Coordinator: Welcome to the Center for Investment Excellence, a production of JPMorgan Asset Management. The Center for Investment Excellence is an audio podcast that provides educational insights across asset classes and investment themes. 

Jared Gross: Welcome everyone. Thank you for joining us today. My name is Jared Gross and I am the Head of Institutional Portfolio Strategy here at JPMorgan Asset Management. I am pleased to introduce my colleagues Dr. David Kelly, Chief Global Strategist and Nandini Ramakrishnan, Macro Strategist in our Emerging Markets and Asia-Pacific Equities Team.

Today we’re going to take a deep dive into one of the four theme papers that was published as part of the 2021 long-term capital market assumptions. The paper which is titled The Fiscal Decade: Promises, Problems and Potential of Fiscal Stimulus can be found on our Web site at www.jpmorgan.com/institutional/ltcma. 

As we’ve all seen around the world this year the pandemic recession has triggered the adoption of widespread fiscal stimulus. Done right, fiscal stimulus can offer a quicker exit from recessions. Done wrong, it can undermine trust in government debt and national currencies. In preparing for this and in reading the paper I just wanted to highlight a few of the key points. 

One of the most interesting aspects of this paper is the rigorous framework that it brings to quantifying the capacity of a government to expand deficits without severe negative consequences. And critically the paper goes one step further to examine the potential (effectiveness) of a fiscal stimulus by considering a role of fiscal multipliers and the nature of the programs deployed by fiscal authorities. 

So with that as a backdrop I am going to jump right in. David and Nandini it is great to have you here today.

Dr. David Kelly: Glad to be here. 

Nandini Ramakrishnan: Thanks for having me. 

Jared Gross: So David let’s begin today’s discussion with you. Can you set the stage for us? What is happening around the globe and specifically in the US as it relates to fiscal policy?

Dr. David Kelly: A year ago we wrote a paper in our long-term capital market assumptions which was (taking) a look back at the last decade. And it was titled “The Failure of Monetary Stimulus.” And what we really found from our research is that if you looked at it in an objective way -- once you had gotten to low interest rates -- cutting interest rates any further really didn’t actually stimulate economic growth. Because it didn’t really stimulate economic growth it didn’t stimulate inflation either. And so this year we wrote an article called the “Fiscal Decade” and in many ways the fiscal decade is a follow on to “The Failure of Monetary Stimulus.” But in a very real sense it’s because of the failure of monetary stimulus. Because when we got hit by this enormous pandemic early in 2020, governments around the world really have no useful option with regard to monetary stimulus. Interest rates were already very low. 

And of course central banks did what they could to further reduce interest rates. But it was quite clear that anything in terms of lowering interest rates as a cost of capital to businesses or potential homebuyers that wouldn’t have any significant impact in sheltering the global economy from the extraordinary impact of COVID-19. And so governments were forced into adopting more fiscal stimulus.

And indeed we’ve seen that. One way of sort of looking at this from a very big picture perspective is if you look at estimates of government debt in gross terms as a share of GDP, for developed countries in 2019 that was about 104%. The IMF estimates that by 2021 just two years later it’s going to be 124%. In emerging markets it’s a lot lower going from 52% to 64%. But essentially in both cases we have increased the burden of government debt by about 20% as a share of the economy in just two years. 

And this is really a harbinger of things to come because one of the other lessons from the last decade is that you could that. You could run bigger deficits and because of a highly disinflationary global economy you wouldn’t have to pay a price in terms of higher inflation particularly if you do it in a recession.

So you could do more fiscal stimulus, you could end up with more government debt. But that could enable you to push the economy forward without paying the traditional price in terms of higher inflation, higher interest rates at least not in the short run. And then if you look at the US in particular we saw the CARES Act passed last March adding $2.4 trillion to the deficit. Last fiscal year which just ended the deficit came in at about $3.1 trillion. This fiscal year even without any further fiscal stimulus it’s going to come in at about $1.8 trillion according to the congressional budget office. 

