Libby Cantrill, Head of Public Policy, PIMCO

implications of policy that is changing rapidly. Through her conversations with institutional, retail and international clients, she outlines how uncertainty around U.S. policy Has become a central driver of investor concern early in 2026. Our discussion highlights how recent geopolitical developments. Including tensions with Europe, rhetoric around Greenland, and renewed trade disputes have amplified questions around US credibility and the world.

Here, she describes two potential forcing mechanisms, bond market pressure or looming entitlement shortfalls. While the so-called bond vigilantes have periodically re-emerged, she notes that market sell-offs have thus far been contained. Suggesting that investors. Continued to grant the US substantial runway. At the same time, projected shortfalls in the trust fund later this decade.

represent a political and economic inflection point that may eventually compel action. I hope you enjoyed this episode of the Alpha Exchange. My conversation

set of uncertainties that you're being asked to provide insight on with respect to the client base of PimpCo. Tell us a little bit about some of those conversations and where the uncertainties lie.

we have a lot of individual investors through our mutual fund complex in the US who are very keen on the headlines and maybe even trading around those headlines. And then our foreign clients, whether they're in Asia or whether they're in Europe, they all sort of have different kind of flavors of questions, but I would say broad strokes, questions about

Fed independence, probably one of the top questions that I'm receiving from clients, particularly those who are overseas. I was just in Asia last week, so probably a little bit anchored based on those conversations.

what it may mean for the dollar in particular and then obviously rate fiscal, whether there's going to be some sort of inflection point, whether it is sort of bond market induced or whether Congress kind of finds religion, so to speak, and starts really becoming more disciplined in terms of spending or

tax revenues or what have you to really fix the deficit. Then there's I think to your questions about the midterm elections and what are going to be top of mind questions around or policy issues for the president and for Republicans, how they may react to those issues, affordability as we know, top of mind consideration for voters, what are the policy implications of that? Could we see actually President Trump try to really meaningfully address those issues before the midterms.

And then geopolitics obviously. I think this has become maybe even more apropos for clients because of the headlines that we've seen around Venezuela. around Greenland, Iran and what have you. So questions about what the president can and cannot do, what is sort of most likely particularly over the next few months.

There's a lot of things that had to fall into place with respect to congressional approval and so forth. Give us kind of your understanding of what he's trying to accomplish, what he's going to be able to accomplish and specifically the interaction between the US and the European Union seems very frayed as a function of this specifically. I'd love to get your insights on those.

So we've been just trying to frame this for clients because I actually don't think the financial press has done a great job of putting this issue into context and also, you know, what can and what cannot happen. Obviously Greenland important from a strategic perspective in terms of location, in terms of proximity, also in terms of sort of shipping routes, and then of course

critical minerals. I think the eighth leading country in terms of critical minerals and the highest in two key minerals. So has a lot of just natural resources that I think the president is interested in. in terms of, you know, potentially tapping or or accessing of geopolitical importance and of strategic importance and also in the context of this pivot towards the Western Hemisphere, if folks want to nerd out on this.

I would recommend reading the National Security Strategy, the NSS, which is a document that every White House produces for this White House. I think it is a pretty accurate, it seems roadmap for their foreign policy and there's a lot of emphasis on the Western hemisphere, shoring up friends in our backyard, if you will, making sure that regimes are sort of aligned with the United States.

And I think Greenland in that context makes sense. They believe that to the south and to the north of the US, ensuring access to supply chains, to minerals, to what have you are all important. As you said though, this was sort of a taco moment maybe.

the rhetoric has been pretty broad and wide ranging with lots of sort of threats and what have you. But again the reality is President Trump is pretty constrained in terms of what he can actually do with Greenland. He cannot acquire Greenland without Senate ratification of a treaty. That's a pretty high threshold. Sixty seven senators have to vote.

