Lead-Lag Live

Why the Fed Will Be Forced to Cut | Jay Hatfield’s 2025 Market Outlook

• Michael A. Gayed, CFA

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In this exclusive webinar hosted by Michael Gayed of Lead-Lag Media, Jay Hatfield from Infrastructure Capital shares his market outlook for 2025 — including why he believes the Fed will have to cut rates, why housing hasn’t crashed, and why the next market move could surprise to the upside.

Jay breaks down:

  • Why the Fed has caused nearly every post-WWII recession
  • How inflation is finally cooling (and why CPI is misleading)
  • The real reason the U.S. avoided a recession in 2024
  • His S&P 500 target of 7,000 for 2025
  • Bullish takes on housing, tech, small caps, and preferreds
  • Why regional banks and credit fears are overblown
  • His contrarian forecast for the U.S. dollar and Treasury yields

Lead-Lag Live brings you inside conversations with the financial thinkers who shape markets. Subscribe for interviews that go deeper than the noise.

#Markets #Investing #FederalReserve #InterestRates #JayHatfield #MichaelGayed #InfrastructureCapital #StockMarketOutlook

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SPEAKER_01:

Uh do me a favor and uh you know just tell other people that this webinar is happening. Uh Jay and uh is always very insightful when it comes to markets, a lot to talk about uh that he's gonna go over uh as far as the macro front, as well as also obviously on the infrastructure capital side of things, their funds. Uh for those that are here for the CE credits, uh I promise you I will email you. I promise you I'll get your information. Just stick to the end of the presentation. Uh, I'll get it from you of the CFP board. If you have any questions, type it in the Q ⁇ A or in the chat. We'll do it during the end, make this as interactive as possible. My name is Michael Gaiad. Thank you for attending this webinar, sponsored by Infrastructure Capital. Uh, the man of the uh 45 minutes rough hour, Mr. Jay Hatfield.

SPEAKER_00:

