Welcome and thank you for joining us today. Before we get into the content, here are a few quick housekeeping notes to help everything run smoothly. All lines have been muted upon entry and will remain muted throughout the session to minimize background noise. This call is being start recorded. Let's get started, shall we? It's my absolute pleasure to introduce Sabrina Bowens-Richard. Sabrina. Hi, and thank you so much for having us. I'm Sabrina Bowens-Richard, head of Truist Wealth's client and adviser engagement team. Now before we begin, I just want to acknowledge the human toll of the recent US Israeli strikes in Iran and the retaliatory attacks against the region. These events have disrupted daily life, closed major airspace, and created tremendous hardship for families throughout the Middle East. Our thoughts remain with all those affected. Now we did come into the year with our annual outlook theme, the seventh inning stretch, and said we did expect some curveballs this year, whether they be geopolitical uncertainty, the midterm elections, and and just higher volatility in general. And this situation is just another example of that. We saw disruptions in Venezuela with the capture of Maduro and now the escalation out of Iran, which still remains fluid. Historically, market impacts have been short lived, though we continue to monitor this situation, particularly through the lens of oil prices. We are committed to keeping our clients informed. So our goal today is to provide you clarity on what's happening and what it may mean for the global economy and markets moving forward. I'm joined today by my colleagues, Eylem Senyuz, our senior investment analyst, and he will walk us through the geopolitical backdrop in Iran's leadership position. Mike Skordeles is head of US economics, and he will discuss the impact on the US economy. And Chip Hughey, managing director of fixed income, will share the effects on interest rates and the role that fixed income continues to play in times like these. So, Eylem, let's start with you. The situation remains very fluid, but just walk us through what has happened, and based on what you're seeing, how should we be thinking about the path forward in Iran? Yeah. Good morning, Sabrina. Thank you for having me, and I'm sure, you know, you have been watching the the news cycle, you know, over the last, you know, four or five days. The current Iranian regime, you know, has been governing, the country for the last fifty years almost, and it is deeply embedded in the Iranian society and also closely aligned with the religious factions rooted in the Sunni Shi'ai divide that happened in the year of six hundred thirty two. It's not just the political regime that's running the country, but it's also deeply rooted religious ideology controlling the country. And they came in power, if you remember, in nineteen seventy nine, the Shah of Iran, Reza Pahlavi got ousted, and and they established the Iranian, Islamic Iranian, Republic of Iran. And and I'm sure you remember him. Ayatollah Khomeini was the first supreme leader, and he died in nineteen eighty nine. And Ali Khamenei became the second supreme leader, and he got killed during the last weekend's aerial attacks. We expect that no near term collapse of Iranian regime. The regime is so entrenched over the last five decades, and it could take many months of fighting to see the collapse of the current regime. And we also do not expect, you know, boots on the ground. And to be honest with you, it's not needed as the US and the Israeli military has the complete control of the skies. Of course, it's a very fluid situation. You know, we're following the news as as as like, you know, old analysts have been doing as well. I hope that answers your question. Yeah. Absolutely. So we don't expect a near term collapse of the regime and and don't expect boots on the ground at this point. So I'm just gonna shift to Mike. You've said in previous conversations that the direct hit to the US economy should be limited. Can you just give us a quick sense of why the US may be insulated here from this situation? Yeah. So the again, the direct impact to the US economy is, our base case quite limited. As Alim just laid out, fifty plus years, but increasing sanctions over the last twenty five years on the Iranian economy, not just by the US, but by the global, economy. And so they've really been disconnected from global supply chains. There really isn't, a production that's even indirectly involved with the exception of crude oil. That's why, as you highlighted, that's the main factor and the main way that energy prices is how things are gonna show up, which we're already seeing on global markets. But as as, I pointed out a number of times, the US gets more than ninety percent of its total crude oil supply from North America. So, you know, again, it's less impacted. That said, global energy prices and particularly natural gas and crude oil are set on global market. So there is an impact. It's just an indirect one. And if we see this drag on a while longer, if it persists, you could see inflation, you know, bumping higher, and