After cutting rates 50 basis points in September, the Federal Open Market Committee meets after Election Day to determine monetary policy. Join us live on Nov. 8 at 1 p.m., as Gary Pzegeo, head of fixed income at CIBC Private Wealth U.S., provides his take on the latest move and where he sees monetary policy going.
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 event. I'm your host bond buyer, managing editor, Gary Siegel. Today we're going to discuss the federal open Market Committee's recent meeting, and my guest is Gary Pzegeo, head of fixed income at CIBC, private Wealth. Gary, welcome and thank you for joining us.
Gary Pzegeo (00:36):
Thank you, Gary. Good to see you.
Gary Siegel (00:39):
Was there anything in the statement or Chair Powell's press conference that surprised you or grabbed your attention?
Gary Pzegeo (00:50):
The Fed meetings are usually an exercise in obfuscation, and I'd say that this meeting was unique in that it's the day after the election and there are certainly some factors that the Fed was not going to talk about and there are a lot of unknowns. So I think the Fed did a good job at hiding behind the language and making statements that could be interpreted a number of different ways. So the hurdle for somebody who follows this stuff on a day-to-day basis is pretty low on being surprised. You change a comma, you change punctuation and people get all worked up, but there wasn't much in the statement that was surprising. I think the one thing change that was made to the statement where the phrasing of confidence and how it related to inflation was removed, that was a little surprising, but I think Paul did a good job at explaining why it was removed and I think he was convincing, the most surprising part of the statement or the press conference was the currentness in the way that he responded to questions about being fired or what Trump's approach might be toward his leadership position.
(02:19):
So I think people are a little caught off guard by that. Typically Powell walks into this press conference, he has a prepared statement, he reads, and then the first question or two is also has a prepared answer. It's either something he's anticipated or something that's been floated by the questioner ahead of time, who knows? But I think he had to know that a question was coming around his leadership and what Trump would want from his Fed chairman, and his answer was one word and he really showed that he wanted to move on from the topic. I think that was a little surprising that he didn't have anything more to say around that topic.
Gary Siegel (02:58):
Some would say that he might've answered, I don't discuss anything political, but he chose to say No, not defer. Exactly, exactly. So I take it you agree that Powell did a good job of saying that the removal of that sentence was related to the fact that they had started cutting because a lot of people have said that have read other things into it. So you didn't read anything into it, you took it at his face value?
Gary Pzegeo (03:36):
I did. I mean at first just seeing the statement, you don't have any other background information, so seeing the statement and seeing what's missing and what's new, that's usually the first exercise in doing any sort of analysis. And so it was a little surprising to see that it wasn't there and certainly you saw certain media outlets bring it up. Then when Paul had the chance to address it, he made it clear that it was a test that was met with first cut. It wasn't something that felt like they were repeating at every meeting or for every cut, and they go through certain language changes over time. And I'm thinking back to maybe it was right after the banking crisis in March of 23 where the Fed added a paragraph that talked about the soundness and safety of the banking system and that's gone now. I don't think anyone's too concerned about that missing from the statement during Covid coming out of Covid, there was a lot of language around the importance of the health of citizens and what it meant for credit and what it meant for the Federal Reserve. And those statements are no longer there either. So it's not unusual to have something in there for a little while and that disappear. I think just because we're one month past that statement appearing and disappearing, it gets a little more attention, but I don't think it's something that we need to be reminded of at every meeting.
Gary Siegel (05:20):
But like you said in your first response, the Fed goes out of its way to be careful about what it says, and so people who watch the Fed look at everything and parse every sentence in every missing word,
Gary Pzegeo (05:36):
Yeah, it's what we do. They only give us that statement once every six weeks or so and we don't have a lot to work with. So any change is heightened.
Gary Siegel (05:49):
So this was the second cut in a row, the first one was a half point and this one was a quarter point. By cutting a half point the first time was the Fed admitting that they were late and that they should have cut earlier?
Gary Pzegeo (06:06):
Yeah, I think you could view it that way and certainly they're sensitive to timing and being ahead of the curve or behind the curve. They took a lot of heat, continued to take heat about the timing of raising rates. So I think they are hypersensitive. You look at the past episodes of Fed easing and this one will stand out as being unique because of that 50 basis point cut. We have had other multiple or large cuts, I guess in other easing cycles, but they've been associated with recessions or financial stress and this one was not. This one was your run of the mill fed that has achieved its goal and is on its path towards normalizing rates. And that's typically done in a gradual fashion doing it with a 50 basis point cut. Yeah, I think you could view that as a Fed that probably felt like they were at risk of repeating a mistake and they certainly didn't want to do that
Gary Siegel (07:20):
And that's why it took some people by surprise because the Fed usually moves in quarter points.
