Hi everyone, welcome to our 2026 Capital Markets Outlook webinar, where we'll talk about markets and what we're seeing in the economy, and then get into some of the changes and opportunities that we are seeing in financial markets. And of course, nothing can be discussed these days regarding the global financial markets and economies without saying the words artificial intelligence or AI at least a few dozen times, so we'll be sure to meet this necessary quota as well. Before we get started, I just want to highlight some of the resources within the Zoom app here. Under the Resources tab in particular, you can read and download more of our insights, including a copy of today's slides and our Capital Markets Outlook piece. There's also a survey there for you to share any of your feedback on today's webinar, and we do really encourage you to use the Q&A tab and ask us questions throughout, and we'll do our best to address any and all of those at the end of our presentation. And the last thing to note, we're going to have two audience polls during our webinar today, and so we wanted just to express our appreciation in advance for your active participation in today's discussion. So with that all put to rest, let's get started with today's discussion. My name is Jeff Ingraham. I'm head of the Portfolio Strategies Group at Manning & Napier. Today I'm joined by Jim Morrow. Jim is the founder and CEO of the Callodine Group, a Boston-based asset management firm and the parent company of Manning & Napier. Before founding Callodine in 2018, Jim spent 19 years at Fidelity, where at peak he managed $45 billion in assets across multiple equity income strategies. Today, Jim manages the Manning & Napier Callodine Equity Income Strategy, which will achieve a five-year track record later this year, as well as the recently launched Callodine Specialty Income Fund, an interval fund strategy that invests across both public and private markets via specialized and highly tenured investment professionals across the entire Callodine Group affiliate platform. Also joining us are my colleagues at Manning & Napier, Marc Bushallow, Managing Director of Fixed Income, and Jay Welles, Head of Core Equities. Both Marc and Jay are members of our Investment Policy Group and the firm's Executive Committee. Combined, they have almost 50 years of industry experience, and they have each been with the firm for more than 20 years. So just a little bit, I've already noted the partnership between the two firms represented here today. As I mentioned, Callodine is a comprehensive investment platform founded in 2018 that has now come to include multiple distinct and highly specialized and experienced affiliates, mainly focused on the income-generating areas of the private credit and public equity markets. Manning & Napier was founded in 1970 as an investment firm offering advice and investment solutions to a broad array of clients, with particular focus on investment offerings in the public equity, public fixed income, and multi-asset class markets. We became an affiliate of the Callodine Group in 2022, and today we partner with them on bringing multiple investment solutions, leveraging the expertise of Callodine's affiliates to our clients and advisor partners, and we look forward to continuing to do so in the year ahead. So let's set the stage here a little bit as we start the presentation. You know, you'll see that we start our comments here reflecting back on 2025 first, and there's the notable acknowledgment of the contradictions that seem to dominate the markets last year, and so I'm going to start by asking each of our speakers the same question. What was the main contradiction that played out in each of your respective areas last year, and how do you expect things to proceed either differently or similarly this year? Jay, why don't we start with you? Sure. Thanks, Jeff. So I think the biggest contradiction in the U.S. was we saw robust headline strength in the U.S. economy and the U.S. stock market. If you looked at GDP growth or returns in the S&P 500, you know, looked like things were quite good, obviously. But if you look underneath the surface, you know, it was a more narrow and tenuous economic growth and market environment than you might have thought, just kind of surface level. So, to give one anecdote, roughly two-thirds to three-quarters of the S&P's profits and returns over the last several years have come from companies linked to AI in some manner. You know, the second part of the question as to how different or how similar this year might be, I'd note, you know, after three very similar, very narrow AI-driven years in the market, we've already started to see the market broaden out towards the end of last year. So we entered a more speculative phase, I think, in 2025, both of AI and the overall U.S. stock market. So I don't know if we're kind of bottom of the sixth, top of the ninth here, you know, to use a sports analogy, but these cycles tend to go on longer than you think. But I do think we're getting certainly later in the game. But it's notable to me that there was some more discernment in the market ending last year and entering this year. Certainly, the stocks and the OpenAI ecosystem got hit pretty hard in the fourth quarter, and we've seen some cyclical areas perk up, suggesting we might see economic growth accelerate this year, so you know, after a protracted period of the market kind of being stuck in one regime, there's maybe some early indications we're breaking out of that. Great. Thanks, Jay. Jim, how about you? Yeah, I think 2026 or 2025 is a good reminder that the market and the economy aren't the same thing. They rhyme with each other. They correlate over time, but you can have very different outcomes in shorter windows of time. I think the U.S. economy in some ways kind of fought its way through 2025. There was a lot of cross-current and a lot of noise, but the market sort of hit an all-time high, you know, across the year. So it's a good reminder that Main Street and Wall Street just, they run on different calendars sometimes. I think, you know, within the economy itself, you know, vis-à-vis the market, you had a market that's very expensive hitting all-time highs, and at the same time, growth in the economy has been reasonably good, but the Federal Reserve was cutting interest rates within a relatively healthy economic backdrop. That's a pretty big contradiction if you look at history. You also, within the market itself, see stocks at very high multiples and very low multiples. If you look at what we think of as the spread of valuations or the distance between most expensive and least expensive stocks, that measure sits at a 35- or 40-year wide right now. Even within the market, there's some pretty strong contradictions as to investor preferences. And I think Jay hit on a really important point, that this was, in some ways, 2025 was a rinse and repeat of 2023 and 2024 in terms of what drove the market, and it was one of the highest returns to momentum we've ever seen within the stock market in particular. And so when