that puts the Federal Reserve in a tough spot. I'll leave that for Chip to talk about as far as what it means for rates. But, again, it it may push out rate cuts to later this year and perhaps cause fewer rate cuts this year. But, again, the main transmission mechanism to impact the US economy is through energy prices. Yeah. And I think that's a good segue to, Chip. So, Chip, we've seen a sell off in treasuries, which historically has been a safe haven asset. What's your take on the impacts of this situation to to interest rates? Sure. Yeah. Let me start by saying that when we say a sell off in US treasuries, we mean that bond yields or interest rates have risen this week after the, the tenure touched its lowest level since late, two thousand twenty four, and that was on this past Friday. There there are a few key things to think about as it relates to the current situation. So one, the Iran conflict is likely to keep intermediate and longer dated yields stickier around higher levels than would otherwise be the case because of the conflict's uncertain impact on global inflation. And that's primarily due to rising oil and energy prices. But that's not to say you you that we think that yields are off to the races higher from here. Because as we saw on Friday and even actually, a little bit, late yesterday, investors are also buying high quality US fixed income as a relatively safer haven in the face of today's, geopolitical uncertainty. And so that should help keep, yields from from rising, in a disorderly fashion, help keep those in check. Second, and I'll mention our annual outlook that we put out in December, which all of our clients can receive. We we wrote that we were entering twenty twenty six with unsustainably low interest rate volatility, unusually low, and we expected to see a bumpier rate path this year. So the the the market was very, very calm in in the latter half of twenty twenty five. The conflict in Iran is a new catalyst for the higher rate volatility that we expected to see, and it will likely continue until there is some de escalation, in the Middle East. And third, although we still believe the Fed wants to lower the Fed funds rate towards three percent this year, which Mike alluded to, the resumption of policy easing is unlikely to begin until either the conflict's impact on inflation is clearer or there is more definitive, deterioration in the labor market, which we do not expect to see in the very near term. So we think we will still see, some rate cuts this year, but also, you know, a rate cut as soon as soon as this month, for instance, is very unlikely. Yeah. Absolutely. I just wanna shift, back to Elam. You know, Elam, as as we look at this situation, what is the overarching geopolitical angle, to what's going on in Iran? Sure. Yes. There's definitely a bigger picture here. You know, we need to look at to almost all geopolitical headline when the US is involved with the Chinese angle. Aside from Iran, I would say China was most negatively impacted by this weekend's geopolitical developments, and let me explain this. You know, China consumes fifteen million barrels per day of crude oil and seventy percent of which is imported. So they only produce thirty percent of what they need. And twenty percent of the imported oil comes from four countries, Iran, Qatar, Bahrain, and Oman. And all these countries are affected by these recent events. You know, state of Urumus is closed, and Iran is not producing anything right now. And Saudi Arabia is supplying ten percent of, you know, what China is consuming, which is partially impacted. Would say half of it, is coming from the Gulf. The other half is coming from the other side. And and China used to buy oil from Venezuela, of course, for all the reasons we know, not anymore. So they're in a difficult predicament in terms of energy, and I believe that was also part of this plan. And Venezuela is the world's number one oil deposit country in terms of proven reserves, and Iran is number three. And almost within a month period, the US took both of them offline. And not only that, you know, we have the Strait of Hormuz closed as well, which carries twenty percent of the world's, you know, exported oil. Also, it's technically a shutdown mode. So the US is uniquely positioned, to establish a strategic chokepoints on global trade routes whenever or wherever it's needed. And I'm sure you know the president Donald Trump and Chinese president Xi Jinping are scheduled to meet in Beijing at the end of the month, this month, to discuss geopolitical tensions, you know, trading balances. I'm sure Taiwan will be on the table. Russia, Ukraine will be on the table, and I'm sure Venezuela and Iran will be on the table as well. So US is going into that meeting with the, you know, the higher end. So what happened in Venezuela and what's happening in Iran right now is connected. I just wanna ask you, Elam, quickly. Just given the seriousness of of the conflict and sort of the leadership uncertainty inside Iran, is there any scenario, whether it's near term or longer term, that could lead to to a better outcome for the Iranian, people