And we do think, you know, there’s some politics right now. But we think that once a new congress is in place if not before you’ll see another stimulus bill. So that will probably take you over $2 trillion. And it’s really I think a sign of what the decade ahead is likely to be. Governments around the world have used fiscal support and run big deficits in order to support their economies through COVID-19. 

But given the failure of monetary stimulus and the impotence of monetary stimulus, they’re really using fiscal stimulus as a way to try to launch a recovery and perhaps also achieve other goals. And the only one thing that they need as somewhat essential for this is a cooperation of central banks. And so central banks have been willing to engage in quantitative easing, buying up a large chunk of that government debt to allow for that fiscal stimulus. 

But that’s really how we got here. We got scared because monetary stimulus wouldn’t work, fiscal stimulus was inevitable to get past the pandemic. And if it doesn’t involve an inflation price and interest rate price, then we do think this will be the fiscal decade.

Jared Gross: Thanks David. And I know we will return later to the topic of debt capacity at the national level. But at the moment I’d like to turn to Nandini and bring you into the conversation. Given both the current pandemic induced fiscal spending and the broader transition from monetary to fiscal support, let’s discuss some winners and losers. And really how can the government best increase short-term demand but also increase long-term productivity. 

Nandini Ramakrishnan: That’s a great question and it’s really the sort of million or trillion-dollar question for the next decade. And when we think about the elements of that question it’s how do we increase short-term demand but increase long-term productivity as well. And that’s really going to be the aim for governments across the world. 

Before we can answer the how we kind of want to look first at the ability to spend. And so our paper and our research really takes us through four different parameters how we can think about the winners and losers in each of these categories. And I’ll tell you the conclusion almost before we even go through the parameters and that is that there is no one size fits all. 

So the winners are going to be the country that within the parameters that we’ve looked at do the best given their space and their landscape. So that first parameter is fiscal space. Essentially how much can a country spend. And we look at this with a mechanical metrics as the base. So as David mentioned central banks around the world have done a pretty good job in lowering costs of borrowing across the world. But there is still a bit of a difference especially when you start looking at emerging markets. 

So we looked at the prevailing real rates of interest in various economies. Obviously the lower the more cheaply it is to borrow so that government, all of those things being equal. We also look at the existing stock of government debt. So how much has the country already borrowed before 2020 and growth - simply real GDP. A better growth environment should again all other things being equal be helpful from a fiscal point of view. 

So using those mechanical metrics we came up with a scoring for our broad 20 country sets. And then added crucially a new element to our analysis which was institutional robustness. And this is where we move a bit away from those mechanical costs of borrowing and move into thinking about what would global markets or investors think of this country’s sort of trustworthiness. 

And in that growth institutional or robustness index when you combine various elements of governance, scores from third-party research institutions on corruption perception as well as economic freedom for each country. And in this institutional robustness work we didn’t find necessarily the top ranked ones to be as surprising. So this will be your Scandinavian economies, Singapore, Finland, other European nations that have very high robustness. The US is in there as well.

At the bottom of the list there’s the usual suspects, like, Russia, Mexico, (unintelligible). But where (it became interesting in the middle) of that robustness was that some countries, like, China and India had decent robustness versus their emerging market peers. So combining that robustness index with our fiscal space in the mechanical sense gives us the idea together to think about fiscal space. Essentially how much can a country spend on their fiscal stimulus plans going forward.

Jared Gross: Thank you. This is fascinating work and I highly recommend to those on the line to take a moment and read through the paper in detail. David, anything that you would like to add in terms of these parameters that Nandini has mentioned?

Dr. David Kelly: I guess there are two things I would say. One, is that (mentioning) the fiscal space are very difficult to estimate in absolute terms because they have changed over time and they depend crucially as Nandini suggested on real interest rates and expectations of real interest rates. So I remember after the Great Financial Crisis there were a number of economists most notably Rogoff and Reinhart who talked about a situation where if government debt as a share of GDP went above 90% that could have negative repercussions in terms of economic growth. 

