(Upbeat music plays.)

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On screen text: Truist Market and Economic Insights, Truist Advisory Services, Inc., Live from Truist Studios, July 17, 2024, Truist logo, Wealth

On screen disclaimer: Securities and insurance products and services are not FDIC or any other government agency insured, are not bank guaranteed, may lose value

(Visual description: Opening screen fades into scene of four people sitting behind a news desk in a studio setting. Oscarlyn Elder begins speaking.)

Oscarlyn: Hello and welcome to Truist Wealth’s Economic and Market Insights quarterly livecast.

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Oscarlyn: We appreciate you joining us. I'm Oscarlyn Elder, Co-chief investment officer for Truist Wealth. My team is responsible for selecting and analyzing the investment solutions and strategies that your Truist Advisor uses in creating your portfolio.

(Visual description: As Oscarlyn is speaking, a new frame slides on screen at left, next to her video frame, and text flows into it from left.)

On screen text: Oscarlyn Elder, CFA, CAIA, Co-Chief Investment Officer. Leads the teams researching and selecting traditional and alternative investment solutions. Guides innovative focus areas of Diverse Asset Managers, Sustainable Investing, and Digital Assets. Host of I’ve Been Meaning To Do That, a Truist wealth podcast.

Oscarlyn: Before we begin our discussion today, it's important for us to pause and acknowledge the horrific tragedy of Saturday afternoon. Peaceful elections are essential to the fabric of our democracy and lives as Americans.

(Visual description: On screen text next to Oscarlyn flows off the screen. Empty panel flows off, and video of Oscarlyn becomes full screen.)

Oscarlyn: Violence has no place in our electoral process. Our thoughts and sympathies are with the victims of the shooting, and we wish former President Trump a quick recovery. Based upon the questions that you submitted during registration, we plan to focus today significantly on the impact or the potential impact of the election on the economy and the markets. Our plan is to continue that focus because we heard you say that this insight is very important to you. We do so with an even deeper understanding of the ties that bind us as Americans, and with the hope that the rest of the election season will be peaceful. Joining me today is Keith Lerner, co-chief investment officer and chief market strategist.

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Oscarlyn: Keith and his team guide our Truist advisors and clients through all sorts of market environments.

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Oscarlyn: They provide timely investment advice with the objective of helping our clients achieve their long term wealth goals.

(Visual description: While Oscarlyn is speaking, a new frame flows in from the left, next to the video of  Keith, and text flows into it from the left.)

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

Oscarlyn: His work is highlighted regularly in the financial press, and you'll often see him on Bloomberg TV and Yahoo Finance. And you can catch him again today on CNBC. From our beautiful Truist Studio around 3 p.m. on Closing Bell. Joining the discussion today is Mike Skordeles, Head of U.S. economics, and Chip Hughey, managing director of fixed income.

(Visual description: While Oscarlyn is speaking, video cuts back to all four people sitting at the news desk, and then cuts to Oscarlyn.)

Oscarlyn: Both are seasoned investment strategists, and they contribute to Truist Investment guidance. They, too, appear and are cited frequently in the media. Let's turn now to the markets and the economy. After posting an impressive twenty six percent return in 2023, the S and P 500 has added another nineteen percent in 2024, with the global market as represented by the MSCI All Country World Index, also posting very solid results. It's up about fifteen percent. The S and P 500 has experienced only one modest five percent setback this year, and that was recovered very quickly. On the surface of the market, it's felt like very smooth sailing, but diving under the surface, the average stock has lagged by a really wide margin and the technology sector has dominated returns. However, just in the past week, in the past few days of trading, we've seen a notable shift in this trend. The U.S. economy appears to be cooling from strong post-pandemic growth rates and inflation is stepping down. We believe that the Federal Reserve will be in a position to lower the Fed funds rate later this year. And as we look ahead to the rest of the year, the global election cycle will be a key focus for investors. We've already witnessed a sharp market reaction around elections in India, Mexico and France. And the U.S. election, of course, will dominate headlines as we move into the fall. Keith, I noted the strong returns earlier, the strong returns year to date.

(Visual description: Video cuts to close up of Keith, then cuts back to Oscarlyn.)

Oscarlyn: What's back behind and driving those returns?

Keith: So well first I just want to say it's great to be with you, Oscarlyn, and Mike and Chip.

(Visual description: Video cuts to Keith.)

Keith: I love being in this studio. Going to your question, it has been a strong year, and that's, as you mentioned, after a really strong year last year. So if I want to break it down succinctly. It comes down to economics, profits and technology, which you mentioned as well. Coming into this year, you know, I think the consensus was offside, again. The estimate for the U.S. economic growth was about one percent. That's been revised up to over two percent now. I’m sure Mike will get into that. That strong economic growth has translated into stronger corporate profits. We continue to see corporate profits move to new record highs almost on a weekly basis. So that's the other side. And then technology up until recently it's been the leadership by far. The technology sector by itself, is up about thirty percent this year. So you put that all together. And that really explains the strong market here. And then also as you mentioned, it's been broader as far as from the international markets as well, but they've just lagged the strong performance of the U.S.

Oscarlyn: But the bottom line is growth and profitability, heavily influenced by tech, have really driven what's happened here today.

(Visual description: Video cuts back to close up of Oscarlyn as she’s speaking.)

Keith: So far this year.

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Oscarlyn: Yeah.

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Oscarlyn: Often on this call we talk about our tactical positioning which is just our shorter term to intermediate term positioning and portfolios. And we highlight that for the folks who are listening in. How has our position changed since our April livecast?

(Visual description: Video cuts back to Keith.)

Keith: Well, it’s interesting. When we were talking last time in April, we were talking about, the, you know, we thought the primary market trend was up, but we thought we'd have some setbacks and we actually had that.

(Visual description: Video cuts back to all four people sitting at the news desk.)

Keith: You talked about the brief pullback we had. It was about five and a half percent.

(Visual description: Line chart titled “Strong market rebound following pullback in April” appears on screen. The chart shows S&P 500 values starting January 2024 and ending July 2024. Values start around 4,750 in January, trend upward through late March to around 5,250. A red trend annotation marks a 5.5% drop from late March to mid-April, where the value is approximately 4,950. The chart line has a highlight for late April labeled "Truist IAG: Upgraded equities." From early May 2024 to July 2024, the line in the chart resumes an upward trend. A green trend annotation marks an 11% increase for this period. Attribution on the chart reads, "Data source: Truist IAG, Fact Set. Past performance does not guarantee future results. Data as of 7/12/24")

Keith: We saw that in April right after this webcast.

Oscarlyn: Right.

Keith: And we actually use that as an opportunity to actually upgrade our view of equities. So before before that we were more neutral then we went overweight. And that proved pretty timely. Since that upgrade, the equity market has has rebounded more than double digits.

Oscarlyn: Yeah. So that was a very timely call. Why don't you also take us through our tactical positioning today.

Keith: Sure!

Oscarlyn: And what that looks like. Just so folks have that for context as they’re listening to the conversation.

Keith: Yeah. So so big picture. I mentioned that we were overweight equities. We are still overweight equities even though we think maybe becomes a bit choppy on a short term basis.

