The markets are watching the Federal Reserve closely, still expecting a reduction in the Fed funds target rate this year. The number of cuts projected for this year has dropped dramatically as inflation remain stubbornly above the Fed's 2% target. Join us live June 13 at 1 p.m., as Steve Skancke, chief economic advisor at Keel Point, discusses the Federal Open Market Committee meeting, the new dot plot, and Chair Powell's press conference.
Transcription:
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.
Gary Siegel (00:09):
Hi, and welcome to another Bond Buyer Leaders Forum Event. I'm your host bond buyer, managing editor Gary Siegel. My guest today is Steve Skancke, chief economic Advisor at Keel Point, and we're going to discuss monetary policy including the federal open Market Committee meeting. Steve, welcome and thank you for joining us
Steve Skancke (00:34):
Gary. Thank you. It's always a pleasure to be with you. I appreciate your having me on.
Gary Siegel (00:40):
So was there anything in the post-meeting statement, the summary of economic projections or Chair Powell's press conference that surprised you or grabbed your attention?
Steve Skancke (00:52):
Well, I think in the statement Gary itself, that was pretty much expected. They maintained their language and all the things that we would expect: economy is fundamentally strong, expanding at a solid pace. Job gains remained strong, unemployment remained low, and then they say inflation has eased over the past year but remains elevated. The committee does not believe it will be appropriate to reduce the target rate until it has gained greater confidence that inflation is moving sustainably toward 2%. I guess what did surprise me in the press conference was Powell's tone of willingness, almost eagerness to be ready to signal that they're ready to move on a rate cut if it looks like there's any jeopardy to employment growth or to employment, unemployment and materially weakening employment growth. And of course we know that the May employment, the jobs gains were way above average, way above expectation. Paul acknowledged that he also pointed out that the household survey showed a decline in jobs. I guess I was struck by him calling that out and also his repeated reference to the current rate, the policy rate being restrictive, that it's in restrictive territory and that it's squeezing the economy. And of course one of the risks that we see in the current environment is that the Fed will wait too long and that the restrictive rate will push the economy and jobs in the wrong direction suddenly and without notice.
Gary Siegel (03:10):
So the Fed, the SEP suggested there will be one rate cut this year down from three in the previous SEP. Do see how that works in with what they said in the statement or do you think that there's somehow a disconnect there?
Steve Skancke (03:31):
Well, Gary, what strikes me is a little bit of a disconnect. I mean, they saw the CPI, the core CPI number, they have a pretty good idea how that translates into their preferred measure of the core personal consumption expenditure deflator, which from the producer price index and the consumer price index. PPI was out this morning, CPI was out Tuesday. The best estimate of PCE personal consumption core PCE over the last 12 months is that it comes in at 2.6%. Of course 2.6% at the end of the year was their estimate back in the March summary of economic projections where they had more than one cut. Now as you point out, they scaled back to an expectation of just one cut with a slightly higher year end estimate of core PCE being at 2.8 and lo and behold, we've arrived at 2.6 over the last 12 months.
(04:49):
If that sticks, I believe given at least Chair Powell's predilection to cut as soon as they can say that they have greater confidence that in point of fact from what they put in the PCE, we could actually get two cuts with the first one coming in September, I would not be at all surprised if inflation continues to move as it is moving now that we end up with two cuts. And I think that markets have signaled that Gary, in the way the 10 year treasury has moved since the Fed announcements and then of course after the producer price index information that was out this morning. What I looked just before we came on the 10 year treasury was moving at the 4.248 at 4.295. So even just today it's come down a good bit and remember just a week ago, so might be back on the table.
Gary Siegel (06:22):
So do you see the economy hitting a soft landing or do you expect a recession?
Steve Skancke (06:31):
Well, I don't expect a recession. I think that we will get a soft landing, but Gary, you and I have had been in this economics business for a long time and one of the things that we've learned is that these numbers don't always move in a straight line, especially on the employment side, to go from 3.4% unemployment rate, which is an incredibly historic low to four that could move unexpectedly from where it is now, doesn't mean that it has to, but it could. Likewise, we had a surprisingly low first quarter real GDP estimate at 1.6% that then got revised down to 1.3 and certainly there are a lot of reasons, inventory buildup exports, some anomalies there. But that's down from 3.4% from the fourth quarter of last year. And the current estimate for second quarter of this year, I believe, well what I see is that second quarter also is likely to be below 2%. So when you get 1.3 in the first quarter, something below 2% in the second quarter, the Fed is incredibly optimistic to think that we're going to end the year at 2.1. So yes, I believe we'll have a soft landing, but I don't think it's fully baked in yet.
