Hello and thank you all for joining us today. Today we're joined with Steve Pavlick of Renaissance macro Research and Tim Holland from Orion, our Chief Investment Officer. So today, before we get started, I have just a few housekeeping reminders for you. As a reminder, this webinar is being recorded and you'll have access to our replay shortly after we conclude. And then if you don't see our video feed, please try refreshing your browser. If you do have any questions for Tim or Steve during our remarks, please use the chat and we will try to get to everyone at the end of our remarks. If not, we can follow up with you individually afterward. Now I would like to turn it over to Tim Holland to begin. Tim, take it away. Alright, thank you, Megan, and our thanks to everyone who's joining us today for what I think is a very timely special conversation we're about to have with our good friend Steve Pavlik from Renaissance macro. So again, we know everyone's really busy. We do appreciate you taking time out of your busy day to join us for for this webinar and if you have to drop off, can't stay around for the entire 30-40 minutes or so which is about how long we think we'll go depends on the questions at the end. And and we're happy to take those questions and and do our best to answer answer those questions. Once Steve and I are sort of done with our fireside chat or or or Q&A, we will push out a link to the replay. So if you, if you miss a little bit if you have to, if you have to drop off. That's OK. You can always circle back to Megan's point. I'm Tim Holland, I'm Mariana's chief investment officer and I'm joined by Steve Pavlik from Renaissance macro. A bit of background on Renaissance macro or Rent Mac and Steve to leading Wall Street research firm. They do great capital markets and industry and company specific work, but they also do great policy work. And Steve is head of policy at at Renaissance macro. And if there was anyone who could shed light on this somewhat unsettled situation from a midterm election or post midterm election perspective, it's Steve. So Steve heads policy, lives and works in our nation's capital. He's worked on the hill. He's worked at Treasury. He's an expert on all things DC and all things politics. And we're really fortunate to have him with us today. So Steve, thank you very much. For taking time out of what I would think is a very busy schedule on your end right now given the the political calendar to join us. So. So thank you. Oh, well, thank you Tim, for having me and good thinking on your part to have the foresight to schedule this for Friday when we wouldn't know a little bit more. Still a lot of questions outstanding, but good move on your part. Yeah. No better to be lucky than smart I guess. So it's it's kind of funny. Steven and Megan and I were talking before we went live with the webinar and I was looking back at the questions I put together first Steve seven or eight and again we're happy to take your questions and the the first couple three are completely off point because the first question was really hey Steve Boy that was some election we know where things sit. So let's kind of unpack it though and talk about what really happened and and we kind of don't know where things. Sit. So I'm gonna sort of tap dance a little bit around the first question but I guess Steve and and this is a bit open-ended and and it's a lot but if anyone can can help us with it with with this it's it's you so it's Friday it looks like the Republicans will take the house the Senate as you know is still up in the air probably won't be decided until next month with the runoff in in Georgia so. I guess my question would be within the realm of what we know, you know what kind of did happen within the realm of what we don't know what might happen and and maybe and being a pollsters probably as tough as being an economist, right. It's hard to predict the future. Most folks thought we were going to get this red wave given the president's approval rating, inflation, all this stuff you know really well and we kind of didn't get it. So where did the, the pundit class go wrong? The three big questions take them into any order that you want and and take as much time as you want because it's it's a lot to to to dig into but but please fire away. Well sure if I forget to answer one or spark another question please interrupt but maybe I'll start with just what the expectations were heading in because I think that's how most of us are judged and judge others in terms of just based on those expectations you know I think. They had evolved overtime. You know, historically it's the political party out of power that does well. And I think that's why there's a lot of reason for Republican optimism to have larger gains in the house and retake control of the Senate. Although the presidential penalty seems to be a little smaller for the Senate and maybe we'll get into that little later. But really there's tends to be a big correlation between the president's approval ratings and swings in the house. One thing to keep in mind in terms of the house just compared to prior years. You know, we have a lot more partisan drawn districts. We had a lot of gerrymandering as a result of the 2020 census. Republicans took an approach to make red districts redder and that maybe, you know, secured some seats but maybe did not present as many pickup opportunities. The other thing I would keep in mind too is that Republicans actually gained 14 seats in the House in 2020. People, I think, tend to forget that, but presumably that was a lot of the low hanging crew, not making excuses, just sort of pointing out, you know, maybe why we're not going to see these. Swings of 40 seats and 63 that were sort of what we saw in the prior to first midterms from the the the President. You know I think one of the reasons pollsters may have gotten it wrong some this time is the last three elections they were actually overstating support for Democrats, understating support for Republicans. And I think what we saw was maybe an effort to try to correct for that and that may have been harder for pollsters just because it can be very difficult to. Eight Republican voters to get them to respond. So they tried to do their best, I'm sure, but that may have raised expectations. The other thing to keep in mind too, is a lot of times the average margin of error is about 5% for pollsters. So when we're talking about a lot of these close races that have been decided by less than 5%, you know, sometimes they can't be all that helpful. Another thing I did here was that this time we saw more partisan polls, you know, party polls that were. Included a lot of the averages that may have skewed things a little bit and that we might have actually seen a decline in some of the more traditional polling metrics. So that might explain where we got some of the results. So what we do know right now is that both chambers remain on, I guess, too close to call. I think, you know, we look at what's likely to