(Visual description: A presentation slide titled “Tactical positioning (3 to 12 months)” appears on screen. There are three visual scorecards here rating investments. All use a score range of 1 to 5 with 1 being least attractive and 5 being most attractive. Scorecard one, Asset classes, rates Equity as 4, Fixed income as 3, and Cash as 2. Scorecard two, Global equities, rates U.S. large cap as 4, U.S. small cap as 3, International developed markets as 2, and Emerging markets (EM) as 1. Scorecard three, Fixed income, rates U.S. government as 4, U.S. Investment grade corporates as 2, U.S. high yield corporates as 1, and Duration as 4.

Keith: But we still think equities on a relative basis makes sense. Relative to the fixed income and cash, we still find opportunities in other areas. But that's where we're biased. When we think more globally, for some time, as you know, we've been team USA.

Oscarlyn: Right.

Keith: We're still team USA. We've seen the U.S. continue to outperform by a wide margin. The international markets, again, we're finding opportunities overseas. But we're finding more in the U.S. So we want to stick there. We've been overweight U.S. large caps this year, which so far has also been working out well. We're more neutral on small caps, but we'll talk more about this. But I do think on a short term basis, this rotation that we've seen likely has a bit further to go. And then, you know, Chip, will talk more about the fixed income markets where we're still focused on, on high quality.

Oscarlyn: Yeah.

(Visual description: Presentation slide leaves the screen, and video cuts back to the four people at the news desk.)

Oscarlyn: Before we jump into the rest of the conversation, what we'd like to do is make sure that each of you have an opportunity, you know, for the folks who are listening, what's the one thing that you would like to have them take away from our discussion?

(Visual description: Video cuts back to Oscarlyn as she’s speaking.)

Oscarlyn: And Keith, I'm going to start with you.

(Visual description: Video cuts to Keith.)

Keith: So I've already said a little bit, but it's similar to what I said last quarter. We think the primary market trend is up, albeit with with periodic pullback. So we've had one pullback this year. I would expect we’re gonna see 2 or 3.

(Visual description: While Keith is speaking, a new frame slides on screen from left, next to his video frame, and text flows into it from left.)

On screen text: Key takeaways. Primary market uptrend remains intact, albeit with normal pullbacks. U.S. growth is cooling but not weak. Reinvestment risks rising as yields expected to trend lower. Elections matter, but other factors tend to matter more.

Keith: But the main message is we think the primary market trend as we think about the next 12 months is still one that moves higher, albeit at a more modest pace.

Oscarlyn: Mike, how about you?

(Visual description: Video of Keith cuts to video of whole group at news desk. Key takeaways text remains on screen.)

Mike: Yeah. So the biggest takeaway is the U.S. growth coming off of several very good years is stepping down.

(Visual description: Video cuts to Mike. Key takeaways text remains on screen.)

Mike: It's cooling but it's definitely not weak.

Oscarlyn: Very good. And Chip you.

Chip: As the Fed's rate cut cycle approaches and starts you know that tends to set up yields falling across the yield curve.

(Visual description: Video cuts to Chip as he’s speaking. Key takeaways text remains on screen.)

Chip: It's especially true in the front end of the yield curve, call it the first two years of maturities. Right. And that creates reinvestment risk. So I hope we could talk about how we're thinking about that and maybe some strategies to mitigate that impact.

Oscarlyn: That's great. And from an elections perspective, because we are going to have a special focus on elections. When it comes to elections, what we want to want folks to remember is that obviously elections are going to come into really greater focus as we move through the rest of the year.

(Visual description: As Oscarlyn is speaking, key takeaways copy and frame slide off of the screen, and video cuts from Chip to whole group at news desk, which also expands back to full screen. Video then cuts to Oscarlyn.)

Oscarlyn: That said, we know that elections matter. However, other factors also matter really significantly when it comes to market performance or potentially may matter more when it comes to that market performance. So we want you to keep that in mind. So Keith, let's turn to that first point, which is really about the primary trend within the stock market. Though we may get some normal pullbacks.

(Visual description: Video cuts from Oscarlyn to Keith.)

Keith: Yep.

(Visual description: Video cuts to Oscarlyn.)

Oscarlyn: What are you seeing. What's behind that view.

(Visual description: Video cuts to Keith.)

 Keith: Yeah. So first from just a fundamental perspective. You know Mike's gonna to talk about this economy that's cooling but still resilient. That's important because if the economy stays resilient that should translate. And those profit trends continue to move up as well. And then we also have a shift in monetary policy. You know, we expect the Fed to cut rates later this year. And we are undergoing a global easing cycle. It may be somewhat slower than we've been accustomed to in the past, but if we have the Fed you know, the Fed has our back and then the global central policy as well. And we have profits moving higher. We think that trend moves. That overall market trend also should move higher again in a stair step fashion.

(Visual description: While Keith is speaking, text flows in at the bottom of the screen.)

On screen text: Truist Wealth. Keith Lerner. Primary market uptrend remains intact, albeit with normal pullbacks.

Keith: Also for just context from a historical lens, when we say, okay, this market has moved a lot, right? We're up, you know, a little bit over fifty percent since October of 2022. We say, okay, how does that compare back to historical, what we call a bull market.

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Keith: Historically, the median or like average bull market lasts over a hundred percent. So we still have some ways to go. And as far as timing the bull markets tend to last 3 or 4 years.

(Visual description: As Keith is talking, the video cuts back to view of group at the news desk.)

Keith: And we're we're less than two years today doesn't mean this one can't be shorter. It can't be different. But just as a starting point that suggests we have more upside. The other thing that happened, we talked about this already. The first half has been strong.

(Visual description: Presentation slide titled "Stocks tend to see gains after strong first half, with normal pullbacks" appears on the screen. It has a bar chart named "S&P 500 2nd half returns & pullbacks following strong 1st half (>10% total return). The bars in the chart show the following values: 17% for 1st half average return; 9% for 2nd half average return; -9% for Deepest 2nd half average pullback. Attribution on the chart reads, "Data source: Truist IAG, Morningstar. Data since 1950. Past performance does not guarantee future results.")

Keith: So one of the questions we've gotten is has that pulled forward the returns. When we look at the data, we always talk about the weight the evidence and just say what happens when we have the strong first half, what tends to happen in the second half. And what we see is we look back since the 1950s when we had these strong returns, meaning ten percent or more in that first half, the second half you tend to see gains by the end of the year with a ninety percent probability, at least historically.

(Visual description: While Keith is speaking, the presentation slide fades off screen, and video cuts back to Keith.)

Keith: So I think that's a positive.

(Visual description: A presentation slide titled "Stocks tend to see gains after strong first half, with normal pullbacks" appears on the screen. It has a bar chart named "S&P 500 2nd half returns & pullbacks following strong 1st half (>10% total return). The bars in the chart show the following values: 17% for 1st half average return; 9% for 2nd half average return; -9% for Deepest 2nd half average pullback. Attribution on the chart reads, "Data source: Truist IAG, Morningstar. Data since 1950. Past performance does not guarantee future results.")

Keith: The one caveat that I'll put out there is that even as we end up higher by year end, the average drawdown that we see at some point has been close to nine percent. So be prepared that we're going to have those normal pullbacks, which may be an opportunity like we had back in April for us to make adjustments as well. But the underlying trend in our view is still positive.