Great. And so this is always a good start because this is definitely not the view from our office in midtown. So that's the reason. Hopefully, um you can go visit this office. I don't know where it is, but we were in midtown then at, but that's not our view. And just um just a quick overview of our firm. We have three fixed income strategies. BMDS is a high-yield bond fund, PFFA is preferred stock fund, BFFR is a REIT preferred stock fund index fund. Uh PFFA is low leverage, about 20%. BMDS and PFFR are unlevered. And then we have three equity income strategies, AMZA is pipelines, uh, tax advantaged, ICAP, large cap dividend stocks, right individual calls. Uh with all three of these funds, we use our GARP methodology to come up with a relative valuation matrix. And that's what we what informs our purchases and our sales as well. And SCAP, we have um profitable companies. We screen for profitable companies, of course, we always do, but if you buy the IWM, you get a lot of unprofitable profitable companies. And we do write a small amount of index calls. We write index calls with small caps because small caps tend to skyrocket, they can get acquired. And so it's better to not cap your upside. Whereas large caps typically go up some, but they don't usually get acquired because they're just our average capitalization and I caps over 100 billion. So it's okay to give up some short-term upside. And then you can see all of our funds have substantial SEC yields. So this is the actual cash coming in. We do enhance these with option writings, writing, uh, not with PFFA, but with the equity income funds. We have a unique take on the economy, which has been uh quite accurate historically. And the reason for that is that we look at the monetary base as a leading indicator, um, which is the simplest way to measure the money supply. And the reasons that that's critical is the Fed has caused 13 out of 14 post-World War II recessions. But the only exception to that was the pandemic. So that was caused not by the Fed, but the federal government shutting down the economy. So really, the Fed has caused every post-World War II recession. And they do that by restricting the money supply, raising rates, which in 12 out of 13 recessions caused a housing recession. The exception was a 2001 recession. That was a tech bust. So all recessions come from investment declines and typically housing investment declines. So you might say, well, we have had a housing investment decline. We have a slide on that later. So you might ask, well, why have we haven't we had a recession? And we'll get into that, but it's really the fourth bullet here, fifth bullet, I guess. Um, and I did try to talk about this a little quickly on TV a few minutes ago. But that if you look at a chart we have later, the housing sector used to be way more boom and so therefore way more bust. But post of great financial crisis, we haven't had those booms. So when it comes off the boom, there's less layoffs. The economy slows, but it doesn't plummet. And in this case, also, we have this tremendous, not just spending on tech, but also tech infrastructure. So data centers, but more importantly, electricity generation. So it's a much the tech side is holding up the real economy, the real economy or old economy, really, construction and housing slowing. So you have that dichotomy. So that's why it's critical. The Fed does cut. Thankfully, there's still four cuts priced in over the next year. We think Powell really signaled he wasn't gonna cut in December, unfortunately. But we're gonna have a new Fed share that's going to be installed not as Fed share, but probably on the Fed as early as March. So you're gonna have not even just a shadow Fed share, you're really gonna have two. So we think it's gonna be more controversial to not cut rates. But even more importantly, this is the critical new data. We're gonna put a note out on this. If you looked at the CPI report on Friday was super bullish, and the reason for that is this stubborn and miscalculated owner's equivalent rent finally declined to 0.1%, so that annualized to 1.2 versus the year over year at four over four. And so this is the core of our CPI R, the fourth bullet versus U. So we use real-time rents, but finally U is going to gravitate uh towards R. So in other words, the lagging poorly calculated BLS measure is going to go to our measure. So we're forecasting PC core, even as reported by the BLS, who's has a terrible methodology, will decline to two by the end of next year. So no matter, even if there isn't a regime change, there will be. But even if there weren't, even this incompetent Fed would figure out they needed a cut because employment's weakening and inflation is declining, particularly if you ignore tariffs as you should. Um, then the other macro point that you won't hear anywhere else is actually we're bullish on the budget deficit declining. Two reasons. First of all, the OBBA don't listen to anything here on the news. It's mostly political talking points from both sides. So we're not political, we're we belong to the greed is good party. But there was a ton of reporting, unchallenged, that it was a budget buster and that it was a huge tax cut for the rich. But that's like reporting on the news eight years ago. So that was true of the 2017 bill, but not true of the OBBA. The OBBA was mildly budget restrictive because there were cuts in IRA, you know, the um CHIPS Act and the subsidies for uh renewable energy. And there was cutbacks in Medicaid eligibility, not Medicaid, but eligibility. So that offset the tax cuts to the middle class from that was structured as reductions in tipped wage taxes and overtime. So totally misreported. So that's a little bit positive for the budget, not that positive, but what's really, really positive, and the CBO does not include, is the$400 billion in tariffs. So we're forecasting the budget deficit drops from$1.8 trillion, which was better than the CBO forecast, because again, they ignore our tariffs, to$1.45 trillion. That's only 4.5% of GDP. That's sustainable because GDP normally grows at 5%. So when you hear about this dire fiscal situation, that's a little bit of old news, not great fiscal situation, but it's sustainable because of the tariffs. And hopefully we slowly increase