you get to the end of those cycles or you get deep into those types of cycles, you end up with this really wide valuation regime. That's exactly what we saw. And even within the year of 2025, it's hard to remember that Q1 was a pretty steeply down quarter, and then the market sort of V-bottomed off the April 2nd lows. And so I think a year of contradictions is a pretty good moniker for what we saw in 2025. And it does set things up, I would agree with Jay's comments. It set things up where there's an incredible amount of, you know, diversity of opportunities within the market right now, and so it's a very good environment, I think, for active management and for stock picking in general as we look forward. Great. Thanks, Jim. And Marc how about you? Thanks, Jeff. Yeah, I'll pick up on what Jim was talking about with the Federal Reserve rate cut cycle on the fixed income side. Economic growth was resilient throughout the year. Inflation remained stubborn, although it was edging in the right direction, and unemployment remained low. Yeah, we're in the middle of a rate cut cycle. I think in 2026, you'll see that divergence end. You know, for there to be a continued deep rate cut cycle, we would need to see a much deeper contraction in economic growth, which is not our base case. I think if you see growth remain resilient, which there's a decent amount of stimulus coming through in the first half of the year, you would expect the Fed to be on pause for potentially a significant amount of time here. Great. Thanks, guys. You know, I'll sort of pick up where you guys left off a little bit there and maybe bring some visual evidence to this idea of the contradictions that we saw last year with these two examples, so just starting with the chart at the top, which we've provocatively titled the most hated market rally ever, but it really is true based on the data that we analyze here, so the blue line represents the nearly 50-year history of the monthly University of Michigan Consumer Sentiment Survey, and so what we've added to that line is the green dots, and the green dots indicate any month during this time when the S&P 500 hit at least five new all-time highs during that month, and so what you'll see kind of quickly here is that those green dots disproportionately occur during times of elevated consumer sentiment. It sort of intuitively makes sense, right? The S&P 500, 500 of the largest companies operating in the U.S. The U.S. consumer drives 70% of economic activity in the U.S., and therefore high consumer sentiment is often reflective of or contributing to a strong U.S. stock market. Obviously now you have 2025, and the blue line, again, representing consumer sentiment, reached all-time lows, and yet the market continued to trend strongly higher and reached almost 40 new all-time highs last year. You know, we can get into the details around the survey methodology or equity market composition, but I think at the end of the day, the fact remains this is a sharp contrast to history, and it sort of contradicts most people's logical expectations for these two things. Of course, it sort of begs the question, okay, well, what was driving that disconnect? And I think what we'd put forward is just this idea that consumers have been enduring for a couple of years now sort of the lasting impacts of the highest inflation on record during the time period we're showing here. And so really what the survey is, probably the sentiment survey, is just reflecting the general sentiment. Consumers hate inflation, and they hate the idea of having to pay higher prices. And even though they sort of hate the idea of it, and they sort of express that in the survey, the reality on the ground that we saw is that consumers have continued to spend, and those higher prices also translate into higher revenue and higher earnings for businesses, and thus you get the rallying stock market. So if we sort of key in on inflation now and sort of blame that maybe for part of the contradiction we're seeing in the top chart, it leads to the next contradiction on the bottom chart here. I mean, Jim, Marc, you both touched upon it a little bit, but the bottom chart is showing the change in Consumer Price Index or CPI since 2020 on a year-over-year basis. We have it broken down by demand-driven and supply-driven effects. I think it's been pretty well sort of documented at this point that the high inflation that we experienced during 2021 and 2022 was both supply and demand-driven, right? The supply-driven component of it was largely due to the global supply chain disruptions that occurred during the COVID-related shutdowns. You can see that with sort of the dark blue bars that are represented here. And then you have the demand-driven component, and that was really influenced by that sort of pent-up demand as economies started to reopen, and then it was supercharged by the stimulus payments that went out directly to consumers during this time. And so you fast forward to today, and Marc, you noted it a little bit, right? Inflation has certainly moderated a little bit during this time, but it still remains persistently above the Fed's 2% target. And you look more closely, and you see that the demand-driven piece of it alone is nearly 2%. So obviously that seems kind of at odds with the Fed's decision to start cutting rates as much as they have already, and then again calls into question maybe the expectation that's currently placed in markets that they're going to continue to cut rates even lower this year. Anyways, I know I spent sort of a lot of time on these two charts, but I just think on this topic of contradictions, they really kind of relate to each other and really illustrate the way that we saw that play out in 2025 and how things may be differently next year. Jay, you alluded to some of these things in your intro comments. Maybe I'll just turn it over to you here a little bit for your comments and your observations on the U.S. equity market in particular last year and going forward. Sure. Thanks, Jeff. So as you noted, you know, certainly the, you know, the economy and market were, you know, K-shaped. There's maybe a lack of breadth and strength. Now, if we zero in on the equity market, you know, very, very two-speed. So again, AI-related stocks have done exceedingly well. Gains elsewhere have been much more modest. Tremendous amount of crowding into the AI stocks. If you look at this chart here on the top right, yeah, I think one of the big themes in the last several years is, you know, we've had three straight years, which is fairly unprecedented, of roughly a third of stocks outperforming the market. You know, more typically, if you look at the average there, it runs in a given year, you know, roughly under half of stocks outperform. So a very narrow market for three years straight. Last time we saw anything of this sort was 1998, 1999, perhaps not uncoincidentally. That was the, you know, the run-up into the tech bubble at that point. And, you know, I think also noteworthy that we've had three straight years of historic underperformance in high-quality