(Visual description: While Keith is speaking, the presentation slide leaves the screen, and video cuts back to Keith.)

Oscarlyn: So Keith, you've given really I think it sounds like three distinct data points that point to this primary trend staying intact. Right.

(Visual description: Video cuts to Oscarlyn as she’s speaking.)

Oscarlyn: So profitability, the bull market is, I don't want to say young, that's not what you said. But the bull market is not old.

(Visual description: Video cuts to Keith.)

Keith: That's probably a good way…

Oscarlyn: The bull market is not old at this point.

Keith: Yeah. And maybe one other point too, what normally the first phase of the bull market’s the strongest, we’re past that.

Oscarlyn: Right.

Keith: Then you kind of go towards more of a moderation. And what's also interesting, the last phase tends to be strong because it gets everyone in. We think we're somewhere in that middle phase.

Oscarlyn: So the bull market is middle aged. Maybe.

(Visual description: Video cuts back to Oscarlyn as she’s speaking.)

Keith: That’s fair enough.

Oscarlyn: The bull market …

(Oscarlyn laughs.)

Keith: As long as no one's insulted, we’re not insulting the bull market. Yes.

(Visual description: Video cuts back to view of whole group at news desk, and then quickly cuts to just Oscarlyn.)

Oscarlyn: And then kind of this first half pattern typically is is a good sign for the second half.

(Visual description: Video cuts back to Keith.)

Keith: It's a good sign. But especially as we get more into the election side …

Oscarlyn: You’ve got other factors.

Keith: … you're going to see those swings. And I think we didn't really see as much in the first half.

Oscarlyn: But hopefully that helps folks have the context for why you've got the positioning that you do around the primary trend.

(Visual description: Video cuts back to Oscarlyn.)

Keith: Correct.

Oscarlyn: Again, expecting maybe some choppiness as we move along. We've got another year in the market where the tech’s been dominating, at least until recently. We're going to talk about that in a minute. And we continue to get a lot of questions around, are we in another tech bubble? Is this going to burst? What's our both short term and long term thinking around how technology is behaving?

(Visual description: Video cuts to Keith.)

Keith: Yeah, sure. So maybe I'll start with the long term first.

Oscarlyn: Absolutely.

Keith: Because we have some made some shifts there more recently. But long term, we don't think we're in a technology bubble. Number one, we don't think we're in a bubble. The chart that we'll pull up here is, if we look at the returns by themselves.

(Visual description: A presentation slide titled “Technology sector extended short term but far from bubble territory” appears on screen. The slide has a line chart titled "Technology 36-month rolling returns relative to S&P 500." The chart shows values between approximately negative 50% and approximately positive 250%, and covers a date range from 1994 to 2024. Two data points are highlighted. The first is 253% in 1999. The second is 60% in 2024. The chart data trends upward between 1994 and 1999, drops steeply from 2000 to 2001, then more gradually trends upward with some downward fluctuation through the rest of the time period. Attribution on the chart reads, "Data source: Truist IAG, Fact Set. Past performance does not guarantee future results. Technology is represented by the S&P 500 Information Technology sector.")

Keith: The technology sector has outperformed the overall market by about sixty percent over the last three years. That's a lot. But look at how much it outperformed on the technology bubble. It was over two hundred and fifty percent. So relative to, you know, what a lot of us lived through, this is somewhat different. The companies are much more profitable than they were back then also. And I also think, you know, later this year and we're starting to see, we're going to see this upgrade cycle on like PCs and iPhones and AI technology and corporations are going to start amplifying their products as well.

(Visual description: As Keith is speaking, the presentation slide leaves the screen, and video returns to the group at the news desk, and then quickly cuts to just Keith.)

Keith: So I think that has a long ways to go. I think the risks that we've seen, is it's been so concentrated. And what we did, going now to the short term, in the short term in late June from a sector perspective, we, we downgraded the sector from an overweight to more of a neutral because we had such big outperformance. It was up thirty percent. You started seeing such concentration and everyone's just falling in love with this one area. And that told us the risk reward had become less compelling. We think there will be a better time to redeploy capital in a more meaningful way in that sector. But in the interim, and we're starting to see that not only today, but over the last week, we think it's likely not going to be the same leadership that we've seen so far this year.

Oscarlyn: So tell us more about that.

(Visual description: Video cuts to Oscarlyn.)

Oscarlyn: There's been a fairly significant change in how technology stocks have been trading, as well as like small cap stocks, which we've seen in some shifting. We call that rotation. So some movement maybe from one area to the other. Tell us what's happening there.

(Visual description: Video cuts back to Keith.)

Keith: Well, it's timely that we're here because we just had a notable shift in the in the market the last week. So small caps before last Thursday, they were actually negative for the year. Or the S and P which is dominated by tech, was up about nineteen percent.

(Visual description: A presentation slide titled “Small cap bouncing back from extreme underperformance” appears on screen. A line chart is on the slide titled "Small cap % returns relative to S&P 500 6-month rolling." The line chart shows values ranging from approximately negative 25% to approximately positive 45% for the years 1994 to 2024. Values fluctuate above and below 0% throughout these years. Three low points of the line are highlighted near the negative 20% value in 1999, 2020 and 2024. Attribution on the chart reads, "Data source: Truist IAG, Morningstar. Past performance does not guarantee future results.")

Keith: So that spread was really wide. And actually the chart we're looking at is the underperformance by small caps was the most we've seen since coming out of Covid. And before that the technology bubble. So the rubber bands between these two asset classes have become very stretched. So that's the condition we were in. Thursday, we had a softer inflation report, and what that meant was that the Fed was more likely to move and cut rates, which later on this year, which, Chip you’ll discuss.

(Visual description: While Keith is speaking, the presentation slide leaves the screen, and the video cuts to the whole group at the news desk and then quickly cuts to just Keith.)

Keith: And we've seen this massive move. In five days, we've seen the small cap index up eleven and a half percent. I mean, that's a full year of gains in that short period of time. So. Right. And if you think about all the money that was going into these larger cap stocks, three of them were more than three trillion dollars. That was more than the entire small cap index size. So when you see a little bit of money coming out of these big cap stocks and into other areas of the market, it can really move them in a meaningful way. Since the rubber band was so stretched and the underperformance was so much for these areas, like small caps, the average stock, we think the snapback has further to go. Longer term, I want to be clear, we do like large caps. Long term, we like tech. But I think this rotation likely has further to go. And I think that's a healthy sign that it's not just one area of the market that's driving everything.

Oscarlyn: And Keith, as we've been going around talking with clients in person, some of the questions that we've gotten, and I've heard you talk about this, like, why do I even need small caps in the portfolio? Should I just be all large cap?

(Visual description: Video cuts back to Oscarlyn while she’s speaking.)

Oscarlyn: And help folks understand with like the movement, the last five days, how does this support the case for diversification?

(Visual description: Video cuts back to Keith.)

