Key Wealth Matters Podcasts

Brian Pietrangelo [00:00:00]

Welcome to the Key Wealth Matters weekly podcast, where we casually ramble on about important topics, including the markets, the economy, human ingenuity, and almost anything under the sun, giving you the keys to open doors in the world of investing. Today is Friday, April 17th, 2026. I'm Brian Pietrangelo, and welcome to the podcast. On occasion, we do talk about human ingenuity on the podcast, and this is certainly an example this past week where we've got the Artemis space exploration opportunity. What a great opportunity to see that there and the success of the mission. In addition, this past week, I also had the opportunity to visit a number of our markets across the East Coast, including Buffalo, Syracuse, and Philadelphia, and had a great engagement opportunity in each of the client events to meet with clients and talk about the markets and the economy. And also in particular on the sports front, tying it back to the beginning of the playoff series for both the NHL and the NBA for hockey and basketball, Want to wish the Cavs here in our own hometown, Cleveland, some good luck in the playoffs as well. And also in Buffalo market, the Sabres made the playoffs for the first time in a long time, almost 14 years. And being in Buffalo was a great opportunity to talk about the Sabres. And in general, good luck to all our markets and all our teams in those markets. Success in the playoffs. With that, I would like to introduce our panel of investing experts here to share their insights on this week's market activity and more. Steve Hoedt, Head of Equities, and Rajeev Sharma, Head of Fixed Income. As a reminder, a lot of great content is available on key.com slash Wealth Insights, including updates from our Wealth Institute on many different subjects and especially our Key Questions article series addressing a relevant topic for investors. In addition, if you have any questions or need more information, please reach out to your financial advisor. Taking a look at the market and economic news for the week, we've got 5 quick hitter updates for economic releases and then we'll talk to Steve about what's happening in the markets. First up, we've got the Monday report that came out for existing home sales, which dropped by 3.6% in the month of March, and that is a level of 3.98 million units, which was the lowest since June of 2025, according to the National Association of Realtors. This also has complications relative to mortgage rates, which were down below 6% for a little bit, but are now back up to 6.37% for a 30-year mortgage, which continues to stymie a little bit of the demand and supply balance. Second, on Tuesday, we got the report for the Producer Price Index measure of inflation, otherwise known as PPI, for the month of March, which was up 0.5%. Now that was slightly better than expectations given estimates had skyrocketed given the Iran conflict, but ultimately it came in at a decent level and was somewhat positive for the markets. That equates to a 4.0% year-over-year rate and 3.6% if it's core excluding food and energy. And third, we had the report from the Federal Reserve known as their Beige Book report, which comes out two weeks in advance of the upcoming Federal Open Market Committee meeting on April 29th. Overall economic activity increased at a slight to modest pace in eight of the 12 Federal Reserve districts, with the other four being at least little no change and or modest declines. To be expected and not much of a surprise, the Middle East conflict was a major source of uncertainty that continued to complicate decision-making. Many of the districts continued to report signs of consumer financial strain with increased price sensitivity, and we also had on balance the employment markets in most of the districts were steady or up slightly in the reporting period. And 4th up on Thursday, the initial unemployment claims report came out and again remained very stable at 207,000 for the week ending April 11th. And to round out the week, on Thursday also, #5 was industrial production for the month of March, which was down by 0.5%. Now this is the first time in three months that it's actually been negative if you go back all the way to December. So there's been a pretty good run in industrial production as a manufacturing side of an indicator, and we'll have to see if the 0.5% decline in March is just one month or a broader trend. So outside of those economic updates, a couple other reminders to give you in terms of some news items. The first is the confirmation hearing for Kevin Warsh as the appointee for the new Fed chair has been basically penciled in for next week on April 21st. Again, this is important because the confirmation process does include a two-step process after President Trump did nominate Kevin Warsh some time ago. You have to go through the Senate Banking Committee and then you have to go through the full Senate for confirmation into the Fed Chair position. There are complications with this confirmation process given that Senator Thom Tillis out of North Carolina has made comments publicly that he will tend to block the vote for Kevin Warsh if the Trump administration and or the federal investigation on Jay Powell is not dropped for the inquisition into the spending on the new Federal Reserve building. And a reminder from a timing perspective, Jay Powell's chair ends on May 15th, which is less than 30 days away. And so that complicates the hearing and the process and where there will be a process of replacing Jay Powell on the Fed Chair seat. So we'll have to wait and see how this goes forward. We also got some updated information about the tariff refund process. It still seems to be a little bit complicated, but there is a process in which there can be filings for refunds. So we'll give you more information on that as it unfolds. So with that, let's turn to Steve. Steve, we're going to start with you on a two-part session. The first part is to give your thoughts on what's happening in Iran and what's going on with oil and jet fuel prices and jet fuel volumes, everything on Iran. And then the second part is we'll get your update on what's happening in the markets. Pretty good rally this week, so we'll get your take on both. So Steve, let's hear your thoughts, starting with Iran.

Steve Hoedt [00:06:32]

Well, Brian, there's been more news out this morning. And Iran is saying that the Strait of Hormuz is now completely open to commercial traffic in response to the ceasefire that has been extended to southern Lebanon. I think that when you look at this from a broader picture, it's a good faith bargaining move on their part, given that they had said that if there were a suspension of hostilities across all the quote unquote fronts in the Middle East that they would that they would reopen the strait. And and they have now done that. There's obviously a lot to try to sort out here with this. Looks like we're going to have more talks between the US and Iran over the weekend and Pakistan. So At the same time, you've got the administration saying that the U.S. naval blockade of Iranian ports remains in place. So clearly, we don't have a solution to this yet. But incrementally, we're seeing positive steps taken by the parties on both sides to come to some kind of arrangement here. Clearly, the Iranians are showing that they remain firmly in control of the Strait of Hormuz. You know, we'll see how things go. I think, though, that the message here is that incrementally we've seen positives and, you know, we'll talk more about the markets here in a little bit, but the markets have for in large part moved on from the crisis at this point in time. They seem to be focusing on other things.

Brian Pietrangelo [00:08:17]

Steve, a couple of interesting articles help our listeners understand what volume and storage means for oil and then the whole concept that Europe is in a jet fuel crisis because of how the supply chain works.

Steve Hoedt [00:08:28]

Yeah, you know, when you focus on the situation in Europe, so the Europeans don't really make, obviously don't produce a lot of oil and they don't have all the refining capacity necessary to meet the needs for all the various refined products that they have. So they rely very heavily on imported jet fuel from other places that have refinery capacity. And those refineries are typically using oil that comes from the Middle East. And so there's been a massive disruption to this. And, you know, this is what you see when you see a knock-on impact down the chain when a refinery can't get the typical oil feedstock that it has in order to be able to produce the refined products necessary, whether it's gas, diesel fuel, jet fuel, what have you, that creates disruption. So, you know, there's a buffer in the system. It doesn't run out immediately, right? But over a period of time, if you don't continuously have that flow coming in to restock what's being used, you end up with shortages and stockouts. And that's what we potentially see in the case of jet fuel in Europe, maybe another month and a half from now. So if you're planning to travel to Europe in June or July, you might have some travel disruptions, let's put it that way. And I think that you've got same situation starting to emerge across Asia too, where we've seen supply disruptions for refined products largely out of India.

Brian Pietrangelo [00:10:07]

So you made the comment earlier, Steve, that the market has somewhat looked past this, but based on your comments relative to the oil supply, it could linger on for a longer point than we might imagine. So interesting thoughts there. So Steve, let's pivot back to the market. Market had a pretty good week so far this week, a little bit of a tech rally, and we've also got continued earnings releases for the first quarter of 2026. What are your thoughts?

Steve Hoedt [00:10:31]

Yeah, so it was an important week this week. I would tell you, I still don't think we have broad momentum in the market right now. And if you look across the board, we've not seen anything that, you know, we've talked before about the concept of thrust, which means you have a broad based participatory move to move higher. We did not see that this week. But what is abundantly clear is that the market made a new 20-day high and a new 65-day high. So that's a new high for one month and three months. And that does firmly put the trend back in the positive camp for now. We would love to see broader participation and more breadth on this, but you can't fight the trend when the trend decides to move higher here. So just because we don't have all the boxes checked doesn't mean that the market hasn't done some healing and repair here because it very clearly has. So we sit here at 71, roughly 7,100 or a little bit more than that this morning. So cleared the 7,000 mark, which we'd been having some trouble with back in February where we tried to punch through that a couple of different times. So the market definitely has enough oomph behind it here to do that. You know, largely to your point about tech, Brian, it's been the tech stocks that have kind of pushed the market up this week. So we had a couple of earnings releases that were okay out of foreign companies that are that are tied to this AI semiconductor theme in TSMC and which is Taiwan Semiconductor and ASML, which is the the large semiconductor capital equipment company out of the Netherlands. And they both had good things to say about what's going on in the AI supply chain. And we've seen stocks that have been, for lack of a better way to phrase it, stuck in the mud for the last few months, like Nvidia and others move to new multi-month highs. So maybe not at new all time highs yet for those names, unlike the market, but When you have stocks that are 8% weights in the S&P 500 go up 25% in a 10-day period, it moves price. And that's what we've seen. You had Nvidia back at the beginning of the month of April trading with $165, and now it's at $200. So that's a significant move. for a large weight in the S&P 500. And there have been others. You know, I'm not just signaling out Nvidia because it's it's special. I'm singling it out as an example. We've also seen software catch a bit of a bounce here in the last few sessions, which has helped help this market out as well, too. So, you know, corporate earnings are starting to filter in. We've had a pretty good set of earnings reports out of the large banks this week. We've seen the S&P 500 earnings line move to yet another all-time high. It's at 340 bucks this week. I keep telling people, and you've heard us on these calls time and time and time again, say that the market's going to do whatever the market's going to do. But if you focus on the trend direction of that long-term earn on that forward 12-month earnings line, on a long-term basis, as long as that line is heading up and to the right, it's very difficult for very bad things to happen to the market. And that's exactly what we've seen over the last couple of months. Earnings continue to move relentlessly higher on a forward 12-month basis while the market was going through this kerfuffle about the Strait of Hormuz crisis. And look, I don't dispute that there's a lot of bad things that have happened to people as a result of what happened over there. And I don't mean to minimize that, but look, at the end of the day, earnings moved higher. And what if stock's done? They've moved, they've followed the earnings line to a new all-time high. So that I think is exactly what we would expect here. We've seen valuations come up as the market has moved higher, which is what you'd expect. Valuation troughed at about 19 times forward earnings back late last month. We're up to 20 and a half, so we've added one and a half turns, which is again what you'd expect. It shows that there's positive sentiment coming back into the market. PE is really a sentiment indicator for the market more than anything else. And I think that you've seen that. But if you think about it, 20 and a half is a lot lower than 23, which is where we were at last October, November. So I would argue that the market looks fairly reasonable here. And if this earnings line continues to do what it's doing, which is chugging up into the right, I think that there's a pretty good likelihood that this rally could continue from here.

Brian Pietrangelo [00:15:49]

thanks a lot for those comments, Steve. I think it's very informative for our listeners to understand what's going on. So thanks for your perspectives. Now let's turn over to the fixed income side of the equation and get some comments from Rajeev. Let's start with your thoughts, Rajeev, on what's happening with overall yields and in the fixed income market.