While clearly many countries have done that without negative repercussions and economic growth. The reason is because investors became convinced that real interest rates would remain very low. That nominal interest rates would remain very low. And that did allow countries to borrow. 

And then with regard to institutional robustness I think we can use these indices to figure out what investors really think about institutional robustness right now. But it is, you know, it’s about trust. And trust takes a long time to build and can be lost very quickly. So I think even though there are countries who should clearly have fiscal space they should not abuse that privilege because if they do abuse that privilege and if people do actually doubt their ability to repay their debt or if in fact at some horrible date in the future default on their debt, those scores go out the window. So I think it’s a temporary benefit but not necessarily a permanent one.

But there’s another thing that I think is important when you think about the effectiveness of fiscal stimulus. And that really has to do with fiscal multipliers. And I learned macroeconomics in Ireland when I was growing up. And I was keenly aware of this whole issue of fiscal multipliers because, you know, the idea of a multiplier is government spends some money and the person who gets that money, you know, whatever service or goods they settle with the government they spend it on something else. And maybe they buy a new car or buy some clothes or whatever. And then the person who receives that money they spend some of that money and so forth. So it multiplies. It feeds through the economy. 

But there a number of things which limit that effect. And one of them is a country which saves a lot. If people save a lot, you know, if the government gives a tax cut to some individuals but they save all the money or save most of the money, then the feed through effects are much smaller.

Another thing that I was very aware of growing up in Ireland which is a small, open economy is imports. If the government gives a lot of money and they spend it on imports well the money’s lost to the Irish economy almost immediately. 

Another factor is taxes. If the government gives people a lot of money but then taxes it all back or the recipients of that loses it all to taxes again, that limits multipliers. So another part of what we did in terms of looking at the effectiveness of monetary stimulus is to combine these things. Look at tax revenue as a share of GDP, look at imports as a share of GDP and look at savings as a share of GDP to see well how effective would fiscal stimulus be in actually generating that aggregate amount. 

And at the top of the list the best countries and the United States is very close to the top of the list we don’t save very much, we don’t import very much and we don’t tax very much as a share of our GDP. And that would leave us in a reasonably good position as is the case in Brazil and in Japan. 

At the other end there are countries, like, Germany with relatively high taxes and certainly a high propensity to import Korea, Switzerland, Sweden. These countries all do a lot of importing. They do a lot of saving. They’ve got high taxes on average. And that means that fiscal multipliers just aren’t as effective. 

So one other element, you know, we want a fiscal multiplier but it’s in the form of a tax cut or government spending. We want to promote a big chunk, a multiplied level of aggregate demand. And some countries are simply better than others at that. That’s sort of a third parameter that we looked at in trying to look at the effectiveness of fiscal spending.

Jared Gross: Thanks David. I just wanted to maybe pivot to Nandini and maybe ask you to speak a little bit more about this idea of fiscal space and its effectiveness and the outliers or particular areas to watch as we try to assess which countries will be most effective in deploying fiscal stimulus.

Nandini Ramakrishnan: Definitely. So to build on what David has just discussed in terms of the multiplier which we can somewhat categorize as a way to measure that short-term demand creation that fiscal stimulus can have we also wanted to look at future productivity boosting ways that fiscal stimulus can trickle through the economy. 

And in order to do that we’ve looked at a few different categories. So first we’ve labeled this as discretionary opportunities. But it essentially means as a government what are the areas that haven’t been saturated by government spending yet and could be area that a fiscal stimulus can be targeted towards. 

And an easy way to think about that would be what percentage of capital stock is public. So your airports, your railway stations, your highways, your various infrastructure elements. What percentage of that is already owned or invested from the government? And countries that have opportunities for that in terms of having low capital stock that’s public would be Brazil, Germany and the U.K. Whereas countries that have already quite a large share of public capital stock are China and Japan for example. So we’ve again relative to each other in our country set thought about where there are these opportunities for investment in that sense.

