RBC’s Calvasina Sees Investors Looking Past Policy to 2026

KKR's McVey asserted that markets are not overvalued, while Federal Reserve Governor Waller indicated the labor market's precariousness, discussing potential rate cuts and inflation outlook. Concurrently, President Trump signed the first federal law governing digital currency, the 'Genius Act,' marking a significant regulatory development for the digital asset sector despite some legislative opposition.

Analysis

The market is currently receiving conflicting signals from key financial and regulatory figures. On one hand, KKR's McVey has asserted that markets are not overvalued, providing a bullish perspective from a major asset manager. This contrasts sharply with the cautious outlook from Federal Reserve Governor Waller, who highlighted the precarious state of the labor market, suggesting it 'wouldn’t take much to tip' it, while also discussing the potential for future rate cuts amid ongoing inflation concerns. This divergence between a positive market valuation view and a fragile economic underpinning creates a complex investment landscape. Concurrently, the digital asset sector has reached a significant regulatory milestone with President Trump signing the 'Genius Act,' the first federal law governing digital currency. While hailed as an 'enormous victory' by some, indicating it could foster institutional adoption and reduce uncertainty, the bill faced legislative opposition, signaling potential for future political or legal challenges to the new framework.

Key Decisions for Investors

• Given the divergence between KKR's bullish market valuation and the Fed's cautious economic outlook, investors should closely monitor incoming labor market data for signs of the fragility mentioned by Governor Waller, as this will be a key determinant for the Fed's rate cut trajectory.
• The passage of the 'Genius Act' provides foundational regulatory clarity for the digital asset space, potentially de-risking the sector for institutional capital; investors may consider this a catalyst to evaluate or increase exposure to digital assets and related equities.
• With Fed Governor Waller signaling a potential for rate cuts, re-evaluating exposure to rate-sensitive assets is prudent; however, any positions should be hedged against the risk that a deteriorating labor market could negatively impact broader economic growth and corporate earnings.