Keith: Yeah. Well, it's you know, it's almost like the last year. It's almost hey, if we just all really concentrated and not diversify, we might be better off until it isn't. And I think part of the reason why you diversify is because in five days, again, we've had eleven or twelve percent gains. And timing that exactly is very difficult. And why did the market move up? It was something that was better than expected, like so the consensus wasn't there, that report came out, and all of a sudden this movement happened. And today, even today in the market, we'll see where it ends. But the headline is actually down. But underneath the surface, we actually have a lot of stocks up. So it just goes back to, you know, basic diversification. It’s hard to time at least for today. In the last week we're seeing some benefits and I think that will likely continue.

(Visual description: Video cuts back to Oscarlyn.)

Oscarlyn: So let's expand that to international markets. Do you think this rotation the shifting will impact international market indices.

(Visual description: Video cuts back to Keith.)

Keith: Well on the margin because those markets tend to have more economically sensitive areas, or more tied to those. So I think they will get some benefit. I still think if you're going to play an economic, you know, maybe a central bank cutting cycle, I would prefer our team sees more of value still in small caps, the average stock mid-caps relative to international. We still have some exposure there. But it's interesting over those last week when we've seen this rotation, we haven't seen the international markets participate in the same way. So we would still be more biased towards the U.S. even though having some exposure to international.

(Visual description: Video cuts to whole group at news desk.)

Oscarlyn: Thank you for sharing that. And now we're going to move on to talk to Mike about the U.S. economy. And so, Mike, one of our key themes for the U.S. economy is that growth is cooling, but it's not weak.

(Visual description: Video cuts to Oscarlyn.)

Oscarlyn: So help us understand what's happening.

Mike: Yeah. So the easy way to look at it is, we've had several really strong years above trend.

(Visual description: Video cuts to Mike. While he’s speaking, text flows in at the bottom of the screen.)

On screen text: Truist Wealth. Mike Skordeles. U.S. growth is cooling, but not weak.

Mike: We're coming back down or cooling back down to the the longer term trend. That's not to say it's weak.

(Visual description: A presentation slide titled "Economic growth cooling but not weak" appears on the screen. A bar chart on the slide is titled "Growth of gross domestic product (GDP) by year." The bar chart shows the following values: 2.5% for 2017; 3.0% for 2018; 2.5% for 2019; negative 2.2% for 2020; 5.8% for 2021; 1.9% for 2022; 2.3% for 2023; 2.0% forecast for 2024; 1.6% forecast for 2025. A dotted line depicts the average value from 2010 to 2019 as 2.4%. Attribution for the chart is, "Data source: Truist IAG, Bureau of Economic Analysis. Change in real (inflation-adjusted) gross domestic product year over year, actual for 2010 through 1Q2024. f = Truist IAG forecast for 2024 and 2025.")

Mike: And if we look at most different metrics, one of the probably easiest ways to look at that is some of the jobs numbers.

(Visual description: A presentation slide titled "Jobs reverting to pre-pandemic trend" appears on screen. A bar chart on the slide titled "Average job growth per month (in thousands)" gives the following data: 177 for Pre-COVID 3-year average; 377 for 2022; 251 for 2023; 222 for 2024 Year to date. A trend line over the bars emphasizes the increase between the Pre-COVID 3-year average, the peak at 2022 and then the gradual decline through 2023 and 2024 Year to date. Attribution for the chart reads: "Data source: Truist IAG, Bloomberg, Bureau of Labor Statistics. Average per period; pre-COVID 3-year average period is 2017 through 2019.")

Mike: And so if we look at the jobs numbers, they were really strong the last few years. Well, we've seen a step down in the in the jobs numbers, but they're definitely not weak. And most of them are still above pre-pandemic numbers. So, and the slide that we're bringing up now, like two years ago, we were having 375,000 per month job growth. We stepped down in in 2023. We've stepped down again in 2024. We're around 220,000. Even if we round it down to 200,000, that's still better than, you know, 25 to 50,000 per month more than we were doing the pre-pandemic trend.

(Visual description: Video cuts back to whole group sitting at news desk.)

Mike: And if we go across the board, things like retail sales, etcetera, those numbers are all all stronger than they were pre-pandemic.

(Visual description: Video cuts to Mike as he’s speaking.)

Oscarlyn: Okay. So we have that side of the coin, which is a step down in growth.

(Visual description: Video cuts to Oscarlyn as she’s speaking.)

Oscarlyn: We're normalizing. The other side of the coin, there's some areas that maybe have weaknesses, weakness, but that still look pretty good overall.

Mike: Yeah.

(Visual description: Video cuts to Mike.)

Mike: And much like Keith's discussion of the overall market where it was flat, but there's a lot of movement going on, if you will, under the surface. Kind of like a duck's legs, like, hey, the, the, the top,

the top doesn't look like there's a lot of movement, but under the water, there's a lot of things going on within manufacturing as a for instance. And manufacturing has been sluggish for the last few years. Things like aerospace, they've not done well, but others within manufacturing, machinery and tool manufacturing have done quite well. Steel production has done well again, going into those sub industries, they've done well. Even within housing, housing has been weak.

Oscarlyn: Right.

Mike: On the single family side, it looks awful. Multifamily has looked stronger. In fact, the latest numbers that we just got for June were up twenty percent on month over month basis. So again, there's some sub industry stuff going on. The whole industry as a whole might be, might look weak, but there's even pockets of strength within that. So overall, the economy looks quite resilient.

(Visual description: Video cuts to Oscarlyn.)

Oscarlyn: Yeah. Well thank you for sharing that. I think that hopefully will help folks contextualize what's happening with the economy. Let's move to inflation. Another, like you know, another key area. So is inflation going to cooperate enough that the Fed can actually start to ease?

(Visual description: Video cuts to whole group and news desk.)

Mike: The quick answer is yes.

(Visual description: Video cuts to Mike.)

Oscarlyn: Okay.

Mike: It does look like inflation is going to cooperate.

(Visual description: A presentation slide titled "The Fed's favorite inflation gauge continues to cool" appears on screen. A line chart titled "Annual change in core inflation" on the screen shows data from 2012 to 2024. The chart has one line for Core PCE (less food & energy). This line stays below the second line, which is a consistent 2% representing the Fed's 2% inflation target, until 2021. The Core PCE line rises steeply around 2021 to a peak marked 5.6% in 2022. The line then begins to decrease to a point marked 2.6% for 2024. Attribution for the chart reads, "Data source: Truist IAG, Bloomberg, Bureau of Economic Analysis; monthly data through May 2024.")

Mike: If we look at a number of pieces especially goods inflation it's definitely cooled.

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Mike: And that's going to give them a wider path where they may be able to to cut rates. We look at a number of other key pieces, especially within housing, things like rents, rent increases on a month, over month and year over year basis are running below pre, pre-pandemic levels. So again, cooling. But I want to be very clear when we talk about inflation, that's about the rate of change, not the level. So whether we're talking about rents or we're talking about egg prices or insert your favorite thing you like to buy, no, for sure. The price is definitely higher than it was pre-pandemic, but the change. I'll take something as simple as egg prices, because I've had a lot of people as I've been out in the markets talking to people, bringing up to me, hey, you're talking about inflation cooling down, but egg prices are double what they were. That's true. So nationwide average today about $2.75 for a dozen eggs. I know that's kind of basic.