Gary Pzegeo (07:27):
Yeah, it took by definition, I guess everyone buys surprise if you look at what the market was pricing in prior to the meeting, we were squarely between pricing in one and two cuts. So the people who expected one were a little bit surprised and the people who expected two weren't fully priced into the market, so you were going to get at least half of the market upset or caught off guard by that kind of a move.
Gary Siegel (07:59):
Gary, recent economic indicators have showed some strength and inflation is still above 2%. So what is the fed's main intention in cutting rates? Are they trying to start normalization to neutral, spur the economy, take out some insurance, a little each or something else?
Gary Pzegeo (08:21):
Yeah, I think it's all of those things. If you listen to poll yesterday, the starting point's high, the Fed is convinced that we are in restricted territory. So if you did not cut rates, then you run the risk of slowing the economy and they are viewing the potential risks of slow growth or slowing labor force or labor market and the risk of high inflation as being roughly equal. So if you don't cut, you're putting inflation, the inflation risk in play, and if you cut by more than that amount or too quickly, you're putting the risk of unemployment increasing at play. So I think they're trying to accomplish all of those things. It's trying to land the plane softly and to avoid hitting any of the risk areas that their mandate is to avoid.
Gary Siegel (09:33):
The neutral rate is an abstract figure. What's your estimate of the neutral rate?
Gary Pzegeo (09:41):
I could cop out and say it's unmeasurable and unobservable, but I think it is somewhere in that three and a half to 4% area. It's a little higher than what the Fed's estimating. It's roughly in line with where we were pre covid, but it's unobservable and unmeasurable for a reason because it's reliant on a number of other rates. The Fed can move from where they are today down to 3%, and if high yield spreads go to 200 or high yield spreads go to 700, it's going to have very different implications on what that rate means for the economy. So it's relying on financial conditions. And so I think we can sit here today and say we're going to go to three and a half percent, and if it's a soft landing and the Fed is successful in engineering, all of what it sets out to do, the financial markets will be pleased with that.
(10:44):
We won't see much in the way of volatility, whether it be rates or spreads and the cost of capital will be transmitted across the entire economy at that three and a half percent rate environment and that will accomplish what they need to accomplish. But any disruption in those other markets, in those non-ED funds rates, and it has an impact on what that neutral rate has to be. So I think that's part of the reason why you have to be a little cagey about trying to make an estimate on one rate in an economy that has multiple rates and we're in that camp, we look at a Fed funds rate and we make some expectations and build them into models, but it can't stand alone. It doesn't operate in a vacuum. You have to think about all those other rates when you're picking those solar projections.
Gary Siegel (11:38):
So the Fed estimates the neutral rate now like between three and a quarter and three and a half, is that correct?
Gary Pzegeo (11:46):
Yeah, I think if you look at their long-term projection, it's a little below that, but when you listen to the governors, someone like Waller, he will indicate that it's perhaps a little higher and that they're likely on a path. So we don't get an update on that projection until the SEP comes out at the December meeting. I think the last two or maybe in the last three meetings, we've seen that long-term rate projection edge up a little bit, so I'd expect that they're on, in addition to adjusting the overnight rate and changing the policy rate, they're also undergoing a process to normalize how they message that neutral rate as well.
Gary Siegel (12:35):
Gary, will the Fed cut rates below what they think the neutral rate is?
Gary Pzegeo (12:42):
Well, if I were in the Fed or if I were Apollo, I would tell you that it depends on the data and if the unemployment rate continues to push up, if it's currently around 4 1 4 2, if you use rounding or not, their project, the last projection was for 4.4 by the end of this year. So if the unemployment rate is moving up above what they had projected and stays up there throughout next year, I think you're looking at a Fed that has to think about bringing a, at first messaging, a long-term rate that is lower than what we just talked about, and then using policy to get rates into a stimulative position and taking rates down below what the long-term or the secular neutral rate might be. So they will be cyclical in their approach when the cycle dictates, when the data dictates
Gary Siegel (13:42):
The Fed has started its easing policy, believing that inflation is moving towards 2%. Target and Poly yesterday said that they didn't intend to go beyond the 2% target. What happens if inflation reemerges? Now there's talk about how President-elect Trump's policies will spur inflation, the tariffs and other things that he's talked about.