Rajeev Sharma [00:16:06]

So yields have kind of moved around along the curve. Some observations I have here is that the very front end of the curve, so I'm talking about the one- to three-month TiBO maturities, they declined from April 1 to April 8 by about 5 to 7 basis points. Longer-dated maturities, the 10-year, the 20-year, the 30-year, they showed a general downward trend this month after spiking in March. We all know that March yields were considerably higher than where they are today as the war broke out. The 10-year treasury note yield was at 4.33% as we started April, and today, we're about 4.31%. But just yesterday, yields in the 10-year had gone down to 4.28%, and we're giving some of that back today. The two-year treasury note yield, as we stand today, is around 3.78%. But last month, we had seen yields in the two-year touch 4%. Much of that had to do with the market starting to think about rate hikes rather than cuts. The two-year is the most sensitive to monetary policy, and any talks about a rate hike or a cut will be reflected in that two-year. So if we look at the shape of the curve, the 2s, 10s curve is the best way to look at how the curve is stacking up. We're stubbornly stuck around 50 basis points with being a differential between the two-year and the 10-year yields. This differential was around 70 basis points at the end of last year. The flattening of the yield curve is the pain trade in the market. Many investors have a steepening bias. on their portfolios. They're expected, as we started the year off, many investors, and even last year, thought that, okay, we're on a rate cutting cycle, so the front end should move lower, the back end will be pretty anchored, and you'll have a steeper yield curve. That has not really happened, and it's been a pain trade. The escalation of the Iran conflict had a lot to do with that. Disruptions to oil flow has caused oil prices to move higher, which in turn has led to these fears about stagflation and higher for longer inflation risk to the economy. If inflation is higher, the Fed can't cut rates, and that has prompted a repricing in the front end of the curve, and it's led to that flattening. Now, if you see oil prices come down, it is immediately reflected by a steepening of the yield curve. We saw that on April 8th, where the yield curve bull steepened as oil dropped from $100 a barrel. That day, the 2-year dropped 7 basis points in one day. The 10-year dropped 4 basis points immediately. Today, however, we see the curve steepening A little more today on today's markets, if I look at my screens, as some Gulf Arab and European leaders are saying that this might take six months to reach a peace deal that everybody agrees upon, that has sparked a bond sell-off today, and longer-dated treasuries are underperforming on concerns that oil will be higher for longer, which means inflation will be higher for longer. Futures markets right now are putting a high probability that the Fed does absolutely nothing this year, and rates remain steady till the end of the year. This was also supported by the latest Fed minutes from the last FOMC meeting, where the overall tone was to keep rates on hold due to an elevated inflation and employment risks. But if you remember just a few months ago, many expectations were that-- and even our outlook was that we would have rate cuts in the second-half of the year. Now, those expectations are further down the road in the second-half of the year. So June expectations and July expectations have somewhat been dashed now. I think everybody's looking at September for maybe a possibility of a rate cut. This is all going to change depending on how this war continues, when we find some resolution of this war, when the Fed can get back to looking at numbers, and what actually is the impact of war on those inflation data points that we're going to see as we get each and every single data released for inflation and employment.

Brian Pietrangelo [00:19:47]

Thanks for that update on yields, Rajeev. Now, let's talk about some things we were talking about in the office the other day with some interesting data regarding FedSpeak.

Rajeev Sharma [00:19:55]

Now, one thing that I think is very interesting is Bloomberg Economics, they've developed what they call a daily FedSpeak Index. This index is developed using an algorithm that uses news headlines to cover the speaking engagements of every Fed member, and then translate that to whether they sound dovish or hawkish. They've captured over 6,000 speaking engagements since 2009, that's when they created this index. They've created this since 2009. And we've seen here that the narrative from the Fed members has been moving firmly in the hawkish area. It has a lot to do with most Fed members not in any rush to vote to cut rates. In fact, in the last Fed meeting, only one member wanted to vote for a rate cut, or actually voted for a rate cut. So rate cut expectations have at least been pushed back later part of the year, as I mentioned, second-half of the year, some Fed members in their narrative are saying that no rate cuts till 2027.

Brian Pietrangelo [00:20:51]

Well, thanks for the conversation today, Steve and Rajeev. We appreciate your perspectives. And thanks to our listeners for joining us today. Be sure to subscribe to the Key Wealth Matters podcast through your favorite podcast app. As always, past performance is no guarantee of future results, and we know your financial situation is personal to you. So reach out to your relationship manager, portfolio strategist, or financial advisor for more information, and we'll catch up with you next week to see how the world and the markets have changed, and provide those keys to help you navigate your financial journey.

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Brian Pietrangelo [00:00:00]

Welcome to the Key Wealth Matters weekly podcast, where we casually ramble on about important topics, including the markets, the economy, human ingenuity, and almost anything under the sun, giving you the keys to open doors in the world of investing. Today is Friday, April 10th, 2026. I'm Brian Pietrangelo, and welcome to the podcast. If you are a golf fan, you're certainly excited this week as we begin the Masters Tournament in Augusta, Georgia, as its famed history is quite exciting to watch on a regular basis every year. All those competing are in search for the coveted Green Jacket, as it is known from the Masters Tournament. In addition, we always have the comforting voice of the famous Jim Nance and all of his sayings for the tournament, which is such a pleasure to listen to, not only watching, but listening on TV for what a great event and its fabulous, fabulous history. So enjoy it if you can, such an exciting time of year. With me today, I would like to introduce our panel of investing experts. Some might say they wear green jackets of their own. Here to provide their insights on this week's market activity and more. George Mateyo, Chief Investment Officer, Steve Hoedt, Head of Equities, and Tim McDonough, Director of Fixed Income Portfolio Management. As a reminder, a lot of great content is available on key.com/wealthinsights, including updates from our Wealth Institute on many different subjects, and especially our Key Questions article series addressing a relevant topic for investors. In addition, if you have any questions or need more information, please reach out to your financial advisor. Taking a look at this week's market and economic news, we want to say thanks to our avid listeners who are listening to us each week. You would know that last week we took Friday off for the holiday. So we're going to have a little bit more data on the economic front in order to report to you because we're picking up about a week and a half of economic data. So we're going to have three big categories of economic release data, one on inflation, one on employment and unemployment, and one on growth. In addition, we'll talk about 3 topics outside of those, including the update on Iran and what's going on there. We see some positive news and momentum with President Trump and the leaders in Iran for some type of ceasefire. So we'll see how that goes forward and comes to some type of resolution, we all hope. In addition, we had the Fed released its minutes from its FOMC meeting back on March 18th that seemed to be a little bit hawkish with the persistence of inflation reading through. And then finally, We received the third and final update for the fourth quarter of 2025 gross domestic product, which showed that the quarter came in at a 0.5% clip, which was slightly lower than the second estimate at 0.7%, which was half that of the first estimate at 1.4%. So clearly seeing a little bit slowing in the growth in the fourth quarter, we'll turn the dial to see where we are in the first quarter coming up here very soon. So on the first batch of information regarding employment, we go back to last Friday's release, which included the new non-farm payrolls for the month of March 2026, where new non-farm payrolls came in at 178,000, which was pretty strong, a little bit stronger than expected. Now this makes up a little bit for the decline in February, which was roughly minus 130,000 new jobs. So again, as the months get a little choppy here back and forth, we'll lead to see if this is a little bit of a slowing. were just choppiness in the labor market. Also in that same report, the overall unemployment rate went down to 4.3% for the month and remains fairly stable. Moving to this week, we got the weekly unemployment claims report that came in at 202,000 for the week ending March 28th, and that number continues to remain very stable. So we continue to be in this low hire, low fire environment, which again is uncertain for business owners to hire people, but also wanting to retain their current employee staff. The second batch of information is related to inflation and comes in two different forms. The first one came out yesterday known as PCE inflation or personal consumption expenditures measure of inflation, which is the preferred measure by the Federal Reserve. And it's still a month behind, folks. So that is only for the month of February 2026. Overall, PCE inflation came in at an annualized rate of 2.8%, and core, excluding food and energy, came in at 3%, again still elevated and above the Fed's preferred target of 2%. In addition, because it's behind by one month, please note that this information through February does not contain any of the inflationary information that might be related to oil from the Iran war. Also, just this morning, we got the CPI, or Consumer Price Index, measure of inflation, which does include through March. And so we'll talk about that with our panel and what those two inflation reads mean with regard to Federal Reserve policy. And the third item to discuss is more about the market and the positive momentum we saw earlier in the week with about a 2.5 to 3% gain in one day after the ceasefire was announced. So the market responded pretty positively in that regard. We're here through the end of the week. We'll get that recap from Steve. So with that, George, we'll start with you with your reaction and update on what's happening in Iran, as well as your reaction to the economic data. And as we use the Gulf analogy, George, there are a lot of hazards out there in terms of uncertainty, whether they're sand traps or water hazards or just a lot of rough. We seem to have a lot relative to the economy as well. whether it's inflation or Iran or oil or all the above. So when we try to hit that ball down the middle of the fairway, George, what are your thoughts on the overall economic environment?

George Mateyo [00:05:51]

Well, when I tee it off, Brian, it's never down the middle, but I appreciate the metaphor nonetheless. I think, you know, there's probably a lot of things we could talk about this morning, frankly, a lot of cross-currents economic-wise and geopolitical-wise for sure. You know, kind of starting though. From just what we see from the economy, you mentioned the fact that inflation has popped up a little bit, and that's probably not too surprising given what we've seen, but the numbers are pretty big. You can't ignore them. You see gas prices, for example, on a year-over-year basis up 20%. Month-to-month, they're 20%. So if you annualize that, that actually kind of extrapolates out to something close to 100%. But again, we're not going to see that hopefully sustained, we hope. That's probably the best thing we can kind of point to, so they might start to come down a little bit. And there's some other things that suggested maybe if you kind of strip out the noisy energy sector, it reminded me actually when we started talking about core inflation versus headline inflation. And of course, core inflation strips out energy prices and food prices because, well, they matter a lot, but I guess they're volatiles we've seen this morning. But I think it's fair to say that that was actually a policy that was instituted, I think, back in the '70s, coincidentally enough. Anyway, all that being said, I think we've started to see inflation at the core level. So again, if you strip out some of the noisiness with respect to energy prices, you've seen inflation somewhat moderate. I think there were some interesting things beneath the hood, though, that bear some monitoring. Housing inflation, for example, is still somewhat sticky, and that's kind of been a persistent issue for some time now. Not sure exactly how to read through that, and I think it might actually kind of bounce around a little bit here in the next few months or two. And then similarly with another thing that was kind of interesting to me, if you look at some of the inflation with respect to computers and technology actually kind of moved up a little bit. And again, maybe that's just AI that's kind of starting to kind of ripple through some of the broader economic readings. So again, inflation kind of a mixed bag. I think it's starting to kind of stabilize a little bit. But again, we've got the shock right now from the oil sector that's going to be with us probably for at least another month or two, if not more. The other numbers this week that were notable has to do with the overall labor market. Again, that's one thing we're watching very closely to understand if the Fed would be more concerned about a slowdown in jobs and so forth. The unemployment claims that we watched pretty closely did tick up a little bit. But again, I think there might be some noisiness with that too. So all of that, I think the economy is kind of in okay shape right now. It's kind of processing as best as it can some of these shocks right now that we're seeing. And again, probably these shocks that we're seeing right now will probably be with us a bit longer. So on that side, again, the real headline, of course, this week had to do with a ceasefire or the potential of a ceasefire. Again, we'll maybe know a lot more after this weekend once negotiations really take hold. Hopefully, they kind of play out. Again, nobody really knows. There's frankly a lot of unknowns that are still in front of us, and we just don't know exactly what might happen next. So it's going to be probably more volatility than anything else in the near term as we understand kind of what happens. in the next 30 to 60 days with respect to ceasefires and some of those things. I want to point out, ceasefires themselves can go on for quite some time. We had, for example, a negotiation that lasted over two and a half years, the last time the United States was involved in some type of negotiations with the Middle East. I think it's fair to say that we started to think about if this war is coming to some next stage, maybe it doesn't include the end, but maybe if it is getting closer to some resolution, we should probably start thinking about what are some of the longer-lasting impacts. And in my view, I think there's a couple of things to point to, one of which has to do with the fact that maybe interest rates might remain a little bit higher for longer. And also along with that, we might see maybe the dollar be a little weaker. The dollar actually was pretty strong in the last month or so, rising about 0.5% or so, which is a pretty decent move by currency standards. But I do think that maybe at some point that might weaken a little bit. Conversely, though, rates might be somewhat higher for longer in the sense that maybe there's maybe concerns about just the sheer amount of spending that's actually been associated with war, the ongoing indebtedness of this country, and other things that cause maybe central banks to be somewhat on hold. So again, those are some things that I'm thinking about at one level. Steve, if I think about your world, think about equities, for example, we've seen energy prices, of course, help energy stocks. That's actually been beneficial. I don't know if you've got a view on that. And also, maybe your thoughts on maybe kind of where oil is headed in the near term based on some of these easing of tensions in the Middle East. Any thoughts, Steve?