in favor and then anything that is related to money typically needs Congress. And so even if you didn't need that treaty ratification, you would still need Congress to appropriate money. usually at least sixty votes in the Senate and then, you know, majority vote in the House. So I think bottom line here is maybe not so surprising that the president has kind of walked away

from some of his threats, just given these constraints. But I do think given the context of the national security strategy and the sort of pivot towards the Western Hemisphere for President Trump, this makes sense, really leaning into trying to get more access to Greenland.

role, acquiring new territory, occupying territory also needs Congress. So whether it's these are expansionist ambitions in Colombia, in Cuba, or in Greenland, you need to have the legislature involved. And I think Congress has been pretty clear. They're not really that interested in acquiring more land. They're not really interested in spending more money.

on these sort of foreign incursions. So that's why it all looks pretty unlikely to result in any sort of meaningful obviously acquisition of territory or occupation.

NATO and its resolve. I'm wondering as an analyst that, you know, is an expert at this stuff, when you step back and look at the set of risks that might come from this fraying, what does that look like to you?

of other administrations as well. President Trump sort of says the quiet part out loud sometimes. a lot of administrations have actually been critical of the European Union just writ large that they haven't necessarily invested enough in their national defense. They just usually say it privately, not publicly.

Going back to what President Trump has said forty years ago, just about how the assumption, this feeling about the US kind of being ripped off by trading partners, I think he does you know put really a target on Europe's back in terms of the trade deficits. historically we've obviously had a large trade deficit with China. That is actually over the last year or so that has actually shifted and now

our biggest trading deficit with our trade partner is with the European Union. Obviously different countries look kind of different. from a trade deficit and trade surplus perspective, but kind of writ large again, we have a big trade deficit with EU. So I think from President Trump's perspective, he thinks all of these complaints are quite legitimate and that The EU is sort of like any other trading partner, unlike other presidents. He's not putting the history that we've had with Europe.

Forefront in his mind, this is all more transactional, sort of self admission. It's led to this point where there are a lot of tensions. And I think some legitimate and maybe some maybe say not so, but it that's not really a again our role. We're just looking at what's likely to happen. But to your point, this is I think going to be pretty dominant over the next three years. We should expect to have

a more fragile relationship with Europe. And that has, I think, accelerated this move to a more kind of multipolar world. I mean you've seen Europe and China. You see now Canada and China as a result. I mean obviously not part of the EU, but sort of a similar dynamic between the US and Canada. And as a result, it's kind of I think led to a more upset world order with maybe allegiances that even two years ago would have had people scratching their heads.

But again has led to a more maybe fragile world as well. But I think that just like in the next twelve months, this kind of tariffs, threat, on and on on and off. trade deals or what have you, I think, are probably gonna be more the norm given some of these, I think, more deep seated issues with Europe.

sell off in the bond market. And yet we get to the end of the year and the S P is at an all time high. And we're collecting, you'll know better than I do, but something on the order of thirty odd billion a month. in new tariff, call it revenue, call it a tax, but it's money coming in. I'd love to just hear how you think about the twenty twenty five tariff episode and then where it's going. A lot of these things aren't

truly in the bag in terms of negotiated. There's frameworks, but they're not entirely crystallized. And then of course there's AIPA. Walk us through your broad thinking on the tariff on them.

President Trump. Where did he sort of spend his time as a public figure but private citizen in the nineteen eighties? You know, he was really focused on trade deficits. At that point it was mostly with Japan, but he was very consistent in terms of his view that trade deficits are bad, that they're effectively a scorecard between the US and the rest of the world, that tariffs

are good not only as sort of a means to an end in terms of leverage over negotiating partners, but also an end unto themselves. He really believes that

tariffs work in terms of making manufacturing and US industry you know more broadly more competitive. He was against NAFTA in the nineteen nineties. He was against China's accession to the WTO in the early odds. The only reason I go through this History is I think it's pretty important because I think the market wanted to sort of rationalize away this focus on tariffs, this focus on trade deficits.