If it goes up to, you know, $2.80, all right. It went up a little bit. But that month over month change has cooled considerably from from where it was. But pre-pandemic, a dozen eggs nationwide average was about a $1.50. So it's not necessarily going to go from $2.75 a dozen down to $1.50. It's we're not saying $2.75 going to $3 or $3.50 or $4. That's that rate of change, not the price level.

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Oscarlyn: Yeah, maybe it goes from $2.75 to $2.77.

Mike: Right?

Oscarlyn: Right.

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Mike: Right. Exactly.

(Visual description: Video cuts to Oscarlyn, and then, while she’s speaking, to whole group, and then back to her.)

Oscarlyn: I'm thinking of our conversation last night at a dinner. Not at lunch, but a conversation at dinner. About lunch and the cost of our salads for lunch, you know, and and our sticker shock at $20 a salad. So, and, you know, it's understandable.

Mike: And that’s real and it's real, and I and I understand that as we talk to clients and a lot of consumers look at that and they say, hey, prices are a lot higher than they were, but it's that are prices continuing to escalate.

(Visual description: Video cuts to Mike as he is speaking.)

Mike: And for the most part, the answer is no. That escalation in price has has largely stopped, or at least cool down or down dramatically. That's going to give the Fed the opportunity. The last part of that question of the when first, when we were here last last quarter, we had had three inflation prints in a row that were hot. We've had two cooling inflation prints. We think the Fed probably needs another one or two before they get there. So they probably don't do it at this month’s ….

Oscarlyn: Right.

Mike: … Fed meeting. But September we think is lined up that the Fed is going to have the opportunity to cut.

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Keith: Can I just add one thing. You know we talked about the egg prices going up.

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Keith: Wages have been going up too. And one thing we've talked about a lot is for the first time since the pandemic …

Mike: wages,

Keith: … wage growth is above inflation.

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Mike: So growing faster.

Keith: That's a little bit of a shift as well. So on the margin that's that's going to the case of the economy is still staying resilient even though cooling down.

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Mike: Absolutely. And then to put a finer point on it, people are talking about those wage gains happened early in the in the recovery after the pandemic.

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Mike: But that's not necessarily true. Literally half the states have increased minimum wages in 2024. So this year, not way back in the in the past.

Oscarlyn: Right. So that's impacting as well.

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Mike: Right. And it's still happening.

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Oscarlyn: Driving some purchasing power there.

Mike: Absolutely.

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Oscarlyn: Yeah. So Chip what's the bond market telling us about the inflation story.

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Chip: I mean as recently as January the market was pricing in 725 basis point rate cuts for 2024. And, and here and elsewhere, we've really pushed back hard against against that idea. We thought that the Fed would be much slower, much less aggressive in rate cuts and really wait for some strong validation from inflation before moving.

(Visual description: While Chip is speaking, video cuts back to whole group at news desk, and then quickly cuts back to him.)

Chip: The market has come around quite a bit, you know, to, you know, to this, this thought process. And so right now the market expects, to see the Fed cut interest rates in September and then potentially actually cut in the next two subsequent meetings too. So September, November and December. We think too, for that to happen, that's a pretty high bar that the Fed will cut that quickly. After after it begins. We do think that the Fed, gets to Mike's point, we do think the Fed gets started in September, leaves the door open for another rate cut later this year. But they're going to go meeting to meeting and allow the data to dictate that next move.

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Keith: Oscarlyn, from a stock market perspective, we get a lot of you know, what if the Fed doesn't go three times?

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Keith: When we look back historically, it's better that the Fed goes slow because that probably tells you the economy's still doing okay. If they have an aggressive easing cycle, it probably means the economy is probably doing a bit more than cooling.

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Keith: So from our perspective, as long as they're cutting and the direction is down, that's a positive.

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Keith: But we don't want them to be too fast because the economy is weakening.

Oscarlyn: Yeah.

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Mike: Absolutely.

Oscarlyn: And that's good information for our listeners to know. Like if it is that slow and steady, we believe that's positive overall. That's very good. So Chip, our main fixed income theme that you wanted folks to walk away with today was really about reinvestment risk.

Chip: Yes.

Oscarlyn: And the reality that we think they're rising because there's an expectation that yields are going to trend lower.

Chip: Right.

Oscarlyn: So with that walk us through how this impacts investors and especially those that may have large cash balances to deploy.

Chip: Right.

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Chip: If you look back at the nine previous interest rate cycles, once the Fed starts to cut rates, yields tend to fall over the next year or two. Right.

(Visual description: Text flows in at bottom of screen.)

On screen text: Truist Wealth. Chip Hughey. Reinvestment risk rising as yields expected to trend lower.

Chip: And that that creates that creates potential reinvestment risk. And that's especially true again, as we said on the front end, the yield curve in the first couple of years of the curve. So we think that you'll see yields fall more pronounced in that part of the yield curve.

(Visual description: A presentation slide titled "Reinvestment risks rising as we approach first Fed rate cut" appears on screen. A line chart titled "Average U.S. Treasury yield moves after first Fed rate cut (9 prior cycles)" is on the slide. The chart depicts the value for 2-year and 10-year yields starting 100 Trading days before the first Fed rate cut and ending 500 days after the first Fed rate cut. For both 2-year and 10-year, the values hover around 0.25% prior to the rate cut, then show a downward trend after the rate cut. The values drop from as high as 0% to as much as negative 2.25%, approximately. Attribution for the chart reads, "Data source: Truist IAG, Bloomberg. Past performance does not guarantee future results.")

Chip: So for those who do want low interest rate exposure passive income, keep it short. We would get that money to work now. We would see, I think we're going to see those yields really start to move lower. As the market begins speculating about how much the Fed is going to cut and over what time horizon.

(Visual description: Presentation slide leaves the screen, and video returns to whole group at news desk, and then quickly cuts to Chip.)

Chip: And for those that are already invested in the front end, in the front end of the yield curve, we think there's still an opportunity to complement that with a little longer exposure, that if you can handle that a little bit more volatility, right, three or five year, seven, even ten years and complement that and complement that shorter, exposure, you know, with that and lock in those yields for a longer period, that buffers against a falling interest rate environment.

Oscarlyn: Yeah.

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Oscarlyn: So Chip you mentioned specifically the ten year. Right. And I want to go there for a second because you really took a favorable view of the ten year I think back in April when it was maybe around four point six percent. You know, around the time of our last webcast. We're now at four point two percent. So it's decreased. Right.

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Oscarlyn: So we rallied if you will.

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Oscarlyn: What's our view now?

Chip: I would say that the opportunity there has diminished but not vanished. Right.

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Chip: We've moved significantly lower. We're down you know, for you know the 420 range today that's probably yields are probably a little bit below fair value. But still you know somewhat fair value.

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Chip: I think the reason we still see value there is really underpinned by the fact that we think that the broad trend for the ten year is still lower. Right. Inflation cooling, Fed easing policy growth. You're taking a step down. We think that we will see yields continue to trend lower. We won't be in a straight line right. We're going to be there will be there will be disruptions along the way. Whether it's inflation surprises, concerns about the deficit, for instance. There are reasons why we don't think it'll be a straight line.