Steve Hoedt [00:10:15]

Yeah, George, to your point about the long-term impacts of this, I think the one thing that has become very clear to both myself and the markets is that the importance of the Strait of Hormuz will never be higher than the day prior to the onset of this conflict. in terms of the flow of oil, because what's going to happen is, and you're already seeing the discussions about it, infrastructure projects are going to happen all across the Middle East to give people options for distribution of oil in the future. So the Kuwaitis are talking about putting a pipeline over to the Red Sea through Saudi Arabia. The Saudis are talking about doubling the east-west capacity on the pipeline that they already have to Yanbu. The Omanis and the United Arab Emirates are talking about another pipeline to go across over to the Arabian Sea. So, you know, and the Iraqis too, they have a pipeline, but it kind of fell into disrepair and they're talking about refurbishing that goes to the port of Sahan in Turkey. So, you know, basically I just laid out four or five major infrastructure projects that have the potential to divert energy away from the Strait of Hormuz to other to other avenues that are not under the potential control or influence of the Iranians or anybody else who wants to charge a toll to go to go across the strait. So I don't think this stuff is going to happen instantaneously, but I do think that it's going to happen because you simply can't have And in my view, and I think across the Middle East to have have one country or a couple of countries having the ability to basically hold the global economy hostage because of the the fact that 20% of the the flow of energy flows through a six mile stretch of the Strait of Hormuz. So that to me is going to be the biggest impact from this, that there's going to be Change the global energy markets going forward Three to five years from now. It's going to look very different and and while the strait will remain important It's not going to ever be as important as it was before and that probably is going to be a big shock to people who think that you know, they I think that the from a geopolitical perspective that the idea that the the strait could be closed was an untested theory and Now it is a completely tested theory And so I think that you're going to see adjustments based on that.

Brian Pietrangelo [00:13:03]

So Steve, with that, what are your thoughts as we get into the start of Q1 earnings for 2026? Any preliminary reads?

Steve Hoedt [00:13:11]

So earnings have been great so far, but at the end of the day, the market hasn't cared. And the reason for that has been this move higher in real interest rates driven by the inflation situation. And we need to see real rates move lower for us to be able to see PE multiples expand again. Essentially, what happened is while earnings numbers have gone close to $340 for the S&P 500, which is up sharply from where they were at the beginning of the year, up closing in on high single digits already this year, making it very likely that we're able to eclipse what were very aggressive numbers coming into the year, which were like 14%. We could end up doing 16% this year, which would be amazing. I think that what you've seen is you've seen the market multiple collapse from 22 down to 18 and a half, 19. And there's been some stickiness there in terms of not wanting to bounce back higher yet. And it has everything to do with where real rates are. Because if you look, there's a historical, a very high historical correlation between real rates and where the B multiple is willing to go. So I think that we'll have a good earnings season, but guidance is kind of going to be mixed probably because of the economic impacts of this situation in the Middle East and changes to consumer behavior because of having to shift around dollars. But honestly, I think you're going to see largely the street give companies a get out of jail free card for this quarter because of that. On the guidance, I don't think it's really going to matter all that much. This is a macro driven market right now, quite honestly.

Brian Pietrangelo [00:15:10]

Yes, Steve, makes sense. Thanks for those comments. And speaking of real rates, it's a good segue to bring a special guest into the podcast, Tim McDonough, our Director of Fixed Income Portfolio Management on the tax exempt side, which is also known as municipal bonds. So Tim, what's your take on what's happening in the overall environment and some of the underlying themes within the municipal bond market?

Tim McDonough [00:15:31]

Thanks, Brian. Yeah, it's been an up and down year for the muni market. If we were filling out a golf scorecard, it would be birdie, birdie, triple bogey. After a strong January and February, which saw the Bloomberg Muni Bond Index up 2.2% for the year, the index dropped 2.3% in March. Yields soared higher across the Muni curve, but especially the 7- to 10-year portion, which saw yields up 60 basis points in just one month. A reason for the underperformance of Munis relative to treasuries for March lays with the Muni-to-Treasury ratios. After a strong January, muni to treasury ratios came below 60% in the first 10 years of the yield curve. So, once we started to see a sell-off in treasuries throughout the month of March, munis surpassed them. And a 10-year muni ratio went from 68% at the beginning of March to 78% at the end of the month. So, where we are right now is that ratios have gone up to a value that we would consider fair. They're not rich, not cheap, but kind of right in the middle of the fairway. And we already have seen a bit of a rally just through the first 10 days of April. Muni yields are down approximately 20 basis points in that 7 to 10 year portion of the curve. There are some structural headwinds that the market does face, though. We are fond of the phrase, beware of the ides of March in Muni-land. This is a period of the year where we see reduced number, total value of bonds, maturing and coupon payments being made. So there's a supply demand imbalance as We have fewer bonds maturing and making coupon payments while new issuance continues to surpass that. So we've got less demand, more supply. We would expect this to change right around the June to July timeframe, which is when we see a larger supply of coupon payments and bonds mature. There has been steady demand with municipal bond inflows into funds. Year-to-date, we've had $28.3 billion come into mutual funds and ETFs. And while that is the second highest year-to-date number on record, we still have to travail these winds for the next few months until we start to see that increased number of bonds and coupon payments coming through. I'll pass it back to you.

Brian Pietrangelo [00:18:40]

Awesome. So to give a finer point for some of our listeners who are not as experts as you are in the muni bond market, when we talk the treasury muni ratio, we're talking about the opportunity for investors who have high taxable income to make the decision between buying a taxable bond like a treasury versus a tax exempt bond like a muni. Just put a finer point on that with the ratio, Tim, to explain to our audience what that means.

Tim McDonough [00:19:06]

Yes, so, it's pretty easy. If a muni to treasury ratio is above 60%, it means the taxable equivalent yield of your tax-exempt muni is higher than a treasury. Whereas once we see those ratios get below 60%, your taxable equivalent yield for your muni is actually below a treasury, in which case you're just better off buying a fully taxable bond, such as a treasury. So again, where we are right now, we would say that munis are fairly valued relative to treasuries. They're not prohibitively rich, but they're also not prohibitively cheap. They're actually not advantageously cheap as well.

Brian Pietrangelo [00:19:52]

Great. Thank you, Tim. And any final remarks, George, as we close the podcast, just for our listeners.

George Mateyo [00:20:00]

Enjoy the masters. Spring is upon us, hopefully, and we can just probably benefit from a little bit of warmer weather, frankly. So I'm looking forward to getting outside and probably just kind of walking around a little bit. So that's my big advice. Aside from that, there's going to be a lot of noise this weekend, potentially, too, geopolitically. And as best you can, try to tune that out. I think it's going to be a lot of noise, but I think we are making progress, hopefully. As Steve pointed out, I think it is kind of one of these moments where maybe there's two steps forward, one step back that we have to navigate. There's still a lot of uncertainty. So again, we would really urge caution, probably be over-diversified, and that's always our kind of tagline. But I really think diversification is going to matter most going forward in this uncertain environment.

Brian Pietrangelo [00:20:45]

Well, thanks for the conversation today, George, Steve, and Tim. We appreciate your insights. And thanks to our listeners for joining us today. Be sure to subscribe to the Key Wealth Matters podcast. through your favorite podcast app. As always, past performance is no guarantee of future results, and we know your financial situation is personal to you. So reach out to your relationship manager, portfolio strategist, or financial advisor for more information, and we'll catch up with you next week to see how the world and the markets have changed and provide those keys to help you navigate your financial journey.

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Brian Pietrangelo [00:00:00]

Welcome to the Key Wealth Matters weekly podcast, where we casually ramble on about important topics, including the markets, the economy, human ingenuity, and almost anything under the sun, giving you the keys to open doors in the world of investing. Today is Friday, March 27th, 2026. I'm Brian Pietrangelo, and welcome to the podcast. Before we begin today's podcast, I'd like to let everybody know that we are having a national client call next week on Wednesday, April 1st at 4 P.m. Eastern, talking about managing wealth during the fog of war, AI disruption, and an uncertain economic path. You might have received an invitation in the e-mail, but if not, reach out to your KeyBank relationship manager or KeyBank contact to see if you can get an invite to the webcast. Again, next week, Wednesday, April 1st at 4 P.m. Eastern. With that, I would like to introduce our panel of investing experts here to share their insights on this week's market activity and more. George Mateyo, Chief Investment Officer, Steve Hoedt, Head of Equities, and Rajeev Sharma, Head of Fixed Income. As a reminder, a lot of great content is available on key.com slash wealth insights, including updates from our Wealth Institute on many different subjects, and especially our Key Questions article series addressing a relevant topic for investors. In addition, if you have any questions or need more information, please reach out to your financial advisor. Taking a look at this week's market and economic news, the economic release calendar is extremely light. We only have one update to give you and that is on the initial and continuing unemployment claims for the week. We normally only report on the initial claims which came in at 210,000 for the week ending March 21st and that is very stable so that is good news in the employment front. On the continuing claims side, we have data that ends March 14th at 1.819 million, and the good news there is this is the lowest level that we've seen in almost two years on continuing claims. Now some of the data that we usually receive in the final week of the month has still been delayed due to the government shutdown that occurred last quarter in the fourth quarter of 2025. So by the end of April, we should be all caught up with the news releases back to their regular schedule. We will certainly talk to Steve about what's happening in the stock market this week and what's going on the entire month. Get an update from Rajeev on what's happening with the bond market. But let's first start with George with a little bit of a recap on what's happening with the Iran conflict and how it's affecting the overall markets. George?