stocks. And I think that's, you know, part of that's driven by, you know, there's been a good amount of speculative investment behavior and risk-chasing in this market. You know, seeing people crowd into unprofitable AI plays. You know, in some cases, some of these stocks are, I'd kind of call them like science projects. They have very little in the way of revenue or pre-revenues. There's all sorts of, you know, evidence of, you know, heavy amount of speculation. So I'd just say, you know, finally, you know, I don't want to label AI as being a clear and unmitigated bubble. I think it's, you know, incredibly nuanced. I do think there are clear areas of over-investment, questionable business models, particularly around OpenAI and the, you know, their commitment to spend nearly $1.5 trillion, which is a staggering amount of money over the next several years, particularly when, you know, their revenue run rate's about $15 billion, and they're losing money, you know, for the foreseeable future. So, you know, there's definitely some dubious things going on out there. On the other hand, we do think AI's promise is very real. We're seeing that every day firsthand in our business. It's staggering to me what AI can do on the investment research side today versus six months or 12 months ago. It's becoming an increasingly valuable tool at a rapid rate. So certainly not, you know, AI bears across the board. There are some, you know, reasonably valued beneficiaries out there that we see as well. And Jim, maybe I'll pivot to you now, kind of similar to the topic of U.S. equity markets, kind of AI. I know you and your team were responsible for creating this highly technical graphic at the top here you've used in some of your investor letters. And just to sort of describe it in my own words a little bit here, I like the way it sort of shows that these sort of secondary and tertiary companies and sectors got kind of sucked into the AI orbit last year. And at the same time, I think sort of in a tongue-in-cheek manner, we're putting things like value investing and basic math as these sort of alien or out-of-this-universe concepts. So what are your thoughts on what we've seen in terms of AI dominance or other speculative behavior in your area of the markets? Yeah, I think markets often oscillate between what I would call sort of story or narrative-driven markets and maybe mathematical return on invested capital-driven markets, right? And those can in some ways be typified by the difference between value and growth cycles. And clearly, we're in a very strong narrative-driven market right now. So the excitement and the allure of AI is legitimate to Jay's points. I think it's real, but the math behind the quantum of investment is also going to matter over time. And if you go back to any great innovation cycle, whether that's, you know, going back to the railroads or the invention of electricity or the invention of aviation or the original mainframe cycle or the dot-com, you know, network infrastructure build-out, this pattern has repeated in different ways each time. Historically, those that end up putting big dollars upfront to build these huge new technologies are not generally the winners at the end. It's the people that utilize what is built that end up being the winner. The closest analogy we probably have to the AI boom is the original internet build-out of network infrastructure in the late 1990s and early 2000s. At that time, people got really excited about what were called the picks and shovels or the suppliers of that cycle. Ultimately, if you look at the next 20 years with the benefit of hindsight, the entire economy was a beneficiary of the internet, right? It drove huge productivity and efficiency gains across the whole economy. My guess is AI will be the same. It will find its way to drive efficiency and productivity across the whole economy, and it won't just be the person who built the data center or NVIDIA or someone that made some piece of technical equipment that was the winner, and so we're, you know, we're in that cycle now. It's a fascinating part of market dynamics, but yeah, this schematic was, I guess, our tongue-in-cheek way of sort of saying, look, you know, math matters. Sectors like energy, financials, and healthcare are the dominant part of the value sector today. They're pretty out of favor. My guess is over the next 10 years or 15 years, they will be massive beneficiaries of AI, and they won't be the ones that put the capital up, right? And that will drive productivity and earnings for those companies, and then they'll get, you know, people will get interested in other parts of the market again in the future. And this is a really interesting point in the cycle to think about where can you drive good returns as a stock market investor, right? Because the market's going to discount the future far in advance. So there's some chance AI, you know, from a future infrastructure standpoint, has already been fully baked into the market, and you need to look elsewhere at some point. Yeah. You know, I think both of you have already sort of used the word maybe seeing some speculative nature sort of creep its way into markets, maybe math sort of out of this universe concept in many regards. You know, one way, I mean, there's a number of ways to try and quantify that. Obviously, what we showed here at the bottom is just a number of different sort of risk-on versus call it risk-off or safer, more fundamental metrics. So whether it's high beta versus low volatility, growth versus value, or cyclical versus defensive areas of the market, I think it's interesting to see it sort of what happened during COVID, right? That was a huge disruption to markets. And then sort of brought to heel a little bit, right, by inflation and a rising interest rate environment made you sort of focus on math once again here. And yet things were off to the races yet again, and now they've sort of exceeded that prior COVID bubble peak. You know, some of the stuff that caught my attention throughout the year last year, as we think about maybe again that speculative nature creeping itself into the markets, there are more ETFs traded now than there are individual stocks that exist. So if you think about it in conceptual terms, that's just different ways to sort of package trading strategies and investing strategies. So Morningstar did a little bit of analysis last year. There were about 1,000 new ETF launches in 2025, and half of them could be described as being somewhat more esoteric or structured in nature. So what I mean by that is I think 20% of the ETF launches were leveraged equity strategies, and then you had another 20% that used structured options to sort of have a defined outcome or a definitive or a derivative income strategy component to it, and then another 10% were all crypto-related. So again, different ways to sort of package more leverage into the marketplace in an accessible format. So we spent a lot of time here at this point talking about U.S. equity markets. Before we go to our next slide, we're going to do our first audience