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Chip: And then, I also, to put it in the context, if we’re at 420 today on the ten-year, we actually think it's gonna be pretty tough to break through that, call it three and a half percent range in the in the near term. So that's still significantly lower than we are today. There's still there's still room there. There's still opportunity. But hopefully that puts into context about kind of where we've where we've come from and maybe where we're headed.

Oscarlyn: Yeah. So diminished.

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Oscarlyn: But not gone.

Chip: Diminished. But not gone.

Oscarlyn: As far as the opportunity.

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Chip: Right.

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Oscarlyn: And we need to stay aware because the environment is going to develop. And there could be some opportunities that develop along the way based upon some of those factors you talked about.

Chip: Absolutely.

Oscarlyn: Yeah.

Oscarlyn: All right.

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Oscarlyn: You've also emphasized high quality. We've talked about this really multiple times. We we have definitely been leaning into high quality. Even though they're higher yields return potential returns, out there elsewhere. Why do we continue to lean into that higher quality fixed income?

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Chip: Yeah. So let's talk about credit spreads. So credit spreads are just are the incremental or extra yield that an investor gets over U.S. treasuries. Right. To take on the risk of, of any particular company or an index, an index of companies, for instance. Those spreads right now are very, very small. It's they're very tight. You're not getting much, you know, incremental, compensation for for taking on for taking on that risk. Now, we think that those spreads are too tight and not accurately reflecting a Fed that's still in a tight position, a slowing, a slowing economy. And we think that when they adjust to reflect those economic realities, there will be opportunity there. And we will certainly stand ready to evaluate those opportunities. But for now, we would be patient, emphasize high quality, still very productive yields until we see those spreads sort of reflect what we're seeing in the economy.

Oscarlyn: Yeah. You've been very clear about that positioning for a number of quarters.

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Oscarlyn: You don't think it's time for people to be risk on and their bond portfolio in that way right now.

Chip: True.

Oscarlyn: And we'll let folks know when it is.

Chip: Absolutely.

Oscarlyn: Yeah. So we've covered a number of points.

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Oscarlyn: I just want to make sure that we summarize those for folks before we move to our next section.

(Visual description: While Oscarlyn is speaking, video cuts to whole group at news desk.)

Oscarlyn: So the first is really that that primary market trend continues to be an uptrend.

(Visual description: Video cuts to Oscarlyn while she’s speaking. Then, a frame slides in from the left, next to the video of Oscarlyn, and on screen text flows in from the left as she continues to talk.)

On screen text: Key takeaways. Primary market uptrend remains intact, albeit with normal pullbacks. U.S. growth is cooling but not weak. Reinvestment risks rising as yields expected to trend lower.

Oscarlyn: But we're going to expect some normal pullbacks. Keith, along the way we've got an economy that's cooling but it's not weak not weak at all. And then our reinvestment risk arising within fixed income. Those are the points that we really like you as our listeners and our viewers today to take away.

(Visual description: On screen text and frame slide left off the screen, and video cuts to whole group at news desk, and then quickly cuts to Oscarlyn.)

Oscarlyn: Now we're going to shift our focus and we're going to turn to a discussion about the election. We heard very clearly from you and our registrations that we received, that election is top of mind. And so today we're going to discuss the election from the perspective of what's the potential impact to the economy and to markets. That's really the lens that we're going to be bringing to that, to this conversation.

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Oscarlyn: And Keith, if you'll start us off, if you'll lay out kind of the big picture, the high level picture around how we think about elections generally. And how they impact markets.

(Visual description: While Oscarlyn is speaking, video cuts to Keith, and then back to Oscarlyn.)

Keith: Yeah. Well, to the point, when we saw the registration questions, we look at them and sixty, seventy percent of the questions were related to the election.

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Keith: So we know this is a hot topic, but it's also a very emotional topic. And what I have seen historically, first, before I get into things directly, is that people often make the wrong decision at the wrong time because of a political view, and I would just say from a market perspective, you've said this in the beginning, elections matter.

(Visual description: Text flows in at the bottom of the screen.)

On screen text: Truist Wealth. Keith Lerner. Elections matter, but other factors tend to matter more.

Keith: They definitely matter for businesses. They matter from a personal tax standpoint, policy. From a stock market perspective, other factors in totality tend to matter more, right? The business cycle, where are we in the business cycle? We talked about inflation, corporate profits. What's the trend in artificial intelligence?

(Visual description: On screen text flows off the screen, and video cuts to whole group at news desk.)

Keith: I will say last week on Thursday when we had that soft inflation print and the market rotated very quickly to other areas of the market, that was irrespective of what was happening in Washington. So, again, it matters. It's not the only thing that matters. And we've done a lot of work on this. You know, one slide that we'll bring up as we look at the the returns under the current president and the two former presidents to say, okay, how’d the market from a high level perspective perform.

(Visual description: A presentation slide appears on screen. The slide features a table titled "Market and sector returns under recent presidents may surprise you." The table has the following values for Annualized % change by sector: Technology: 17% Obama, 28% Trump, 26% Biden. Consumer discretionary: 19% Obama, 19% Trump, 8% Biden. Health care: 14% Obama, 14% Trump, 12% Biden. Consumer staples: 13% Obama, 8% Trump, 9% Biden. Industrials: 13% Obama, 10% Trump, 15% Biden. Utilities: 11% Obama, 11% Trump, 5% Biden. Materials: 11% Obama, 11% Trump, 11% Biden. Communication services: 10% Obama, 10% Trump, 14% Biden. Real estate: 14% Obama, 8% Trump, 6% Biden. Financials: 8% Obama, 8% Trump, 18% Biden. Energy: 6% Obama, negative 16% Trump, 42% Biden. A row below the chart indicates Similar returns from the S&P 500 as 13% for Obama, 14% for Trump and 16% for Biden. Attribution for the table reads, "Data source: Truist IAG, Bloomberg. Obama = Performance from Election Day 2008 to Election Day 2016; Trump = Performance from Election Day 2016 to Election Day 2020 to June 2024. Past performance does not guarantee future results.")

Keith: So when you look at even though there may have been big differences in policies under the current president and the two former presidents, the S and P 500 return has been very similar. Very similar. Between the annualized returns have ranged from thirteen to sixteen percent, which, by the way, is higher than average. You know, the long term history on there all. The other thing we talked about this a little bit about, you know, last quarter is the sector returns. There's a lot of ink that is spilled about what sectors will outperform or underperform. The one thing that stood out to me as we did the research and let the research, you know, lead us, the technology sector has outperformed under the last three presidents, and that's where the innovation has been. So that makes a lot of sense. Prior to, President Biden, we could see that under President, former President Obama and former President Trump, that the financials and energy sector both underperformed even though there was a discussion. Well, there's this this president may have less regulations, maybe more favorable. And that's because of the economic environment was different as well.

(Visual description: The presentation slide moves off the screen, and video cuts to Keith.)

Keith: I remember coming into, the 2020 election and there was a lot of discussion that if President Biden wins, the energy sector and finances will really get hurt. And maybe underneath the surface, we've seen some of the smaller banks get hit somewhat. But from a broad perspective, the energy sector has been the top sector. And then, the financials has been in the top three. So again, it matters. It moves things. Industries matter as well. But in totality what, your starting points matter. And also, you know other trends on the private market also matter a lot as well. So I guess the key point is, you know, we do factor this into our work, but it's not like an on off switch for our overall view. We follow the way the evidence there is one factor. It's important. But in totality other factors matter and history even more.