George Mateyo [00:02:44]

Well, Brian, I think just stating the obvious, it's kind of more and more apparent every day that the fog of war continues to be quite thick. And we just haven't really quite seen major resolution just yet, despite the president's suggesting that one might be coming. And it's been an interesting week in the sense that we started, you know, this time last week when we were recording the podcast, there was some talk about a pretty dire scenario unfolding. And then, of course, sometime late Sunday, early Monday morning, that was reversed a little bit. We kind of went from the brink. We kind of were staring at Obliteration Day, perhaps, maybe just to kind of use the metaphor from last year's Liberation Day. But thankfully, we walked back from that. But I think what's most notable to me is that this war probably has many dimensions that we just need to appreciate in the sense that what we want, perhaps, from this outcome is probably different from what the Iranians want and also really what the Israelis want. And I think that's an important consideration for us to consider. Frankly, right now, I think the Iranians are just probably very content to let this drag out as long as it possibly can. I mean, their motivation right now seems to be survival. Conversely, the Israelis want complete and utter regime change. So there's very diametrically opposed views on terms of what success looks like. And then we're now kind of in the middle of this, perhaps, to some extent, because we probably don't want either. or at least maybe we'd be willing to be less accommodated towards certain things as well. So it just strikes us, we've kind of talked about, I think, on certain things we've published. I think we had a deck out earlier this week that talked about the fact that there really has been no, there's no easy way out right now, and that's somewhat problematic, and the markets are gonna have some time to digest that, unfortunately. You know, we've been thinking for quite some time too that the markets have been rather calm about this entire affair. Most people think this would be a short-lived conflict. I think it's probably gone on a little longer than we would've thought, but we definitely didn't think this would be a days-long event. We might thought this maybe would be a month or two, and hopefully it doesn't last longer than that. But I guess we'll have to see. There's still a tremendous amount of uncertainty in this environment. And I think to some extent, markets, participants in general will probably at some point find valuations attractive. We have actually seen not a big slippage in overall earnings degradation, meaning the earnings line has actually held it pretty well for most companies. It might be a little bit too early, Steve, for us to really kind of wave the white flag and say all clear in terms of really earnings quality. But nonetheless, right now, we've seen a pretty big rerating of stocks in general, meaning multiples of them down, but earnings haven't just yet kind of flinched. So as you think about kind of what happens next, of course, earnings will start kind of leaking out probably next week and the week after. Are you pretty confident or are you just kind of optimistic about earnings? Or how are you thinking about the earnings environment in this backdrop right now?

Steve Hoedt [00:05:35]

So, George, to your point, we've actually seen a pretty healthy acceleration in earnings year to date. So we came into the year and forward 12-month earnings expectations were $310 for the S&P 500. As we sit today, we're just shy of $335. So the market's tacked on $25 worth of earnings and expectations on a forward 12-month basis in less than three months. So that's not insignificant. So clearly, there's plenty of earnings momentum behind the market from a fundamental perspective. To your point, though, that we have seen a repricing of the value of those earnings coming down. We came into the year with a little over a 22 multiple on the market, and we sit a little north of 19 today. So we've taken three turns out. That said, at the liberation day lows last year, we were at 18 times. So, you know, when you get into these periods of uncertainty, it's very clear that the market takes down takes down valuation and tries to sort things out later. Right now, we don't see anything that really tells us that there's going to be some kind of a significant turn in earnings. I think our mantra for a while has been as long as the earnings line continues to go up, it's really hard for bad things to happen to the market. And while we do believe that to be true, when we talk about bad things, we mean like the nasty bear markets that people think about where you think the market goes down 30%, 35% peak to trough, right? That does not mean that the market can't have a 10% or 15% correction. And when you look at the price action today, continue to make new 65-day lows, three-month lows, market trading below the 200-day moving average. There's also an old saying among technicians in the market that nothing good happens below the 200-day moving average. And I believe in that too. I think that you look at the current expectations the market has, and we're just not to a place where things have gotten washed out. The selling has been very orderly. There's been no chaos here, to be honest. And when you look at things like put call ratios, you look at number of new lows that the market has made or the stocks have made in the last month. We're just not at levels that show that things have gotten washed out here yet. So it feels like we're at the mercy of the macro. And macro uncertainty is going to be a reality until we get through this Hormuz crisis. And I think we can try to game theory it out. And I think if you look at the political realities here domestically in the US, it really makes sense for them to try to get this resolved by the end of April to early May at the latest so they can pivot domestically. But the problem with that is that, to your point earlier about Iran and Israel having differing interests, I'm not sure that the White House controls when this ends. And that's kind of the problem and you've got the market moving to price in rate hikes at this point. Now, we came into the year and we were pricing in two rate cuts for 2026 and the market now has got half of a hike in as you look at the end of the year. So that means that the 50-50 shot that there's actually a rate hike between now and the end of the year. It's a big narrative change, George, big narrative change.

George Mateyo [00:09:21]

So I want to get Rajeev into that conversation in a second, but before I move over to him, Steve, I thought I should ask you, one thing that we've been talking about as well has been this broadening out trade, right? Where we thought that the market, coming in this year, we thought the market would essentially broaden. We'd see more stocks than just a handful of Magnificent Seven, as they're known, and see more participation amongst mid-cap, small-caps, cyclical companies, value stocks, however you want to describe it, but things beyond the MAG 7. Do you think that still holds? Do you think there's other opportunities that people are overlooking? Or how do you think about the overall, I guess, internals of the market, whether just the broad indices?

Steve Hoedt [00:09:57]

So when you look at the performance of the MAG 7 this year, there's a real bifurcation. It's very clear that the stuff that's been going on with the disruption from AI and software is real, and it's had significant impact on names like Microsoft, that's typically been a defensive and it should be benefiting in a tape like this. And it's definitely not like it's it's down significantly year to date. You look at company a company like Meta, which has been spending a lot of money and not getting a lot of bang for their buck. They that that stock has turned materially lower. And when you look at the fact that 35% of the S&P 500 is still tied up in these mag seven names, It's very hard for the headline index to make a lot of headway when those names are having a hard time. On the flip side, you look at the energy sector year to date, and it's got a positive number next to it, right? So there are areas of the market where there still remain opportunity. opportunity. Our belief is that you still want to stick with the cyclicals here, whether that's energy, materials, industrials, banks, and financials, because we don't think that this macro is going to persist for a very long time, but very clear. And prior to the macro coming to the fore, that's what we had seen is market leadership. There had been a definite change in market leadership tenor since last October. You know, I think that we think that that's going to reassert itself on the other side of this.

George Mateyo [00:11:34]

Great, Steve, thanks. So you mentioned, Steve, just this significant repricing with respect to interest rate expectations, right? Where can the market coming in here, that we'd get a couple of cuts. And from the Federal Reserve, we see interest rates being somewhat of a stimulus kind of effect where lower rates would probably encourage more borrowing, it would encourage more lending. Right now, it seems like that's reversed, Rajeev, where now, as Steve mentioned, we've kind of pivoted quite dramatically from a few rate cuts to maybe a rate hike sometime later this year. At the same time, of course, we have probably a new leadership change at the Fed that's still in front of us that we have to get through. We haven't even kind of really broached that in a while. What are your thoughts, Rajeev, with respect to the bond market, which actually hasn't been all that great either this year? I mean, it's not done terribly, but it's really been you know, somewhat kind of hurting as well as we've seen this rotation away from rate cuts to rate hikes.

Rajeev Sharma [00:12:28]

Well, yeah, George. I mean, the bond market has a few things not going for itself in the last couple of weeks, almost a trifecta, if you will. We've had a very lackluster front-end Treasury options this week, provided more upward pressure because of oil prices, overall curve flattening, which remains the pain trade for many investors right now. The three- to seven-year yields have risen 10 basis points in just one day alone on Thursday. Then you throw in there the Treasury auctions. You had the seven-year auction that did not do well, just like the two-year auction and the five-year auction that preceded it. Because investors really do not feel that we've reached the high points in yield right now on the Treasury curve, and they're demanding more yield to participate in those auctions, and that's leaving dealers holding the bag. So you really need higher interest rates to attract investors in this market. And the message is clear. The risks of a prolonged war with Iran will further flatten the yield curve. If oil prices go up, the yield curve flattens. If oil prices come down, the yield curve will steepen. And eventually, everybody's feeling that the oil prices will directly impact consumer prices. And I think that's really bad for not just the markets, but the Fed as well. Because the Fed has made it very clear, they had their FOMC meeting just about a week and a half ago. And in that meeting, they said, okay, we have the dot plot, we have one rate cut this year. The market seemed to be okay with that because that's what they said back in December. But now the narrative is shifting to Steve's point, and you're seeing the market expectations on your screens right now that basically say that there could be a rate hike, a 50% chance of a rate hike by the end of the year. And you're seeing more and more Fed members start to gravitate towards the fact that inflation is everything. So if inflation is everything and inflation starts to move up because of oil prices, you're going to see this narrative even catch more steam. And you could see this becoming part of the norm where investors start to anticipate rate hikes. So this is a completely different narrative that we saw just a few weeks ago. A few weeks ago, when we would put up those market expectations, we were looking at two rate cuts. Even in the beginning of the year, I think many felt that the rate-cutting campaign is going to continue in the first half of this year, which it has not. And so I think this is going to be extremely important for the Fed. Now, I mentioned those auctions. Typically, front-end auctions each month lead to seasonal steepening of the yield curve, but we did not see that this week. So if oil prices move up, again, you have a treasury curve that's going to flatten. And that's taking a lot of investors by surprise because the steepening trade was on there for a reason. You were betting on the fact that the Fed would cut rates. You were betting on the fact that the front end of the yield curve would move lower, and it would steepen the whole Treasury curve. Now what's happening is those bets about rate cuts are going away, so investors are starting to get a little less excited about the front end of the curve, and you start seeing the front end of the curve actually move higher. We've had four consecutive weeks of yields moving higher across the curve, and Fed Chair Powell himself came out, said if inflation doesn't come down, you're not getting the rate cut. So right now, if you look at the Treasury yield curve, you see the two-year is up almost 50 basis points this month. These are big moves. And the cost of war is affecting the 10-year Treasury note. That's up about 45 basis points this month alone. So this has all led to a rise in volatility in the bond market. If you look at the move index, which is the best proxy for the bond market volatility, we are at the highest level since the tariff war with China. And now if you look at credit spreads, what's interesting here, credit spreads, we have seen credit spreads for investment grade compress about five to eight basis points this week. They had reached their peak on March 16th. Now this is in spite negative news that we've seen in the headlines. Credit is outperforming underlying benchmarks. The sell off in credit that started in the late part of January, ended about two weeks ago, but could likely resume if You start seeing systemic risks start to come up from the private credit industry or this issue of extra supply that's coming to the market from the AI boom. So these AI hyperscalers need to come to market. That extra supply did push credit spreads off their multi-year lows that we saw at the end of 2025. So I think all of these factors are going to be extremely important. You're not seeing investors rush to say these are great opportunities because yields have moved higher. With the uncertainty of how long this war goes on, yields can continue to move higher from here. So investors really are not excited about the market rate.

Brian Pietrangelo [00:17:01]

Rajeev, interestingly enough, you talked about the yields backing up. Also, mortgage rates accordingly. So mortgage rates are up about 40 basis points also on the 30-year, up to 6.38%. So it continues to be a little bit of a stickler for the housing market in the overall fixed income arena. Any thoughts?