Gary Pzegeo (14:16):
I think that's sort of the flip side of what we said about employment and the economy. If inflation comes in hot, then they have to be above the neutral rate and they have to keep rates in a restrictive territory for longer. So how does that inflation come about? What you were getting at in your question? There's a couple of different ways to get there. One is longer term in nature. Powell talked about the policies of the new administration and not really being able to, it's a little too soon to get them into the economic models of the Fed. And so it's not likely that they'll be dealing with tariff driven inflation, certainly before the December beating or maybe even in the next few meetings. But they've got existing lingering inflation that they need to think about. And the core PCE has been hovering around 2.6 to 2.7 for a few months, and that's a little stickier than I think they were counting on.
(15:28):
We were on a pretty steady down path of inflation in the US and globally, and that speed of deceleration has come way down and I think you have to look at the components of inflation and say, well, are we at risk of stalling here? Do we need to think about this near term risk of inflation right now? And there may be a little of that going on at the Fed. I think you look at the components of inflation, certainly core goods are in deflation and not really a near term concern, but they're not likely to go further negative, so you're not going to get a lot more improvement at the margin from core goods.
(16:15):
Housing has been getting better. If you look at some of the private sector surveys and data, it indicates that we can expect that housing inflation will get a little better. So at the margin that should be contributing to them achieving their goal. But core services X housing or the super core, that has been a little rockier. So we've seen some components there that are driven by wages that may be of a concern, but I think some of the more recent sources of risk in that component of inflation have to do with one-offs in airfares or healthcare. And while this isn't a thing that the Fed really has to be concerned with when it thinks about the tradeoffs between unemployment and inflation, they're getting in the way of inflation getting down to a level that they're targeting. So I think they need to be mindful of these near term risks to inflation and not moving too quickly with their rate reductions and making sure that the overall rate is firmly on its path and it's out of the way. It's not an issue, I guess when we get to three, six months down the road when they need to think about what those policies are and what the longer term risk to are at that point.
Gary Siegel (17:52):
So do you expect the Fed to cut again in December?
Gary Pzegeo (17:57):
Yeah, I think the bar is pretty low for another cut. You listen to Powell yesterday and you look at what's ahead of us here for the next few releases, I think you would have to have some data that was clearly out of line with what the recent experience has been for them to not cut. Again. They think they are restrictive and Powell likes to point to housing market activity, which it hasn't rebounded. We had a little episode not too long ago where mortgage rates got low and we saw a little bit of a pickup in activity, but overall, we're not seeing housing as undergoing a big recovery from the rate driven recession in the housing sector anyway from 2022. So that as a source of restriction, I think is still with us and not likely to go away, and it will lean on the Fed to continue on this path to chip away at that level of restriction while they can. So yeah, I think again, if CPI comes in well above expectations, we get another employment report that is as surprising as the one from two reports ago, then I think they'll have a serious discussion about pausing. But I think absent that, you're looking at another 25 basis point cut.
Gary Siegel (19:25):
And right now, what is your base case for 2025?
Gary Pzegeo (19:31):
Well, I think you're looking at least two to three cuts for next year. A lot of this is up in the air. I think as a result of the election, as a result of the recent data, what we've done is raise the floor on fed funds, target fed funds for 2025, but also expanded the range of potential outcomes. So we were looking at what was likely going to be a lower floor, something closer to 3% prior to the election, prior to the September october data with a pretty high degree of confidence and the data, the election potential for new fiscal policies, the potential impact on monetary policy causes us to bring that floor a little higher and raise the probabilities of some outlier scenarios. So in general, I think a Fed will be more careful and you think about, well, how does this Powell's fed deal with uncertainty in the past? They slow down. I think he's used the metaphor of entering a room and the lights go out, you stop. You don't want to run into the coach or knock something over. So I think we'll hear that from him again in the next three to six months in regards to the developing new fiscal environment.
Gary Siegel (21:01):
So we're getting into the election discussion now. The Fed cut before the election, they cut by half a basis point. Did they front load that because of the election do you think? Or was it more because they felt they were behind the curve?
