B (3:46)

So I would say the clearest catalyst is the impending decision from the Supreme Court on the legality of the IPA tariffs. I think on that front, there are really two things to watch. The first is what President Trump does in response. Right now there's an expectation that he will just replace the tariffs with other existing authorities, which I think probably should still be our base case. There's obviously a growing possibility, we think that he actually takes a lighter touch on tariffs, given the concerns around affordability. And then the second thing I would say is on the refunds piece. So if the Supreme Court does in fact say that the treasury has to pay back the tariff revenue that it's collected, we've investigated some different scenarios, what that could look like. And in short, we think it's going to be dragged out over a long time period, probably six months at a minimum. And a lot of this will come down to the implementation and what specifically treasury and cbp, its Customs and Border Protection, sets up to get that money back out to companies. The second catalyst on the trade front is really the USMCA review. So this is an important topic because it matters a lot for the nearshoring narrative. For the trade relationship that the US has with Mexico and Canada. And there are a number of sectors that come into scope. Obviously, autos is the clearest impact. So that's something that's going to happen by the middle of next year. But early in January, the USTR has to give his evaluation of the effectiveness of the USMCA to Congress. I think at that point we're going to start to see headlines, we're going to start to see lawmakers engage more publicly with this topic. And again, a lot at stake in terms of North American supply chains. So that's going to be a really interesting development to keep an eye on next year, too.

A (5:16)

So what about things that Congress might do? Recently the president and Democrats have been talking about the concept of affordability in the wake of some of the off cycle elections where that appeared to influence voter behavior and give Democrats an advantage. So are there policies, any legislative policies in particular that might come to the forefront that might impact how consumers behave?

B (5:44)

So a really important starting point here is just on the process itself, right? So as we've said, one of the more reliable historical priors is that it's difficult to legislate during election years. That's a function of the fact that lawmakers just aren't in D.C. as often. You also have limited availabilities in terms of procedure itself because Republicans would have to probably do another reconciliation bill unless you get some bipartisan support. But hitting on this topic of affordability, there are really a few different things on the table right now. Obviously, the president has spoken about these tariff dividend checks, the $2,000. They've spoken about making changes on housing policy, so housing deregulation. And then the third is on these expanded ACA subsidies. Those are obviously the crux of the government shutdown debate. And for a variety of reasons, I think each of these are really challenging to see moving over the finish line in the coming months. We think that you would need to see some sort of exogenous economic downturn, which is not currently in our economist's baseline forecast, to really get that kind of more reactive fiscal policy. And because of those procedural constraints, I would just go back to the point we were saying earlier around tariff policy and maybe the Supreme Court decision giving Trump this opportunity to pull back a little bit. It's really the easiest and most available policy lever he has to address affordability. And to that point, the administration has already taken steps in this direction. They provided a number of exemptions on agricultural products and said they weren't going to move forward with the Section 232 tariffs on semiconductors in the very near term. So we're already seeing directionally, I would say, movement in this area.

A (7:13)

Yeah. And I think we should also keep our eye on potential legislation around energy exploration. This is something that in the past has had bipartisan support loosening up regulations around that. And it's something that also ties into the theme of developing AI as a national imperative. That being said, it's not in our base case because Democrats and Republicans might agree on kind of the high points of loosening up regulations for energy exploration. But there's a lot of disagreements on the details below the surface. But there's also the midterm elections next year. So how do you think investors should be thinking about that as a major catalyst for policy change? Or is it more of the same? It's an interesting story that we should track, but ultimately not that consequential.

B (8:02)

So obviously we're still a year out, a lot can change, but obviously we're keeping an eye on polling and that sort of data that's coming in daily at this point. The historical precedent will tell you that the President's party almost always loses seats in a midterm election. And in the House, with a three seat majority for Republicans, the bar is actually pretty low for Democrats to shift control. Back in the Senate, the map is a little bit different. But let's say you were to get something like a split Congress. We think the policy ramifications there are actually quite limited. If you get a divided government, you basically get fiscal gridlock. So limits to fiscal expansion absent like a recession or something like that that we don't expect at the moment. But you really will probably see legislation only in areas that bipartisan support. In the meantime, I think you could also expect to see more kind of political fights around things like appropriations, funding, the government, the debt ceiling. That's typical of divided governments unless you have some area of bipartisan support. Like I said, maybe we see something on health care, crypto policy, AI policy, industrial policy is becoming more of the mainstream in both parties. So potentially some action there. But I think that's probably the limit of the most consequential policy items we should be looking out for.

A (9:10)

Right. So the way I've been thinking about it is no clear new policies that someone has to account for coming out of the midterms. However, we definitely have to pay attention. There could be some soft signals there about political preferences and resulting policy preferences that might become live a couple years down the line after we get into the 2028 general elections and the new power configuration that could result from that. So interesting, impactful, not clear that there'll be fundamental catalysts and probably along the way we should pay attention because markets will discount all sorts of potential outcomes and it could get the wrong way on interpreting midterm outcomes which could present opportunities. So we'll certainly be tracking that throughout 2026.

B (9:54)

Yeah, and if you think about the policy items that President Trump has leaned on most heavily this year and that have mattered for markets, there are things in the executive branch, right. So tariff policy obviously does not depend on Congress. Deregulation helps if you have fundamental backing from Congress, but occur through the executive agencies. So to your point, you know, less less to watch out for in terms of how it will shift Trump's behavior.

A (10:15)

Well, Arianna, thanks for taking the time to talk.

B (10:17)

Always great speaking with you, Michael, and to our audience.

A (10:19)

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C (10:28)

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