President Joe Biden and former President Donald Trump participated in the first presidential debate on Thursday night. The two candidates took aim at each other for current economic conditions and immigration challenges.

22V Research senior managing director Kim Wallace and AGF Investments chief US policy strategist Greg Valliere join Morning Brief to give insight into the takeaways from the first presidential debate.

"Well, it was a disaster. It was a debacle ... They did not accomplish what they were hoping to do with their bases or with crucial support. In terms of someone new coming in at this late point, it's a process. I don't think it'll be resolved in a day or 2 or 3. I think we've got to see how polls look. We've got to see how the party is. But I can tell you, and I'm sure Kim would agree, that during the night, there were an awful lot of emails and texts from Democrats who are now really worried about losing the House, the Senate, and the White House," Valliere told Yahoo Finance.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Nicholas Jacobino

Video Transcript

Let's talk about another big story that we're tracking and that is the first presidential debate happening last night.

President Biden and former President Trump kicking off their first debate of this election cycle, blaming one another for the state of the economy and inflation.

We gotta take a look at what I was left when I became president and what Mr Trump left the economy collapsed.

There were no jobs, it was terrible.

And so what we had to do is try to put things back together again.

There's more to be done, working class, people are still in trouble.

I come of household where at the kitchen table, if the things weren't able to be met during the month, it was a, a problem.

We have the greatest economy in the history of our country.

We have never done so well.

The thing we never got the credit for is getting us out of that COVID mess.

He created mandates.

That was a disaster for our country.

He has not done a good job.

He's done a poor job and inflation is killing our country.

It is absolutely killing us.

Well, despite inflation being top of mind for many Americans, some something else really dominated the debate.

President Biden and former President Trump's performances on the stage here with debate reaction.

We have Kim Wallace, he's senior managing director of 22 V Research.

And also with us, we have Greg Valliere, chief US policy strategist of a GF investments.

Great to have you both.

Kim.

Let me start with you in terms of democratic side here, the Democrats, we're looking to reassure Americans that we have made progress on inflation, that the economy is actually in a strong state.

I'm curious to get your reaction to last night and whether or not it backfired.

Oh, I don't think uh anything but backfired.

The goal for each of these guys last night was to reassure their base, not have any erosion of the base and to not alienate undecided voters and independents.

Um Former President Trump didn't violate that theme.

Uh It's hard to say that uh President Biden will be able to repair quickly the damage done to both the base and his attractiveness to independence, Greg.

Uh I was looking through your note this morning here and you actually put that in your bottom line here quite frankly.

And your bottom line tentatively was that Biden will drop out within days giving an opportunity to a fresh young face.

I wanna get your reaction to the debate and also who the markets or anyone out there, some of the Fortune 500 CEO S that even have said that they might not side with Trump, but they also saw last night's performance from Biden.

What their kind of calculus is that they're running this morning?

Well, it was a disaster.

It was a debacle.

I agree with Kim that they did not accomplish what they were hoping to do with their, uh, bases or crucial support.

No, I, I, in terms of someone new coming in at this late point, it's a process.

I don't think it will be resolved in a day or two or three.

I think we've got to see how polls look.

We've got to see how the party is, but I can tell you and I'm sure Kim would agree that during the night there were an awful lot of emails and texts from Democrats who are now really worried about losing the House, the Senate and the White House.

Kim.

Do you agree, Greg?

Good to see you again.

It's been a while.

I completely agree.

Um, the text and the emails started about 10 minutes after nine.

They continued through 1 a.m. this morning and I turned it off after that.

Uh, it will be a contentious process to select someone other than Biden to run against, uh, President Trump.

But my betting is that's where most of the money in the Democratic Party and most of the core supporters, the leaders are this morning.

It's very difficult to avoid the fact that President Biden no longer seems viable.

In this election, we'll have some feedback.

He's in North Carolina.

He kept that schedule, so we'll have some feedback this morning.

I agree with Greg.

It's very difficult to come back from this Greg.

What does this mean for our viewers out there?

The investors trying to figure out if we do see Biden drop out of the race.

The Democrats ultimately end up putting somebody else in the front there to run against former President Trump.

Is that going to add instability?

Does that add volatility?

How do you see that playing out?

Yes, volatility, instability.

You name it?