happen. You know, Republicans, if I'm looking at sort of where things stand, at least according to RealClearPolitics, they have 211 seats in the house. Like compared to 196 for Democrats, that magic number is 218. So still a lot of races to be called, particularly in California where things may take a while, which isn't uncommon out there. But you know, the betting markets and everything suggests that Republicans are likely to get that 218. I think it's going to be at a much smaller majority. You're talking maybe low two 20s, mid two 20s if things sort of break as expected. And that's going to be very difficult for Kevin McCarthy to win the speakership. More difficult to keep the speakership and to just to get that governing coalition moving forward. And I think you're going to be more beholden to more of the far right side of the party similar to how Pelosi had a or has still I guess still in this Congress has you know that sort of five seat majority there or that Democrats have and sort of been a lot of discussions about her being beholden to the squad and where the progressive elements there. So very comparable Congress make up and then on the Senate. Right now it looks like we have 3 outstanding races, you know? Basically, either you can never get to two first is going to decide that you have Democrats with 48 seats, Republicans with 49. If you're questioning my math, it's because Democrats only need to get to 50 seats. That would be the current makeup because the tie breaking boat goes to Kamala Harris. They could retain their majorities here at the committees Republicans need to get too. And I think that's why we're really focusing on Nevada. Looks like Democrats are likely to pick up Arizona, Nevada. You know, if I had to guess, I think it's probably gonna go to Democrats, but that's Republicans best hope. And if Democrats pick that up, then I think they're likely to pick up the December 6th runoff in Georgia. Because I don't know there's going to be as much motivation for Republican voters because you saw Herschel Walker, the Republican candidate there really underperform. And I think you could see more justification motivation for Republican voters if they thought, you know, OK, I will vote in December 6, not that I'm necessarily. Rolled with Walker. But because it's going to be able to sort of deprive Democrats from controlling the Senate and to be sort of a block against Biden. So I threw a lot at you. I don't know if I covered all your questions but no you did. That's all really interesting stuff and if I could back up a tiny bit so you know so the three outstanding races, right. So Warnock Walker going to runoff Nevada and Arizona. So that's a really interesting point because you know if Republicans take. Nevada, if they can flip that seat then all of a sudden Georgia looms super large. But to your point if the Democrats kind of run the table in the Southwest, Kelly in Arizona, I think it's Cortez maybe and in Nevada then you know George is still important but maybe folks aren't as fired up and and it becomes an easier pickup for for the Democrats or I guess a whole for the Democrats. So that's a really and so if you if you had to kind of pioneer crystal ball today. Do you think the Democrats take Arizona and Nevada? If I had to pick today, I probably would say yes. I think Arizona, we have a lot of votes outstanding. I believe in Maricopa County, which I think is Phoenix. That's urban area. Talk about mail in votes. They tend to skew Democrat. Similar situation there in Nevada or I believe it's Clark County. Las Vegas is located again a lot of mail in ballots and I think I saw something yesterday that showed that Cortez Masto, the Democrat senator is getting about 65. Percent of those outstanding ballots compared to Adam Laxalt, the Republican candidate. So if that trend holds for the remaining ballots, she should be able to make up about the one point deficit that I think she currently has. Now, I do suspect whoever loses is going to ask for a recount, so that could delay things. And you know what that means practically. This in the near term is a lot of the lame duck session is going to depend on the midterm results. That sort of impacts your. How you approach it from a negotiating standpoint, I mean Republicans are going to gain control of both things. They might prefer to wait a little bit longer and have a greater say over some of these legislative items next year when they're controlling the the majority where they have the pin. You know, that also might accelerate the timeline for Senate Majority Leader Chuck Schumer saying, look, you know, we're running out of time here. Let's go ahead and try to pass as much as we can. You know, I think one thing that may be of interest to folks on this call, it's possible they could try to address the debt limit. Knowing that it's going to be very difficult for Kevin McCarthy in the house. We talked about the pressure that he's going to be under from more the the Freedom Caucus wing that that far right wing of the party fiscal conservatives that are going to want more probably demands and concessions than Biden is going to be willing to give. And at that point he's really going to struggle to have enough votes to avoid default and if this sounds familiar it's because it is. There's very similar situation that occurred in 2011 when you had the exact same makeup and. Biden should be familiar because he was Obama's vice president. Then. You had House Speaker John Boehner, I beat with a much larger Republican majority, you know, sort of getting the pressure there. I believe they told the Democratic Senate at the time. So that's sort of, I think what we're fearful of. So it's a question of do Democrats want to try to address it now during the lame duck? They maybe want to try to have this fight later, you know, next year. So something to to watch for. Yeah, that's a good point and we'll sort of go back to the lame duck session in a second. And if I remember sort of that kind of budget and and or sort of sort of sort of deficit sort of Cliff, that fiscal Cliff sort of ushered in to a certain extent with some folks thought was an age of austerity. A little bit here, maybe a little too soon. The government sort of stepped back not to say one side was right or wrong sort of after the Great Recession and you know there should have been more fiscal support but obviously concerns about sort of the country's fiscal profile at that point. And then back to the polling. Comments and not to get too in the weeds. You know what I read was that? While the outcome wasn't sort of along the lines of a red wave to to any extent, it looks like the Republicans are winning the popular vote. Broadly speaking by a decent percentage. And so if you kind of look at the math that way, it seems like a lot of the polling was pretty accurate. It just hasn't translated into as many seats being picked up I think as many folks thought would what would happen. So I think that was kind of interesting too. And then if