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Oscarlyn: So as we move closer to the election. What should our clients be watching for? What would you have them pay attention to?

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Keith: So again, this is a starting point. Historical trends. What we tend to see as we get into the fall and there's more and more headlines and uncertainty about the outcome. We tend to see the market in October. We see we see the volatility in the market really start to jump. And then as you move past the election cycle, you get some clarity on the outcome. The market breathes a sigh of relief and normally the market rallies again. That's a historical template. Obviously every cycle is a little bit different when we say the word volatility, I think most people say, uh oh, I'm not—I mean and by the way, I do expect maybe that can lead to some of these corrective periods that we think. But I will if I go back to 2020, our team, right before the elections, we had a pullback and we actually thought the economy was still sound. The policy, from the Fed was still accommodative. We use that pullback or volatility to increase equities. So I don't know if this will happen this time. We're going to let the data you know lead us that way. And also if we have that pullback. So it's when you hear the word volatility it's two way there's ways to mitigate risk but also opportunities for things where there's an emotional setback that we can actually take advantage of. If it's not fundamentally based.

Oscarlyn: So volatility, Keith you say this over and over, volatility is the admission price, right, to the market.

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Oscarlyn: And it's not just negative. There's the positive.

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Oscarlyn: We we need volatility to give us opportunity.

Keith: Exactly.

Oscarlyn: Yeah. So, Chip, let me turn to you for a second and let's talk about the concern around rising fiscal deficits which we've heard from our clients.

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Oscarlyn: You know lots of concern. And we've had discussion on this call before about that. How could the election potentially impact the deficits and and the bond market?

Chip: Yeah, I think we saw a little bit of it this past October when all of a sudden, you know, deficit concerns the amount of U.S. debt being issued really became a concern.

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Chip: And what happened?

(Visual description: A frame slides in from left, next to video of Chip, and on screen text slides in from left onto it.)

On screen text: Chip Hughey, CFA. Managing Director, Fixed Income Strategies. Establishes Truist Wealth’s fixed income outlook and strategy. Authors Truist’s Fixed Income Perspective and frequently contributes to publications. Deep expertise helping advisors and clients craft bond portfolios.

Chip: The ten year jump from four to five percent very, very quickly based on kind of that uncertain fiscal outlook. Right. And what happened was then the Fed started speaking about, hey, maybe we can end our our rate hike campaign.

(Visual description: A presentation slide titled "Interest rates are sensitive to deficits and debt" appears on screen. A line chart titled "10-year U.S. Treasury yield" is on the slide. It depicts fluctuating data from January 2023 to July 2024, ranging from approximately 3.25% to 5%. An upward trend line highlights August 2023 to October 2023 with the label Deficit concerns. A downward trend line highlights November 2023 to January 2024 with the label Fed pivot. Attribution for the table reads, "Data source: Truist IAG, Bloomberg. Past performance does not guarantee future results.")

Chip: And actually maybe we could discuss, like when is it going to be appropriate to lower the Fed funds rate and it'll race to that reaction. We saw yields absolutely plummet, but the deficit and the amount of debt the U.S. is issuing is still is still out there sort of simmering in the background.

(Visual description: While Chip is speaking, the presentation slide leaves the screen, and the video of Chip and the on screen text reappear.)

On screen text: Chip Hughey, CFA. Managing Director, Fixed Income Strategies. Establishes Truist Wealth’s fixed income outlook and strategy. Authors Truist’s Fixed Income Perspective and frequently contributes to publications. Deep expertise helping advisors and clients craft bond portfolios.

(Visual description: On screen text flows off of screen, and video cuts to whole group at news desk.)

Chip: So as it relates to the election, these these type of discussions or debate around the deficit, around debt might put that spotlight a bit more back on it.

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Chip: And so I do think that you may see periods where yields rise as that focus returns a little bit and disrupt that broader trend we've talked about. That we do think overall yields will continue to to move lower. So volatility is up. But to Keith's point, we think that would be an opportunity, right? Yields moving higher in a in a broader context of falling falling interest rates actually would create an opportunity to capture those. So I think that might be one way that we see the election, you know, relate more directly to what we're seeing in fixed income.

Keith: If I may chime in, Chip, if we think about it, in April, the market had a reset, the equity market had a reset because interest rates were moving up.

(Visual description: As Keith speaks, video cuts to Oscarlyn for a moment, and then to whole group at news desk, and then back to him.)

Keith: So in some ways it kind of move in tandem. So if that would have happened and we see a market sell off because of interest rates, again, that might be a prime opportunity for us to even boost equities or rebalance portfolios.

Chip: Absolutely.

Oscarlyn: So it really what I'm hearing is we're going to be in a season where we're always looking for opportunity, but we're in a season where just based upon the unique dynamics right now, there could be opportunity that's presented to us.

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Oscarlyn: And it's important that folks stay attuned to that and and watch what's going on, talk to their advisor, certainly listen to our investment guidance. Because if those opportunities present themselves, you know, we'll be coming to our clients with that information.

Keith: Exactly.

Oscarlyn: Yeah.

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Oscarlyn: Mike, how do you see the deficit impacting potential economic growth rates?

Mike: Yeah. So the quick answer there is there's a crowding out effect.                                                                                                                

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Mike: There's only so much money in the budget.

Oscarlyn: Yeah.

Mike: They only can prioritize so many things.

(Visual description: A frame slides in from left, next to video of Mike, and on screen text appears in it.)

On screen text: Mike Skordeles, AIF^®. Head of U.S. Economics. Shapes Truist Wealth’s macro outlook on the U.S. economy. Authors Truist’s Economic Commentary and Economic Data Tracker. Expert in making sense of complex economic trends for Truist Wealth clients.

Mike: And if you're spending more money on servicing the debt it means you can't do other domestic spending or spending generally or make other investments. So tax changes, other things, all of those things get crowded out because you're spending much more of that federal budget on servicing the debt.

Oscarlyn: Yeah. So it can impact a long term growth rate …

Mike: A hundred percent.

Oscarlyn: … kind of bottom line.

Mike: Absolutely.

Oscarlyn: Bottom line. Mike, let's broaden that conversation and take a moment. And how do you see the election playing into really the economic outlook?

(Visual description: While Oscarlyn is speaking, on screen text flows off the screen, video cuts quickly to her, and then back to Mike.)