We’ve also taken a look at flexibility that the economy has. So this is a key when we think about what other obligations does the central government of an economy have versus its peers. And a key obligation in the current climate is pension. So an aging population definitely requires government spend to be directed towards that. And for many developed countries especially in Europe there are high commitments already made to funding those aging demographics.

In terms of the other areas where countries can take some spending from or think about the long-term productivity boost is also military spending. So we’ve included that in some of our scoring as well.

And then arguably the most important element of this long-term productivity boosting fiscal stimulus discussion is stewardship. And this is a key build upon what David mentioned in terms of the multiplier for the near term. Essentially making sure that one dollar, one euro, one yen spent gets to make its way fully through the economy and stay within the economy. You also need to make sure that the institutions and organizations in that economy allow that to happen. 

And so we look at again corruption as well as government efficiency indices to see where countries that have high stewardship could have a great long-term multiplicative effect of their fiscal stimulus as well. 

Countries that score well in stewardship would be Sweden, Switzerland. The US is pretty high in the middle of the developed market space as well. And then again no surprise at the bottom in terms of stewardship would be Russia, Brazil, Mexico and Turkey. 

You can look at the stewardship elements in two ways. Firstly, that existing high levels of stewardship is very good. It means your multiplier for the long term should be quite strong. But it also affords the countries that are at the bottom of the list to have opportunity to improve that for longer-term multipliers. 

So almost thinking of it as an opportunity again for those low stewardship scoring countries to get better, eliminate bureaucracy, think about blockages in the financial system, the red tape, whatever is blocking that original dollar, yen, euro, repeat a fiscal stimulus from getting out there into the broader economy and having that strong multiplier assessed.

Jared Gross: Thank you very much. So David back to you. You know this sets up kind of a fascinating matrix if you will where you have both the aggregate amount of fiscal stimulus. Too much obviously could be inflationary, too little could be ineffectual at getting an economy started. And then you have the deployment of that stimulus where countries with both the large opportunity set and positive stewardship could be most effective. And those with limited opportunities and poor stewardship could be ineffective. So spend some time and talk about this balance in terms of how fiscal stimulus is deployed. 

Dr. David Kelly: Yes, I think it’s a very important question because if you accept the premise that low interest rates allow you to do more fiscal stimulus, to run bigger deficits, to cut taxes, to increase government spending. You still have some very important questions to ask about the efficiency with which an economy can operate and whether you’re doing more harm than good to a fiscal stimulus.

You know I’m reminded before the French Revolution there was tremendous fiscal stimulus going on in France. The problem is they were just building palaces while the population starved. And that was not a particularly good use of fiscal stimulus. And of course it was bankrupting the French government at the same time. 

But we often have a situation where the projects that a government will engage in don’t actually help the welfare of the public that much or certainly don’t provide wealth to the public as well as free market forces would. You know the famous economist, Milton Friedman always used to worry not so much about budget deficits as about government spending because he felt that the more areas the government spent money on, the more areas that would almost certainly see some inefficiencies. And there has to be some inefficiency in a lot of government spending simply because you don’t have the same incentives, the same pure message that’s coming from the marketplace every day about how you should spend that money when it’s being spent by the government.

So one issue is are these truly projects that are the best use of money in the economy? Do they really make the product to be better? Do they re-enhance welfare or are these people often talk bridges to nowhere or investing in projects that really won’t benefit the public at all in the long run.? And then there’s also at the microlevel how do you incentivize public service employees to achieve the very best if there is (a data) or profit motive at the end of it? So that’s one issue and that’s always been there and that’s why free enterprise economies dominate the world because communist and socialist societies have never had the same economic dynamism.

But then there’s a second question, which is, again, freed of the constraint perhaps of higher interest rates, the temptation for politicians to always run big deficits is huge. I mean, it’s too easy for a politician to say the other side wants to raise your taxes; we’re going to cut your taxes. It’s too easy for politicians to say the other side is going to cut your medical services; we’re going to increase them.