I could go back, I would, I would just sort of reiterate that point. I think it's a good one is you know, we may not have seen a national red wave, but you definitely saw pockets of flooding when you look at Florida in particular. Georgia Republican Doug performing in New York. There are different reasons for for this but you know the generic ballot to national measure which means you know in certain states where different issues are priority, you know it's not going to have as much predictive ability. I mean I the one I'm thinking of at least for the democratic side was Michigan. You know that was where you had an abortion issue on the ballot. I think that did a lot to bolster the Democratic gubernatorial candidate there and you saw them flip the state legislature. I think for the first time since 1984 if I heard it correctly and a lot of congressional gains is as well. So it was interesting to see where you know these states you know sort of different priorities there and how that impacted the the vote. Yeah. And if I could go back to Kevin McCarthy as well on a question there. And we already have a question that came in around sort of the democratic leadership and speaker Pelosi. So assuming the Republicans do take the house even if it's by a smaller margin than than the Republicans would have liked to have seen, do you think it's sort of his speakership to lose and if the Republicans do take the house and and and that sort of is the path forward for the next two years. Do you think Nancy Pelosi given she won't sort of have the gap on her hand anymore and she's had a long career. Big chance that maybe she resigns or retires early and they hold a special election for her seat. I I could be completely wrong about this. I've heard some chatter that maybe her daughter has political aspirations. So just if you could kind of speak to the Republican leadership dynamic and on the democratic side as well, please. Sure. So maybe I'll do that. The Democratic one first. So they went ahead and announced they're going to have their leadership races, they being the Democrats November 30th. It gives little time. Pelosi believes that the COP 26 conference in Egypt right now on the climate change front. Don't know why she would want to stick around to be Minority Leader again for the third time. You know, she has mentioned in recent interviews that the attack on her husband would influence her decision, although she didn't say which direction that would influence her. So I would personally be surprised if she sticks around. I would also be surprised if either of her deputies, Steny Hoyer, the House Majority Leader, or Jim Clyburn, the majority whip, run to replace her because they're fellow. Octogenarians, I think there's more of a movement amongst Democrats to get a new generation of leaders there. I think at least from the DC perspective, it appears that Hakeem Jeffries, Democrat from New York, is sort of the favorite to replace Pelosi. But at this point, the over performance by Democrats really makes it Pelosi's decision. I think they're sort of waiting on her for that confirmation. And again, you know, I don't know which way the attack may have influenced her decision making there. And in terms of retiring early, I suspect that would happen. I mean that's not uncommon. We saw that with Republicans, you know, Dennis Hastert, you know, comes to mind, you sort of step down. And in terms of her daughter Christine, there have been reports that that's sort of the calculus as she would step down, this would create a special election in San Francisco district she represents to replace her. Her daughter would be clearly favored with name recognition. And in a short race to replace her would probably be one of the the presumed. Frontrunners there. So I could understand that on the Republican side, they're gonna try to have at least their initial crack leadership race next week. It looks like McCarthy just has to get a majority of votes to proceed. I suspect he will get that. His challenge will be when the new Congress is sworn in, I believe January 3rd that week. You have to get to 218 on the floor. Clearly he's not going to get any Democrat votes, so will he have the support of at least 218 Republicans? That's sort of bringing back to the beginning of our conversation why that that margin matters in terms of your majority. McCarthy tried before and failed. That was when Republicans had a much larger majority. That sort of created the vacuum for Paul Ryan. You might recall 2015 to ride in as the White Knight, as the one person that could sort of unify the party. So I don't know that anybody's actively opposing McCarthy right now. One of the challenges McCarthy had the last time was trying to shore up that support from that right flank. So I think one of the. Games to watch would be, if we get to this point, McCarthy just can't get to 218. Does Steve Scalise, he is the current #2 from McCarthy. You know, he sort of aligned himself with that. I think he has more clout with conservatives, obviously not actively campaigning for the job. If McCarthy fails that sort of create an opening for him, you know, we'll wait to see, but there could be some, some drama there beginning of January. Interesting. Yeah, I know. I didn't know there was a there was sort of leadership contest would take place so soon. So that's pretty interesting on the Republican front. Yeah, I mean, really the most of the lame duck. Serious conversations and legislation is going to be, I would say after Thanksgiving. I mean really the next few weeks are more just sort of trying to organize and usually, you know, figure out committee assignments and leadership contests and things of that sort. The problem is that we don't know who's yet in control and so, you know, I think they'll still have this conversations, but yeah, that should impact some of that potentially as well. OK. And we're gonna get into what all this means for 2024. It'll be here before we know it. The presidential election and obviously the election for Congress. 