poll here. So last year, we saw the third straight year of double-digit returns for the U.S. equity market, but it wasn't enough to beat non-U.S. equity markets. You know, non-U.S. equity markets broadly were up about 30%. So just sort of a simple question for the audience here. Do you believe that a sustained, what we'll call a regime shift, is underway at this point starting last year and that non-U.S. equities will continue to outperform in the years ahead? So if everyone can sort of express their opinion and make their choice, we'll sort of see what the results look like before we move on to our next slide here. Okay. Somewhat evenly split, although, you know, the shading of the results goes to no. So maybe this was more of a one-off, and we are not truly seeing a regime shift underway here. Obviously, what we've presented here on the top is just sort of the history of these market regimes over time of U.S. versus non-U.S. equities. What stands out more recently is both the duration and magnitude of U.S. equity dominance over the last, you know, call it 15 years or so. We've given a little bit of benefit of the doubt to non-U.S. markets and sort of signaled maybe a new regime shift that could be seen moving forward. So maybe, Jay, what are your thoughts on non-U.S. equities? Sure, Jeff. So we're the most overweight international stocks in our global accounts that we've been in 10 year or 15 years. So we are believers, you know, we really opened that overweight up towards the beginning of 2025. So that's been the positioning for a year plus now. So we do think there are some signposts suggesting that we were at an inflection point. And I can just run through a few of those quick. So, you know, the relative undervaluation of international stocks versus U.S. reached extreme levels. And that had been blowing out for a while, and it's, you know, tough to say, you know, when there's enough fuel in the tank for a tipping point there. But, you know, we reached levels in the past year where, you know, Europe, for example, was trading about 10 turns cheaper on price to earnings than the U.S. So, you know, roughly U.S. markets trading at, say, you know, 23x-24 x earnings, Europe trading at around 14x. So that's a pretty massive delta. And certainly, some U.S. premiums warranted, you know, given faster growth in the U.S., more tech exposure, higher profitability, et cetera. But 10 percentage points, that's pretty staggering. So there was a lot of valuation fuel there for a regime shift. Second point, I would note, you know, markets, you know, at the end of the day are rate of change driven. So if things are getting better than investors expected, that's positive for markets. And so we're more focused on rate of change and directionality than level. So certainly, you know, if you look internationally, Europe, China, you know, growth there has been weak. They've been proverbially, you know, laying on the basement floor economically. We're not expecting, you know, growth to be as strong in the U.S., but it's moving in the right direction. It's accelerating off of low levels, and we think that's positive for international equities. There's a geopolitical element to it as well, just to use a microcosm. You know, if you look at the German debt brake and, you know, the increase in the German budget, a lot of that to finance increased defense spending as, you know, the world gets kind of more multipolar and we all go at it alone. There's, you know, a good amount of trickle-down effect to that, you know, to the rest of the economy as well. You know, we think a weaker dollar is also. There's also some call option value there if you're an international, you know, if you're a U.S. investor investing internationally. Continued dollar weakness could be something that enhances returns. So I would argue the dollar has generally been somewhat overvalued and that, you know, there's some puts and takes here, but I think overall, I would argue the administration's policies are more dollar negative than not, and they probably, in fact, want a weaker dollar to support manufacturing exports. And then, you know, finally, to bring it home, I think the single most compelling argument is, you know, our bottom-up analysts are finding a tremendous amount of investment opportunities outside the U.S. So, you know, our allocations are primarily driven by where we see the best bottom-up risk-rewards. You know, we feel best about investments when the top-down macro view and the bottom-up are marrying, and that's what we're seeing right now. There's a lot of good top-down arguments to be made for non-U.S. equities. At that same time, we're seeing tremendous productivity from the analysts in finding international ideas. So very simply, we've been able to buy great companies that are domiciled outside the U.S., outside the U.S., that if they were just simply listed in the U.S. and traded on U.S. markets, they would be, you know, several turns more expensive. So there's a little bit of a, almost like an arbitrage there where we can buy very strong international companies for a significant discount to what we pay for a U.S. equivalent. Great. Thanks, Jay. And maybe just one thing I'll add, and maybe in particular to the roughly 40% of the audience members that do think a regime shift is underway. One of the things we highlight in the bottom right here is just thinking about maybe where in non-U.S. equity markets to put those incremental dollars to work. And so we're just showing the performance historically of investing in the international large-cap markets. So I think EAFE or ACWI ex USA is that large and mid-company segment of the marketplace. You compare that to investing in international small-cap companies, which are not covered by those EAFE or ACWI ex USA indices. And historically, the beta offered or the investment opportunity offered by international small-cap companies has been greater than what's been on offer from large companies over time. And then, just the sort of nature and structure of the international small-cap market, you know, we're talking thousands of companies that comprise this index. So it is by far the largest, from an investable opportunity set, the largest number of companies that exist in the main public equity markets. Sort of lends itself maybe to more inefficiencies to capture in a passive way, more valuation inefficiencies. And so if you just take kind of median active manager performance in international small-cap, you can see how that's added incremental value over time. So just sort of building on those different components of where to look to invest in non-U.S. markets. So we're going to finally allow Marc here to find his voice again as we pivot away from the public equity markets towards the public fixed income markets. Maybe, Marc why don't you just kind of walk us through what's happening in rates markets first and maybe what your views are going forward? Thanks, Jeff. When we think about rates markets, really two very different outcomes for the short end and the long end of the curve last year, and we would argue that