If you can always run deficits to do so then the tendency for government will run bigger and bigger deficits and eventually that can end in tears because eventually the bond market may become suspicious of whether you will ever pay the money back.

Now that doesn’t seem to be an issue right now. But when the global economy gets back towards full employment, when there is more demand for capital later on in this decade, there is a danger that too much fiscal spending right now could cause a great deal of fiscal stress and discomfort later on in the decade.

So I think it’s important to be honest with ourselves about those projects which genuinely, certainly give us a good long-term boost in terms of positivity in human welfare and those projects, which are more dubious in that claim.

I think we need to look at that and then we also need to have the courage as voters and the backbone as voters to vote for people who are willing to show some moderation in the spending of government money so that we don’t see those bigger, bigger deficits inevitably pushing us towards some sort of fiscal stress down the road. 

So one of the problems with fiscal stimulus is it can be very powerful and it could be powerful for good. It’s kind of like nuclear power. It can be powerful for good or for evil and so it needs to be tended very carefully.

Jared Gross: That’s great. Thank you, David. Staying with you for a moment, you mentioned Milton Friedman and maybe the more academic argument for fiscal prudence and you mentioned the bond market, and maybe I’ll characterize it as the bond vigilantes who we used to think of as imposing fiscal discipline on government. Although today, most public markets and central bank balance sheets are providing an ample source of (financing for) deficits, we also earlier had mentioned Robert Reinhart and the argument that debt stock was going to be a critical feature in how governments would be able to finance themselves. 

That doesn’t seem to be as big as issue as me might have feared. Talk a little bit about the role of debt service cost and what that might imply if we see the stock of debt go up and, of course, interest rates go up as well.

Dr. David Kelly: Well, it is a problem that we haven’t faced, but I think the lynch pin to all of this is inflation. And so if you look at the last few decades in the United States, and indeed around the world, inflation has tended to go down.

Now there are sort of three things that can cause inflation to go down broadly speaking. One of them is a lot of economic (flack). And we’ve had that from time to time. But for most of the last decade we didn’t have a lot of economic (flack); it was just inflation was very low, even in a “full employment economy”. 

The second thing that really is kind of permanent is that information technology is making more and more markets competitors around the world. And that means that after you run out of supply, and targets run out of supply prices will tend to trend down. 

And so I think there’s information technology overall empowers buyers around the world, it makes it harder for sellers to maintain prices that’s kept inflation low.

But a third really important factor we believe is increased inequality. Because there’s nothing about the spending behavior of the rich person to poor which is so dramatically different as the savings behavior of the rich versus the poor. Richer households save more. 

And remember when I was talking about those multipliers. That’s actually a very important point because what we’ve seen over time is more and more of the income of the world, and certainly the United States, has gone go the richest household. The richest 10% of households in the United States control about 50% of the income. Well the interesting thing is the top 10% of households actually save about 30% of their income while the other 90% of households spend all of their income on average.

And so as income has more and more gone towards the top of the income spectrum in the United States, that has caused more and more savings. That means you tend to be short of aggregate demand. If you’re short of aggregate demand you end up with low inflation. If you end up with low inflation, you end with low interest rates so you can finance these deficits so long as (deficit) equilibrium is sustained.

But to me the critical point going forward is this - if at some stage we decide that we’re going to try to deal with the problems in inequality, which are very real and very painful, but if we try and deal without dealing with deficits at the same time, if we take money from the rich and give it to the poor, the poor will spend that money.

And so you end up with excess aggregate demand and then you can end up with excess inflation. You end up with excess inflation, suddenly the bond vigilantes will come back to life.

So, I think that we have had a reprieve from bond vigilantes but it’s not a permanent reprieve and I think we have to be honest about what has kept inflation low. In a funny way, you know, all these - the proponents of modern monetary theory say that you can run big deficits and you don’t have to worry (unintelligible) inflation shows up and then you can just fix the problem by raising taxes at that point.