I heard a lot of people say, Oh, he doesn't mean it. This is just again a leverage and negotiating tactic. I do think it is, as we've seen with Greenland, he does use the threat of tariffs. to again extract leverage over negotiating partners. But I also think he really believes it as well. When Liberation Day came, granted those tariffs were higher than even, you know, we thought, but I was guiding our investment committee that he really did believe this and he

did feel like there was this sense of unfinished business from his first administration. He felt more constrained under Trump one point oh, maybe not as sympathetic of folks around in his staff and his cabinet. in terms of his world view. So he did come to Washington in January twenty twenty five with this view that there was unfinished business tariffs between one of them.

We sort of saw the apex of tariffs on Liberation Day, the week following with our effective trade embargo on China. The president of course then walked that back, but still, and I think this was our view, that even if you blocked it back, that the tariff level would still remain high. And right now, you look at the effective average tariff rate across all US imports.

It's around thirteen percent or so, more or less. I think the announced tariff if he goes through with all the product level tariffs that he's referred to or there's a pending investigations around, that effective average tariff rate increases to about fifteen, sixteen percent.

As you mentioned though, this AIPA, the International Emergency Economic Powers Act, that is the law that President Trump has put around half of those tariffs on. So it's about a hundred billion plus of revenue so far that we've collected under this IEPA statute, a little bit more than 100 billion, maybe 125 billion.

And this is of course being litigated and has now gone to the Supreme Court. We are expecting that verdict any day now. We thought maybe it would happen this week. It looks like there may be a pause until the court meets again until the second to third week of February. But based on some folks that we've talked to, it does look like the courts will probably in some fashion decide against the president. Now that might be more nuanced.

Maybe they say that some of these things he's declared a national emergency over immigration, for instance, or fentanyl. That was a justified use of the law and tariffs were a fine remedy, but for some other national emergencies like putting tariffs on Brazil, for instance, because former President Bolsonaro was jailed. Maybe that wasn't a national emergency and and that was an illegitimate use of AIPA. So there's definitely a possibility that you get a more nuanced

ruling, but I think that more or less we could see the court move against the president. And that means that theoretically you could see half of these tariffs roll off. And potentially the Treasury have to repay those tariffs to the importers on record in the market.

probably a bare steepening as concerns around the deficits come back into sort of focus the long end or term premium increasing at the long end of the yield curve. You could also see maybe a short term rally of risk assets based on this too. I think we would say that's probably should be fated, that the president has other authorities that he can use. to impose tariffs. We would be s not surprised that if he were to announce new tariffs immediately after a Supreme Court verdict should again at a

Decide against the president. There's section 122, for instance, where Congress has given the president very clear authority to put 15% tariffs. on countries with whom we have a trade deficit for five months. So it is time limited, it's cap at fifteen percent. But he could announce those promptly after the Supreme Court's verdict. So

again, we think any sort of respite would be pretty short lived. And then he would try to kind of reconstitute that thirteen, fourteen, fifteen percent effective average tariff rate that we have now with AIPA intact, using sort of different

statutes. Long way of saying we think the president believes that terrorists work. He believes that trade deficits are bad. And as a result, I think we should expect trade policy to be volatile, to be a source of volatility over the next three years and the tariffs remain high.

if he wanted to, he could reconstitute the Fulmati, if you will. That would take a while though. That's important because those two statutes, 232, 301, require these investigations. Those investigations require public comment. there's kind of a rigma rule that process that has to be followed. But again, if he wanted to get to that destination, he could. I think in the intervening period

he's gonna put those section one twenty two tariffs on fifteen percent though for five months. So at least for the short term. much of that revenue could be kind of recaptured. And then again, the ultimate destination, maybe that effective average tariff rate, lands at ten or eleven percent versus thirteen percent. So

I see him be able to get mostly there and fully there if he wanted to. I think that's the conventional wisdom. One other potential source of market volatility, but also has implications for tariffs. is the renegotiation of the US MCA, NAFTA two point oh, if you will, the trilateral trade agreement between Canada, Mexico, and the US. That is going through its sort of review period in twenty twenty six.