Rajeev Sharma [00:17:18]

Yeah, just about two weeks ago, I think people were getting pretty excited about the housing market. Yields had started to tick lower, and here we are again, yields moving higher, all related to the Treasury curve, all related to yields going higher. I think this is going to be very important. And again, to Steve's point, if there's no call by the end of April for this war to end, you're going to see those yields, those mortgage rates go even higher. And I think that's a big problem for the market. So if you're thinking about affordability and you're thinking about midterm elections and what we have to do domestically, none of this is adding up to anything good on that front. So, I mean, I really don't see how, what would be the catalyst for yields to go lower from this, unless we have a resolution on this war.

Brian Pietrangelo [00:18:03]

Steve, one final question for you, and then we'll close with George. Gold down 16% in the month, doesn't seem to be correlated to risk off with the war. What do you think?

Steve Hoedt [00:18:14]

Yeah, it's the same thing that we've talked about here before, Brian, that when something doesn't behave the way that you think it should be, that you should pay attention to it. And when you see what has happened with gold, like gold traditionally would be seeing safe haven flows, right? And you're not seeing that. just tells you, in our view, that things had gotten a bit too overcooked with gold to the upside on the move that we saw here over the last couple of years. where effectively we doubled in terms of the price of gold. So while over a multi-year time horizon, we continue to like the barber relic, I think that there's nothing that stands in the way of this thing pulling back to 4,000 or 3,500. And that would be entirely normal within the context of a long-term multi-year bull market. When you look at these things historically, Back in the late 70s, there was also a period where gold ripped to new highs and then had a 40% drawdown before it ripped again to another set of new highs into the early 1980s. And so this could be the same kind of a move this time. You get pullbacks after you have these kind of explosive blow-off moves, and that's kind of what we think is going on here.

Brian Pietrangelo [00:19:36]

Thanks, Steve. And George, final thoughts for our investors in this time of uncertainty and volatility?

George Mateyo [00:19:42]

Stay focused, stay calm. I mean, it is going to be a wild ride that we've been on and that's going to continue. Brian, as you know, these things don't take, again, these things don't settle down in a matter of days. But I think over time, I think as Steve pointed out, Rajeev mentioned as well, there is value being created. I mean, we've seen Now, for example, the overall multiple of the S&P 500, correct, well more than earnings would suggest they should, I guess. We've seen a significant rerating of stocks, not to say that they're categorically cheap, but they are probably cheaper. There are probably some values amidst the rubble. Probably shouldn't say that in the time of war, but that's really kind of an app maybe description. At the same time, when yields back up, as Rajeev pointed out, that's actually providing some value in fixed income too. So this is going to take some time, as we've suggested, We've actually also suggested maybe if you have cash in the sidelines, it's not a bad time to just keep that cash dear, but at the same time, look for opportunities. So I think at some point, the one thing we know for sure, we don't know how this is going to end. We don't know when it's going to end, but we know it's going to end at some point. And I think we've seen many conflicts throughout our history. Unfortunately, this is just another one of those tragic events, but eventually it will end. And I think at that point, it'll probably be too late to buy in a big way, but you want to start nibbling along the way as the conflict continues to rage on. So uncertainty, for sure, unsettling, most definitely. But ultimately, I think things will resolve and things settle up, as we say. Things don't settle down, things settle up, meaning markets tend to move higher over time. And I think that's going to be the same case this time around as well.

Brian Pietrangelo [00:21:18]

Well, thanks for the conversation today, George, Steve, and Rajeev. We appreciate your insights. And just another quick reminder that we'll be having the Key Wealth National Client Call next week on Wednesday, April 1st at 4 P.m. Eastern. We'll be discussing managing wealth during the fog of war, AI disruption, and an uncertain economic path. So please join us. It will be a robust and relevant and timely conversation with our team. In addition, for a program note on next Friday, so next week when we normally have the podcast, we will be off for the holiday and we'll rejoin with you in the following week. So thanks to our listeners for joining us today. Be sure to subscribe to the Key Wealth Matters podcast through your favorite podcast app. As always, past performance is no guarantee of future results, and we know your financial situation is personal to you. So reach out to your relationship manager, portfolio strategist, or financial advisor for more information, and we'll catch up with you in two weeks to see how the world and the markets have changed and provide those keys to help you navigate your financial journey.

Disclosure [00:22:28]

We gather data and information from specialized sources and financial databases, including, but not limited to, Bloomberg Finance LP, Bureau of Economic Analysis, Bureau of Labor Statistics, Chicago Board of Exchange Volatility Index, Dow Jones and Dow Jones NewsPlus, FactSet, Federal Reserve and corresponding 12 district banks, Federal Open Market Committee, ICE Bank of America Move Index, Morningstar and Morningstar.com, Standard & Poor's, and Wall Street Journal and wsj.com.

Key Wealth, Key Private Bank, Key Family Wealth, KeyBank Institutional Advisors, and Key Private Client are marketing names for KeyBank National Association, or KeyBank, and certain affiliates, such as Key Investment Services LLC, or KIS, and KeyCorp Insurance Agency USA, Inc., or KIA.

The Key Wealth Institute is comprised of financial professionals representing KeyBank and certain affiliates, such as KIS and KIA.

Any opinions, projections, or recommendations contained herein are subject to change without notice, are those of the individual authors, and may not necessarily represent the views of KeyBank or any of its subsidiaries or affiliates.

This material presented is for informational purposes only and is not intended to be an offer, recommendation, or solicitation to purchase or sell any security or product or to employ a specific investment or tax planning strategy.

KeyBank nor its subsidiaries or affiliates represent, warrant, or guarantee that this material is accurate, complete, or suitable for any purpose or any investor. It should not be used as a basis for investment or tax planning decision. It is not to be relied upon or used in substitution for the exercise of independent judgment. It should not be construed as individual tax, legal, or financial advice.

Investment products, brokerage, and investment advisory services are offered through KIS, Member FINRA, SIPC, and SEC-registered investment advisor. Insurance products are offered through KIA. Insurance products offered through KIA are underwritten by and the obligation of insurance companies that are not affiliated with KeyBank.

Non-Deposit products are:

NOT FDIC INSURED • NOT BANK GUARANTEED • MAY LOSE VALUE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL OR STATE GOVERNMENT AGENCY

Brian Pietrangelo [00:00:00]

Welcome to the Key Wealth Matters weekly podcast, where we casually ramble on about important topics, including the markets, the economy, human ingenuity, and almost anything under the sun, giving you the keys to open doors in the world of investing. Today is Friday, March 20th, 2026. I'm Brian Pietrangelo, and welcome to the podcast. today marks two types of seasons. The first season is the end of winter and the beginning of spring on March 20th today. So good news for those that are on the East Coast and the top of the market getting a lot of winter and snow this year. Other places in the country are getting pretty hot. And this is also the week of the second season to mention, and that is the season of March Madness as it is known for the NCAA men's college basketball tournament along with the women's tournament. And so it's a fantastic time of the year. What a great, exciting time for both seasons. It is my favorite time of the year for basketball and also a shout out to all the teams that made the tournament and some of the upsets for the Cinderella teams making some good progress this early in Thursday and Friday of this week. With that, we've got a little madness in the stock market this week for the past couple weeks, given the conflict in Iran. Again, all due respect to our military and the casualties that are being affected on that area. And from that perspective, we always take it into consideration. So with that, I would like to introduce our panel of investing experts here to share their insights on this week's market activity and more. George Mateyo, Chief Investment Officer. Steve Hoedt, Head of Equities. Cindy Honcharenko, Director of Fixed Income Portfolio Management, and David Harvin, Senior Lead Research Analyst of our Multi-Strategy Research Team. As a reminder, a lot of great content is available on key.com slash Wealth Insights, including updates from our Wealth Institute on many different subjects and especially our Key Questions article series addressing a relevant topic for investors. In addition, if you have any questions or need more information, please reach out to your financial advisor. Taking a look at this week's market and economic activity, we've got three key updates for you from economic release perspective, and then we'll talk about the market. Up first, we've got industrial production earlier in the week came out at a positive 0.2% for the month of February, which was good news because it's the 4th month in a row that we've had positive activity in industrial production in the market. Up second, we have the initial unemployment claims report, which came out at 205,000 for the week ending March 14th, which continues to remain stable, which again is a good sign as one of the indicators in the labor market. And up third, we also got an inflation report from the producer price index measure of inflation, which was much hotter than expected for the month of February, month over month, up 0.7%, which you got a couple decimal points before in terms of an increase, what we were expecting. And then year over year, that translates into a positive plus 3.4%, which again continues to run hot. These numbers report into the PCE inflation report that we continue to watch, and it's the Fed's preferred measure, which leads us to the 4th item for this week, which was probably the most notable, which was the Federal Open Market Committee meeting, where the Fed decided to leave rates unchanged and had a pretty good update on their summary of economic projections. In addition, Chair Powell had a number of interesting comments during the press conference, so let's go right to Cindy Honcharenko to get a recap of the Federal Open Market Committee meeting this week. Cindy?

Cindy Honcharenko [00:03:39]

Well, Brian, the Fed didn't change rates, but they sent a very clear message. They're definitely not ready to cut, and they're not convinced inflation is under control. So if anything, this meeting was about patience and a reminder that the last mile of inflation might be the hardest. The Fed held rates steady at three and a half to three and three quarter percent, continuing its pause. There was one dissent, Stephen Miran, who preferred a 25 basis point rate cut. reinforcing that there's still some internal debate about the appropriate path. Importantly, the Fed did not signal an imminent pivot to cuts. Moving to the statement, the statement reinforced that the economy is still holding up. Growth remains solid. The labor market is still firm, and inflation is still above target. Growth for 2026 was revised higher to around 2.4%. Inflation was also revised higher, now closer to 2.7%, and unemployment remained stable at 4.4%. So, what you have is an economy that's still growing, but not in a way that gives the Fed confidence to cut. Looking at the dot plot and the SEP highlights, the median still points to no cuts, but not aggressively. The dispersion was 7%. Participants were at 3.625%, seven were at 3.375%, and a small group of clusters below that 3.375%. One participant, we know who that is, was as low as 2.625%. The longer run rate remains elevated. The dots didn't pivot, but they did spread. So, so far, no clear signal, and that seems to be the signal. Lack of conviction and policy path is still uncertain. The SEP, again, the GDP was revised slightly higher to 2.4%, and that's up from 2.2% in December. Unemployment largely unchanged for 2026 at 4.4%. Inflation still remains sticky. PCE for 2026 is at 2.7%, and that's up from 2.4% in the December SEP. And core inflation for 2026 is also 2.7% and drifting higher. So the economy isn't cooperating, but inflation isn't fully. Moving to Powell's press conference and trying to decode some of the things he said or didn't say, he noted that we're well positioned, meaning they're comfortable waiting but less certain. They remain data dependent, meaning we're not getting any forward guidance, and leadership uncertainty remains a factor. Regarding the Iran conflict, Powell acknowledged uncertainty on the overall effects to the economy, but currently not incorporated into the policy path for monetary policy. As far as Kevin Warsh and his confirmation with Congress, Powell was very standoffish on trying on giving a response to that, but he did offer that if Kevin Warsh was not confirmed by Congress by the time his term is up in May, that he would stay on pro tem as the chair, but he was not sure if he would stay on as governor once the chair was confirmed. As far as market pricing for rate cut expectations for 2026, markets are still expecting some easing, but the timing and magnitude have clearly shifted. And so what this means for investors is we're reinforcing higher for longer environment with increasing two-way risk. Front-end yields still remain attractive. However, rate cuts may come later than expected. Reinvestment risk might become relevant in 2026, and spread volatility could also increase. So positioning and flexibility matter. George, I'd love to get your thoughts, insights, interpretation of this week's FOMC meeting.