those tariffs and reduce the budget deficit. Um, and so um we are optimistic, though, that because the the um futures market is still pricing four cuts in, it might be delayed. That means the 10-year will stay around four, 30-year mortgage rent six, and housing should at least stabilize, or if not recover. So if you want to predict the economy, look at the Fed money supply and housing. If you did that, if you do that, you always will be ahead of the curve. And if the Fed did that, then they would have started tightening about a year earlier. Because when housing prices went up 20% year over year, like they did in the first quarter of 2021, they should have known that was going to translate into rent inflation because they're highly correlated. But they follow this delayed index. So it was delayed both on the way up and the way down. So if you just follow those indicators, you don't need to listen to us. You can create your own economic research, but it's extremely effective. I did my master's thesis at Warden on on it. It's very statistically critical. And Keynesianism does not work for predicting the economy. Um, in terms of what's the implications of this, we're bullish in the stock market. We raised our target to 7,000. Looks like mostly most of the risks are to the upside on that target. I will say that earnings season's about to end or the bulk of it. So we might have a little pullback. So, you know, market's a little weak today. So that's normal, but that doesn't mean that the target is 7,000. It's not relevant. And on the other hand, too, it does, if if we're right about that 7,000 target, it means the market probably will stall out or pull back a little. But it's not necessarily time to get out because we still think we're going to be 7,700 next year. And both of those targets are 23 times the following year's earnings. So it's very obvious, but some people don't do this. So if you have an end of 25 target, you use 26 SP earnings, and for the which is 305. And the 27 SP earnings is 335. So we're not expecting an expansion in the multiple. We think 23 is sustainable. Um, a critical point about that 23 times, you might say, well, the average is 18 over the last 30 years. But what that ignores is that uh corporate tax reduction from it was a gigantic deduction reduction, 35 to 21. That expanded in our models, expanded the sustainable multiple by four points. So that 18 became 22. So 23, at least when rates are low, is reasonable, and particularly when you're getting fast earnings growth from AI. So we think the targets are um very achievable. Risk mostly the upside. We've been extraordinarily accurate in our targets really since we ramped up our PR activities in 21. So I wouldn't ignore our targets. They worked perfectly, really, the last two years. And if you want to be in fixed income, high yield is going to do well. So PFFA, which is high yield preferred, high yield bonds like BNDS. You don't want to be in investment grade like B D, whose ticker we arbitrage by adding an S to. That's a Vanguard fund yields four. That's likely to be very flattish over the next couple of years because they don't have spread, spread tightens when the stock market's up. So be in higher risk stocks, uh, financials, industrials, tech, and higher risk fixed income, high yield bonds, and preferred. And then we talked about a lot of this. The easy way to predict the 10-year is first of all, you have to get the terminal rate on the Fed funds rate. We're estimating 275, as is the futures market. That's the normal rate. That's 75 basis points over inflation. If you measure inflation properly, which we do on our website, CP, actually PCE-R. So we correct the shelter component to market to market for real-time data. We're at two. So the neutral rate on the Fed funds is uh 275. Normally the tenure trade's 100 over that. That's 375. So don't get confused. Don't focus too much on the budget deficit, although that is a bit of a tailwind in our models. And a lot of, you know, um super bears commentary, like, oh, the debts is unsustainable. We're gonna go to rates are gonna go to infinity. It's not the key driver of rates. Key driver of rates is Fed funds, Fed policy. So we're likely to have the 375 tenure that supports 23 times. Um this point here, four, fourth point. So it's you know, you 70% correlated uh if you want to predict interest rates to the terminal rate. So that's if that's really all you need to know. And in fact, we're a little bit short-term bullish on the tenure because it's actually gapped out to about 130 over the uh Fed fund expected Fed funds rate. So it's a little bit high, it should be closer to 100. So you might see the 10-year, well, either the terminal Fed funds rate will come up or the tenure will drop. Um and we, you know, mentioned that we'd prefer to be further out on the risk curve. This is a great chart. You might say, well, why didn't we have recession? The Fed is has tightened rates 15 times since World War II, 13 times we had a recession. Why didn't we have recession this time? We talked about already we do have a tech them, but also see that these peaks in the housing sector used to be way higher. And keep in mind that this isn't adjusted for population. So um we used to top out at well over 2 million, you know, almost 2.5, 2.3 million, like before the great financial crisis. And then when you have this precipitous drop, then you have tremendous layoffs. People who are laid off do not consume. So investment leads the recession, but then consumption drops. But in this case, we capped out in this cycle, first of all, we had really low home building for a long time. And so we have a shortage of homes. So that stabilized the market, and then we're dropping from a much lower level, so there's less, fewer layoffs. And then the AI, boom, also absorbs some labor. So that's really the explanation why we didn't have recession. But it does require the Fed to stay on track. It doesn't have to be this Fed, it could be the next Fed with a new Fed share on track for cutting that's to keep the 10-year somewhere near four and the 30-year mortgage around six, and have the housing market at least stabilize, if not grow. And we are bullish on the economy. We think we're gonna have a 3% growth rate because we do think