Gary Siegel (08:29):
Are we seeing stagflation currently?
Steve Skancke (08:34):
I don't think so. Gary. I was around and actually in the White House and then the US Treasury when we had stagflation back in the seventies. And the things that gave rise to that really were different. President Nixon had taken us off the gold standard. He floated the dollar against other currencies. We had an oil embargo, gas lines, oil prices went up. They tried to contain it by wage and price controls. I don't know if you remember those. It was remarkable in that those things together contributed to both the inflation and the stagnation. When we look today, I mean last year, remarkable economic growth this year, even if we achieved 2%, that's probably our capacity at the moment. So that's not really stagnation and when you look at the things that could be disruptors to bringing inflation down, energy prices is certainly not going to be one of 'em. And the other things that are working through the economy all seem to be in pretty good order. So I put the risk at stagflation pretty low.
Gary Siegel (10:20):
So intermediate and longer term rates are a little bit elevated. Will they ever settle back to what we saw before they increased a couple of years ago? And if not, what are the considerations keeping them where they are now or driving them even higher?
Steve Skancke (10:38):
Yeah, that is a great question Gary. I do not think that we're going to see them go back to where they were a few years ago and mean, you know better than I, the 10 year treasury was at 55 basis points in August of 2020. Now 2020 was a special year, but for the 10 year treasury to be in the range of four and a quarter to four and a half with an inflation target of 2% doesn't seem unusually high. I'd be surprised if in the current scenario we see the 10 year treasury above five, not that it can't get there, but with inflation moving in the direction that it is and the Fed wanting to bring short-term interest rates down, I think that we're going to see short-term rates down both the intermediate and longer term rates about where they are now, the one thing that we can't ignore is that we've had a massively expansive fiscal policy and last year record low unemployment above average economic growth and we ran a $2 trillion deficit.
(12:13):
We ought to have had a $2 trillion surplus. If you just think of traditional Keynesian economic policy and that wasn't the case. And then you listed to both presidential candidates and one of the candidates wants to extend and increase the tax cuts that were put in place in 2017 and cut back in some of the spending areas. The other candidate wants to increase taxes, certainly not extend some of the significant rate cuts double, well, I shouldn't say double increased materially taxes on corporations and even conversation about eliminating the preference on capital gains to tax capital gains as ordinary income.
(13:18):
Those are extraordinary. And if we continue to run fiscal deficits at the rate that we are and interest rates stay where they are, we could very quickly get to a situation where interest on the federal debt is the principle expenditure and accelerating that would be problematic for interest rates remaining where they are. Now, you may recall that in 1979 the US Treasury issued treasury debt denominated in Deutschemark because we had just pretty much saturated the demand for dollar denominated treasuries. Now I don't think that we're quite there, but if the debt as a percentage of GDP continues to grow the way it has been, that puts a lot of pressure on treasury rates. And of course if treasury continues to be viewed as a risk-free rate, then the rates that investment grade corporates just right on up the ladder only go higher. So I think there's a real possibility that, well first I think it's unlikely that we're going to see, excuse me, intermediate and longer term rates coming down materially. I think that there's a fair probability in the current environment with the policies that are in front of us from the two competing party campaigns and platforms, that those rates, those intermediate and longer term rates are just destined to be higher over the next several years.
Gary Siegel (15:38):
So we're talking about deficits, treasury borrowing requirements are also increasing simultaneously and the buyers of treasury debt, the pool of buyers is declining. At what point does the US Treasury become an unwelcome issuer of debt?
Steve Skancke (16:00):
Well, in some respects, Gary, it's heading in that direction. We've, we've depended over the years on US institutions, individuals and then overseas governments, Chinese and Japanese being principle among 'em for the US Treasury to continue to increase its debt issuance at the rate that seems likely. I think there's that they become an unwelcome issuer. At the same time their holdings unclear as to what Japanese are doing. We have a lot of benefit from being the reserve, the dollar being the reserve currency of the world. That gets chipped away at by a lack of fiscal deficit discipline. It also gets chipped away at, we use the dollar holdings when we freeze or limit or impede the dollar as a transactional currency in the world. And I understand from my time in government that that's one of the ways that we try to put pressure, pressure on foreign governments to do things that we'd like 'em to do that they're not doing now and sanctions against European or Middle Eastern governments from behavior that we disapprove of. But every time you do that, it motivates them not to want to have dollar holdings. So as they have a choice of increase increasing their holding foreign reserves and are motivated not to hold those in dollars, we see various blocks.
