Let's get into this, the parallels between now and 2016. How strong are they? They're not strong at all because, at the end of the day, the business cycle and earnings and also interest rates will determine kind of where stocks trade over the next year or two. And in 2016, as you recall, we went into that election with a lot of slack in the economy. Right. Things were slow. We had a manufacturing recession around the world. In 1516, the Fed was, you know, rates were pretty low. Generally, the economy, we had last slide from a labor standpoint. So it was, it could receive kind of a pro reflationary policy strategy. Today, we don't have that slack. So prices are extremely high. Consumers and small businesses are much more, I would say, sensitive to higher interest rates. So rising interest rates and kind of a pro cyclical strategy not going to be

good for those types of stocks. And I think also the bond market now is in a much different position where we have way more debt. As you mentioned earlier than 2016, we had plenty of slack in the borrowing markets today. We don't have that. Here's what doesn't make sense to me then about the Trump trade. If you get bond yields that climb, how can risk assets keep rallying? Well, I think it depends on why they're rallying. So I do think the equity markets are still nervous about growth concerns. I mean, labor markets all over the place. I mean, you can people can make excuses for why it's better or worse month to month. But the general trend in labor is down. We're in a late cycle economy, so the equity market is worried about growth slowing and that's why the Fed's cutting interest rates. Okay, so the bond market, I mean, the bond market, the market goes up because

growth is better, and people believe that. Then it could be okay for equities if bond market yields go up because term premium is widening because of fiscal sustainability issues. Then it's a problem. Well, I guess the reason why I ask this is because the Trump traders' knee-jerk reaction supposedly is bond yields go up and equities, particularly in the more cyclical sectors, and thinking of financials based on the idea that you're not necessarily getting some sort of economic impulse that's immediately overlaid onto the scenario. Why should risk assets continue to rally if yields continue to surge simply on this idea that the deficit's increasing and the bond vigilantes suddenly could be back? Well, I mean, first of all, the financials are a little bit different because that's a direct sort of call. And I do think that one's fairly visible. I think if you have a Trump presidency and maybe even a red sweep, you could get a more lenient regulatory environment.

maybe M&A picks up. That's kind of the financial trade, but that's unique and we don't think the financials have really rallied that much on that trade. It's been more about the third quarter earnings season and the fact that we went into that earnings season with not a lot of high expectations. So I think there is there's scope for further follow-through in certain, quote-unquote, Trump trades. At the same time, there's probably, you know, the other side, which is I think a lot of the negative trades have played out for the Trump trades. I mean, bonds have sold off probably too much, and the renewables and things like consumer goods companies will be hurt by tariffs have really been hammered. So if Harris wins, you could see a really a pretty big rebound in some markets. So there's a lot of permutations here. This is it's not as clear-cut. I think you said it exactly right.

It's all about the setup. Okay. Stocks and asset prices move based on positioning as much as they do about the actual news. I'm looking for a clearing event. Okay. I'm hoping this is a clearing event, and then we can kind of get back to doing what we get paid to do, which is analyze interest rates, earnings growth, and kind of multiples, trying to figure out, okay, what's the fundamental case here? And my guess is that could take maybe a month to kind of clear when it comes to a clearing event. Would you agree with Kit Jewkes that it's either likely going to be a Republican sweep or Harris with gridlock? Republican Senate? Yeah, I think that's probably, I mean, that's what the prediction markets say. Who am I to argue with that? And but there are, but it's not like it's a slam dunk. Okay. I think the more I think, but I do not

agree with the view that a Republican sweep is the best outcome for equities. I think it's probably Trump with a divided Congress. The Republican sweep means a 50% corporate tax rate. Potentially. Potentially, potentially. I mean, let's see if they can actually get that through. I mean, the bond vigilantes may come for them if they try to cut taxes in that sort of form or fashion. And they're not even talking about, they're talking about, at the margin, trying to reduce some taxes, maybe extending some certain things. I think the margins, the whole election has been a tax cut election. But I mean, I don't think that's priced it just like in 2016. Remember in 2016, nobody priced that bond cut until December of 17 when the Senate actually passed it. I mean, the whole year is like there's never going to happen.