Mike: So there are a lot of, as Keith was pointing out, there are a lot of different changes between either candidate and there are huge impacts that can be made. But let's take a half a step back and some of the things that aren't going to change because of those longer term trends, much like Keith said, the elections certainly matter. Policy changes certainly matter. But, the overall, you know, longer term trends, things like demographics. So a lot of talk about the baby boomers, well, what's going on with the baby boomers. There's many things. One is this massive wealth transfer that's going to happen or is or has already started to happen. That's one piece that's regardless of who's in office now, different tax changes may accelerate or delay those things, but that wealth transfer is going to need to happen in the coming decade plus. Additionally, those people are living longer, and so you have health care that's related to it that we've never really dealt with in prior generations because many more people are living longer. That so there's the health care aspect. Additionally, there's senior housing that hasn't been keeping up. And then as I get to housing, there's the just housing. Housing in general. We don't have enough housing supply. We've been underbuilding since the, housing bubble popped. So literally 15 years of underbuilding across most of the U.S. That's regardless of who's in office. And then the last one and Keith mentioned several times about artificial intelligence and AI. Those are longer term trends. Now, it is going to take a while for those AI pieces to get into iPhones and other sorts of goods and services and improve things and help with productivity. But that long term trend of AI is going to again, be regardless of who's in office. Now, it can be accelerated or or delayed some based on how the regulations are between each. And there. Again, there are distinct differences, even specific to AI. But those longer term trends for just those three things are going to drive where economic growth is going to be for the next decade plus, again, not just the next four years.

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Oscarlyn: Yeah. So you've talked about some things that we wouldn't expect to change based upon electoral outcomes.

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Oscarlyn: Maybe take a second and and walk us through a couple of areas where there could be, you know, a significant change based upon the outcomes.

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Mike: Yeah. And the outcomes matter. And what are those outcomes? Certainly everyone's focused on what the white House, but it's also about the makeup of Congress. So again based on where polling is going and those sort of things, it looks like there's been a shift in sentiment and that potentially there could be a so-called red wave. But what does that red wave really mean. Is that 1 or 2 extra senators in the Senate? Is it ten extra senators in the Senate? Because as we saw in President Trump's first term, he had two extra senators in the Senate, all you need is 1 or 2 of them to disagree, and you don't get something to pass, even though there's a red red House, red Senate and red White House, it doesn't mean you can get everything you want done, depending depending on how that composition is, but also regulation generally. So, in President Trump's first term, actually didn't focus on a whole lot of new regulation. What they actually did was kind of lean back somewhat and relax things and not put on as many new regulations. In fact, it was the lowest administration as far as the number of new regulations compared to the prior 25 years. Then you get to things like tax policy and spending very different plans, and those are going to shape the contours of how growth is certainly for individuals and for certain for, certain segments, industries, etcetera, particularly things like defense and what have you. But overall, I still think we're going to be, driven by those long term fundamentals I mentioned earlier that aren't going to change. The other thing too, just to kind of put a finer point on it is regardless of who's president, those long term trends are going to really kind of force where the economic growth is. We're going to grow in this two and a half ish range. We may have a year or two where we're growing closer to three or maybe above three percent, but we're not talking about going from two ish percent or two and a half percent to five percent for a long term, a long stretch of of, you know, a number of years.

Oscarlyn: Yeah. Number of years.

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Keith: If I, if I may chime in again, which is what I do, just the tax question comes up a lot about the markets.

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Keith: And I will say we've done a lot of work to say, what is the correlation between taxes and the market.

(Video description: Video cuts to whole group at news desk.)

Keith: And we can't find one that's consistent. Some recent examples in 2013 we raise taxes and the stock market went up. A lot of people say oh we're going to go down. And in 2018 we cut taxes and the market actually went down.

(Visual description: Video cuts to Keith.)

Keith: And why was that? Because as the tax cuts happened, the economy started heating up. And then the Fed started to raise rates. So there was this kind of yin and yang effect. And so it goes back to the broader point that this matters on a personal basis. It matters a lot. From market perspective, can't automatically assume because where taxes go that's going to have “x” impact to the market.

(Visual description: Video cuts back to larger group at news desk.)

Keith: Other factors certainly matter.

Oscarlyn: Yeah. Well I want to call out a couple of things.

(Visual description: Video cuts to Oscarlyn.)

Oscarlyn: And I know we're running up against time and we've got to we've got to leave here in a minute. But I want to make sure that folks understand that we're not election pundits.

(Visual description: Video cuts to whole group at news desk.)

Oscarlyn: We're not calling the election. You were just kind of calling out some data around where polling is right now, and really what we're trying to help folks understand, are the potential outcomes under various scenarios, election outcomes. And then, you know, Keith, both you and Mike brought up taxation.

(Visual description: Video cuts to Oscarlyn for a bit, then cuts back to whole group, and then back to just her.)

Oscarlyn: And we just want to give a nod that we have a publication coming out, likely in the next week, that gives a high level comparison of policy under both candidates. Around that. And of course, we've highlighted a couple of times on this livecast around the potential for the estate tax planning sunset, trying to encourage folks to plan early and often, like get get it right, don't don't wait until too late. Because we're expecting that that that could be significant down the road. So we'll continue to update folks as it evolves. But thank you all for the conversation. And, you know, in closing, we've covered a lot of ground today.

(Visual description: Video cuts to whole group at news desk, then back to her as she continues speaking.)

Oscarlyn: So I'm going to quickly recap the main points from a stock market perspective, Keith, primary uptrend remains intact, but expect some normal pullbacks.

(Visual description: A frame slides in from the left, next to the video of Oscarlyn, and on screen text slides onto it.)

On screen text: Key takeaways. Primary market uptrend remains intact, albeit with normal pullbacks. U.S. growth is cooling but not weak. Reinvestment risks rising as yields expected to trend lower. Elections matter, but other factors tend to matter more.

Oscarlyn: From an economy perspective, growth is cooling, but it's not weak. Fixed income we've got our reinvestment risk are rising as yields are expected to trend lower.

(Visual description: On screen text slides off of the screen, and video of Oscarlyn becomes full screen again.)

Oscarlyn: And then from an election perspective, the election’s definitely coming into greater focus as we move through the summer. Elections matter, but other factors tend to matter more as it relates to stock market performance. If you want to view the charts that we've shared and explore other market and economic visuals, Truist Wealth’s monthly publication The Market Navigator is available through your advisor, so reach out to your advisor. We last published on July second, and as a reminder, Keith is going to be on CNBC in just a couple of hours from the Truist studio. So join him on the Closing Bell. And we want to remind you that regardless of the near term market movements, we really believe in leaning into the benefits of the diversified portfolio. And, Keith, you talked about that today, that they are really built on long term views of the markets, and an understanding of your unique financial planning situation and goals. A Truist Advisor can support you on your journey. They're going to listen to you, and they're going to help put all of this complexity into context so that you can make the decisions that are best for you. And so with that, in just a moment, as we close out this particular call, you're going to have a survey that shows up on your screen. What we ask is that you participate in that survey. We take all of your feedback and we use it to shape our future events. So with that, thank you so much and we look forward to talking with you again in October.

(Thoughtful music plays.)

(Visual description: Video cuts to whole group at news desk.)

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U.S. Investment Grade Corporate Bonds are represented by the Bloomberg U.S. Corporate Investment Grade Index which is an unmanaged index consisting of publicly issued U.S. Corporate and specified foreign debentures and secured notes that are rated investment grade (Baa3/BBB- or higher) by at least two ratings agencies, have at least one year to final maturity and have at least $250 million par amount outstanding.

 

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The HFRI Fund Weighted Composite Index which is a global, equal-weighted index of single-manager funds that report to HFR Database. Constituent funds report monthly net of all fees performance in US Dollar and have a minimum of $50 Million under management or a twelve (12) month track record of active performance.

 

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CN 2024-6790984.1 EXP 07-2025