But what they fail to stress is that the reason inflation hasn’t shown up is because the deficits that we have run haven’t really worked in terms of reducing inequality. If they had worked, then we would’ve ended up with an inflation and they wouldn’t have been able to do it. And so deficit spending to try and deal with inequality issues can only be sustained if it doesn’t work.

So I think this does raise some interesting questions. For the moment, yes, we have a low inflation environment, there are a lot of factors that have caused this and (unintelligible) now going into 2021. We still have the long-term effects of greater information technology and spread of information reducing inflation.

But, if over the next two years attempts are made to reduce income and inequality, we will realize I think quite quickly that we have less scope to do that in the context of big budget deficits than we thought. So I think that it’s going to be important to keep a watchful eye on inflation as we come out of the pandemic recession so that we can continue to use fiscal policy to achieve public goals without actually precipitating a fiscal crisis.

Jared Gross: Thanks David. That’s great. And then (unintelligible), maybe just pivoting back to a topic you raised earlier, which is institutional robustness and the degree to which it is an important variable in determining the amount of fiscal states that a sovereign borrower enjoys.

Maybe just dig a little deeper into that topic and maybe bring it a little bit closer to home. We recognize that there’s domestic criteria for determining robustness but it’s also a relative thing across countries. And so I’d be curious to get your thoughts on which countries are improving or declining.

And more specifically, just given the turmoil around the recent election and the process sin the United States and frankly just longer term a backdrop of more challenging political environments and partisanship do you see the US on an improving or declining trend?

Nandini Ramakrishnan: Yes, so the institutional robustness concept which we’ve explored helped us with a couple of things and just reframing that again. It’s how much do we trust the county, its institutions in terms of government and how does that affect whether it could be currency depreciation, this is more of an EM issue, ratings, downgrades or upgrades, also a little bit more of an EM issue. 

But then across the world how much do financing or yields move based on government action? Again, essentially how much do we trust them? And in terms of the US, it does start at a pretty high position. 

And while one small component of that mathematical creation of our institutional robustness score is a political stability or bipartisanship indicator, overall we’d expect the US to maintain its position as a very robust economy and government globally, especially in light of its comparison to other countries. So, would not say that there is a risk of that falling.

And I would couch that in the greater statement, which is within the develop markets, including of course the US, it’s kind of like looking at too much of the nitty gritty to find differences in institutional robustness. Where that robustness comes into greater play is as we move down the spectrum and there we see nominal and real interest rates of these countries in the middle and bottom of the pact. 

So this would be your peripheral European economy, some EMs and then even frontier economies like Nigeria and Egypt, this is where the dispersion really amplifies. And that’s where when we track movement in robustness scores it becomes important for sovereign bond yields or ratings. 

And one country I’d point out that is suffering in recent decline of institutional robustness would be Turkey. Another one that followed suit a little bit is South Africa. So, those are the countries in the emerging space where we watch what the government says more closely with a bit more scrutiny up to can they actually finance the fiscal stimulus that they’re trying to spend.

Jared Gross: That’s great. Thank you. David, I wanted to maybe ask your thoughts on the current situation in Washington and I’ll maybe put this in two parts. The first of which would be what happens if the US fails to produce another meaningful round of fiscal stimulus? What are the non-legislative paths that we might use to support the economy?

And obviously I think I would be remised if I didn’t include in that question to ask for your thoughts on the appointment or the presumed appointment of Janet Yellen as Secretary of the Treasury having so recently served as the Chairman of the Board of Governor of Federal Reserve and whether you think that that will have a positive presumably or perhaps negative influence on the policy (unintelligible) going forward?

Dr. David Kelly: Well, on the first issue I think there is unfortunately still politics being played on this issue of support for the economy through the rest of this coronavirus pandemic. 