1/3 of the Senate again, and and everyone in the house. And we want to talk about what all this means, even if it's somewhat unsettled for the markets. And the economy next year, but to to step back and this is kind of a somewhat big again sort of somewhat open-ended question. As you look at the results what we know and again sort of what we don't know given the votes that are still being counted what is and as a political scientist right you know what does this midterm say about again where we are as a country from a political perspective sort of any big picture high level thoughts you know as you kind of step back and. Just try and view the broader landscape. What, what, what does this say about America? I think sort of from a political perspective, if they're, if they if it says anything. I think it sort of almost echoes a theme that we've been seeing and definitely in in in 2020 is that we're still very polarized and divided. And they mentioned that it's because we're still going to be very narrowly divided in terms of the congressional makeups you're talking about right now. Democrats have a very slim majority in the House. Republicans gained 14 seats in 2020 when Speaker Pelosi was anticipating 20 seats. Historically, that probably would have been a safe bet this time, you know? Party was anticipating 30 seats. Again, clearly they're not going to get there. So he's looking at a very slim margin as well. We're talking a best case scenario of Democrats getting to 51 seats in the Senate, 51 seats as the best opportunity available for Republicans as well. So and that's sort of my take away is, you know, I don't know that either side is really running away with it necessarily in terms of independent voters, but in terms of just that polarization narrowed divide. I think that's what we're seeing in terms of how both sides are going to respond to that. I think that's sort of a thing to watch. I think Biden and it took a little victory lap is probably should have based on the expectations that Wednesday after the election since it wasn't the rejection he basically said you know I'm not planning on making any changes we'll see what that means in terms of 2024, but I sort of understand what that means now and you know and then a non conclusive result sent from the voters I. If I were him, you know, probably wouldn't change directions either. Yeah. No, it's it's interesting not to sort of go down the rabbit hole bit, but if you look at some of the things the Democrats have done, you know, some sort of set aside what was done through the worst of the pandemic because that did have bipartisan support sort of early on, right, Republican in the White House and then Democrats doing better obviously with the midterms, Trump's midterm election and then you know, sort of through the worst of 2020 and even in Donald Trump sort of lame duck period. Passing legislation when the economy was still in a pretty precarious spot and sort of everything, maybe not everything, but some of the big stuff since then. Has been passed very much along the lines of just a party vote. And so to your point, given how polarized the country is, the political fallout from that polarization is, you know, it seems like either party, if they want to do something big and something that's sort of considered particularly partisan, they're probably going to do it because it doesn't seem like there's ever going to be a lot of broad bipartisanship around big stuff if that makes. Sense I it it, it does and I think you know even talk about the results but it wasn't a major shift. It was still a shift in terms of giving Republicans the House which is desire for gridlock and not moving forward with anything. I think at this point we've sort of reached the cycle. You saw it during the first two years of the Obama presidency, the first two years of the Trump presidency now the first two years the Biden Presidency where this window of opportunity to move legislation while you have control of both chambers. Is narrow. And that's why you're gonna be as bold and aggressive as you can. But you're confined by the fact that we don't have 60 votes in the Senate, which means what can you sort of shoehorn through budget reconciliation? And that's sort of why we've seen a lot of changes, in particular to tax policy and some of the spending. And that's one of the few things that complies with the budgetary restrictions of reconciliation. I think that also is one of the reasons now we see more administration because you got to deliver on your campaign promises. Try to get reelected. That's why I think the next two years, and this has been the true under Obama and Trump's the shift towards executive actions. Because pretty much the legislative pathway is blocked for most things. And at a very simple level, executive actions aren't law, which means they're more susceptible to legal challenges, which is why you see both sides emphasizing the importance of confirming partisan judicial replacements to uphold the executive actions. We're still going to have a 630. Conservative Majority, Supreme Court. So in terms of some of the executive actions you see, you know, take those with a grain of salt because they'll, as they work their way through the legal process, the Supreme Court will be the ultimate arbiter for many of those decisions. But it's not necessarily an endorsement. I'm just a cynical guy who lives here in DC, but unfortunately, that's how the game is being played. This is a great town. It does breed cynicism. So, and you're a wonderful person, but I can see how that that happens. And you're sort of answered this question, but maybe, as they say, if you could unpack it a little bit more or I guess some people say double click on it. So let's assume the Republicans do take the house, the Democrats hold the Senate. The next two years from a policy perspective at a high level you know is it mostly gridlock and and why do you think if it is why, you know what does that mean for the markets and the economy are and this is probably like a four Part 2 part question, four parts of a two-part question if you could and then where might there be areas for compromise if if if any? And then back to the regulatory dynamic right you talk about presidents and executive actions during this sort of very polarized period. What does this election. Mean from that sort of executive or regulatory perspective, from an economic perspective. So let me hear thoughts kind of tie this back to the markets in a couple years, what is or is not possible or likely on on from a fiscal perspective and then how this plays out from a sort of administrative executive branch perspective as well would be really helpful. What's your just from the legislative prospect, there's really no difference between other Republicans just have the house or the Senate. You are at that point in divided government, which basically means most of the legislative agenda is is done. Now from just a general perspective, politics aside, and you can skew this, I've seen different scenarios going back to analysis, you know, divided government in terms of market performance, but generally speaking divided government is viewed as good because it provides certainty over the next two years from an operating perspective. We're not talking about any changes to the tax code, no major policy changes. You know, I I think that's probably what we're looking at moving forward. Now. What does it mean if you're Republicans were to get the Senate? Well, because we talked about this desire to do executive actions, you need to get the Senate. To confirm a lot of your nominees to replace those vacancies which are going to happen, there's always a natural turnover during the midterms that will be easier for Biden to get nominees, particularly one that are more ideologically aligned with his views and the views of the left confirmed if they have control of the Senate. Republican Senate does not have a lot of incentive to confirm by the nominees