construction and housing will start to come out of recession, be growing year over year on investment, plus you'll have continued tech spending. So we're bullish on the economy, really focused on housing. That's one of the two key indicators, the Fed, money supply, which is what the Fed controls, and then the quote rates, and then the housing sector. This is a fantastic chart. I get excited about charts, unlike most people. But you can see this graphically, and we made this actually readable, which was nice, that uh this is year over year, this last 12-month number here. And then you can see that the two old economy sectors, structures, and residential are in recession. But IP, which is obviously software and then equipment, a lot of that's tech equipment. So it's electrical equipment, for tech. That's kept um investment positive over the last year. They have to ignore inventories because they're moving all over the place uh because of tariffs. But that positive investment kept the economy growing but slowly. And um employment's slowing because these very employment uh intensive sectors like structures and residential are in recession, so there's less employment there. If you didn't believe me that investment drives cycles, here's every cycle since World War II. You can see that on average, there's no decline in consumption. There is some that occurs, like I said, after layoffs. But, you know, like in 1949, actually consumption went up, 23% decline in investment. So investment's only 20%. Everybody says, oh well, consumption's 66%, so that's what's going to cause uh recessions, but consumers consume, they're like wood chucks who chuck wood. So low-income consumers have to consume to survive. High income consumers want to spend because they have high income. So consumption is really stable, but investments not. Um, you can see overall we had a very shallow recession in 20 um because that was just a quick um you know pandemic recession. This is just the same data, but you can see that preceding every recession, you had a dramatic drop in investment. Um watch our CPI-R versus U, because R, so in other words, our our real-time calculation leads CPI. So that's why we're bullish that even the reported number will go to two, because it's finally being reflected that shelter costs, owners' equivalent rent in particular, are declining. So the this Fed has no ability to forecast. We do, and we're forecasting goods of two. So either this Fed or new Fed with a new Fed share will cut rates, which is super bullish for the market. This is just a graph that shows what we were asserting, which is the 10-year typically trades a little bit over 1%, 1.05 over the Fed fund rate, Fed funds rate. And when the yield curve is inverted, it'll trade over the terminal rate. So that's why 277 right now is the terminal rate. 105, that's like 187, the 10 years, a little bit above that right now. So possibly we'll get a little better rally in the 10 year. And just another graph that shows the essentially the same data. The 10 years of about 1% over the um Fed funds rate. Um, watts the money supply. If you did that, unlike the Fed, you would have assumed we'd have near hyperinflation. We didn't have that, but we had double-digit inflation. Um, and in fact, the uh monetarism, we had the perfect experiment uh to test monetarism. It worked absolutely perfectly. 60%. So this net increase in the money supply is 60%. And uh nominal GDP grew at 38%. Uh and Milton Friedman's theorem that excessive monetary growth above nominal GDP produces inflation worked absolutely perfectly. 22%. So he would be dancing in the streets right now because we kind of had this uh unfortunately a perfect experiment where we massively jacked up the money supply. The uh quantity theory of money worked perfectly. And Keynesian completely blew up. They came, the Keynesians came up with this transitory theory of inflation, was totally wrong. And then just some details, more almost disclosure about our funds. Uh uh PFFA is our preferred stock fund, uh, yields over nine SEC yield basis, which is the good way to evaluate, particularly fixed income. Um we um are constantly managing three risk, interest rate risk, uh, credit risk, and call risk. And we're taking advantage of the fact that this is an active fund, index funds uh don't uh care whether security is trading above par. They just mechanically keep buying it because if they have inflows and they can't participate in new issues, and they're rebalancing every month, and they sell do the opposite of what they should do. They're cap weighted, so they buy more of what's up, sell what's down. That's normally the exact wrong thing to do. We take advantage of that. So you can see that PFFA has a very strong track record versus the index and also just provides kids stable income. Um, and these are again, these are almost more um disclosure, BNDS, high yield bonds. We do look just like we do with PFFA for situations where the rating agencies are negative on a credit, but we think it's a great credit. So Plains All-Americans is a good example. Rating agencies hate pipelines, particularly ones that pay dividends because they do a forecast, they don't d-lever. They ignore the fact you have great assets. The company has financial flexibility, they can reduce their dividend. It's great for the preferreds and the bonds. In this case, they're bonds, but so BNDS has a good track record as well since we launched it relative to the high yield index. Uh MLPs have become a great asset class. They're challenged during the pandemic, obviously, but super stable, better capital structures, and they used to have great tax characteristics. With PFFA, you get, I'm sorry, MCA, you get a 1099, so no K1s, so way cleaner tax reporting. And in this fund, there's likely tailwinds to our distribution because it does borrow money. Our cost of borrowing is dropping. Uh ICAP's our large cap dividend fund. And that's reflected in the returns and also good income. As Cappy mentioned, screening for profitable companies, writing small amount of index calls, uh, not enough to cap the upside. Uh, and also it's one of the few ways to generate income from small caps. And then we just have disclosures. So, with that, Michael, I would open it up, see if there's any questions.