begins this summer. I think there is not a low chance. I mean, I think there is actually a relatively high chance that the president withdraws the US from NAFTA two point zero or the USMCA in order to kind of renegotiate a bilateral agreement with Canada and Mexico. And there I think you would see higher tariffs. Because right now, even though he's announced these 25% tariffs on Mexico and Canada, the vast majority of products.

are actually not being tariffed because they're in compliance with US M C A. There's kind of a workaround in his tariff announcement that as long as you comply with US M C A, you're not tariffed at that higher level. So if that trade agreement goes away, of course Mexico and Canada are huge trading partners with the United States. We have the biggest trade deficit with Europe, but Canada and Mexico are biggest trading partners, period.

And as a result, I think you could see even tariffs going up and that revenue maybe staying the same. So there are obviously a lot of puzzle pieces here, but I think the upshot for the market

is that at least the majority of these tariffs, if not all of them, will be reconstituted one way or the other. Again, given this firm belief that tariffs work. And last thing I'll say, Dean, I think that this is quite important. is that you know the president's scorecard again is the trade deficit. And what has happened with the trade deficit

since he put these tariffs on, it has declined. He's thinking in this sort of more two dimensional way. And again, I'm not saying that's a right way or wrong way of thinking, but I think this is the way that he thinks he's have been a success. I don't think he's gonna be swayed by this argument that he shouldn't just put all of them back on using different stats.

Very tough for the US, just given how our electorate is and and how our Congress is set up. And so that's where, you know, as you mentioned, the bear steepening potential impact of pulling this away. I had the thought of really wanting to get your thoughts on the budgetary dynamics for the US. I just read about these things and I rely on the experts like you, but they talk about Social Security as whether it's seven years or ten years.

But the conversation is certainly creeping in to the dialogue, where the sustainability in its current format. is in question. When you start to talk about seven years, that's just not a ton of time to get things right. And it's always been a third rail. We printed consecutive$1.8 trillion deficits.

Amidst an incredibly low unemployment rate? What's the appetite within the US political system to try to rectify this? And in your conversations with clients, is there a worry that the US just can't get itself on the right path?

And the reason why we had that view and still have that view is because to your point, neither then candidate really seriously talked about the things that would need to happen in order to actually change the fiscal trajectory of the US. And there are a few fold. One is reforming social security. It's honestly probably the easiest to do, indexing the retirement age for life expectancy. Arguably should have been done years ago. Arguably should have been done when it was first conceived.

But the life expectancy was much l obviously younger than it is now. So it's in some ways a good problem to have. But I was on the Hill twenty years ago and we were talking about this, indexing the retirement age for life expectancy, changing the way that which version of CPI it was indexed to and and what have you. So in some ways those they're politically maybe more painful, but actually mechanically pretty easy. Medicare probably is a harder one, healthcare costs in this country.

have gone up almost every year. They started plateauing a little bit but then they've gone back up. And of course as we get older, Medicare becomes more and more costly. defense, also kind of a sacred cow, I think everybody would argue, regardless of what your politics are, you know, relatively important, especially given sort of the geopolitical landscape.

But if you kind of look at the government's budget, there's this joke that the government is basically an insurance company with an RB attached to it. And that's what the budget looks like. Sixty percent entitlements. 13% defense, and then the balance is what's called non-defense, you know, discretionary spending, and then interest expense.

So especially if you're not kind of getting into the real source of the expense, you're not going to actually change the trajectory. So, you know, earlier in twenty twenty five when there was a lot of

optimism about Doge, I was pretty skeptical because one is you need Congress actually to effectuate any of those spending cuts. Really difficult to cut spending unilaterally without the Congress, if not impossible, Article one of the Constitution, but also because it wasn't really focused on the stuff that was really expensive.

people politically might support cutting foreign eight or whatever, but it's just not that big of a part of a budget. Bottom line, you know, to your point is that deficit Are high, you know, 6.3% of GDP this year, high in 2025, it just finished up between six to seven percent. over the foreseeable future and without really any political will to really again address the source of the cost, unlikely to change. Of course the other component of this is revenue.