that will continue to a degree in 2026. At the front end of the curve, obviously, the Federal Reserve was cutting interest rates, and you saw interest rates come down a bit. I would note that valuations were very attractive across the fixed income markets last year. On the rate side, returns were generally pretty good across the fixed income markets. The short end of the curve, obviously, with those rate cuts, valuations have come down some, but they still remain modestly attractive, and our viewers are still getting decent compensation over the rate of inflation. On the long end of the curve, we think it's a little bit more complicated in that valuations remain attractive and, quite frankly, pretty attractive. We do think that there's a lot of things that could continue to press on the long end of the curve and prevent it from coming down as much as the short end of the curve. We are expecting, and there's a significant amount of stimulus in the pipeline. A lot of fiscal is going to be coming through in the first half of the year from the tax cuts that were enacted in 2025. Additionally, obviously, the Federal Reserve has been cutting rates, and that acts on the economy with a lag, so that will be coming through, and you're shifting from quantitative tightening, where the Federal Reserve was running down their balance sheet to what I would call stealth QE. They're not going to be out there buying billions or trillions of dollars of bonds, but they're going to start growing their balance sheet in line with the economy, and that's because, really, when we look at the markets, there was lots of liquidity out there. But the Federal Reserve is more focused on the banking system, and rightfully, you know, liquidity within the banking systems becomes more tight. And that differentiation is post the global financial crisis, non-bank financials. You know, you get your mortgage from Rocket Mortgage. You don't probably get it from JP Morgan. A lot of credit is done by private credit as opposed to done directly within the banking system. So a lot of things that used to be done within the banking system that the Federal Reserve was kind of measuring and checking on are now done outside of the banking system. It's very clear looking at the valuation across risk assets that there remains a lot of liquidity out there, so a lot of stimulus in the economy, and at the same time, there are, you know, we're still running very large deficits. Historically, a lot of that was bought by sort of less price-sensitive central banks, sovereign-type buyers, so increasingly, that's needing to be bought by private investors, so obviously, to be able to fund those deficits, they're going to require more and more term premium or, you know, a higher interest rate than you would sort of at the short end of the curve to take down that debt at levels that are attractive, so at the long end of the curve, you know, rates have been sort of sideways for the past few years, as you can see with the graph on the left. Even if the front end continues to come down a little bit, if there's a couple more rate cuts, we think that you could have pressure that keeps longer rates, meaning the 10-year or the 30-year bond sort of in the range they've been in over the past few years. Right. So I think one of the things that we had talked about, maybe risk to the upside, risk to the downside, sort of cases to be made in either direction, but at this point, maybe sort of evenly distributed. So there's some fair value at current rate levels from what we're seeing either on a nominal or a real basis. As you look outside the rate markets and the other sort of spread areas of the fixed income markets, maybe risks are not so evenly distributed. So what are your thoughts on the other areas outside of the rate markets? Yeah, I mean, when you look at credit spreads and whether you're looking at the investment-grade corporate bond market, the high-yield corporate bond market, the [SFAC] markets, look, credit spreads are tight across the board. Again, there's been a lot of liquidity in the markets for five years now. That said, defaults have remained modest. And without a downturn in the economy, we would expect defaults to remain modest. So we don't see a huge push that's going to push credit spreads materially higher. But we are very much focused on the compensation for risk. When you're not getting paid very well for risk, we want to make sure that you're getting really well paid for the risk that we're taking to us. That generally points to what we would call the shorter duration part of the credit markets. Things like asset-backed securities, we think, offer an awful lot of value here. On the other hand, focusing on pure beta, reaching for yield and things like long corporate bonds, you know, we don't think that that's as attractive here because even small changes in sort of the credit spreads on longer duration corporate bonds can lead to sort of significant underperformance relative to treasuries for those vehicles. So overall, alpha over beta, really focused on where you're getting paid. Look for those niche opportunities, which is really what we focused on, you know, in our sort of standard fixed income objectives or our high-yield objectives over time. Great. Thanks, Marc. So we're going to pivot one more time here. This time, we're going to pivot to private markets. But before we do so, we have our second audience poll question. So this one's a bit of a two-part question. First part is, do you plan to increase your allocation to alternatives next year? And assuming the answer is yes there, maybe just indicate where you anticipate increasing your allocation the most within the world of alternatives. So we'll give everyone just a minute here to submit their vote. Okay. So it looks like maybe half the audience here is content with either the existing allocation they have or alternatives or maybe even decreasing them a little bit. I guess we didn't offer that as one of the options. But for those that are looking to increase their allocation, kind of an equal mix across all the different asset classes. So it probably speaks to the idea that there's sort of broader adoption of alternatives happening. And obviously, that can be done in a lot of different ways. So, Jim, I know with the other affiliates at the Callodine Group, there really is a specialty within the private credit market in particular. So maybe just share your thoughts. Private credit has obviously been in the news a lot at the beginning of the year, maybe for more positive reasons. As the year went on in 2025, we had some more negative headlines. So just give us maybe your view on private credit the year that was and what we expect to see going forward. Yeah. I mean, in general, private credit had another really strong year if you look at returns across the private credit landscape. Not dissimilar to public bonds or public credit markets, you've seen, in general, outstanding credit performance. So you haven't seen any kind of material losses sweep across the private credit landscape. There were a couple sort