SPEAKER_01:

Yeah, and and again, folks, for those that want to ask questions, you can uh put it in the QA. I see a couple of people have asked here. Uh obtain a copy of the slide presentation. I'm gonna try to make this an edited uh uh webinar on the Lead Lag Media YouTube channel. I'll put a blast out about that. Uh Mike here asking about PFFA tax consequences.

SPEAKER_00:

Yeah, so the the important thing about preferreds is the word preferred stock. So stocks can and do benefit from the same tax characteristics as common stock. So if you own any REITs, you know you get a 199A deduction. That's an equalization between pass-through and corporate taxation. Surprisingly, but fantastically, preferreds also get that deduction. Uh they also preferreds benefit if there's excess tax depreciation. And then also to the extent they're not cumulative, which isn't great from a credit perspective, but it's usually really high-quality financials, you get QDI. So your effective tax rate changes every year, but it's probably going to be low 20s, you know, assuming you have a 40% notional tax rate. So it is quite tax-advantaged. And I would contrast that the BNDS, which you should assume you get a few preferred in there, but assume basically that your taxable income is equal to your income. So unlike, so your effective tax rate would be 40 on bonds. So it's more attractive to hold that in your IRA where you don't pay tax.

SPEAKER_01:

I don't think you and I have talked about this, Jay, but I'm curious to get your take on um what's going on with regional banks uh the last several weeks. So there's been a little bit of a scare around private credit. Um, any any thoughts there?

SPEAKER_00:

We think it's overdone. The we would be nervous about credit if it was early 2022. So clearly you should be nervous going into a tightening cycle. There's a little bit of weakness in the auto sector. There's definitely a big story in your uh sorry, Wall Street Journal. There's definitely more repossessions happening. Low-income consumers pressured. You're seeing that uh from reports from Chipotle um saying that. But that's a very, very small part of the credit uh capital market. So we're actually bullish on regional banks. We think when the Fed cuts go upward sloping yield curve, which is better for regional banks as opposed to money center banks are usually fully hedged. Regional banks usually aren't. And we don't think credits can be a problem. Although, having said that, we think the real way to play, if you agree with us that we're not heading into a credit crisis, which, like I said, would be very unusual when we're in an easing cycle, uh, we would recommend like our largest holding in ICAP, which is KKR, because there's a lot of fears around credit. They have relatively small private credit or asset-backed credit, about 10%, a lot of private equity that benefit from a booming stock market, very depressed stock price, great franchise, great brand, gonna benefit from realizations if the stock market continues to be strong. So rather than going into, you know, the blast of go one step away. Something is down, even if there are credit problems, it's not their money because they're managing other people's money. They have a little bit invested. So we think that's an easy opportunity. Um, do you have to be patient? You know, every other day people sell them off because of these credit fears, but we think there's little evidence. If you really listen to what the bank said, not Jamie Diamond, who's always usually wrong, but what the bank, other bankers say, everything's fine with credit. Um, few spot issues like there always is. So we're bullish on financials. Uh, we were bullish on Goldman and Morgan, Stanley. Those are up like 100% since we started recommending them. So now you have to be patient, but we think KKR is in that same situation where you're not really taking them at risk because you're getting these great franchises, but they're out of favor and likely to at least over the next year or two become back in favor and trade up dramatically.

SPEAKER_01:

Let's talk about uh small caps for a second here. Um obviously SCAP has done quite well, and small caps are an area that I often focus on, at least on social media, but there seems to be somewhat of a stopping of momentum. Um any thoughts on what's maybe happening, at least kind of short term here? And should we expect any kind of year-end rally in small caps, or at least outperformance in small caps? I guess.

SPEAKER_00:

So there's normally when the Fed cuts rates, so that's risk on. And small caps are clearly riskier than large caps and riskier than and you know, tech stocks have, at least over the last three years, been very defensive, strangely. So they did start to rally, but the problem really, and it's not happening today, is that tech is taking the oxygen out of the room. So it's competing for capital with non-tech stocks, and small caps have only about 10%, particularly the value index exposure to tech, whereas ecoided SPs is 17, and of course the SP is closer to 50 if you properly measure it. Because Amazon, you know, is technically consumer cyclical, but it's really tech stock. So um, that's really what's happening is the oxygen is coming out of the room. But we think that tech is getting pretty fully valued. Our models show it's not. In a bubble, but companies like Brockom are close to our target, and video is getting closer to our target. And so, like on days like today, it's not up, but earlier in the day it was. But the Russell 2000 is outperforming. So we think it's better to be not just all in tech. And we do think it's going to be an everything rally. So being in large cap dividend stocks like ICAP or SCAP, we think will pay off. You just have to be aware, like if there's some big super positive tech announcement that, you know, it's going to underperform the market, but it's a good hedge, like days like today, where you've got Facebook falling up and Microsoft Week, then you're going to outperform by having a broader-based um portfolio. And small caps are super cheap, have great growth opportunities get acquired, uh, usually do well, at least the ones we're in when they report earnings. So good long-term investment. But just be aware that, you know, on certain days, if tech's booming, then the equal weighted SP would be down, small caps will be down, and large cap dividend stocks will be down.

SPEAKER_01:

You often hear this term um markets are priced to perfection, right? So earnings come out and some of these companies, you know, gap down. We saw that with Meta, obviously. Uh yes, say you mentioned Chipotle, that's obviously a weaker company dynamic. But um how are earnings and and more importantly, how are the how's the reaction looking at you? Um the way things are coming up.

SPEAKER_00:

It's not very surprising. The companies are beating consensus, but not necessarily beating the whisper number. And then, well, in the case of Facebook, it's really guidance. But to your point, these companies, we don't think they're you know bubbles, but they're fully valued, so they can't really afford to disappoint. Whereas the rest of the market, like if you pick KKR, um, they're gonna report next week. Maybe they'll sell off just because everybody hates the financials right now, particularly anything related to credit. But the expectations are really low. So even if they did slightly miss, they could very well trade up. So like Amazon's pointing tonight, maybe they miss, but the stocks only up 3%, the market's up, excuse me, over 20. NASDAQ is leased. So there you have a better risk reward. So it's pretty obvious. If you have big runs in stocks, then going into the print could be more risky than reward. And so that's one reason we think it does make sense to have a broader base portfolio where everything's not priced for protection for perfection, and you have a better risk reward going into earnings.