George Mateyo [00:08:06]

Well, Cindy, as you pointed out, there's a ton to digest there. I think that probably the biggest thing that we can all kind of recognize understand and maybe even empathize a little bit is the fact that the Fed is not in the driver's seat right now. I mean, they just kind of throw their hands up pretty much saying, we just don't know. And I think Powell said that himself where he said the effects of all that's happening right now with the world today, the impacts could be bigger or smaller. We just don't know, I think was his quote. And so I think that's probably a fair summary of what's going on. The Fed is really kind of operating in a really uncomfortable place right now in the sense that maybe they had some room to cut rates earlier this year with some of the weakness in the labor market, but they chose to pause. And we can't go back and change history. But at the same time, I think they're recognizing now that they can't really do much because inflation seems to be moving higher. Some of that could be temporary. Again, we just don't know because we just don't know how long the duration of this war in Iran is going to last. We don't know exactly what the impact from productivity gains that could offset that would be. There's just a ton of uncertainty right now. And they find themselves probably in somewhat an uncomfortable position because as we saw also this week, there's still a lot of divergences inside the labor market, which is a key thing they watch too. We saw, for example, the fact that layoffs have really not been moving higher, not much hiring either. So again, it's been this low fire, low hire environment for quite some time. And the overall job creation though is still pretty sluggish. I mean, there aren't a whole lot of new jobs being formed. in the overall aggregate in the sense of the economy. Some of that might be because of immigration policies. Some of that might be because of AI. Again, we just don't know. So frankly, there's just a ton of uncertainty out there. And the market's probably sensing that and not knowing exactly where to go. So the market seems to be kind of adrift because the Fed, I think, is as well. And that just creates probably more unease and more uncertainty as we think about what goes on next. So as the saying goes, “The fog of war is upon us, and now it's getting increasingly foggier”

Brian Pietrangelo [00:10:08]

Well, thanks, George and Cindy, for that recap. We've got a special guest with us today. David Harvin is going to join us. He is a senior lead research and analyst with our multi-strategy research team and covers a lot of ground, but specifically also covers private credit. Now, George, you had a great overview for our listeners last week with regard to what's going on in private credit. We're going to dive a little bit deeper in with David. So David, give you a couple of questions just to start off. Give a quick recap on what private credit is, and then we'll go to the other questions.

David Harvan [00:10:37]

Thanks, Brian, and great to be here. My first time on the podcast. As you said, I know George talked about the sector last week, and I thought I would quickly remind everyone just to demystify exactly what the sector is. And very simply, Private credit represents loans to private equity-backed companies. And over the past 15 years or so, due to regulatory reforms in the aftermath of the financial crisis, this lending activity shifted from the balance sheet of banks to non-bank lenders, namely alternative asset managers. And the asset class has become a material part of both institutional investor portfolios and more recently for non-institutional investors as well.

Brian Pietrangelo [00:11:30]

Great, David. Why is private credit in the news the last couple of weeks and what's the issue at hand?

David Harvan [00:11:36]

Great question, Brian. Given the expanded investor base, the asset class has attracted increased media attention. And so I thought it might be helpful to walk through a timeline of the recent events over the past six months or so that have led us to this point. And hopefully I can cut through the noise of the articles you may be reading to distill what really matters. The first headlines started in September of last year and were essentially focused on the occurrence of fraud at two companies, namely TriColor (Holdings) and First Brands (Group). And that really kicked off a series of comments, notably by Jamie Dimon of JP Morgan, remarking around potential cockroaches lurking in the credit sector. But these have really been idiosyncratic events. And while fraud always exists, it is extremely limited. And the risks were concentrated in two companies that were actually not private at all, but it nevertheless did spook investors. And then around year end, the next theme that took hold was related to AI and the recent developments in large language models namely Claude, which suggested even greater capabilities for this technology, and specifically those exhibited with regards to coding and building software, which rang some alarm bells due to the fact that information technology, especially software, is the largest industry exposure across these loans. So with regards to AI and potential software disruption, this is more of a fundamental issue that the market is wrestling with. Approximately 20% of private credit loans are in the software sector. This is higher than the public loan market, as well as the public equity and bond markets. However, much of the concern is only speculation at this point, given that we have yet to see any material degradation in the fundamentals of these companies with regards to key metrics such as revenue or earnings growth. Now, we do expect there to be winners and losers in the sector. Some of the winners may be focused on mission-critical services or have some regulatory barrier, or as cliche as it might sound, have built their client relationships and trust over many years, which cannot easily be replicated by a new entrance. The losers, on the other hand, are more likely to be seen in consumer-facing sectors, such as advertising or education. The third and final issue which came to the forefront last month and has continued here in March is the concerns regarding the ability for investors to redeem from BDCs (Business Development Companies) and interval funds, which invest in private credit loans. An attractive feature of these funds, in contrast to their institutional counterparts, is the ability to tender shares for repurchase at regular intervals. However, there are limits to the amount of redemptions the funds will provide. and these limits are being reached, which has caught some investors by surprise and attracted increased attention from the media. The term gates is being thrown around, but this really isn't the proper term. Proration is the better term to characterize what's occurring with unmet redemption requests, and the funds have predetermined the amounts that they will repurchase. And this is for the expressed intent of balancing the liquidity needs of a small group of investors with the broader interests of managing the fund for the remaining investors on an ongoing basis. But all investors will still receive partial proceeds from their redemption request.

Brian Pietrangelo [00:15:23]

Great, David. So as George talked about last week and as David just mentioned, for our listeners, private credit is really an investment opportunity that is used for high net worth individuals and institutions and is meant to be long-term. So we're talking 5 to 7 to 8 years of investment. And with interval funds, people are having the anticipation of being able to withdraw their money sooner than that. So we talk about, David, what a great opportunity for you to talk about the credit side of the risk, but now we also talk about the liquidity side, because it's really like a domino effect. If somebody wants to redeem their money, then other people want to redeem their money, and that goes down the domino. So ultimately, last but not least, David, what are your final thoughts on private credit?

David Harvan [00:16:05]

Absolutely, Brian. It's very much a liquidity issue versus a fundamental issue. And what I would say is the recent idiosyncratic events have led to what we view as an incorrect perception that there are systemic risks across private credits. Namely, AI disruption will have an impact. This will be felt across asset classes, but managers who are disciplined, who have longstanding processes should be able to outperform and generate excess return for their clients. We do believe that private credit will continue to outperform liquid credit. And while the asset class may pause here in the near term as retail investor flows trend toward withdrawals, we do expect to see a reversal as these fundamentals take hold into the future.

Brian Pietrangelo [00:17:00]

Great. Thanks, David. So that's a great segue when we talk about fundamental analysis of either private credit, private equity, or public equity, to go back to Steve to give your thoughts Steve, and what's happening in the market this week relative to all the things we've been dealing with for the last couple of weeks? A little bit of choppiness, some good news, some bad news, oil going up and down, a little bit around company fundamental analysis. Steve, what's on your mind this week with the markets?

Steve Hoedt [00:17:24]

Yeah, I was just chatting with one of my strategist friends on Bloomberg IB this morning. And you know, the market in one word is sloppy. It is kind of a mess. We spent a good chunk of the week this week, trying to put ourselves into a position to have a place where the market could rally from. We got down and we're in the neighborhood and we're below actually around the 200-day moving average. And market tried to get to a place where it could bounce, but that bounce failed over the last couple of days. As we sit this morning, We're about a percent lower. We're just above the November lows last year, which we're at 6521. We're at 6545 as we sit right now. I've mentioned here recently how this market is in a kind of a precarious position here because it had been a trend market, not a momentum market for the last few months. And now we're in a position where if we take out that November low, the market will have definitively lost trend. So that kind of opens a door to a potentially larger correction. Now, I'm not telling you that's going to happen, but I'm saying that the odds have tilted in that direction. And look, Given the way that the macro situation has evolved, I don't think anybody should be shocked that stocks are selling off here, right? There was some talk earlier this week that every day that the Strait of Hormuz is closed essentially results in about a $3 addition to the price of every barrel of crude oil. And that we're likely going to see that continue in that $3, $3, $3, $3 in crude oil until this conflict is resolved. because the only method that the global economy has to balance the deficit of 10 plus million barrels a day that have disappeared from global supply is by a demand destruction. And the only way demand destruction happens is through price. So, basically Asian consumers, because Asia is where most of that crude oil goes, have to get the message that they're not going to be buying as much crude. And that's going to do damage to the global economy. And as equity markets are pricing in the likelihood of higher inflation and slower economic growth over the course of this year than what we had thought of as little as six weeks ago.

Brian Pietrangelo [00:20:06]

Steve calibrated, for our listeners, I think oil, when I recently looked this morning, was around $95 a barrel, and it's been shooting up and down to 120 and down to 85, around 95. What are your thoughts on its growth and where do we start getting concerned?

Steve Hoedt [00:20:19]

Look, I think anytime you see crude oil historically have a move where it goes up 50% plus in a short period of time, it's concerning. You're in an area now where historically you've seen economic impact from prices, price movement. There's no two ways about it. And we're going to be continuing to deal with that over the coming months. The numbers that I've seen here lately are that we should probably expect a six-tenth of a percent hit to CPI in the next month, specifically because of the impact of crude oil prices. So to the earlier discussion about the Fed being concerned about inflation, like it goes directly to that, right? And the markets have moved very swiftly to price this in. In fact, if I look at my warp go on my Bloomberg screen this morning, we may actually be pricing in tightening later this year, not cuts because of the inflation situation. We've gone from having the market expecting cuts to taking cuts completely out of the equation, and now we're fractionally pricing in tightening. It's been an amazingly swift change in tenor And you go from, when you go from accommodation to tightening, the market doesn't respond well to that.

Brian Pietrangelo [00:21:48]

Great. So Steve, I've got two final questions for you, but before I do, we're looking at each other. You're wearing your Michigan State sweatshirt for March Madness, and I'm wearing my Miami of Ohio sweatshirt for March Madness. So we're going to cross our fingers and hope for good luck to those teams this week. But at the end of the day, there was a small drop in gold. Steve, did you have any commentary on that? And then last but not least, Nvidia had their conference this week and started some restarting of their manufacturing for chips in China. Doesn't seem like a lot of big news, but love your comment on it. So gold and then Nvidia.

