation. What's happening now, 'cause when there and we've talked a lot about this on these calls. When you feel uncertain about the future, you crowd into the things you know, right? In different periods of times, we call them the staples, right? Mm-hmm. If you were uncertain about the world, you bought Colgate-Palmolive, you bought Procter & Gamble, right? Because people had to buy those things every day, recession or not. The average kid in the street doesn't even know what Colgate-Palmolive does, they probably or Procter & Gamble. But they know what Google does, Apple does, they know what Microsoft does. So when we have this period of uncertainty, we're crowding back into those things. Very big things. They're great companies, great quality, great earning streams, great cash flows. They may be pricey. So you're gonna see that until we get to certainty around the recession and certainly around the economy. The true rotation will not take place until you start to cut rates aggressively. I just caution and remind people, if you're cutting rates aggressively, think 50 basis points in September, followed up by another 50 after the election, because there's a lot of volatility. You're gonna spook people, and in the first instance, equities are gonna get hit. There's a point in time, we actually show that that rate cutting is actually doing something to slow the degradation of the economy, that you're going to see that rotation. I'd say last point. You know, the real earnings driver in the last year has been that Mag Seven, the seven names of the 500. This is the first quarter the 493 have actually shown decent earnings growth. So again, if you get to this rate cutting thing, in the first instance, probably not good for equities, but once you're into it and you see that you're actually doing something to lessen the impact on demand, you're gonna see that rotation take hold, particularly with the small caps. I'd say it's early on that trade today. And the last question is, where do we go from here? We're gonna see a lot of volatility. Prepare yourself for some drawdowns in between here and the election. Our guess is that you actually finish the year higher, but that's gonna be getting through this period of uncertainty. If, in fact, this election winds up by a big number, because of something that Greg just said, somebody has an advantage, somebody makes a mistake, the market will breeze through that, maybe because they can see that this contested idea is off the table. They can also start to place bets on different sectors. If it stays narrow, you probably have a lot of volatility, but you probably end the year higher, because by the end of December, there will be some relief, that there will be certainty about who the next president will be and what those policies will be. Okay, one more question at least we might be able to get into. Greg, back to this idea of that there probably is, you know, the idea of a clean sweep in Washington is- Mm-hmm ... is probably not something in the cards right now. Does that also give you some comfort when you think of Trump's agenda as well? You mentioned Harris' agenda, but does it go both ways on that front? Absolutely. I think it's unlikely that Trump would be able to have a sweep. And, you know, a lot of his ideas are viewed as radical. I mean, we could talk about Kamala Harris having, you know, an activist agenda. She's a liberal from California. That's what they do out there. But at the same time, I think some of the Trump ideas, this Project 2025 from the Heritage Foundation, that has all sorts of radical ways to restructure government, is viewed with some real anxiety. And I think it, it's something that would probably hurt Trump. It... We'll get to a point on November one, with four or five days to go, we'll get to a point where any story can move a state by a point or two. It can be any little story can move New Hampshire, which has three electoral votes. So I think this Project 2025 is something that you're not gonna hear Trump talk much about, because he realizes it could be a liability for him. Okay, I think we're probably running a little short on time. So what I'm gonna do, guys, is I'm gonna give you guys an opportunity to provide some final thoughts. Greg, maybe just a quick salvo from you, and then, Kevin, I'll get you to close things out for us. Yeah, I've said all year long that it was time for fresh blood in the U.S., and I thought all along it was gonna be Nikki Haley. Little did I know, it wasn't Nikki Haley. It, the fresh blood comes from Kamala Harris, and I think it will be fascinating to watch. I think she will get a cold dose of reality when she realizes she can't get a lot of her agenda through Congress. And I think once she realizes that, she's gonna have to resign herself to making most of her big impact on regulatory policy, whether it's Gary Gensler, the infamous regulator. There are plenty of regulators who would like to take over the Federal Trade Commission, things like that. She might have some influence there, but I think on her legislative policies, there's going to be a learning curve, even though she has served in the Senate. But last point, it continues to astonish me that no one gives a damn about the deficit. It's. We talked about it earlier. It's an issue that everyone is seemingly oblivious to. Okay, great. Thank you for that, Greg. And, Kevin, I'll let you finish things off for us. Yeah, I think we're gonna be in a volatile patch. As I said, I think the equity markets are gonna be choppy in here. Ultimately, we may have a bit of a correction, but we may finish the year higher, depending upon, again, the path of the economy, which we think is actually weakening, but not in a recession yet. Obviously, what the Fed does will be the main story for September, for markets between now and then. It's, like I said, four data points. Friday's speech is the first. Two big data points, CPI and the jobs report, coming out on the heels of that, and then obviously what the Fed says when they meet in September. There won't be an October meeting, so the next one will be the day after the election. You know, if you think that we're finally in a place where whether it's twenty-five, it may not be fifty, but you're probably getting twenty-five basis points in September. It's okay to own, you know... Love your bond portfolio here. Again, there's enough coupon now that you, that you're gonna get some income off of that. And if they cut rates aggressively because things are weakening, you'll get a lot of return from that, as well, as your bond prices are gonna go up, so don't fear your bond portfolio here. We own a little cash, and we'd own some hedges to your portfolio, if you can own some things that give you a, you know, an alternative to equities, such as an anti-beta ETF or something of that nature. Something that hedges some of the downside risk in this volatile patch. But I think, you know, for the first time, I said, the U.S. being behind the curve, I think is going to be a narrative that we're gonna have to watch every data point to see, in fact, that the U.S. has been. But we're clearly now at a place where the ECB, the Bank of England, the Bank of Canada, are all now with the U.S. Fed marching toward easing this restrictive place we've been. The question will then turn to: How aggressively are they going to at a month-to-month, meeting-to-meeting cuts, and how many between now and next year? But obviously, I'd say, you know, hedging out equity market risk through an allocation of your equity, your fixed income portfolio or cash right now is gonna help you the next few months. All right. Great, job, gentlemen. That's a wrap. As always, thanks to everyone tuning in today. On behalf of Kevin and Greg, we appreciate your time and support, and we look forward to sharing our insights with you again next month. Before you go, please make sure to click the Add Session button in your Attendee Hub to register for our upcoming market update events, including our next installment, taking place on September eighteenth. To complete your CE credits today, please complete the survey available to the right of your screen or at the top of the homepage in your Attendee Hub. Note, you may only submit answers for your survey once. However, you may have the opportunity to go back and edit responses if needed. Have a great day, everybody. So long, David. Thanks.