(18:27):
Bricks plus Brazil, Arabia, South Africa, India, all talk about having an alternative reserve currency. The folks in Europe would certainly like to do that with respect the Euro and just the Chinese and the Russians together as they recruit others to be part of their economic block are going to try to promote an alternative to the dollar. Now at the moment, there isn't a good alternative to the dollar. I don't see a lot of folks lining up to hold their savings in rubles or renminbi or other currencies, but at some point it just starts moving in that direction and that then becomes problematic for the dollar for treasury borrowing and to be honest, for the standard of living that we enjoy as a result of our currency being the reserve currency of the world.
Gary Siegel (19:39):
So you said you don't expect medium and intermediate and long-term rates to material decline materially. Is there a danger that the path for sustaining higher levels of US treasury debt becomes problematic at these levels?
Steve Skancke (20:02):
There is. Gary, when the US Treasury made the decision to issue treasuries denominated in a foreign currency, it was motivated by pushback we were receiving and issuing them in dollars to test the market to see how that would work. But the spending the fiscal policies in the United States and we're in the middle of a stagflation back then made us look like we were not being responsible stewards of our own fiscal and current account policies. We had just disregarded or we were viewed as having disregarded our responsibility to be good debtors in what we owed the rest of the world. And that was something that accumulated over a period of time, we've been enjoying a tremendous peace dividend since the fall of the Iron Curtain. And some would say that we've stayed at the punch bowl a little bit too long and haven't paid attention to our fiscal responsibilities. And obviously with higher interest rates, increased borrowing requirements, and interest in other countries to dethrone the dollar as the reserve currency, it does become problematic as you say. I think it's something that we just need to be careful about. But the reality also is we'd be hard pressed to find voters. Indeed, we'd be hard pressed to find members of our legislature who understand a well, who understand the benefits we all get from the dollar being the reserve currency and what it looks like when that's no longer the case and what are the things that we're doing that sort of pushes in that direction.
Gary Siegel (22:29):
Steve, what are the implications of a $2 trillion fiscal deficit when the economy is growing above average unemployment at record lows and the economy fundamentally strong overall?
Steve Skancke (22:44):
Well, the first implication Gary, is inflation. It's a big fiscal stimulus and if you're trying to bring inflation down, it's very hard to do that. I mean, you can only apply the brakes so hard on the monetary policy side of things to squeeze consumer and business spending out of the GDP, the final demand when government is putting in taking a bigger and bigger piece of that, that's always been one of the fundamental strengths of our economy, that consumers and businesses are the principle economic decision makers in our economy. And as the government with these fiscal deficits that you point out start to crowd out or push out consumer and business as the economic decision makers, number one, you are reducing the growth potential of your economy. And when you're trying to grow and you're trying to absorb the massive fiscal stimulus and the private sector is not able to produce the capacity to do that, you end up with more inflation and you end up with a lower capacity to grow.
Gary Siegel (24:28):
So I'm going to take a question from the audience on the topic of the deficit.
Steve Skancke (24:33):
The other thing, sorry. Oh, go ahead.
Gary Siegel (24:38):
Sorry. No, no, you continue. Sorry.
Steve Skancke (24:45):
Well, the other thing about it, Gary, is that is that it also has huge implications for the bond market. Not only does the US treasury have to pay more, but business and consumer entrepreneurial borrowers end up having to pay more too. And as a result you get less risk taking, you get less private infrastructure investment, you get less of the things that make us more productive because at the end of the day, if productivity isn't growing and productivity by the way does not come out of the government, it comes out of individuals and businesses, if you don't have productivity growth, then your economy just isn't going to grow as robustly. You get economic growth by more people working and by the people who are working, being more productive and producing more with the resources that they have. And when government squeezes that out, the result is evident. We can see in other countries around the world as to what's happened to their standard of living as government has crowded out productive private sector investment.
Gary Siegel (26:16):
So I'm going to take the question from the audience. The question is, is the deficit based on the significant governance spending that the current administration has done?