and increasing taxes is just as unpopular as performing Medicare and Social Security. I will say we probably have some more latitude to do that if you just look at our tax base relative to say Europe. our tax regimes is much lower. Now you could say that's one of the reasons why we grow and Europe doesn't, and that's a I think a totally fine and credible argument. But it does mean that if push comes to shove

and we need to try to actually balance the budget, we probably do have a little bit more fiscal runway than maybe some other developed countries have. The last thing I'll say though, Dean, is that there is no political appetite to do this. There is no political appetite to increase taxes. There's very little political appetite to reform these, you know, important entitlement programs but expensive and growing. It means kind of one of two things.

Is it the Bond vigilantes that actually sort of impose discipline on Congress and on Washington? Or is it this sort of inflection point that you refer to? The Social Security Trust Fund has projected that Social Security will start paying out less benefits, fewer benefits than they take in by 2033. This is when people talk about Social Security going bankrupt. It's not gonna go bankrupt.

But it does mean that it is paying less than it's taking in. So it means beneficiaries would be receiving a twenty, twenty five percent cut and benefits. That does not seem politically very likely. So if it's not the bond market that imposes discipline, we'll see. There have been sort of these flotations with maybe a real steepening, a real term premium coming back, sort of a big sell off, but then

that usually catches a floor and and oftentimes rallies again. So if it's at the bond market, then it may be this twenty thirty three date. And that means that probably for twenty twenty eight you will have this be an issue. And then for definitely for twenty thirty two. In my view, this has to be done on a bipartisan basis. It has to be done with both kind of Republicans and Democrats holding hands and sort of jumping off the cliff.

together, but as long as the music's playing in Washington, members of Congress will keep on dancing. I don't think we're necessarily to a point where that looks like the music is stopping anytime soon.

I think one thing we do learn about deficits, and maybe this is the poison chalice of it, is that the market gives the US so much runway. to just keep going and you wind up with, as you say, the lack of political will. It's a very intractable

Agency costs because the pain is now and the benefit is uncertain and it's to someone else in the future. So it's a very tricky circumstance. How does this conversation, maybe if you can, bring us inside the walls of the investment thought process at PIMCO and how big a risk this is or isn't.

structurally and secularly, it means that there will be steeper yield curves in the US. The time of flat yield curves where if you own a thirty year bond, a two year bond, and you're basically getting the same yield, that feels like that's not gonna happen at least any time soon, given that you need to compensate investors for the extra kind of risk that they're taking for tying up their money when you're running deficits at six, seven, whatever percent.

a steeper yield curve, higher term premium. We've had that position on again s since the election and we've been able to make money for clients, which has been great. We've sort of taken that down a little bit from a risk management perspective, but just from a secular perspective or the long term, we think

we'll see structurally steeper yield curves in the US and in other developed markets too. Maybe that's the other point. That the US is not the only country that's suffering from high deficits and aging demographic. But certainly a steeper yield curve here in the United States. And then while we do not think that the dollar is losing its reserve currency status, the dollar will be

king and continues to be king for the foreseeable future, you know, does mean that we see some value in just diversifying away from dollar based assets and from the dollar just in general. Not in this idea that there's a referendum against the dollar or that we're gonna see a failed treasury auction or what have you. We don't believe that is the case. As you said, the dollar still benefits from the fact that there really is no alternative to the dollar or to US Treasuries in terms of

their depth and their breadth of the market, the fact that commodities are priced in dollars and that settlements still happen in dollars and central banks still hold dollars or treasuries on their balance sheet and what have you. So we don't think that dynamic Is gonna immediately go away anytime soon. But we do think that there is opportunities outside of the US.