that are going to carry out a bunch of policies that they don't want. So I think that's more the the practical application. And in terms of executive agencies, obviously that would apply to the judicial. Vacancies as well. And we talked a little bit more about the now that we're anticipating a Republican House the greater shutdown risk over the debt limit need to raise that I'm interesting to see what the if you're the Fed you know you have to consider this as well too. I mean if we are in a recession next year you're only going to have the monetary lever to pool because Republican House is not going to provide any additional fiscal stimulus spent a lot of time attacking Biden Democrats for their partisan COVID relief that a lot of the social spending there so I just. Don't see them really being open to that. If we have a Republican Senate, I think it'll be interesting to see what that means in January 2024. That's when Lisa Cook's term runs out. I don't know that Republicans would reappoint her to the Federal Reserve Board because they all opposed her confirmation the last time it took Kamala Harris to cast that tie breaking vote. That's not unusual for the Fed to not operate with a full slate there of the seven members, but. That would be interesting because right now it's currently in terms of political ideology you have 4 Democrats on the seven person board versus 3 Democrats that would sort of if she were not to be confirmative that vacancy open that would more the the three, three you know split there in terms of the the board that might have some impact that's the direction of some of the the regulations at least the Fed intends to go. But that's sort of how I think about, you know, the, the big picture, you know, reaction in terms of sectors, you know, I think aerospace and defense is probably a likely winner because I think Republicans are going to look to boost spending beyond whatever level that Biden and Democrats propose. Republicans are going to try to push more of an all of the above energy plan. They've said that in terms of greater role for fossil fuels. I don't know that Biden's going to sign that legislation. We that we talked about the lame duck agenda that might also delay the the permitting considerations until next year since Republicans would have a bigger sway over what mansion, said Joe Manchin, that Democratic senator from West Virginia has proposed. But that's something to keep an eye on fairly. Republicans don't like or shouldn't. Let me more careful with my words. Republicans aren't as biggest supporters of this transition to renewable energies, at least as fast as the bite administration Democrats would like to go. So I think that's an area to watch. And sort of related to that, you know, because Republicans will now control the committees, I think they're going to be a lot of pressure on financial services firms, particularly asset managers, banks that are looking to discourage investing in fossil fuels. I mean, Democrats sort of emphasize that as a way to achieve their goals. I think they wanted to include a lot more sticks. Directed at the fossil fuel industry, Joe Manchin sort of limited that being a representative there or the senator from West Virginia and a lot of the fossil fuel industry. So they preferred a lot more carrots, I would say, to incentivize the renewable approach. That's why you've seen more of an emphasis is can you go after the the banks and the asset managers to try to limit the funding there. You're seeing Republicans on a lot of states sort of pushing back on that. I suspect there's going to be a push and a lot of hearings devoted to that topic, at least in the house and possibly the Senate. Republicans do get that chamber as well. And those are all really interesting points and and to to sort of not to sort of take your words and sort of rework them a bit but you know what you said early in the answer was interesting because again sort of a lot of folks and I think Wall Street was anticipating a bit of a red wave as well. And to your point gridlock on historical look back basis has been has been welcomed on Wall Street because of the policy certainty and and you know we lean heavily on the research you've done and and you know this better than anyone. You know, the S&P going back a long period of time has always been up meaningfully 12 months after midterm, even six and usually 3 as well. Obviously had a big bounce yesterday which was probably more inflation driven. But you know, to to paraphrase gridlock is gridlock, you know, even if it's more of a A, it's not a red wave. Some people have called it red sprinkle. You know, as long as you take one, one part, one house in Congress, you know, you've got gridlock, maybe not to the extent a lot of people thought. And so again that creates policy certainty and historically that's been a really good thing for capital markets and it's been a tough 2022 for sure. And and I think people know that data point they're they're they're heartened by it and then if passed this prologue. You know, markets have already started to have a good fourth quarter. You know things should be a lot better as we look into 2023. So that that's a really interesting point and then. Back to the debt ceiling and I could be completely off about this, Steve. Is there, is there a date attached to that or is it a number? I thought I saw Q3 of next year, but I could be completely wrong as to the mechanics of that because one of the questions that have already has already come in is, you know the debt ceiling. If that becomes an issue, what does that mean for the Fed? Obviously fiscal monetary separate, but they obviously impact each other pretty meaningfully. So if you could kind of talk about that issue in a little more detail. Well, sure. So I will, as you mentioned at the beginning, I worked at the Treasury Department in Legislative affairs and that role sort of being the liaison between the Treasury Department and Congress. And I bring that up is because I remember negotiating those conversations around the need to raise the debt limit several times when when I was there. And it was always our job at the Treasury Department to to make it maybe worse than it actually is just to try to motivate and incentivize lawmakers to act. So you know. Speak with the department says with a grain of salt. They probably don't mean revealing their secrets, but it it just is what it is. In terms of the date. We never have an actual date just because it really depends on the outflows and inflows. So This is why you sort of get that time horizon. But you're correct. I mean what I've seen was the bipartisan policy Center which usually has a pretty good finger on the pulse for this had suggested in June that the ex date which is their way of saying that they that the US would potentially default. Would occur sometime in the third quarter of next year. That was interesting because we think back to where the country was in June. We had passed a lot of things and legislation wise