Steve Hoedt [00:22:20]

You know, we'll take the Nvidia thing first. Like, I think it's just important to understand that they wouldn't be doing anything without the imprimatur from the administration on this kind of stuff. So I think it shows that there's a bit of a thawing in the trade relationship between the US and China, which in my view, over the intermediate to long term can be nothing but unabashedly positive for our markets. So that's the that's the main takeaway on that. Nothing specific to the company that I would say. I just think it's a macro call there. And then on gold, gold has been really funny because you would have expected gold to react like a safe haven with all the chaos that we've been having here lately. And I think whether it's in this forum or other calls that we have, I've pointed out how it's been odd to see gold not behaving the way that you would typically expect it to. In fact, it's behaved the opposite of that. And I just feel like when you look at where gold had, gold had a heck of a run. It got into a place where it was overbought. It was probably a bit overcooked on the upside. And when you don't get that response to news that you normally would in a market, it tells you that market's likely ready to go the other direction because too many people are already on board. And I think that's simply where we were with what happened with gold. Look, long-term, we think that there's a really positive outlook for real assets. I know we've talked about that on these calls before. Gold is part of that real asset mix that should benefit from the world that we see evolving over the next 3, 5, 10 years. But that doesn't mean that that things can't get overcooked in the short term and have pullbacks. And with commodities like gold, pullbacks can be sharp and painful, and that's normal.

Brian Pietrangelo [00:24:15]

Well, thank you for the conversation today, George, Steve, Cindy, and David. We appreciate your insights. And thanks to our listeners for joining us today. Be sure to subscribe to the Key Wealth Matters podcast through your favorite podcast app. As always, past performance is no guarantee of future results, and we know your financial situation is personal to you. So reach out to your relationship manager, portfolio strategist, or financial advisor for more information, and we'll catch up with you next week to see how the world and the markets have changed and provide those keys to help you navigate your financial journey.

Disclosure [00:24:50]

We gather data and information from specialized sources and financial databases, including, but not limited to, Bloomberg Finance LP, Bureau of Economic Analysis, Bureau of Labor Statistics, Chicago Board of Exchange Volatility Index, Dow Jones and Dow Jones NewsPlus, FactSet, Federal Reserve and corresponding 12 district banks, Federal Open Market Committee, ICE Bank of America Move Index, Morningstar and Morningstar.com, Standard & Poor's, and Wall Street Journal and wsj.com.

Key Wealth, Key Private Bank, Key Family Wealth, KeyBank Institutional Advisors, and Key Private Client are marketing names for KeyBank National Association, or KeyBank, and certain affiliates, such as Key Investment Services LLC, or KIS, and KeyCorp Insurance Agency USA, Inc., or KIA.

The Key Wealth Institute is comprised of financial professionals representing KeyBank and certain affiliates, such as KIS and KIA.

Any opinions, projections, or recommendations contained herein are subject to change without notice, are those of the individual authors, and may not necessarily represent the views of KeyBank or any of its subsidiaries or affiliates.

This material presented is for informational purposes only and is not intended to be an offer, recommendation, or solicitation to purchase or sell any security or product or to employ a specific investment or tax planning strategy.

KeyBank nor its subsidiaries or affiliates represent, warrant, or guarantee that this material is accurate, complete, or suitable for any purpose or any investor. It should not be used as a basis for investment or tax planning decision. It is not to be relied upon or used in substitution for the exercise of independent judgment. It should not be construed as individual tax, legal, or financial advice.

Investment products, brokerage, and investment advisory services are offered through KIS, Member FINRA, SIPC, and SEC-registered investment advisor. Insurance products are offered through KIA. Insurance products offered through KIA are underwritten by and the obligation of insurance companies that are not affiliated with KeyBank.

Non-Deposit products are:

NOT FDIC INSURED • NOT BANK GUARANTEED • MAY LOSE VALUE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL OR STATE GOVERNMENT AGENCY

Brian Pietrangelo [00:00:00]

Welcome to the Key Wealth Matters weekly podcast, where we casually ramble on about important topics, including the markets, the economy, human ingenuity, and almost anything under the sun, giving you the keys to open doors in the world of investing. Today is Friday, March 13, 2026. I'm Brian Pietrangelo, and welcome to the podcast. There certainly is a lot going on in the world today, and we have immense respect for the conflict in Iran and lives at risk and lives lost for our American military, in addition to everyone else that's suffering from the conflict. On a much lighter note, as we head into next week, it's certainly St. Patrick's Day for those of you who celebrate, and also the beginning of the college basketball tournament known as March Madness colloquially. In terms of some excitement, my favorite time of the year in terms of college basketball, hopefully have a chance to watch some of it next week. With that, I would like to introduce our panel of investing experts here to share their insights on this week's market activity and more. George Mateyo, Chief Investment Officer, Steve Hoedt, Head of Equities, and Rajeev Sharma, Head of Fixed Income. As a reminder, a lot of great content is available on key.com/wealthinsights, including updates from our Wealth Institute on many different subjects, and especially our Key Questions article series addressing a relevant topic for investors. In addition, if you have any questions or need more information, please reach out to your financial advisor. Taking a look at this week's market and economic news, we've got information on economic releases, three key updates for you, and then we'll talk with Steve and Rajeev about market volatility in both the stock and the bond market. First up is the weekly initial unemployment claims report, which remains stable at 213,000 claims. So not a lot to talk about there, and it continues to be one saving spot or favorable spot in the jobs market where some others are softening. And second, we've got some inflation data from two different reports, one from the CPI report and one from the PCE report. They usually do not fall in the same week, but have been recalibrated due to the government shutdown that occurred last year with regard to PCE inflation. So we'll give the update in two parts here. Part A is the Consumer Price Index, or CPI, read for February, which year-over-year all items were 2.4% and core, excluding food and energy, was 2.5%. Both of those numbers were the same as January, so not any increases or decreases, but again, this information does not take into consideration any changes in oil prices yet. Part B is the personal consumption expenditures measure of inflation, which is the Fed's preferred measure. And again, this has been delayed for the government shutdown from last year. So we're only getting January's read as of today, just this morning at 8:30, and it was 2.8% on overall inflation as measured by PCE. And if you exclude food and energy, the core was 3.1%. Now both of these numbers have gone up a little bit and remain sticky. The key that they have not gone down and the other key is that again, this is January's number folks. So again, these are stale data and we'll have to continue to read through this as we get updated data likely to get caught up in the month of April on both of these. And by some point in time, we'll have updated estimates from the conflict in Iran as it flows through into inflation. More importantly, we'll talk about what this might mean for the Federal Open Market Committee meeting next week with regard to Fed funds rate and the possibility of inflation continuing to remain even more sticky as we go throughout the remainder of the year. And the third update for you today also came out today at 8:30 in a stable basis, meaning that it was over a month ago that we should have gotten this update. But again, because of the government shutdown, we didn't have it earlier. And that is the second estimate for real gross domestic product for the United States economy. And essentially the number for the fourth quarter of 2025 was cut in half. The advance estimate that we got a month ago was at a 1.4% quarterly rate for the last quarter of 2025. The second estimate that came down today was only a 0.7% increase for the fourth quarter of 2025. Most of the major contributing factors for the calculation of GDP went down from the advance estimate to the second estimate, including a decline in consumer spending, a decline in investment, and a bigger decline in government spending. Again, that was the big decline from the first estimate, where we had the government shutdown in the fourth quarter, and it got revised downward even more. So we will talk with our team what that means in terms of overall economic growth as we head into 2026. Again, some of these numbers a little bit stale because they're only Q4 from 2025. In addition, as I said earlier, we've got the Federal Open Market Committee coming up next week with a policy on the interest rates, likely zero chance of a cut. And we'll begin to talk about our panel with what that means later on in the year. So let's begin our conversation with George to give us a recap on his thoughts on progress or other developments with the Iran conflict and what's going on with oil, as we'll cascade that into Steve's conversation. So George, what are your thoughts on Iran and also some of the economic data that came out today?

George Mateyo [00:05:25]

So Brian, I think the big turn of events this week probably got everybody whipsawed at the beginning of the week when we kind of thought that things were really escalating in a negative way. And then things reversed course after the president's remarks that maybe the war won't be coming to an end, maybe, maybe not. And then I think people kind of get a little bit fatigued with that very quickly. Energy prices then spiked again. And now this morning, they're starting to flooded back a little bit further, and we see stocks generally higher. So all things said, I think it's just a time of tremendous uncertainty. I don't remember a time in my career where I've seen the price of oil fluctuates about $35, $40 a barrel in the course of just a few hours. But that's kind of what we got. That's really difficult, probably, for a lot of people to think about what that means for their lives, for their businesses. Just think about that for a second in terms of planning a major organization that's dependent upon energy for shipping things and making things. And if you see that much fluctuation in one of your key raw material ingredients, How do you plan a business with that type of volatility? I just can't fathom that. So I think it's fair to say that we are in a time of just tremendous uncertainty. We've talked about this before. Of course, there's a lot of focus on just how long this conflict might last. So duration of this conflict is probably what matters most in terms of the broader, longer-term economic impact. And if we see this spillover, no pun intended, if we see this spillover for a few more weeks and in a few months, then, yeah, I think we have to start thinking about economic risks on a more sustained basis. If, however, this turns to be somewhat short-lived, and we could see a lot of scenarios that could take place, things might actually kind of normalize and stabilize here in the next few weeks or so. So frankly, there's just so much uncertainty. It's hard to get your head around what might happen next. But I do think it's going to have some impact on consumers. We've seen a couple of companies this week talk about the fact that this could actually maybe dense spending a little bit. It's not surprising to see consumers, it would not be surprising, I should say, to see consumers retrench a little bit. You know, they kind of see this every day. I mean, it's something we kind of feel all the time when we just drive past the gas station, even if we don't refill. So there's going to probably be some impact on consumer spending. They might have to dip into savings a little bit. The offset, though, of course, is that tax refunds are coming out in the next few, literally days and weeks, and that might provide some refuge to some people. But I think, nonetheless, there probably will be some impact on the consumer if this continues to persist. Nobody really knows, again, how long this conflict will last. And no one really knows what the outcome will ultimately be. I do think it's probably fair to say that the markets anticipate this to be somewhat of a shorter-term event in the sense that I think if you look at the near-term, kind of one-month forward expectations for inflation, They've obviously picked up. And there's certainly, you're kind of seeing that in the bond market, where the bond market is now repricing and kind of taking away rate cuts from the Fed. But if you look at a longer-term window in terms of inflation expectations beyond, say, 12 months, there really isn't that much of impact. In other words, the market, I think, again, is anticipating this might be somewhat short-lived. And then, Steve, in terms of the stock market, we've also talked about this, I think, in the past few weeks, that typically you start to see pressure in the first two months or so of a conflict like this. But then typically six, 12 months later, markets tend to move on. So while there's tremendous uncertainty, and we just don't know how this will end, ultimately this will end. And I think the market's somewhat kind of holding its hat on to that right now. But Steve, I'm not sure if you've seen any other comments from companies, how they're processing this, or anything that we should be noting from the overall stock market performance thus far.

Steve Hoedt [00:09:06]

I haven't seen anybody really make any comments, George, about changing behavior of any kind. I think basically, if you didn't have hedges on coming into this, you're you're certainly not going to be doing it now when you look at the volatility in the energy markets, it's and we we feels like over the last five, six years, we've used the word unprecedented way too many times. But I mean, I've I've been around for a while and I've never seen anything like the volatility that we've had in the last two weeks in the energy markets. So I think when you look at the impact on things like the dollar and gold, you know, I'm I'm I'm actually a little bit surprised that we haven't seen more of a bid to gold in this, given that, you know, you typically do have a bit of a a run, the quote unquote safety here. And we really haven't seen that this time. I wonder if some of that's a function of the run that we had in the in the yellow metal up to this stock market. It's funny, but I think the stock market was looking for an excuse to sell off a bit. We've been in this trading range for the better part of the last five to six months, haven't made a ton of progress to the upside. Obviously, trend is still favorable, but we got to a point where we either needed to make some progress to the upside or we were going to test the other side, in my view. And quite honestly, the price action to the downside has not been all that severe in reaction to the impact from the conflict in the Middle East. In the past, you would have expected a much sharper sell-off than what we've seen, so it suggests to me that this this too shall pass kind of thing. The market is seeing through this. I don't know whether it's the whole taco thing about Trump always chickens out or what.