Steve Skancke (26:32):
It's based on several things, Gary. It's certainly spending by the current administration now three and a half years into the administration is on the shoulders of the current managers, the president, there was two years of a democratic Congress. So together the White House and the Congress are responsible for the spending situation that we have now, but there's also legacy responsibility from the prior administration. 2017 tax cut increased the need for treasury to borrow more instead of having those tax revenues. And that's not to say that the spending is not good or that the tax cuts are not good. Those are policy decisions that ultimately citizens, voters, electors and the representatives in the Congress and the White House are going to make.
(27:41):
But what we've seen is that as those decisions to increase spending without increasing taxes to pay it, I mean that you borrow more. And one of the things that's easy to understand when you just think about it for a moment is elected officials love to spend, doesn't matter if they're Democrat or Republican, never seen a member of the legislature who didn't like to spend, especially if they can be spending in their home district and for their own communities that they represent. And everyone who runs for public office at the national level has an idea as to how to make America better. And that usually involves spending either taking less money in by cutting taxes or putting more money out. And very few people ever squawk about the government borrowing more. So it's an easy way to absorb the desire to spend but not raise taxes. And that's where it comes. It's not a new phenomenon, it's not all on the current administration, it's on the current, the past and the ones before that, just finding it easier to borrow than raise someone's taxes when you want to spend the money for programs that genuinely have a positive impact on the lives. We live in the United States.
Gary Siegel (29:29):
So there's a presidential election in November. What do you see as the greatest risks from that election for the Fed, for the economy, for interest rates, inflation?
Steve Skancke (29:45):
I think Gary, there's a couple of risks. One, and we read about this almost every day, the geopolitical risks in the United States that somehow the election results are not accepted and that leads to conflict and increases uncertainty. And when there's uncertainty, people invest less. Interest rates are likely to rise from that uncertainty. Stock markets, stock prices will go down, businesses will postpone decision making. Now we all hope that it'll be a smooth electoral process and that we won't have that, but the current moods suggests that that may be the case irrespective of who wins. So that's one issue. The second issue is that both candidates, current president, former president, have talked about increasing tariffs. Former President Trump has talked about significant increases in tariffs both on our European partners as well as on China. And at the end of the day, that causes prices to go up that contributes to inflation. It also contributes to uncertainty about product sourcing, which also leads to an increase in prices. So I'd say there's just from those tariff policies that have been expressed, that's going to be a contributor to inflation and with inflation to higher interest rates and to a postponement in the Fed cutting rates because at that point the only break on inflation is the Fed keeping interest rates high in a restrictive policy stance or if necessary increasing them further. I think folks will be surprised when they see what the impact particularly of tariffs is.
(32:19):
I think there will also be a tendency to spend, whether that's in extending tax cuts or in new policies before they figure out really how they're going to pay for some of those things. Both sides want to get going quickly and certainly if there's a sweep by either side, former President Trump being reelected, Republican stay control of the Senate and the House, they know Gary that they've got two years to do the big things that involve cutting taxes, raising spending, and so they're going to be busy about that. Likewise with the Democrats, I mean they understand that if President Biden is reelected and the Democrats hold the Senate and win back the house, that they've got two years to get done the things that they want to get done. And so they're going to be moving about it quickly. And as that contributes to higher deficits, even just for a one or two year period of time, that's going to be a force for increasing inflation. Not withstanding their effort not to do that, but I think it's going to be the result of just the fiscal policies that they're pursuing in addition to whatever they do on tariffs.
Gary Siegel (34:03):
So getting back to the Fed, Steve, the Fed originally at the beginning of the year had predicted a lot more rate cuts in the SEP and now they're down to the possibility of one. What are the chances the Fed will be late making the first cut? Are they already late?
Steve Skancke (34:26):
Well, Gary, in my opinion, they're already late, but I totally understand that inflation was moving in a very positive direction at the end of last year. The core personal consumption and expenditures deflator was annualizing over a period of three and six months at 1.9%, which was below the 2% target, and then all of a sudden it turned around and it's above 3% in January, February, March. And so their decision was the right one, I believe to defer any cutting until they could see that inflation in fact was moving in the right direction and that direction being down because as Chair Powell pointed out, inflation hurts everyone and the harm is disproportionately greater to and middle income groups. And so they wanted to get that under control and with the economy fundamentally strong and unemployment still at or below 4%, there wasn't a real harm that was going to be put upon our labor force.