Democrats hadn't passed for second, partisan spending bill, the Inflation Reduction Act, you know, HANDPASS chips plus bill that includes a lot of spending there as well. And Biden hadn't released his student loan plan, which you know, still being challenged in the courts. We'll see where that goes. But if it's upheld, the reason I bring that up is if all these things start to happen. We would assume they're a lot more outlays and that might accelerate that that timeline. But you know one of the reasons you get pushed back a little bit last year was revenues on the tax side did come in higher than expected. Some attribute that at least some areas to inflation, people getting bumped up to those higher tax rates which they may not have appreciated. But I think that's one of the things right now just time to consider is that's sort of the date I think it probably move up a little bit and then just do you want to have this political conversation and negotiation. Here the White House reports are was at the White House prior to the election was reaching out to Democrats in the Senate take their temperature to see if they wanted to address this during the lame duck session to avoid this potential negotiation of next year. If they decide to do that, I'm curious to see whether they are going to have to do it using budget reconciliation. If they do that, that's going to take up a lot more time during the lame duck session and could limit potentially the size and scale of omnibus. Pending package, it's gonna have to get done. If not, then you know, you should prepare yourself for a lot of headlines and concern about potential default next year when these negotiations pick up. And the reason is, is, you know, Republicans basically. That's one of the few leverage points of opportunity that they have. You can argue they might have played their hand. I'm sure Obama would have said that in 2011. But they basically know is like, you need our votes. A lot of our fiscal member Conservative Members don't want to vote for this. So you need me. To do this for you, what are you going to do for me? And that's when we get into these conversations and there's negotiations back and forth. So it's not an endorsement, it's just that's how the game is played. Got it. No, that's really helpful as well. So look at tax receipts, look at spending kind of do the math, maybe Q3 really starts to hit could be a little bit sooner to your point depending on how tax receipts come in and how much money is is going out. So that that's that's very the bipartisan policy center usually provides another estimate. So I think that would be helpful. I don't know if they do that before the end of the year, they might see whether or not Congress is going to try to take this up but. Be surprised they won't wait till the quarter Q3 next year to just spring that on everybody. Got it. OK. Now that's good to know. Thank you. So we're about 40 minutes in. Again, appreciate everyone who's still on the webinar and and thank you for your time today. So I've got a couple, three questions around what this the midterm as unsettled as things are maybe as unresolved still things are what this means for 2024 and you know I don't even know how to ask the the three questions considering the headlines of the last couple of days. Around the Republican Party but also the Democratic Party to your point Joe Biden took a bit of a victory lap he he earned it right. They they outperformed and all of a sudden if I think and not to put words in your mouth because you're the expert maybe he's looking better for 2024 than he was before the midterm. And then on the other side obviously Ron DeSantis to your point just ran away with the governor's race in Florida and and former President Trump obviously endorsed a lot of folks some of those. Kenneth said, well, some didn't. And if you read the media the last couple of days, not to say who's right or who's wrong, seems like the knives might be out as they say a little bit for the former president. So I don't know how you want to take 2024 because there's so many angles to it and some larger than life characters and and some pretty important people involved on both sides. But boy, what's the read through for 2024? What is, what does this, how does this impact the presidential race? In particular, does the former president? And there's Joe Biden. Seek reelection. What does Ron Desantis's performance in Florida mean? And any other direction you want to go? Because my head swimming, trying to trying to figure that one out in particular. So I'll stop there and and let you let you go. Try to be as brief as can clearly go on a lot of different ways and I think we had talked before we did this call. You know we said well we may not know the outcome of everything the Wednesday after the elections but we can be assured that the 2024 election will unofficially kick off then and and that was definitely the case here. Look on the Democrat side you know we talk about winners and losers. I think Joe Biden was obviously one of the the bigger winners over performing those expectations. I think the narrative going in. Was it Democrats had a bad night? If there had a red wave materialized, there would have been growing pressure on him to step aside, not run again. Yes, he would have taken most of the blame. You had. We had a traditional midterm result. Clearly that didn't happen. Biden was asked, you know, about this. And, you know, it was reminded that polls showed that 2/3 of Democrats heading into the election would still prefer another candidate other than him. And, you know, just sort of took the victory laps, viewed it as a sign that, you know, people approved of his policies, may not have been as concerned about the economic approaches, maybe others had speculated. So he said, I'm going to make an announcement. Beginning of next year, historically, candidates declare in the spring of the year prior because you get some restrictions on how you can spend campaign funds if he announces that he's running. And I think right now he's probably bolstered by this. I just don't see the lane opening at this point for somebody to to challenge him. I think one of the losers based on that would have been California Governor Gavin Newsom. He was somebody that was actively trying to position himself to be that progressive alternative to Biden because Biden was less. To drag on his party. I don't know if that opportunity is going to present itself now moving forward. I think the case for Biden's reelection is very similar to this case for election in 2020, where he tried to convince Democrats that I am best positioned to beat Donald Trump if Trump is not the nominee, I think there will be some questions. Is Biden still the one who's best positioned moving forward? So that's something to keep an eye on. And look, I don't want to be morbid, but he's about to turn. 80 in a couple of weeks you run the risk, if you stick with him, of a health scare. Should we get two years down the road? And at that