Gary Pzegeo (21:19):
Yeah, I think it was more what we talked about earlier, being behind the curve, being at a restrictive level, being concerned about where employment is headed at that moment. Fed has been very careful. Powell has been very careful to avoid politics. I don't think he was using that as an opportunity to step back into the political realm.
Gary Siegel (21:46):
Donald Trump in his first term as president, had a contentious, if not worse relationship with Chair Powell and was talking about not nominating him, although he finally did. What is the election of Donald Trump mean for Jerome Powell going forward?
Gary Pzegeo (22:12):
I think a couple of things. First, viewership of the regular Fed Press conferences is going to go way up. People going to pay a lot more attention to the back and forth. I'm not sure they'll be satisfied with what they get, but they'll pay more attention to it. Second, I don't think you're looking at Powell extending beyond 26. I think Paul gets to early 26 and he's done. He moves on to whatever lays ahead for him. And Powell and Trump will provide some interesting back and forth mostly from Trump, maybe not so much from Powell, but I think back to 2016 through 2020, and you can remember all of the volatility and all of the offhand comments and impromptu press conferences. It created a lot of fodder for markets pundits, but in the end, it didn't do a lot for monetary policy. So I think we're looking at a lot of noise and not a lot of signal, a lot of entertainment.
Gary Siegel (23:35):
Well, like I said, Trump originally said he wouldn't nominate Powell, but then changed his mind. It did. Is there a chance that once again he changes mind and Renominate Powell, especially if there's a soft landing?
Gary Pzegeo (23:51):
Yeah, I think if there's a soft landing, Powell will say, mission accomplished and move on. I don't think that he would want to sign up for another round. There are, I'm sure lots of other candidates who Trump may prefer, who may fit a mold that Trump is looking for, especially if he's looking to have more of a say in monetary policy other than Jay Powell. So I think your scenario has a non-zero probability, but I think it's not a lot more than zero. And I think the markets have to come to grips with a new leadership at the Fed sometime in 26, and we'll get to know who those candidates are leading up to it, I'm sure. But for now, I think Paul will be dealing with the issues at hand and we'll have to deal with a new framework, a new leadership at some point in the next year and a half.
Gary Siegel (25:00):
Well, Trump has said that he should be able to influence but not set the federal funds rate. What is his pathway to doing this? Is it through picking the leadership, picking the new governors?
Gary Pzegeo (25:16):
Yeah, I think that's probably the most likely is to find somebody who is sympathetic to that. That's going to be a very difficult path to walk for Trump. I think you will get a lot of market pushback. You'll get some questioning of the independence of the Fed chair and the board, and if markets protest that it could have negative implications for all assets. Risk assets I think are high on Trump's dashboard of how he's doing. So I would look for some market volatility event to try to sway the selection of a Fed share. So that would be the way to do it. But I think the pushback from market in that kind of an event would reduce the likelihood of him being able to do it.
Gary Siegel (26:21):
And again, the Senate has to approve any choices he makes, and even if it's a Republican senate, you don't know if that's going to happen if the candidate is really out there,
Gary Pzegeo (26:33):
Right? I think he's got a little bit of room there, depending on the final here, but not enough room to make a bold pick that fits into a model where he's got, say, over fed policy. So again, I think the likelihood is very low. I wouldn't be surprised to hear a floating of ideas along those lines only to have them shot down by market reaction or by political reaction is possible. But I think market is more likely
Gary Siegel (27:15):
Trump will have the opportunity to name two governors and perhaps a new chair. How much of an impact will this have on monetary policy, if any?
Gary Pzegeo (27:27):
Yeah, it's difficult to say, and it sort of falls into the category of what we just talked about. If you've got a chair who is sympathetic to your view, that certainly gives you more influence. Same is true for governors. You may have more room to do that with governors than you do. You probably have a lot more room to do that with governors than you do with the chair. So I wouldn't be surprised to see selection of governors that are more along the ideological mold of what he's looking to do and who knows what that is. Maybe that is a governor who is more open to using a formulaic approach, or maybe it's something else. I think we'll know more once we have a treasury secretary. I think Trump is not somebody who's going to hide what he's looking for in a fed chair, and we should look for something similar along the lines with the governor's selection.