(35:59):
So that was understandable, but that of course then just pushed off depending on where you were looking at it, the four or six cuts and into 2025 and 2026. If you look at their summary of economic projections from, well last December from March and now from June, they've still got the same number of cuts. They're still ending up at the same place. It's just not starting as soon and more of it is happening in 2025 and 2026. That of course depends on inflation coming back closer toward their target. So the chance of them cutting sooner, I don't think that there's a pathway to them cutting the Fed funds rate before the September meeting because that would mean that they have to be convinced by the time they get together at the end of July, which is like six weeks away that inflation has been vanquished. I don't think they're going to see evidence of that well just simply because there's not enough months. But by the time they come to their September meeting, they will have, well the okay number from April, the really good number from May and if June, July and August provide the same good news or the same trend that we're on now makes it easier for them to cut at their September meeting.
(37:54):
And if it continues down, it even makes it possible for them to cut at their November meeting and then again in December because at that point they're following a trend path of, okay, inflation is down, we're cutting in September, inflation's down more, we're cutting in November. Inflation is approaching a 2% target, not the 2.8% that they put in their summary of economic projections yesterday for what we should expect at the end of the year. But in reality, they're seeing a number at 2.4 or below, which allows them, I don't think there's a high likelihood, but it would allow them to cut in November and December. So I currently very high probability of one cut in December.
(38:58):
If we see declining inflation like what we saw this week and which will get reflected in a week or so and the PCE easy to see how we get a first cut in September. I think that, as I said before, I think there's a high probability of that and we should expect that. And the markets seem to think that the possibility of that has also improved. Again, we'll just have to see what happens with the June, July and August data to understand that better. But when you deconstruct what was in the CPI and PPI, the outlook for continuing improvement in the personal consumption expenditures, deflator core PCE Deflator is actually pretty encouraging.
Gary Siegel (40:07):
So you think three rate cuts in a row is possible but not likely, is that what I heard you say?
Steve Skancke (40:13):
Possible but not likely for there to be a November cut. Not only would inflation, inflation need to be looking like it has been reined in, but you probably also need to see some weakening in the labor side of things. Unemployment bumping to four and a half percent job growth below 125,000 jobs, which is the number that you need just to provide jobs for new entrance to the labor force each month. And the fact that the household survey showed a loss of 400,000 jobs in May could be a data anomaly. Since Covid Gary, it's the continuing reliability of the employment and the household surveys hasn't really recovered. So you see 272,000 new jobs in the employer survey at a loss of 400,000 jobs in the household survey. What is that telling us? It's hard to reconcile, but we've had those discrepancies ever since the ability to survey in person changed with covid. But if, for example, the 400,000 loss in jobs from May turned out to be reaffirmed with the data for June and then gets reflected in the employer survey and inflation is coming down, yeah, a cut in November is also possible, but my thought is it would have to be something extraordinary that would warrant them to do that after they have cut in September.
Gary Siegel (42:41):
So I'm going to take some questions from the audience because we have a few European central banks have already cut rates. Does this influence the Fed in any way to cut rates once?
Steve Skancke (42:54):
I don't think so, Gary. They obviously observe what they're doing, but that doesn't motivate them at all. And it's interesting, I was a longtime partner of a former Fed chair and we used to have folks from Europe who would come over and they would say, well, Europe is doing this and look at what's happening with the dollar. We think surely the Fed is going to increase, decrease. And my partner would say, well, that's interesting, but it's never been the way the Fed worked in the past. It's hard to see how that's going to be how they work today. So the short answer is no. Obvious they acknowledge that it's great. Europe and Canada also cut last week. It's great to see that that helps the US economy if it helps those economies. They're also in a different situation. They have not enjoyed the sort of robust growth in their economies and the strong position of their labor markets that we have in the United States.
Gary Siegel (44:25):
So the other question we have is housing values have increased significantly since the pandemic. What would be the impact on the housing market of an interest rate cut?
Steve Skancke (44:42):
I believe it would be very positive, number one, if it translates into a further softening in the intermediate term rates like the 10 year treasury, that makes it easier for people to get mortgages and buy houses and it continues to support housing prices also makes it less expensive for the housing industry to borrow and build more homes. And that's positive. I mean, chair Powell also pointed out that we still have a shortage in single family homes and he didn't say a number, but the number is about 3 million. The built up shortage is about 3 million as people are forming families and looking to buy single family homes. And the alternative build to rent programs that have actually been fairly successful in meeting that need are not able to keep up with that demand. Homeownership in America is something that people see positive for our culture, our communities, and the stability in our governance. So it's a good thing to support, but prices have gone way up even in the current environment. They continue to go up and the cost of home ownership on average has increased about 25%. That number was out maybe last week that it bumped from about on average maybe 12,000 a year to 17,000 a year I think is what I saw.