of headline losses around a couple of frauds. Frauds happen. They're unfortunate. They were relatively small and actually hit banks far more than private credit, even if the news got that a little bit backwards or some of the bank CEOs got that a little bit backwards in their commentary. In general, credit events were pretty benign across the full private credit landscape, with maybe the one exception being parts of real estate. You know, the commercial real estate cycle feels like it's sort of bottoming, but it's still working through, I think, post-COVID hangover in some areas, particularly office. But in general, private credit had a really good year. You know, the spread tightening that we've seen in public markets, you've seen a little bit of that in private credit markets. Again, that's an influx of liquidity. And in general, you don't get credit cycles without economic recessions or events, right? That prior chart kind of showed that. The credit cycles are very coincident with recessions. Without recessions, you don't really see exogenous credit events. Typically, markets at all-time highs, multiples near all-time highs are pretty inconsistent with a looming credit event. And so I think when you look at markets, you have to be pretty intellectually honest. You know, you talk to folks who are really bullish on a speculative asset class like crypto but are nervous about private credit markets. And I'm not sure you've got your risk, you know, sort of in order there in terms of where risk might lie in the grand scheme of the markets. But, you know, private credit continues to take market share from banks more broadly and from other parts of the credit ecosystem because returns have been good and investors have put additional funds towards most private credit strategies. And so, you know, both sides of the equation are pretty happy with the results right now. Yeah, and I know we were talking in advance of this and just on the idea of that spread compression, a little bit of what we're showing in the graphic here. I think at face value, you might say, "Oh, that's just more liquidity coming into the markets or more lax underwriting standards." I think maybe from what you see, there's a little bit of a different take and other things happening in addition to maybe those components. Yeah, and I would just point out on this chart, the underlying base rate actually went up about 300 basis points. So returns on an absolute basis are higher at the end of this chart than at the beginning in terms of what you're actually netting as an investor. Yeah, I think in general, the thing that's happening in credit markets, just like, you know, if you use a different analogy, when Amazon, you know, came to town and it was really disruptive for a lot of small retailers because Amazon had a much better business model and was able to deliver products in a more efficient, more cost-effective way to communities. In some ways, private credit is doing the same thing. It's a much lower-cost business model relative to a bank or some other really highly regulated deposit-driven franchises. Therefore, they have some advantages in terms of getting cheaper cost of capital to borrowers, which is what borrowers care about at the end of the day. So you've seen a little bit of that. Certainly, the liquidity in the market and the advent of private credit has put, I think, some lid on borrowing costs, right, which is good for the broader economy, not so great if you're running a bank maybe. In general, you know, private credit and the advent of investor funds has been good for the market and good for the economy more broadly. If people can borrow at more attractive rates because there's a more efficient way to get capital or allocate capital to borrowers, that's a net-net good thing. And so it's a little bit, you know, charts. This is a really good chart, but it's, in some ways, it could be missing a broader story underneath there. Yeah. And one of the things that can be a little bit tricky or misleading about just using the terminology private credit is thinking about how vast of a market truly that is. I mean, the equivalent would be saying, "Hey, public fixed income. Yeah. Public fixed income could be really leveraged CC C unsecured high-yield deals, or it could be short-term T-bills, right? And then you have everything in between. So I know that what you and some of our affiliates at the Callodine Group focus on is more niche areas of the market. So maybe just talk a little bit about what real private credit sort of means to us at the Callodine Group and the affiliates and the different markets that they focus on. Yeah. I mean, it's a very broad catch-all term, private credit. There's lots of different forms. You know, the growth of private credit has actually been occurring in more investment-grade rated sort of credit markets as opposed to more speculative historical mezzanine or more aggressive types of lending. But yeah, I mean, to boil it down, and what a lot of people think of private credit is they think of direct lending, which would be, you know, a credit fund is directly lending to a large corporate. That corporate could go borrow money from a bank, the bond market, or a private credit provider. They're relatively indifferent. You know, we do focus on what we would call specialty finance. So we do very specialized forms of private credit. The best equity market analysis would be like a broad index fund versus a small-cap strategy or international strategy, right? There's a lot more nuance to those, and so we focus on asset-based lending, bridge and transitional real estate lending, sports, entertainment lending, which is a new business for us, life sciences lending, so these are all, you know, dedicated verticals within the private credit market where it takes special underwriting skills and special origination skills, and in our view, you know, you can earn excess return per unit of credit risk in those types of markets, and so we like those markets quite a bit, and we've now brought those to market in a fund product, an interval fund product that's really easy to access as an investor, and so that's just the evolution of private credit as it gets more widespread and more adopted. You'll see that, and I think this is a really interesting offering for investors. Great. Thanks, Jim, so as we look to wrap things up here and take some of your questions, I'll just take a moment to summarize some of our comments from today. Obviously, we did spend a good deal of time discussing the risks and concerns around AI, the current level of tech spending, the expectations that have grown and been priced into many of these AI-related companies, and I think, you know, a lot of those concerns have been justifiably elevated by us, but, you know, Jay, to sort of lean into your comments earlier, you know, we're not meaning to suggest here that we're on the precipice of another tech bubble 2.0 for the technology sector or markets in general. I think what we want to do is just convey a more realistic outlook around return expectations going forward in many