And as some of this economic nationalism, I mean you to asked about Europe earlier and so the implications, obviously geopolitical implications. from kind of freight alliances between Europe and the US and some fragilities around NATO. But the other is the fact that you are seeing some more economic nationalism. So even if it's not necessarily an economically rational decision, you're seeing big allocators in Europe

reevaluate some of their dollar based exposure, some of their exposure to treasuries, because they also have their own constituencies and stakeholders and political pressures that they need to assuage. So I think the bottom line is all of this means higher deficits in the US, structurally steeper yield curves, maybe some fragility around the dollar and trying to take some opportunities globally. And then also of course then you just think about what happens if there is a big recession in the US.

and you are running kind of six, seven percent deficit. I'm sorry, I have teenage children at home so I can't resist the six seven which I'll laugh or they'll have no idea what I'm talking about, although again I was last week and people did seem to understand the sort of six seven reference. But obviously it makes the US having kind of less fiscal flexibility. Should there be obviously a garden variety recession, you don't necessarily need a huge fiscal response.

But if you do have covet again or covet kind of whatever a shock to the US economy.

I think you could just argue that the US just has a lot less flexibility than they did even when they were going into COVID, when we had four percent deficits. Now almost six and a half percent deficits, again sort of less flexibility. So We do think there are investment implications and hopefully ways for us to be able to make alpha for our clients, but certainly it's not a very hopeful or optimistic view when you just look at the reality.

and as you said, the economic and political incentives of folks in Washington.

You get into 2022 and of course the tightening cycle was just so steep. The front end came up so fast, the back end had to come up as well. So you get this flip of the correlation. And then last year during the tariff tantrum, you got something different. You mentioned that bare steepening. You had the front end lower in yield and the back end going up. It just was a destabilized period, at least short lived. And maybe that's why

Trump back down. So it's such an interesting asset class where the behavior of it So we'll finish up with Fed independence. That's a topic of conversation, I'm sure, all the time within your firm and then for you and your meetings with clients. I'm curious if you can frame out what clients are asking, what their concerns are, and then we can talk a little bit more about Jerome Powell showing up at Lisa Cook's hearing.

But I think it is a good reminder that sterling was a reserve currency until it wasn't. These relationships exist until they don't. You can't take them for granted. And I do think Fed independence is another issue that is obviously a big concern for our clients, but also could potentially cause the market to behave emerging market like, if you will. Like everything we have sort of different views around the table around Fed independence.

You know, my view has been though that there are lots of guardrails to protect

the independence of the Fed. Now we have people who would argue that the Fed's never been independent. There's some credibility to that argument, obviously with people around the table at the Fed and people are gonna have biases and what have you. But in terms of the institution being independent and being protected from really overt political influence, we think that there are a number of guardrails that cannot be changed by the president or others, one of which, of course,

Is the fact that the FOMC is a vote of twelve, not just a vote of one. So even if you get a chairman on the Fed. who has a very dovish leaning and wants to cut rates down to, you know, one percent or what have you with like Steven Myron, that person is only one vote and you need a majority of that.

twelve in order to actually move rates. There's also just the construct of the Fed that you have these seven Fed governors, which of course are nominated and then subject to Senate confirmation, but then five regional presidents. were really pretty inoculated from the politics of Washington at least. And of course there was a concern that maybe those regional presidents might not get renewed in January. They of course did

and they've been renewed for another five year term. So that's another structural characteristic of the Fed that makes them just less susceptible to the politics of the day. And then of course, and this is something that I really hammer home a lot to our investment committee, but also to our clients. Which is just that the Senate confirmation process, while it may seem perfunctory, it's actually very important. There is a lot of back channeling between any kind of Senate and any White House.

around Fed chair and Fed nominees because and this might be hard to believe, but the Congress and the Senate really actually do want the Fed to be independent. They like being able to sort of scapegoat the Fed if the economy is going sideways. But I think even more importantly, and I think this is very apropos to what happened in twenty twenty two, inflation is just a political killer.