(46:47):
So everything points to being more positive for the housing market as job markets remain strong people wages are rising on average, and if there's some opportunity for interest rates to soften a little bit even just in the near term.
Gary Siegel (47:11):
And the last question from the audience. If oil prices start rising, what impact would that have on the economy and markets?
Steve Skancke (47:22):
Well, it would have a negative impact generally. It would be a perception that it's going to feed back into inflation, which ultimately it does. It would create anxiety. It's interesting, Gary, the price of energy, which is not in the core consumer price index or not in the core personal consumption expenditures. Deflator is probably one of the things that most of us even just subconsciously use to gauge. Whereas inflation, because it's posted on the corners, we all buy gasoline for our cars some more often than others and it's just right there. And so if the first number in gas prices is three, you have a perception the prices are high, but they're not going higher. When it jumps to four, everyone understands or believes that inflation is going up, which in some respects it is. Even the core inflation might be coming down and if it hits five, the general perception is that it is just out of control.
(48:47):
So energy prices matter a lot. Now the interesting thing is that the International Energy Administration had numbers out either earlier this week or late last week that suggests capacity of oil, fossil fuel production, oil and gas production is continuing to grow faster than demand. And that by 2030 I believe it is, that there will be like 10 million barrels a day in excess capacity. So when we see that OPEC plus, including Russia as decided that they want to maintain production restrictions, that's a reflection that they see the supply demand pressure on oil prices pushing it lower.
(49:59):
On the same day that OPEC plus announced that they were maintaining their production restrictions, the price of Brent crude fell into the seventies. I think it settled around $72 a barrel, so long as it's below so long as below a hundred, it's not the material, it's not the principle contributor to higher gasoline prices once it's above a hundred, it is. That isn't to say that when the price of oil goes up, that gasoline producers don't raise their prices, but for it to be between 75 and 85 where it's likely to be absent, some disruptive event like blowing up production capacity or a transportation difficulty in getting it around the world. And with the United States now producing, I think it's like 13 and a half million barrels a day, but we are a net exporter. The current presidential administration likes not to say much about that because it's inconsistent with their goal of reducing fossil fuel consumption, production and consumption. But that's a great governor on overseas producers being able to increase their prices because some of the production in the United States can come online pretty quickly. Not all of it, but some of it. And being in a position of energy independent IEA net exporter gives us a lot of latitude in controlling international price increases. So headline effect, big deal continuing effect, probably not so much.
Gary Siegel (52:01):
So we're running out of time. So I'll end with this. What questions are you getting from clients? What are they worried about?
Steve Skancke (52:12):
The principal question, Gary, is the market too good to be true? Is all the good news priced in but not any of the bad news? Is this a time to come out? And the answer to that question is, yeah, the markets are doing really well. If on average they're up 10 and a half percent a year for them to be up 12 and a half before the end of the first six months ought to make you cognizant of the fact that you're already above average. But the other thing about it, when you think about what will have a positive impact on equity and bond prices is inflation is continues to be headed in a downward path. The likelihood of a Fed interest rate cut before the end of the year continues to be pretty high on the equity side of thing. Corporate earnings s and p 500 earnings continue to be in the range of double digit.
(53:25):
One of the big research groups came out just at the end of last week with their projection of US and global earnings per share growth. And in the United States over the next 12 months, it's 12%. When you look at what it is in the world, it also continues to be positive and that will continue to have a positive impact on where we see stock market and bond market prices. The other question we get is what do we need to do, if anything, to protect against what might be political and civil disruption around the time of the elections?
(54:20):
And we just point out that historically that's not been an issue that has a material lasting impact. Yes, you could have volatility go up, confidence go down stock markets, correct bond markets, correct in for a period of time. Historically, that period of time has been relatively brief, but it certainly is on people's minds regardless of their political persuasion as they just look at the increased intensity in the discourse around policy and elections. So we think about that a lot and for the ones that have concern, we show them the options for mitigating some of that risk without creating too great an opportunity cost of being outside, being out of the market and just in cash for a period of time. Those are the two principle questions and concerns that we are dealing with.
Gary Siegel (55:39):
Very good. I want to thank you Steve. Steve Skancke, chief economic advisor at Keel Point, and I'd like to thank everyone who tuned in to listen to us today. Have a good afternoon everyone.
Steve Skancke (55:51): Thank you.