themselves? Yes. I mean, Iran has a tremendous potential. If you go back to nineteen seventy nine, Iran's GDP was equivalent to Switzerland. When you look at today's, you know, Swiss economy, it's over one trillion dollars and Iran is less than four hundred billion. So there's a tremendous potential for the country, and the country could become a, you know, g twenty country if the current regime is out, but it looks like it will be a really difficult path for them to achieve for a quick change. But anything is possible. Like it happened in Venezuela, regime could stay intact, and maybe the new leader will be able to change the political structure aligned with the US as much as possible. So possibilities are endless here. You know, it's definitely an important year for the region, and of course, we're following the developments as closely as possible. Thank you for that, and we'll continue to follow those developments. I wanna shift to to Mike again. I mean, you mentioned that the direct impact on the US economy was minimal, but can you help quantify, that for us just a little bit? Yeah. So coming into this episode, our expectation was that the US was gonna grow US economy was gonna grow about two and a half percent, two point, two point five percent. This has the possibility to shave off about point one percentage point from that. So two and a half would go to two point four. That there's not much there. If it was to persist for longer, that could grow maybe two or three times, which is point two or point three. Maybe on the outside, if it lasted much, much longer, could be a half a percent perhaps. And, again, main transmission mechanism back to the US is through higher prices. But, again, with the vast majority of our crude oil and natural gas coming from North America, again, little impact because those additional dollars that are spent on energy can't be spent elsewhere, so that's part of the drag, but it also cycles back into the US economy. So there's that. That said, there are plenty of tail risks. They're low probability, but there's plenty of tail risks. So, these are things like a broader escalation, continued drone attacks to various other places. Halem didn't mention it, but there was a attack on, Cyprus. Again, not directly involved. There's a UK British Air Force base that was there that was attacked. To retaliate, may choose to go that route. Another one is sleeper cells. There there's an a whole bunch of possibilities there, but we're not talking about hypothetical. This is very real. Iran damaged three Amazon Web Services sites that are in the Middle East. Those took down other services that weren't military related or anything like that. So the point here is that countries and companies are likely to step up defensive postures and investment in sort of defensive sort of, investments that draw investment away from other things. So, again, need to keep things in context. The other thing to keep in context is that, other things matter to the US economy. So Chip mentioned jobs. There's a whole lot of other things that matter much more for economic growth than what happens in Iran. Not that it doesn't matter, just that other things matter more. Yeah. I know we have a lot of business owners on on the line as well. Are there other secondary impacts that could potentially affect, those clients? Yeah. Broadly speaking, the probably biggest secondary in impact is by uncertainty, especially shipping cost. So anything that relates to crude oil and what have you is gonna increase shipping cost. Again, not just things that are sent overseas, but when you raise oil prices, that raises diesel prices, which means anybody that's trucking anything and literally anything we receive gets trucked to us. That's gonna increase shipping costs. And, you know, there's also supply chain disruptions that may happen in global locations. So this really weighs on decision making for companies. Conversely, there's possibly some upside on some of it. Historically, there's typically means that some Americans are gonna choose to stay closer to home. The there's, you know, any sort of military conflict that happens in various regions, especially in the Mediterranean. So these are these are popular locations that it's typical that you see more people staying closer to home when they travel, like summer travel and what have you, rather than going international. So there's possibilities for some, whatever you wanna call them, offsets that that happened for the US economy. So, again, that's why we're largely isolated but insulated from what's happening directly with Iran. Well, thank you for that, Mike. And, I just wanna pivot back to Chip. You know, again, just given the current backdrop, you know, how are we reviewing the role of fixed income? Again, this is supposed to be our safe haven asset. How are we viewing this in the context of a balanced, diversified, portfolio? Yeah. Well, I would say that there's been a relatively positive development within the fixed income world this this year. Historically, high quality fixed income has been negatively correlated to the US stock market. So