It's never going to happen. I think the markets are they always wait for the actual evidence to to actually trade those types of events, particularly when it comes to Congress. You said the most beneficial Trump with divided government. Yeah. Can you explain that just a little bit more? Well, I mean, the markets like uncertainty. They don't want one party in power. I do think that a Trump we said this all Trump presidency is probably more pro-growth. Okay. Maybe not as good for for bonds. Harris would be probably a little less gross, but probably better for bonds. And that's been been our general view even prior to the last couple of weeks. And things have kind of traded through now at the margin, is it going to be dramatically better? I mean, I don't know. The markets are very price a lot. You know, I'm saying like that's the problem. We've already priced a lot of good news.

and let's just take a step back. Two, we're treating 20 almost 22 times earnings. Okay. And 20. 16, we were trading 16 and a half times earnings. You got five have multiple points of you know, we got to justify that no matter who wins this election. So we're just in a totally different set up going into this election. So AT&T, any of you want any research was on the program earlier this morning and essentially said to us choppy road to nowhere, flat market into year end. Do you share that view? Well, choppy meaning there could still be some big swings. I mean, maybe we end up flat from here to there, but there's going to be some big trading opportunities between here and there. I think we could see 6000 potentially, you know, in some sort of a clearing event that isn't now a lot of consternation if people feel good about things.

But then I think it's really hard for us to get past 66,060 100 in any scenario because then you're I mean, you're so stretched on valuation and I don't see growth accelerating in a kind of way which would justify even higher multiples for 2025. Can you explain what this clearing event for a month looks like? No, I can't. Okay. All right. Give us a sense of what that could mean. I mean, is it basically just whipsawing every single day or is it basically that you see one trade in particular that you could see really getting blown up during that period of time? Well, I could see many trades getting blown up, not just because of the election, but because, once again, we're very stressed. We're into the FOMO season and people need to perform in two months. There's a lot of things going on here. And so I could I could see a blow off

move of some kind post-election in a clearing event. But then reality sets in that we're going to have some kind of fiscal consolidation next year no matter who wins. And in my view, I think that has to happen and that, you know, that's going to create uncertainty again and then positioning gets kind of whipped around. The other thing that's going on is the Mag seven, which reported last week, was a very it was a mixed bag when I was you know, we've been more pro-cyclical. What I was worried about last week was that they would come in with such great results, they would suck all the oxygen out of the market again. So that didn't happen. But if we were to get a new thing, for example, let's say a new theme pops up, I can guarantee you this and is going to flock to that theme very quickly because that's that's what that's what we need

right now. We need something to get excited about. And we're kind of lacking in that. We're kind of lacking it, but something will happen. In other words, the market will find a new shiny toy, and it will move to that shiny toy. Right now, the Fed is not the shiny toy. We have barely mentioned the Fed's meeting on Thursday. How much does that matter to this entire equation? Isn't it Wednesday or Thursday? Thursday decision really moved it back. Yeah, I know. Yeah, but I mean but Wednesday is I mean they're meeting, they're meeting on Wednesday. Yeah they're meeting on Wednesday but decision are still meeting. They're going to know what happened I think anyway. Yeah. What do I think. I mean they, they don't have any, they don't have any crystal ball. They don't, I don't think the election is going to change their decision making. So right now, 25 basis points, Do they change yours?

I mean, look, I mean, even the day the Fed's on is somewhat on autopilot. Assuming we don't, the economy does take a really bad turn and get a cut even more rapidly. I think the trick for the equity market is going to be what's their tone? The dovish tone or hawkish tone is a hawkish cut or is it a dovish cut at that? But that's one or 2%. That's not a 10% move. And the Fed the Fed is kind of over here now. They're doing their thing. They made their decision. That was that was September. That was a shiny 20 September. But now we've kind of got off of that. And now it's about earnings. And then as we go in year and it's going to be how does 2025 settle in for the economy, for earnings growth, and where should multiples be based on how the

equity how the equity merger interpreting the move in bond yields?

Morgan Stanley's Mike Wilson on Trump Trade, Fed, Earnings, S&P Call

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