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We're going to talk about the reaction that we're seeing today in markets moving to the upside as investors digest, not only those Goldman Sachs results that I mentioned out this morning, but also the impact of potential volatility to continue this election cycle following that assassination attempt. So joining us now on this, we've got Michael Kelly, global head of multi-asset at Pinebridge Investments. Michael, thanks for coming in studio with us. Really appreciate it. So I know that you have an interesting take on the potential of a soft landing which I want to talk to you about, but I'm just curious about this weekend's volatility and the degree to which any potential upcoming unknown unknowns to come could weigh on your economic outlook.

You know, I I don't think so that weekend, you know, very very sad and unfortunate, but how much will it change the trajectory of things? We don't think very much. There've been a lot of a lot of political trends, um, you know, moving from austerity after the financial crisis to letting the purse strings go after COVID. Um, we just see more of the same of that going forward and um, you know, as long as that's the case, you know, the the die is pretty much is pretty much set. You're going to have you're going to be in a stronger dollar world. You're going to be in a stronger growth world. Well, inflation and and real rates will come down a little bit, they can't come down too much because they're really going into run hot type of political policies in Europe, the United States and many, many places for a lot of common reasons. Um, and actually we even think, you know, depending on the candidates, uh, Biden or Trump, they would both keep the majority of these 5 trillion dollars of tax cuts expiring. Biden wants to keep all those for people earning $400,000 or less, which is a big chunk of that number. So it's run hot or run hotter. And um, you know, the bond market isn't going to like that. The dollar is, the stock markets are.

Well, the treasury curve is already steepening on the heels of this weekend. Do you think that that's the market pricing in what a Trump presidency could look like?

Yes. How durable it is at this juncture, normally markets make those assessments after Labor Day. Now, usually the first debate is after Labor Day. And you can't trust the polls until after Labor Day. Um, they'll it's still a little early, but yes, that's that's what it's about. You see a firmer dollar, a steeper curve. That's the market's beginning to, at the very beginning of replacing how they're going to try to invest, uh, given this uncertainty of the election.

And you mentioned tax policy specifically, is that the key policy to watch from your perspective that could impact markets or?

Well, it's it's uh, there's actually three big ones, which is, you know, we're in a very tight labor market. And it's been alleviated by immigration. You can have all kinds of political views on on immigration, but the tight labor market is being alleviated by that. So the two the two candidates have very, very different policies. Uh, tariffs, um, they're more similar than dissimilar. It's a matter of degree. Um, taxes, as we said, it's a matter of degree. Regulation is a big divide, big divide. Um, you know, in the first Trump presidency, you saw a big rollback of uh regulation. It was quiet, but it was significant and Biden has been advancing that. So, so that's that's going to that's going to be a big a big factor as well.

A Trump presidency could be a catalyst for more M&A.

Yeah, could be a catalyst for more more M&A, uh, more aggressive investing by businesses and still feel uh more confident uh that, you know, no one is going to come up with a new regulation that harms their cash flows.

How much does the Fed impact your thinking on that?

Well, the Fed, um, we're in a policy rate cutting cycle. And these are big moments in financial markets. And there's two types of policy rate cutting cycles. Those where the central banks stay behind the curve. Growth is beginning to come down. It's time for the central banks to either get ahead of the growth slowdown, in which case you have a soft landing, in which case equities will do very well. Bonds so so. Um, or you have a hard landing in which case bonds will roar and stocks will come down hard. So it's it's very meaningful whether the Fed now steps forward, steps up and begins joining uh the ECB and many other central banks. We think they will.

Real quick, you do think soft landing still.

Oh, yes. Yeah. No, it's it's it's uh, it's basically central banks giving the confidence that while we're not super fast, you know, we're on our way. Um, and it's also the way you'll see small business reacting to an environment that may be less regulatory. Um, and uh those two things, uh, finally inflation to the consumer is disinflating faster than uh wages. Right. So real spending power is starting to fortify itself. So those things are the fabric of the soft landing.

All right, Michael, we got to leave it there, but thank you so much for joining us. We really appreciate it. That was Michael Kelly, global head of multi-asset at Pinebridge Investments.

Thank you, everyone.