George Mateyo [00:11:07]

I'm sorry to interrupt you, but how much do you think, Steve, is that just a function of the fact that we as a nation now are producing more energy than we were, say, in the last-

Steve Hoedt [00:11:16]

I think it shouldn't be lost on people that were a net energy exporter, right? So when we get into a situation like this, 40 or 50 years ago, if we had a problem with the oil flowing through the Strait of Hormuz, it would have been a disaster for the United States. But now with the U.S. being a net energy exporter, it's not. It's actually cash flow positive to the U.S. when this kind of a shock happens. Now, obviously we don't want to see it, but... At the end of the day, it's not a disaster for the US economy like it was 40 years ago. Think back to back when we were in college, George, when we were all talking about Gulf War I, right? And that was a major reason why that war occurred was to keep the free flow of oil through the Strait of Hormuz at market prices. And the reaction of the market is completely different today to what we saw back then.

Brian Pietrangelo [00:12:09]

Well, Steve, how much more? How much more, given George's comment and your comment, is about communication? So the supply disruption, and then we talk about the strategic petroleum reserve with 172 million barrels, and then the price goes up and down.

Steve Hoedt [00:12:26]

Yeah, look, I think that the communication stuff is not, it shouldn't be lost on anybody. I think that the biggest issue from a global energy markets perspective with all this is the problem that the countries that are dependent on natural gas that comes out through the Strait of Hormuz, much more so than crude oil. Like you can find crude oil from other places if you absolutely have to. So for example, the Chinese I saw yesterday have shut down exports of refined products to Australia. Okay, so the Australians are going to have a problem because they're not going to get refined product from China, but China isn't going to have a problem. And the Chinese have been buying, obviously, their crude from the Iranians, right? So the global markets will find a way to balance. There'll be people who will have to pay a lot more for what they need. The issue with the gas, though, is that there's no-- gas either gets someplace via liquefied natural gas, as we talked about last week, which gets put on ships and then shipped around the world, or it comes through pipelines. And if you don't have the pipeline infrastructure in place, then it has to come by a ship. And if the ships are not coming out of Qatar, then there is no gas. And that's the problem that you see in Europe right now with the Europeans not having enough gas as we start to think about the next three to six months. And that's really the kind of the global pain point from an economic perspective, much more so than oil, I think. And by the way, there actually has been crude oil getting through the strait. It's Iranian shipments from Kharg Island. They have been letting those out. So my understanding is there actually has been a trickle of oil out of the strait. It's not completely closed, but it's Iranian oil that's getting out. So that hasn't been 100% shut off. And that oil is obviously going to China and other places that have relationships with them. So oil will flow. It has to flow!

George Mateyo [00:14:34]

So in terms of things flowing, I guess, Rajeev, to kind of get you into the conversation too, it seems like the credit markets are still flowing fairly freely in the sense that we are still seeing deals get done, get priced, and there's still demand for credit overall. Is that a fair assessment in your view? And also, as you think about next week, of course, we've got the Fed meeting for the first time since this conflict broke out. How do you think they're processing recent events?

Rajeev Sharma [00:14:58]

Well, I think next week's meeting of the Fed is going to be a little more important than many had thought. You know, nobody thinks the Fed's going to cut rates next week. They won't cut rates next week. But we do get the summary of economic projections next week, and we get the dot plots next week. And that's going to be very important because if, you know, right now, the latest dot plots that we had from the last time they released those, the Fed is thinking about one rate cut for 2026. If they stick with that, I think the markets will be happy. If they move to two, I think the markets will rally. But if they decide to come out with a dot plot that says zero rate cuts for 2026, we're going to see a repricing of the bond market. And we've already seen some of that repricing. We've seen bond yields move higher across the curve. I mean, we ended February where 10-year yields were below 4%. And now we're at this point where they are well above 4%, 4.25. And I think that move continues. In fact, we've seen a flattening of the yield curve, where you see twos, tens curves, a differential between a two-year treasury note and a 10-year treasury note now stands about 50 basis points. Just a few weeks ago, we were close to 70 basis points. So the curve is flattened. And what that means is front-end yields have moved higher. And that's all about Fed policy. If the market starts believing that the Fed is not going to cut rates, those front-end yields will continue to gradually move higher. Last year's trade was the steeper trade. Everybody was believing that we're going to have fed rate cuts. The front end of the yield curve will continue to move lower. The back end of the yield curve will stay higher because of fiscal deficits and other issues about the economy. Now we're seeing the front end move higher. The curve is flattening, and that has become the pain trade for the bond market. Many people are offsides on this trade because many people thought, we're going to have two rate cuts this year at least, and you've seen the front end reflect that. Now we're seeing the front end move higher. It's a flattening of the yield curve, and many investors are offsides on that trade. That being said, you know, you would think in this kind of conflict environment that we're in, generally, treasuries become a safety haven asset. We have not seen that. I think people are actually viewing corporate bonds as a safety haven, especially high quality corporate bonds. You see a lot of new deals that came to market. Almost $100 billion in new deals have come to market this month alone. And that number is going to continue to escalate, maybe not next week because of the Fed, but I do think that we could end up with this month being around $200 billion at least of new issuance for the corporate bond market. And investors are going for these high-quality names. They like the higher quality nature, the strong balance sheets of these names that are coming to market. And they don't even have to pay a lot to play in these deals. Because of the uncertainty that's in the market right now, these deals are coming with really nice concessions on them, and they're getting done very well. So I think the bond market continues to look at opportunities right now. We have seen spread widening, but again, we have been at historical tights. But if you're playing for high quality, this is the time to continue to be in that trade.

Steve Hoedt [00:18:09]

Rajeev, we've seen the spread back up for like BB relative to BBB spreads. We attacked the highs we saw last October earlier this week before seeing credit improve a little bit over the last couple of sessions. Are you starting to get concerned by what you're seeing in some of the more speculative parts of the credit markets right now, or are you OK with the price action?

Rajeev Sharma [00:18:34]

I think the price actually makes a lot of sense because some of the speculative parts of the market, they have really, really grinded tighter over the last several months, even last year. I think now investors are getting wary about it. If they're going to be playing in the credit markets, they'd like to be up in quality trades. We have been strong advocates for high quality, and I think that's paid off. I think now the market's repricing itself, that if you are in that part of the market, are you really getting paid for being in the lower rung of credit ratings? And I think now investors are kind of shunning away from that. And it makes a lot of sense. You want to get more defensive right now.

Steve Hoedt [00:19:12]

What would cause you to become concerned?

Rajeev Sharma [00:19:15]

Some kind of contagion, default rates picking up. We haven't really seen that happen, but you will start to see it if rates remain higher. And they have been quite high right now. So you'll see some of the lower rated credits come to market because they have to for operating expenses, they'll start borrowing money at higher rates. And that could cause an increase in defaults in high-yield market. I think that could have some contagion effects. But really, unless you see defaults start to pick up, I'm not concerned as much for the high-quality names.

Brian Pietrangelo [00:19:47]

So, Speaking of credit, let's talk about another area of the credit markets, which is the private credit markets, which are getting some press recently. And it's not necessarily a credit risk issue per se, but more of a liquidity issue per se. So, George, why don't you give our listeners a little bit of an overview and then pivot back to Rajeev in terms of what happens in the private credit market these days

George Mateyo [00:20:05]

Well, there's a lot to unpack there, Brian. And you can kind of go back to 15, almost 20 years ago now when the great financial crisis first took hold back in 2007, 8, 9 or so. And the aftermath of that led to a lot of banks, frankly, being forced to sit on the sidelines, for lack of a better term. They had to actually have higher capital in their balance sheets to try and prevent another crisis. We're always kind of fighting the last war with these things. But from that, a lot of companies emerged to try and provide new capital to companies who needed it. And that kind of gave rise to what we call private credit. It's still credit, but it was actually done on more of a discretionary and kind of a private basis. These loans don't trade on exchanges. These contracts and these transactions take place in private, I guess, just to kind of keep the name simple. And so I think it's fair to say that we also had an environment where interest rates were very, very low and investors were looking for yield. So some of these private credit funds raised a ton of money pretty quickly. And now we're kind of seeing maybe some of that kind of come unwind a little bit. I think as you pointed out, and Rudy mentioned, we don't see this as a real credit event. We've talked about more of a liquidity event. And you really just kind of have to understand that if you're investing in private credit, you really understand that these loans, essentially, they don't trade every day, so they're intentionally illiquid in the sense that they really kind of are meant to be designed for a longer-term holding period than just a few hours or a few days or a few weeks. So we are going to see probably some more issues of this because we saw a few credit issues come under some pressure. Again, just to underscore what you said, we don't see this as a credit event, but certainly some forced liquidity is prompting some funds to raise more capital, to try and overcome the liquidity wall, so to speak, and actually overcome the narrative around liquidity as being an issue. And I think to some extent that might be some babies being thrown in the bathwater, some indiscriminate selling. So I think from this, I think those people who are probably a bit more opportunistic that are willing to actually give up a little liquidity for a portion of their portfolio might actually see some benefits here and probably some interesting returns going forward in this space. That's my take on it, Rajeev. Anything that you want to add?

Rajeev Sharma [00:22:16]

Yeah, well, I agree with you, George. I think some of the themes that are in the private credit market right now Amongst them, you could talk about liquidity, you could talk about valuations, you could talk about how the banks are maybe retrenching right now. But the biggest headline risk right now is liquidity, and that's putting some pressure on this. And we came from an area where private credit was unstoppable growth. And now we are starting to feel like we're in an area where we're maybe late cycle stress test right now. And I think that's going to enforce some of the the flows that we see coming into private credit. That being said, I think a lot of investors right now, they want to know what they're getting involved in. They want to know that private credit, even with the yields being where they are, they want to realize exactly what they're investing in and what the liquidity is, can they get in and out of this. Banks are tightening their stance towards private credit lenders. I think some of the larger banks are reassessing collateral, reducing leverage to the sector. So every time you see these headlines, I think, again, it pushes investors to really reevaluate whether they want to be in the private sector or public sector. And when they are evaluating that, how much are you really getting paid to be in the private credit domain? I think high-quality credit still remains pretty attractive with blue chimp names.

Brian Pietrangelo [00:23:36]

Well, thank you for the conversation today, George, Steve, and Rajeev. We appreciate your perspectives. And thanks to our listeners for joining us today. Be sure to subscribe to the Key Wealth Matters podcast through your favorite podcast app. As always, past performance is no guarantee of future results, and we know your financial situation is personal to you. So reach out to your relationship manager, portfolio strategist, or financial advisor for more information. And we'll catch up with you next week to see how the world and the markets have changed and provide those keys to help you navigate your financial journey.

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