of these areas. And maybe on the sort of flip side edge, just sort of highlight the other areas of the market that seem to be offering significantly more attractive risk-reward propositions as we look to 2026. And I think similarly, you know, there's probably equal amount of ink that's been spilled on so-called alternatives or investing in private markets last year as there was on AI. And, you know, the reason for that is a lot of them are available for the first time in a more efficient and accessible manner for a lot of, you know, wide variety of investors and asset allocators. And so, you know, these markets and these investment vehicles, they look and act really differently than traditional public markets. And so, you know, really coming to understand the asset class selection, strategy, due diligence, manager selection, you know, the different vehicles, that's sort of paramount to really understanding and exploring those different areas. And so maybe just one last thing before I turn it over to Q&A, I'll ask each of you once again the same question. Maybe just in summary, looking forward to 2026, what is the most attractive opportunity that you perceive in each of your respective areas? And conversely, what is the biggest risk that you're monitoring or worried about out there? And Jay, once again, we'll start with you. Sure. Thanks. So I think the biggest opportunity is, you know, it's for active investors. It's to, you know, be able to kind of dive into all the babies that have been thrown out with the bathwater and with this kind of excessive narrowing and focus on AI. So as Jim said, there's incredible dispersion of sentiment and valuation out there. So we're seeing some really great cyclical opportunities such as, you know, housing recovery plays, you know, some cyclical plays in the logistics transports area. We're seeing more deep value opportunities than we have in a while. I would highlight the, you know, the pharmaceutical companies. Some of those are trading at 8x earnings, 12x earnings, and incredible franchises that are still growing. So I think the best opportunity is to, you know, just to be able to sort through that as active investors. Your question on the biggest risk, I would put this in, you know, it's odds that I would say are below, well below 50%, but better than 5%. So not something that's a base case, but something we do think about as a risk and position for is that, you know, AI investment cracks at some point, you know, possibly, you know, causing some, you know, economic/market contagion. Again, not a base case, not expecting that contagion to happen. But I think there's elevated risk given how narrow, how fragile growth is. I think if AI investment slows, I think it could bring down all the various markets that are supporting it, such as data center construction, electrical equipment, and so on and so forth. It's felt to me like almost every week we find, you know, a new sub-industry or company that in some way, you know, is starting to benefit from AI investment and kind of a surprising, you know, growth shows up in some segment, you know, unexpectedly. I think there's probably almost certainly been some, you know, malinvestment and some bad lending to the space. We saw, you know, GPU-backed lending to Neocloud circular investments. So, you know, there's probably somebody when the tide goes out that we find out is swimming naked. So, you know, that possibly could spiral again. You know, I think relatively small, modest odds of that happening, but, you know, kind of like a worst-case scenario that, you know, we're monitoring and keeping an eye on. Thanks, Jay. Jim, how about you? Yeah. I would say just in general, you know, we're three to five years into effectively a market that's been, you know, red-hot in the equity market, you know, very above-average returns. We talked about sort of some of the speculative nature and the returns to momentum and high-valuation stocks. Those are all kind of harbingers of future risk to future returns. I'd say when you look at 2026 and a go-forward basis, it's probably a good time to start, you know, evening out and balancing the fear and greed elements of saying, "Look, it's probably a time to start to consider risks and not just upside when I'm making an investment." To that end, I think the more value-driven parts of the market, energy, financial, healthcare, you know, we would sort of echo Jay's sentiments on pharma and some of the other, you know, housing-driven parts of the financial landscape that have been pretty out of favor as places where you can just take a lot less valuation risk or a lot less cyclical risk and still make really good equity returns. Those would be the things that are probably most interesting. And I'd say, you know, along with AI, the other exogenous sort of factors out there is always, you know, we're in a volatile, you know, geopolitical environment. You know, exogenous market shocks can come from left field pretty quickly when you're in those types of environments. And so, again, to me, that just means, you know, placing a lot of emphasis on diversification and having a lot of different bets, not singular. And unfortunately or fortunately for the U.S. market, it's gotten extraordinarily concentrated in kind of one thing, which is AI. You know, if you look, almost half the U.S. market cap now, something like the S&P 500, is directly linked to technology and/or, you know, compute in some capacity. And so I think you have to start to question whether owning the index in the aggregate or generically is actually diversifying you anymore, right? Which is somewhat ironic given it's, you know, it should be a diversified index. It's really become in some ways a one-trick pony. And so I think it's a good time to broaden out where you're allocating capital in general as a de-risking mechanism. Great. Thanks, Jim. Marc you're up. Yeah. We continue to see a lot of value in the asset-backed sector, especially in sort of the smaller niche deals where we really know the businesses, we really know the assets, and you can get paid really well and earn really good returns. Likewise, there's select opportunities in the corporate space, especially on the high-yield side where some of the smaller off-the-run things, if you're willing to take the time to do the credit work and dig in, you can really find good niche businesses where you're getting well paid. So that's really where we're focusing our time to continue to find good opportunities. The risk to me, look, the risk that always gets you is the one that nobody's looking for. So I don't know what that is. But the risks that we're really focusing on that would, you know, sort of negatively impact our view either on the long end relative to the long end of the Treasury curve or in the credit markets would be a weakening in the labor market, which again, not our base case, but a real deterioration in the labor market would obviously bring some potential pain. And the credit market's in a very different view on the long end of the rates curve than what we're thinking. So for