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00:00 Speaker A
Let’s talk about some of your predictions for 2026. It is an election year, so, uh, guess what, that’s midterms. Could see some volatility there. What do you think’s going to happen?
00:08 Speaker B
I think we are going to see volatility and confusion the way that you and and chaos the way that you identified in the opening. Look, it the the whole house is up for for bargains, right? So all 435 seats are up to be re-elected. So that’s going to cause some confusion. Uh I think the expectation is that the Democrats are going to retake the house, but yet the Republicans are expected to maintain control of the Senate and we have a Republican president, so therefore we’re going to have gridlock. Guess what? The market actually loves gridlock. Why?
00:33 Speaker A
It’s predictable. Nothing happens.
00:34 Speaker B
That’s right, it’s predictable because nothing happens. You can’t go too far left, you can’t go too far right, right? Everything stays in the middle and the market likes that. But remember, the market can can function no matter what happens. It just wants to know what’s happening. It’s that lack of clarity in the first nine months of the year that’s going to cause that confusion until it becomes clearer on who the candidates are, who’s the actual winner, what does that now mean? And then the market can uh adjust. Look, you may not like the result, but the fact is the market can deal with it.
01:05 Speaker A
All right. Got to get your take on what the Fed is going to do. Um, we don’t quite know what the Fed is doing in December, but just big picture, next year, are we going to get more rate cuts?
01:13 Speaker B
So, I’m first of all in the camp that we shouldn’t have any rate cuts right now. So while I expect they’re going to cut them in December, uh I’m in the camp that we could leave them right where they are. Now, I think the first uh half of the year, I think we see the Fed just remain patient and they want to wait to see how some of this chaos unfolds. Now,
01:37 Speaker B
if the data, if the macro data starts to get really weak, if the labor market starts to honestly get really weak, then I would say, yes, the Fed will cut. But I don’t see that yet. I don’t see real, real weakness in the labor market. I see it ticking up a tiny bit, but not enough for me yet to demand that they continue to cut rates. Remember, we’re already down 150 basis points from where we were, right? We’re going to be back at, you know, by by after the Fed mee- after the December meeting, we’re going to be in the 3 and a half, 3 75 range on the Fed funds rate. That’s actually historically normal. That’s not necessarily restrictive. It’s not overly stimulative, which is why I think at that point, what’s going to be interesting is what J. Powell says at the meeting. It’s not going to be about whether we get the cut or not. We’re going to get the cut. It’s going to be like anything, it’s the forward guidance. What’s he saying about the next six months? What’s he saying about the mindset of the Fed?
02:18 Speaker A
That’s right.
02:19 Speaker A
Let’s uh we got a minute or two to go. Let’s bring it back to risk management. Any other thoughts that you would give to traders, investors heading into the new year?
02:29 Speaker B
No, I think you know, it’s always about not being emotional, right? Is that trying to trying to build a portfolio, understand your risks, build your risks, and then don’t make emotional decisions. If the market backs off, and I fully expect that we’re going to see the market back off. Remember, it’s a mid-term election year. Don’t be surprised if we’re down 10 or 15%. You should know that going in. So you should build your portfolio with that expectation that we’re potentially going to see that. That should allow you to then not get emotional if that happens and to be able to take advantage of uh of the pullback in the market.
03:07 Speaker A
Yes, and I think people should exercise patience for that because the market will come to you. And uh also my recommendation, always have a written plan. Write down your thoughts, why you’re doing stuff because that’s important.
03:22 Speaker B
That’s right. And you can always go back and refer to them. And and kind of it reminds yourself if you have the written plan, right? It kind of settles you down if you go back and you look at it and you understand your reasoning in the middle of all this chaos.