Kamala Harris would logically be next in line.

But as you know, her polls aren't good and there's a feeling she may lack the gravitas for the job as far as Gavin Newsom, he's in the middle of a huge budget crisis in California self inflicted.

I might add and I don't see Newsome.

So they're going to, if they decide they have to look elsewhere.

I think there are several governors headed by uh Gretchen Whitmer of Michigan, uh maybe uh Josh Shapiro of Pennsylvania, but they're gonna have to look at other governors.

Pamela Harris is not a shoe in.

You mentioned two governors in major swing states as well.

Here, you know, another big election issue hit last night and that was Trump's tax cuts which are set to expire next year.

Trump touted the success of his policy while Biden defended his own stance.

Wanna play this quick clip and I'll get your reaction on the other side, Kim, the tax cuts spurred the greatest economy that we've ever seen just prior to COVID.

And even after COVID, we took in more revenue with much less tax and companies were bringing back trillions of dollars back into our country.

The country was going like never before and we were ready to start paying down debt.

The fact is that I said nobody even making under $400,000 had a single penny, increasing their taxes and will not.

And if I'm re-elected, that would be the case again.

All right.

So one element where A I could probably be used es especially in fact checking in real time, perhaps here, Kim, you know, as you're hearing all of this discussed, what, what is this set up for?

What Americans should expect to be the core and central debating point around taxation.

It, it's a good question.

It will be relevant.

It will be a lot more relevant uh in the first half of next year than it is today.

And it's certainly not important to Democrats right now.

But to answer the question, uh, fact Checker Paradise last night.

Uh throughout this debate, that's not the story.

The story is one guy prevailed Trump in a setting that was negotiated by the Biden team and the other guy did not show up the person we saw at the State of the Union was not available last night.

Greg's right.

Democrats are gonna be thinking about who replaces him.

Another name you have to throw into the mix whether you want to or not.

Is Hillary Clinton?

She will gather some support immediately from donors and some of the leaders of the party.

Do you think she could be a candidate there?

Grey.

I, I think that if the party is desperate, what's the old saying?

Desperate times require desperate measures?

You can't totally rule her out.

I kind of rule out Michelle Obama, she hates politics.

I think that would be unlikely.

But yeah, they, I'm sure there'll be a boomlet for Hillary.

My take would be that within the party.

She's pretty much a pariah right now.

Ok. And so Greg's point is right.

But, you know, it goes back to something he and I have both said the way forward is contentious for Democrats.

There's no way around that realistically, there is absolutely no way to do this smoothly, but they have work to do and they know it.

I mean, is there either side that's actually getting across an agenda at this juncture?

Ok.

I'll go to you first.

I, I, you know, I'm gonna go back and gently dissuade you from thinking in those terms.

No one else is thinking about that inside of politics this morning.

Uh In, on the democratic side, it is all crisis management.

On the Republican side, it is taking advantage of the momentum that was handed to them as a gift and protecting it growing it as they go into Milwaukee in July to answer the question.

Policy agenda hasn't really been foremost in this campaign, which has been a campaign from home for both guys for different reasons.

And I don't expect policy to matter much in the next week or two.

Greg II.

I love the same question to you.

I mean, with the additive that uh a lot of people who are trying to figure out exactly what they saw last night and the lack of pushback on, on kind of both sides there, ultimately and clearly that Biden missed on some of the alley.

Oops that should have been there for his own camp.

And uh I imagine many people still trying to figure out what black jobs actually are at this point.

All these things considered.

I mean, there were several snafus and, and clear as they were, are either of these candidates in a good position to govern for four years.

Should they take office?

No, they're not.

They both have huge flaws and I think it will be difficult.

I let me go back to one point really quickly.

You mentioned tax cuts.

They, they were discussed last night.

My sense is in the last few weeks, a lot of members of Congress including Republicans are beginning to get cold feet about a extending the or even expanding the Trump tax cuts.

That's another four or $5 trillion.

And I think a lot of members of Congress are getting worried that our total debt of 34 trillion is unsustainable and we may have to look at a more restrictive fiscal policy.

All right, Kim Wallace, senior managing director of 22 V Research, and Greg Valliere, who is the Chief US policy strategist of A GF investments.

Great to have you both here.

And thanks so much for your reaction to what we saw yesterday evening.