SPEAKER_01:

And for the last uh question here on mine, again, folks, if you want to ask questions, click on that QA. I'm happy to bring it up. But uh, let's talk about active versus passive for the rest of the year and then into next year. I saw some chart that showed the uh the differential between high beta and low beta stocks on the large cap SMP side is like historic in terms of the last six-month differential. Um what's the outlook on active versus passive going forward here?

SPEAKER_00:

Well, the the first kind of obvious point is you absolutely need active with fixed income because you have to manage these somewhat obscure risks that don't exist with equity. So call risk, credit risk, interest rate risk. So absolutely critical for fixed income. Yeah, it's PMDS and PFFA for our funds. Equity is more ambiguous because sometimes momentum is the most important factor. So in effect, index funds are momentum funds because they're cap weighted. So they buy more whatever's going up. So sometimes that works. If we do have more of a rotation, um, and we also we do position our funds for our view in the market. So ICAP's done really well this year, but partly because we positioned it in financials and a little bit of tech, not nearly what the equalated SP has, a little bit of tech, but more risk-averse tech and industrials. So we think that active management, if it's properly implemented and then writing these short-term calls is a huge advantage, um, can beat, but just be aware that it's more of a fair battle because of this momentum cap weighting factor working in some markets, like you mentioned this year, really being in the stocks that move the most. So they have higher market caps. So index funds have done fine this year for that reason.

SPEAKER_01:

Uh again, folks, if you're here for the C Credits, I will email you uh by end of day. Get your uh information to submit to the CFP board. Uh as always, I appreciate the support for those that are attending here. Jay, take it away with any uh final thoughts here and we'll wrap up.

SPEAKER_00:

No, I wouldn't be too concerned. You know, we were predicting that the Fed doesn't cut in December, but just keep looking at the expected one-year number, where the 10-year is, where the 30-year mortgage is. Uh, we think those will be relatively stable. And that we're really set up for a great market where you have a at least gradually easing Fed, great tech dynamics, potential for rotation. So don't be scared out of the market. We might have a little pullback, post-earnings, which we're getting close to because tech earnings is really the bulk of earnings. But I wouldn't panic and sell everything. It's probably not going to be a tradable route or tradable pullback. And so just stay invested. That's the best long-term strategy.

SPEAKER_01:

Well, okay. These are more about the CP, but there's one question from Sherry. Let's address this real quick. Any any thoughts on the dollar uh here?

SPEAKER_00:

We have a unique view on the dollar. There was kind of a notion that the US is going to hell in a handbasket and the dollar was super weak and we're losing reserve currency status. And we view it completely differently. If you look at the uh 25-year average, the dollar index is about 95. Over the last 10 years, it's right where we are now, around 98. Really, what happened is people got super bold up about the dollar when it became clear that uh Trump was going to become president. And we think that was kind of irrational. Like there's a notion there's gonna break the budget, rates are gonna go to infinity, and the dollar would be ultra strong. So it's kind of the opposite where tariffs are reducing the budget deficit, uh, the Fed's cutting. But so we think the dollar is gonna stabilize here where it's always been or where it's historically been. Uh, the U.S. is not gonna lose its reserve currency status. In fact, it's stronger than it has been because this revenue from tariffs is gonna fix at least the worst of our budget problems. So we're not bullish on a dollar, but kind of neutral on the dollar, um, which would be fine for investing in other asset classes. Means gold maybe will lose a little momentum because a weak dollar is good for gold.

SPEAKER_01:

And stay paying attention to Jay Hatfield Infrastructure Capital. Thanks everybody for attending, and we'll see you on the next webinar. Thank you, Jay.

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Michael A. Gayed, CFA

Host