(28:29):
Now, how much does one or two governors influence overall policy? I don't think it influences a whole lot. I think the choice of the chair is clearly very important. I think we had these same discussions as the Biden administration was installing its choices for Fed governors. And I can't tell you that there has been a big sway over policy from those new governors. I think policy tends to be driven by the facts, by the inflation, by the unemployment rate, by the market reaction, and by the chair who was originally appointed by Trump, by the head of the New York Fed and by maybe one or two key confidence. And I'd throw Waller into that group, and I believe Waller was one of Trump's appointees. So I just don't think one or two governors will make a big difference on policy once you factor in all the regional bank presidents and the mandate that the market will hold you to. So I think it's pretty limited on what you can do there.
Gary Siegel (29:46):
Moving on to another topic, Gary. The two year, 10 year portion of the old curve has inverted. What does that tell you if anything?
Gary Pzegeo (29:58):
Well, that a market is moving closer to functioning the way it normally does. The fed lowest rates. You typically have some curve steepening. I would couch that in saying that the curve and the ability for the curve to tell us anything has been compromised over the last whatever timeframe you want to throw back to the great financial crisis when the Fed started using its balance sheet to purchase longer term treasuries, the signal that we get from the curve is less reliable than it was prior to that. So there's some normal behavior here, but I think the degree of steepening is limited by the fed's ownership, particularly with longer dated maturities. And so we're getting a bit of a noisy signal, I guess is what I would say.
Gary Siegel (31:09):
Just to clarify, are you saying that the yield curve is no longer reliable or just in this case it's no longer reliable to predict a recession?
Gary Pzegeo (31:19):
Well, I think it's less reliable. You can't ignore it. If you looked just at the curve as your leading indicator of recession, you would've been wrong in early 2019 prior to Covid when the curve was flattening and inverting. You would have seen a curve that was materially inverted over the last couple of years for an extended period of time that did not lead to recession or hasn't yet led to recession, and the curve would've been not your best indicator for the future. And so I think we have to look at, well, why is that? I say it's because of fed ownership. It's because of just the degree to which the Fed crowds out, other participants of the market distorts the signal, and therefore we need to look to other things. So if you include other leading indicators into that basket of indicators, you do end up with an outlook that is less recessionary. So the odds of a recession that come from things outside of the yield curve is lower. So the curve stands out. Even though it's back into an upward sloping position, it's still pretty flat. And if you just, as I said before, if you just had an indicator that was based on the curve, it would be pointing you in the wrong direction. So I think you need to be careful given those distortions. You need to look to other indicators and incorporate them into your outlooks.
Gary Siegel (33:11):
Do you expect a soft landing or are you expecting a recession?
Gary Pzegeo (33:17):
Well, I mean, I think we're in the middle of what looks like a soft landing. It looks a lot like the mid 1990s experience in the US economy and the global economy. You could be 12 months away from a recession at any point. There could be something that pops up to throw you off track. But right now we see growth that's slowing but not slow. We see an economy that doesn't have the degree of excesses, particularly in debt leverage that we have seen at the tail end of previous cycles and things that have led to recessions. And we still have the lingering effects of covid stimulus. And so these things lead me to believe that we're in a very long extended period of slowing that doesn't necessarily have to lead to recession because of that lack of excess. Now we see excesses in valuations. There are certainly parts of the economy and the markets that are extended, but it's not corporate balance sheets and it's not individual balance sheets. Yeah, credit card usage has gone up, but it hasn't returned to the trend of what we saw pre covid. So there are lots of indicators out there that give us some confidence that growth can remain down around here in the low twos, high ones, and the Fed can keep rates or migrate rates towards something that's more neutral, less restrictive, and things can balance out here over the next six to 12 months without a recession.
Gary Siegel (35:16):
Are you expecting stagflation in any way?
Gary Pzegeo (35:21):
No. I think that we talked a little bit earlier about inflation. I think you could six to 12 months down the road, if the policies come into play that lead you towards higher inflation that way on it isolates you economically and lead to a lower potential output, then you may be tilting back towards some area of stagflation. But what we see on the ground right now is not stagflationary. It's something that's normalizing, something that's moving out of hyperinflation or excessive inflation and settling into a good level of potential growth here in the US or a level of growth that's in line with potential growth, I should say in the us, not something that's unusually low.
Gary Siegel (36:12):
Gary, the pandemic? Well before the pandemic, it was difficult to forecast the economy and the pandemic just made it more difficult. Has it gotten any easier to forecast the economy in recent years after the pandemic?