us, that's the real view to sort of our risk on the fixed income side. Great. Thanks, Marc. So that's the end of our prepared remarks. We're going to move into Q&A, and we'll kind of move quickly here because we have a number of questions to address. And Marc I'm going to stick with you for a minute for the first couple of questions. We had one that came up probably related to the early part of our conversation. We were talking about inflation, the Fed's inflation target, where inflation is today. Obviously, the Fed has been in the headlines a lot, the Fed Chairman role in particular more recently, and at least for the next couple of weeks here. So the question was, do you think the Fed will revise up its inflation target? I don't believe that the Fed's going to explicitly revise up the inflation target. They have a policy whereby they revisit sort of their framework every number of years, and it would take course in the realm of that. Look, it's become very clear that whatever the official stated policy, they become more comfortable with levels of inflation. That's also they're weighing both sides of the mandate and that they're worried about employment as well. So no, I wouldn't expect that they're going to explicitly come out and say, "We're okay with 3%-4% inflation." And that's a slippery slope because as an investor, if the Fed can say, "It was 2%, now we're fine with 3%," what's for me to then think, "Well, if they're fine with 3%, why wouldn't they be fine with 4% three years from now?" So it's a slippery slope, but no, we don't think they're going to explicitly sort of move that up. Obviously, they have softened that and are really focused on both parts of the mandate. Yeah, and you know, we've actually done a couple of pieces on this, but just to sort of complete that thought on what you said, Marc is just, you know, the regular consumer doesn't think about inflation in the same way economists do, right? They typically don't think about it as in, "Oh, like the year-over-year terms or the past three months annualized." It's, "I paid X for eggs two years ago, three years ago, four years ago, and I'm now paying 25% more." That sort of anchoring of price at a price level rather than a year-over-year change, obviously to the extent you increase your inflation target, you're just compounding cumulatively at that sort of higher rate. So I sort of agree with you that I think they would be low to sort of increase that, certainly from a consumer political perspective, if you will, anything more. Sticking with you, Marc real quick, just on fixed income, a question. We didn't talk about it at all, so that's why I'm glad we sort of saw the question here. Kind of your view on the muni market and active munis in particular. Yeah. I mean, the muni market can offer really attractive, obviously, after-tax returns to clients, and when we think about the muni market, we don't think about avoiding taxes. We think about what is your sort of maximizing your after-tax wealth, and that's how we treat it for the taxable portions of our client accounts. Look, the muni market relative to the Treasury market and some of the other markets has been very tight. Valuations have been very compressed there for a long time, so we have a more modest sort of allocation there than we normally would. We would love to own more munis for our clients sort of as that relationship normalizes, but, you know, we do think that the muni market can provide attractive opportunities. We would just like to see valuations sort of more in line with where, on an after-tax basis, sort of that's a better place to be than some of the other opportunities out there. Great. Thanks, Marc. Jay, I'm going to come to you on the next question. I know there's been a lot of discussion among our investment team last couple of days on this since it was announced, but just the question around how the, you know, the presidential announcement of this or the idea of a 10% limit on credit card interest, how's that going to impact banks, credit card companies, the markets more broadly, maybe the payments companies? Just what impact do we think that could have? And maybe even the question implies kind of what is the likelihood of that actually being implemented? Sure. So we've been staying busy the last few days. There's been quite a few proposals that we've been looking into, and this is one we've dug deeper into. So to hit the question, you know, head-on, it's clearly a negative for banks if it happens, but it's manageable. So our financials analyst, he did the work on JP Morgan. And, you know, if you look, it's about 7% of their net income that's related to credit cards. So if you capped rates by half, it's maybe like 3.5% of earnings. So negative, but manageable. You know, certainly there's other financial institutions where it could be more than less there, but you know, probably generally indicative. But, you know, I think the bigger point that you alluded to is just the likelihood that this happens. I think a good analogy is price controls or rent controls. So these, you know, hey, you know, all of us paying, you know, credit card interest rates that are half of what they are now or, you know, your rent being frozen for five or 10 years sounds great. Problem is that that constricts, you know, supply. What happens if you control prices or rent? You know, landlords, you know, stop renting out their properties. If we saw banks be forced to cap interest rates at 10%, I think there would be a good portion of, you know, the populace that they would pull back on credit limits or pull credit altogether, which would, you know, I don't think is the administration's intended goal there. So we think small likelihood of, you know, we think that's more kind of jawboning and low likelihoods that it actually happens. It wouldn't have the, you know, the intended consequences. Great. Thanks. Yep. It's probably the single greatest way to cause a recession also. Like if you want to say what's on your bingo card for what could cause a recession unnecessarily, it would be the massive restriction of credit to like half the consumers in the country. It's sort of implausible that it would play out that way. It's such a horribly bad idea. Yeah. It's unlikely. Yeah. I mean, we're sort of forced to go through the exercise just saying sort of a what if, what if, what if, what if, what if. But I think, yeah, our investment team certainly agrees with your sentiments there, Jim. So I want to be respectful. We are coming up on the hour here. I want to thank the panelists who joined me today: Jim Morrow, Jay Welles, Marc Bushallow. A big thank you to everyone who took time out of your busy lives to attend our webinar. We appreciate your interest. You know, the markets and the economies don't stop moving, and neither should our engagement with all of you. So we encourage you to visit our websites and reach out to your Callodine Group representative to keep the conversation going. So we appreciate everyone's time today. Hope you have a great rest of your day, great rest of your week. Take care, everyone. Bye-bye.