what does that mean? That on average, the the negative return, correlation suggests that when stock returns decline, bond returns rise and vice versa, which is what you wanna see as an investor because income and diversification are the two crown jewels of of fixed income investing. And so between two thousand twenty one and two thousand twenty four, the the traditional inverse return relationship between stocks and bond prices, that broke down, meaning that they were moving in the same direction more frequently. And that was largely due to the massive fiscal and monetary stimulus that was unleashed, and then its simultaneous removal, that distorted this relationship. So now two months into twenty twenty six, core fixed income is providing valuable portfolio stability much more consistently. Now to to be fair, it's been less consistent over the past couple of days, but the fur it doesn't change the fact that the first two months of twenty twenty six, it's been really encouraging to see bonds reassert their power of diversification while also generating strong income. So essentially, the role of bonds within a diversified or balanced portfolio, it's as strong as it's been in more than, in more than five years. Yeah. And, I just want to turn to riskier fixed income. How has that been reacting in these, recent trading sessions? And do you see opportunities in that Yeah. So I mean, to start credit spreads is I'll use that term here. So just lay that out. It's simply the the amount of extra yield or compensation an investor can receive for buying US, corporate debt, whether it's investment grade or below investment grade, debt relative to buying a US treasury bond with the same maturity. So investment grade and high yield credit spreads have widened a bit over the past month and especially, you know, more recently, but it's been pretty orderly so far. And it's also important to note that the widening that we've seen in those credits in those credit spreads is coming up from historically low or tight levels. But that means two main things. For one, riskier fixed income sectors have underperformed high quality fixed income over the last month or so. And two, the wider credit spreads reflect that higher uncertainty we're we're discussing today around the world the uncertainty that the world is facing now with the conflict, in in Iran. So broadly speaking, we continue to monitor credit spreads very closely because they can send important economic signals. For instance, if we see spread not the spread widening really accelerate, but that can also create tactical investment opportunities as well. But for right now, what we are seeing in credit continues to validate what we have said for some time, which is an emphasis on higher quality fixed income and still using patience before adding a significant amount of credit risk. Well, I know we covered, quite a bit today. I guess what I'm hearing from you all, we continue to monitor the situation in Iran and the Middle East. As of now, the US economy appears insulated. We are continuing to watch energy prices and the potential impacts on, inflation. And just from a fixed income and yield standpoint, we're seeing treasury yields high, but we don't anticipate that, you know, they're gonna be somewhat capped just given this environment. And we would stick to high quality, fixed income as it continues to to play a stabilizing role in portfolios. Is there anything that I missed from you all that you wanna just make sure we reiterate to our clients? Yeah. I'd say I'd say the quick one, and you hit it a number of times in that wrap up, is the the diversification piece. And when things go south, whatever the situation may be, it's typically too late to try to readjust your portfolio to account for that. And that's one of the reasons why diversification is important. Additionally, you know, Eilin mentioned very quickly the dollar among other things is that we're gonna continue to see some of these safe haven assets. Chip obviously talked about US treasuries. But things like gold, things like the US dollar, which was extremely beaten up, is now positive for the year. So, you know, again, we're seeing these impacts and needs and reinforcement for diversification, whether it's in portfolios or in other things, but just kinda underscoring that point. Yeah. Absolutely. Well, thank you again for joining us today. As we heard, you know, while the situation is Iran is is deeply concerning on a human level, the broader impact, both globally and here in the US remains manageable at this stage. The US again is largely insulated. Energy markets are are the main channel to watch, and fixed income continues to provide stability as uncertainty plays out. We'll keep monitoring developments closely and keep you informed as the situation shifts. Your Truist team is here to help you translate these insights into thoughtful guidance as we navigate through the uncertainty. Thank you again for spending time with us. Attendees, this concludes our session for today. Thank you again for spending time with us. We truly appreciate your engagement and interest. Have a good day.