Gary Pzegeo (36:28):
Wow, that's tough. It has been. Let's go back to what I said earlier. You look at the yield curve. The yield curve is a great predictor, had a great track record of predicting recession. It's not so great anymore. So what else do we look at? Well, let's think about the leading indicators they were predicting. Recession didn't work out that way. So the old line indicators, the things that were reliable inputs to your model, your economic models are less reliable in part because of covid, in part because of the structural changes that have taken place. You've had to find new ones. And once you step into those new areas, once you figure out what is driving future expectations, it becomes a little easier. So we've had a period here of stability. We've come out of covid, we're now several years out. We're seeing some return to trend in things like real incomes and areas of employment.
(37:42):
So some of those old line indicators, while they're a little sed, they're not as clear. Some components of them are increasing in their reliability. So I think we're past the worst in dealing with the messiness of the data. We're not out of the woods yet. I'm thinking about the labor data in particular, but things are getting better. The labor data and survey data in general, think about what we just went through here with the election and the reliability of polls. A lot of the same things are going on with the collection of data response rates. We hear a lot about that. But seasonal adjustments are distorted or had been distorted. I think they're getting a little better, but had made it difficult for a while to rely on some of the data series, and particularly when you get into the area of making changes to those adjustments. So getting better, I guess is the short answer, but not completely clear.
Gary Siegel (38:48):
Okay, fair enough. So when asked yesterday, chair Powell said he was concerned about geopolitical risks. What do you see as the biggest risks to the economy?
Gary Pzegeo (39:03):
Well, I mean, those are certainly large ones geopolitics, and we've got a lot of events going on. So it could be the Middle East, it could be Ukraine, it could be China. I think those would be very high up on the list, particularly China. Trump and the new administration will continue some hard line policies with trade, and I think that could lead to some volatility down the road, whether it be economic or military. And I don't think much of that is priced into markets. I think the market has gotten very good with dealing with the internal macro risks and pricing in some volatility there. But the geopolitical events always seem to be surprises as much as we talk about them. They tend to drive a lot of volatility when you get some realization of those risks.
Gary Siegel (40:11):
So what does all this mean for the bond market?
Gary Pzegeo (40:17):
Well, I mean, we've had a lot of volatility in the bond market. We had a record increase or historic increase in rates at the front end. We've talked about the impact on curves. It caused a lot of distortion, a lot of pain for owners of fixed income securities for a little while. But it created value. And it's happened at a time when the risk premium in equities has gone negative. If you look at the s and p, so we're looking at entering an environment here of greater uncertainty and with a relative value between those two big asset classes. That has shifted quite a bit over the last couple of years. So I think it's a time of opportunity. It's a time when you get some repositioning of portfolios to take a little bit of risk off the table to go into areas where perhaps relative value is a little better.
(41:17):
And I think it sets up for a pretty good environment for the rates market. Now, we talked about the rates market not being the only market. You have to think about financial conditions and spreads. Corporate bond spreads, municipal bonds, and the conditions in those riskier markets mirrors more or less with what we see in equities. The risk premium is very low. So I think you need to be careful about where you place your risk in bonds. If you do make that decision where it's the time to reposition portfolios and take advantage of some relative value shifts, that's one thing. But be careful where you do it. We're not saying that there's likely to emerge a big risk on corporate balance sheets or on credit risk in general, but the pricing of that risk is a little expensive. So I think you need some exposure there, but you need to be careful. So that's what we're talking to clients about. That's where we think money tends to migrate here. Over the next intermediate term, we'll say,
Gary Siegel (42:28):
What questions are you getting from clients? What are they worried about?
Gary Pzegeo (42:33):
The deficit? It's a big topic. It wasn't reflected in the polling leading up to the election, and maybe that's because there were bigger issues on people's minds, but the mind of the investor is concerned about government spending. They're concerned about the deficit, the implications. We're having lots of conversations around what the likely pass forward might be, given some of the potential policies. And given what's already on the table, we've had a big expansion of the deficit through an expansion in the economy. That's unusual. So we're starting at a very unusual spot and moving into some new policies that may take us to an even more unusual spot. So it's raising some concern and it's taking a lot of our client conversations, FaceTime with those clients.
Gary Siegel (43:42):
Well, that's all the time we have. I'd like to thank my guest, Gary Pzegeo, head of fixed income at CIBC Private Wealth, and I'd like to thank everyone who tuned in to listen to us today. Thank you and have a good afternoon.