point, you know, what would Democrats do? Presumably they might try to go to Kamala Harris. I think there's some concerns about her polling. I don't know that Democrats want to have that conversation of going to a candidate other than Harris. It would be very difficult, I think, to decide to not go with the first black female Vice President. And I don't think that's a conversation Democrats really want to have, particularly if they're going to decide to go for. A white male alternative like Gavin Newsom, but we'll see if that conversation even comes up. If Biden is challenged in a primary or if he decides not to run, Democrats are also going to reorder their primary states. They've got some issues with Iowa in the past. They're sort of opening this up. So I don't know if they're going to necessarily just forget Iowa and go right to New Hampshire and Nevada. Some jacking going on with a lot of bids. That will be something to watch. Another Democrat quite thought performed overperformed expectations on election night with Gretchen Whitmer. She was somebody who was mentioned as being considered for Biden's. Vice presidential selection. That she actually carried a number of Democrats down ballot across as somebody who could be viewed as a potential 2024 candidate as well if the desires to you know, move away from Biden and concerned about his popularity. That's why I think a governor is probably a stronger prospect there. On the Republican side. I think, you know I would agree with a lot of what's been written. It's interesting that's also been written by a lot of right leaning outlets that Donald Trump was. The biggest loser, a lot of, you've mentioned some of his candidates, you know, won a lot more lost. And he also discouraged a lot of candidates and probably could have won from running just because they didn't want to endure his wrath and risk maybe losing in a primary. I mentioned specifically New Hampshire because the popular governor there, you know, was considering a Senate bid, but it was crosswise with Trump, so he decided not to do it. Same thing occurred in Arizona. So those are two potential pickup opportunities that Republicans missed just right there. Trump brought a lot of this attention on to himself because I think he was sort of anticipating this red wave because he went ahead over the weekend prior to it and teased this upcoming Tuesday announcement where he's expected to declare his candidacy for presidency. Rather than getting credit for the red wave that I think he wanted, he's going to get a lot of the blame. And so now there's just speculation whether or not he's going to go through with this announcement. Gantos, he looks weak, like he's coming under pressure. Ask begs the question of does he get in? I think it could also be determined by what happens in Nevada, because if Republicans do win Nevada, we talk about how much more impactful that Georgia Senate race is with the last thing people want is Trump declaring he's going to run for President? Because that could hurt Walker's chances soon as he forces her to delay it beyond then. So we'll see. But the big winner, you know, we talked about Ron DeSantis winning by 20 points, winning on a conservative record. Um, you know, going back to, I think he rose to prominence with his approach to COVID and just a smaller role for government, just as a philosophical, philosophical difference between Democrats who tend to prefer a larger role of government. And I think he's going to try to point to that victory as saying, look, I have broad appeal, which means I could be a more viable candidate in the general election. You should get behind me personally if I were Trump and I were sort of motivated by running some people. Speculated that he might try to accelerate his decision timeline because he's concerned that the Justice Department's going to have these indictments against him now that the elections over and that he was sort of running to bolster his legal defense, that these are just politically motivated. And if you were to win, he'd have his Justice Department, you know, drop the charges. If he's really concerned, I would suggest that he just make a deal with the sadness, endorse him Tuesday, have an exchange for the promise of a pardon. But I don't know that he's going to listen to me if De Santis goes against Trump in the primary. It's sort of a delicate dance he has to do because he still wants to be able to appeal to Trump voters. When polls of Republican primary voters show that many Trump supporters migrate towards DeSantis. And the shorter have asked the question, OK, who would you support if Trump was not the nominee? So I think you might see some potential Republican candidates like Governor Chris Christie, former New Jersey governor Chris Christie, former vice President Mike Pence. Perhaps they go on sort of some kamikaze mission just to sort of attack Trump, knowing that their chances of winning the nomination aren't good. But they want to try to, for the party sake, move beyond Trump and sort of try to damage him up rather than make the sanest do it on the there's primary debates, which, if history suggests will begin around June. That Twin Democrats began there so something to watch. Sorry I'm maybe going a little longer than no no that's it's again that's such a fascinating question again giving given the people involved the the way the the midterm went relative expectations for sure and so. You know, do you think regardless of what former President Trump says on Tuesday, if he says anything at all, whatever his plans may be, do you think Ron DeSantis throws his hat into the ring regardless, like this is his moment or 2024 could or would be his moment given the the, the, the size of his victory earlier this week, he seems to have handled Hurricane Ian, I believe was the name of the hurricane pretty. I mean, you know, do you think he goes forward no matter what, understanding that these windows don't always stay open? For a long time if you're if you're interested in in being the President of the United States. I think he does. I think he views sort of the 2012 Chris Christie window of opportunity closing as a cautionary tale. I recall he had a similar situation responding to a storm. There was a lot of movement behind him and he sort of missed his opportunity, so to speak. You know, it's going to be challenging to take on. Trump would be the presumed frontrunner, but there's an example. Probably wouldn't like this comparison necessarily, but he could be the next Obama. You'll recall in 2008, everybody assumed Hillary Clinton would be the Democrat. How many bomber thought he had his moment, he was able to over perform and win Iowa and clear the field. I think that's the big thing is you have to sort of clear the field and be able to consolidate as the way Obama consolidated the anti Clinton vote. I think that would be desantis's challenges. OK, can I go ahead and sort of consolidate that anti Trump vote and that's there. I mean even before the midterms you