Unemployment is bad and of course really affects those people who are affected by unemployment directly, but inflation's like a big regressive task. And we're seeing this obviously with just the question of affordability, but you know, affordability can be kind of recast as like inflation. Politicians are really interested in not having kind of runaway inflation. So

this confirmation process around the Senate and around the Fed are just really important. And because the very narrow majority right now, the Republicans have fifty three to forty seven and the Senate you need fifty votes in order to get confirmation

That just means that there really isn't a margin of error for the president to nominate somebody who really is viewed as politicized or does it have the kind of the right incentives in place. The Senate Banking Committee, not to get even kind of wonkier, but That's the first step towards Senate confirmation. And that majority is even more narrow than the Senate majority, meaning that it only actually takes one vote to actually kill a nominee.

the figurative way, not the literal way. That just sort of speaks to this idea that we probably will have a more conventional Fed chair or future Fed nominees, even though you have the president really job owning and demagoguing the Fed and of course going to the very unprecedented measure of threatening to fire a Fed chair and then this sort of criminal investigation into Powell. And not to say that it doesn't matter or that it's not for nothing or all this, because obviously

I think it does chip away at our institutions and at the at least the perception of Fed independence. But in terms of those guardrails that still exist, they still very much are intact.

And I don't see those going away, whether it's Trump or whomever the next president is. And as a result, more or less the Fed will be able to make their decisions around monetary policy without kind of fear or favor to use Powell's term, regardless of what the president or any other policymaker is sort of putting them pressure to do.

the unwind of a trade can really be impactful. So we have to pay attention to crowding and things like that. And then the last category is just political risk. Could be geopolitical risk, Ukraine, the China uncertainty. Increasingly, it appears at least to me that the US is a source of political risk. Our politics are sadly very dysfunctional, polarized.

Would you agree with that? Is that me reading the newspaper too much? From your very informed and nuanced understanding of these risks, for example, the Fed one. You essentially just said, look, I think there's more bark than bite there that the Fed can hold up. What's your just broad assessment of the US as a source of risk now versus other years you've been looking at this?

the symptom of the broader issue or signal of the times or what have you. With that said though, water finds this level honestly. And if you just pull the majority of Americans, most identify actually as centrists. or, you know, independence. I think most are actually pretty disillusioned by both parties. They don't necessarily feel like these extremes and vitriol and ugly rhetoric.

necessarily characterize the country. Maybe I'm just an internal optimist, but I do think that we do as a North Americans have much more in common than we have that separates us. I at least hope that this is just a low point for our politics and that we kind of find our way out. With that said, political risk just in general for markets.

is going to be again a risk factor that they have to contend with. And it's not just around the partisanship or the polarization or the potential for political violence, which I do think sadly certainly exists. But it's just around government being more involved in markets and more involved in companies. Clearly President Trump has I think upset the apple cart. Republicans just traditionally have had a small government ideology that has not been President Trump, obviously with

the equity investments in Intel and mining companies and what have you. I just think that the political risk will be something that markets will have to price. or factor in in all sectors. And some of it because of this partisanship, because of some of this populism and what have you. One thing I do think that is maybe a little bit more on folks radar but it's pretty apropos to the equity market, is just around the politics around AI. I think is going to get increasingly difficult for

politicians to sort of ignore. You did see in some of these local elections and the off year, off cycle elections in last November of twenty twenty five, where the cost of electricity, data centers,

the resource extraction that go into data centers becoming actually a political issue, an issue that was sort of on the ballot, if you will. I think that will be increasingly the case again as affordability continues to be a political issue. And then should we see the labor displacement that a lot of folks are

estimating that we may see from AI, then that becomes like an even bigger political issue and probably an issue for the general election in twenty twenty eight. Again, this may not be on the ballot, so to speak, on twenty twenty six. But I think increasingly this becomes a much knottier political issue and you think what can go wrong with some of this run up in AI valuations? Well, one is if the government starts to really clamp down.

I don't wanna say this is like a tomorrow thing because even for the government to regulate AI probably would take Congress. to write a bill to create a new agency to regulate it because there really is no natural home for AI in Washington from a regulatory perspective. But you can kind of see this train leaving the station and this likely becoming a bigger political issue, again, if not cyclically, certainly over the longer term secular time frame.