Possibly what’s still going on is there are two Senate seats to be fought for in a runoff in January, and so far we still have a situation where the Senate is proposing a bill which seems too small. The House is proposing a bill which seems too large. And you think they could split the difference and find a way of getting some money to people who are really in pretty desperate shape between now and the end of the year. But that doesn’t seem to be happening.

I do think that once those elections are over in January and briefly when the new president and Congress are installed later on in the month, I do think there’ll be some urgency in passing something. And I think that Joe Biden as president, regardless of his position right now or negotiating position of the Democrats is right now I think they will come to some compromise with the (unintelligible) depending on who controls what. But I think some compromise will be found and they will push something through.

Now, between now and then is there anything that the government could do administratively to try to relieve the problem, not really. I mean, you do need Congress to authorize more spending. More spending for unemployment benefits, more spending to support businesses that can’t stay afloat in this environment and landlords who are going to be in trouble in this environment, (unintelligible) mortgages to help save local governments who are going to have to lay off more workers. So there is going to be more pain without stimulus, unfortunately.

I do think we’ll get stimulus in January but there’ll be damage done. But is that permanent damage? Probably not. I mean, economics is a very cold science. It’s very like Mother Nature, it can do terrible things in terms of the pain it inflicts without actually damaging long-term prospects. 

So, maybe this pandemic’s going to be more of an economic forest fire with greater damage. But it doesn’t change the fact that as soon as a vaccine is distributed widely there’s going to be an enormous pent up demand and pent up supply of services.

And maybe a restaurant’s going to open up under new management and maybe the old management went to the wall, went bankrupt after years of building up a business and that’s a terrible, terrible thing. But it’ll open up under new management and people will get hired back and the economy will try it again.

So, from an investment perspective, a I don’t think stimulus is as important as it is from a human perspective. Although I think it is very important from a human perspective. So that’s where we are and I wish that they would stop playing politics and pass something right now. And I’m not terribly optimistic of something getting done before the inauguration but at least at that point I think something will get done.

And with regard to Janet Yellen’s appointment, thinking about it now, it seems like the absolute obvious choice for Joe Biden because he had a real problem with Treasury Secretary, it’s a very important policy position. 

How could he find somebody who’d be seen as sufficiently, (unintelligible) and concerned about issues of inequality to satisfy progressives within the Democratic Party and yet was seen as sufficiently experienced and reliable to make sure that Wall Street didn’t worry about any attempts to reduce inequality or damage unfair economy. 

And I think Janet Yellen is perhaps the only person who could take both of those boxes. So I think you can see that in the last 24 hours, markets have rallied off that, it makes perfect sense.

In terms of stimulus, maybe that will facilitate stimulus. I think it will facilitate very easy and smooth cooperation (between) the Treasury and the Federal Reserve. Janet Yellen knows Jay Powell very well, knows all the institutional elements of this. And so with experienced people on both sides I think they will be able (to manage) whatever’s tend to do. But I think there’s more fiscal stimulus will still depend ultimately on the balance power in the Senate and the ability of the administration to push through some proposals to (unintelligible) they may or may not have control of as of January, and we just have to wait and see on that.

Jared Cross: Thank you all for joining today’s call. We hope you found the topic interesting and insightful. If you would like any additional information on anything that was discussed, please reach out to your JPMorgan Client Advisor.

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JPMorgan Asset Management Singapore Limited Company (unintelligible) which does advertisement or publication has not been reviewed by the monetary authority of Singapore, JPMorgan Asset Management Taiwan Limited, JPMorgan Asset Management Japan Limited, which is a member of the Investment Trust Association Japan, the Japan Investment Advisors Association.

(Unintelligible) Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency, Registrations Number 10 to local finance bureau. Financial (unintelligible) Firm Number 330.

In Australia to wholesale clients only as defined in Section 761A and 761G of the Corporations Act 2001 Commonwealth, by JPMorgan Asset Management Australia Limited (unintelligible). Copyright 2020 JPMorgan Chase and Company. All right reserved.