know Trump was getting about 50% or so of Republican presidential primary vote, which sounds good except for the fact that you are a former Republican president which means half your party. Is familiar with you and still prefer somebody else. So there was an already an opening emerging prior to Tuesday. I think that openings only grown and I think the Santis is victory speech sort of signaled to his 2024 aspiration. Supporters were chanting 2 more years as opposed to four more years. And during his debate with Charlie Crist, his democratic challenger. No, he would not commit to serving the the full term there, which you know. Reading between the political theories to me suggests he's he's ready to run. Yeah. No that's a that's a really good point. It's gonna be fascinating the next couple of years and the next couple of weeks in the next couple of months is all this plays out and we'll we'll have to have you back on and before I get back to you see for any closing comments you've already given us a lot of content we did get got a couple of questions around sort of tying this back to the markets inflation. I'm I'm going to sort of take a stab at it feel free to add any any thoughts and then any closing comments as well. So one of the questions was I yeah I think sort of the midterms what all this may mean for inflation. My two cents would be the Fed is obviously raised rates and historically rapid rate to try and tamp inflation down, sort of bring demand down, supply can catch up and obviously restore price stability, if you think that. Fiscal policy is also important from an inflation perspective and I think it it it, it is meaning if the government spending a lot of money and the feds cutting rates well that's all inflationary it's going to spur consumption and and investment. If you get gridlock for the next couple of years and there's not much in the way of incremental spending at the federal level, there's not another big inflation Reduction Reduction act or or or a stimulus package of of another name then that should all things being equal help in the battle against inflation. And and I and I think it will as it ties back to again what this may mean for the market seems already done a really good job historically gridlock is good. And so as we sit here in mid November, it's been a very tough 2022 for sure. As we think about the outlook for the markets from an investment team perspective and an asset allocation committee perspective, we've become more optimistic than not. We're through the midterm that's historically been a good, a good thing getting through the vote even if some votes are still to be counted. Were in the seasonally strong period for the markets. Next year is a presidential from a presidential cycles year three, which is historically been the best year. Tying things back to the political calendar. Valuations come in a fair amount because earnings have done OK better than I think a lot of people thought and the market still off about 1718% from its highs and sentiment is still pretty bearish which is historically been pretty bullish. So as we think about the rest of 2022. Been to 2023 between sentiment, seasonality, valuation, the resiliency of the private sector from an earnings perspective for sure and getting through even if there are still votes to be counted, the midterms, we think all of those things. Dew point to stocks being higher as we think about the state of the state of Affairs 6 and 12 months out. So we're leaning into risk a bit or or we're sort of orienting our portfolios in that in that direction or will be. So I'll stop there. Steve, any other thoughts around sort of what this may mean for the markets and any closing comments as well? Sure. Maybe some of the how the midterms may impact the the Fed. I mean just sort of to to reiterate the fact that you know if we are in a recession next year knowing that Republicans are going to provide that fiscal stimulus, does that mean the monetary level or is it going to be pulled as much, is it sort of accelerate that shift to either lower rates increases, no rate increases or actually you know cutting rates. I think that's something that's weighing on the Fed he's getting drum palace showing himself to be. Susceptible to political pressure in which is why you're seeing a lot of that happen right now. A number of Democratic lawmakers on the banking committees, house and Financial Services Committee, which are Banking Committee in the Senate, Financial Service Committee in the House that are already encouraging him to slow down on the rate increases, clearly emphasizing much more that employment side of the dual mandate. Republicans are if they control the committee. Agenda and gavel, they are going to push much more that price stability portion of the dual mandates that look you need to go further and ensure that you get inflation down to the 2% target, don't make 3%, the new 2%. So we sort of caught in advice there. I think that's of his own making. One thing I'm curious about Powell is now that you know he was reluctant to sort of provide the, the bad medicine needed until after he secured that nomination from Biden to be Fed chair again. And you know now he keeps referencing Paul Volcker. In bulk with somebody who was criticized for doing what was needed at the time and raising, you know, interest rate tied to sort of tame inflation, history was kinder to Volcker, you know, recognizing that, you know, he had the political courage to do what was needed if. Powell is serious about his legacy, which you know, is not doing this job for the money. I suspect he is only doing it for his legacy. If you serious about that and following that Volcker Path, then maybe he is committed to to doing that moving forward. And whether he can keep, you know, fed Board of Governors and, you know, part of the FMC, not all of it. But whether you can keep them sort of in lockstep to go along with his plans to do that when they're going to be a little more devilish in the people that they're preceded them, is something I'd keep an eye on. Yeah. No, that's a really good point. Now a lot to to think about, a lot to pay attention to, just not just near term, but obviously in the 2023 and then gearing up for 2024. So I'm Steve. Thank you for your time. We're very grateful to have your insight, your perspective. I'm sure we're going to be coming back to you again over the next two years. There's going to be a lot to talk about. Thank you to everyone on the webinar for your time. We very much appreciate very much. Appreciate it, Megan. I'll turn it back to you for any closing remarks. Ohh, Tim, I think we hit all of our questions here that we got in from you as the audience. Just our reminder of it. Within a few hours, you'll have access to our recorded on demand webinar to watch at your leisure. And as always, if you have any questions, please reach out to us here at our team. And everyone enjoy your weekend. Steve, Tim, thank you very much for joining us today. Thank you. _1732420308737