Key Wealth Matters Podcasts

Get the breakdown on the news behind the headlines and how it impacts financial strategies.

Latest Episodes

Join our Key Wealth Institute experts as we explore the biggest news of today, and reveal potential impacts on personal financial planning strategies, businesses and the economy. Tune in for unbiased, proactive advice about financial, estate and legacy planning, investing, family dynamics and trends for business owners, nonprofits and institutions. Listen here or wherever you get your podcasts, and subscribe today.

July 31, 2026

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, July 31st, 2026. I'm Brian Pietrangelo and welcome to the podcast. And if you are a music fan, you might take note, there may or may not be tickets available to the annual festival known as Lollapalooza in Chicago over this weekend for four days. The Chicago edition of this festival includes more than 170 bands on 8 stages during four full days of music, founded back in 1991. Organizers of the festival try to deliver meaningful engagement programs and create positive impacts in the city year-round and from the festival. 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, Rajeev Sharma, Head of Fixed Income, and Steve Hoedt, Head of Equities. 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. We also publish our Federal Open Market Committee recap article after the Fed meets every time, including this week, so check that article out as well. 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 economic releases to share with you this morning. Starting off first with the initial weekly unemployment claims continue to be very favorable, just under 200,000 for the prior week. So that's good news there. And second, also yesterday, we received the first estimate, also known as the advance estimate, for the second quarter of 2026 gross domestic product, GDP. The quarter rate came in at 1.5% growth for Q2, which was down from Q1, which was at 2.1%. So a little bit of a slowdown. Now that being said, consumer spending within the GDP report continued to remain strong or resilient in addition to some of the private investments. However, the number in aggregate was dragged down a bit by overall net imports being negative and overall government spending being a little bit slower than it was in the prior quarter. So net-net, I would categorize it as a fairly neutral report. And third, we also got the PCE or personal consumption expenditures measure of inflation for the month of June and we actually saw a decline on the overall PCE price index on June at minus 0.1%. Now a lot of this did have to do with the decline in gasoline prices in a very major way. So when we go to the next component, which is PCE price indexes, excluding food and energy, we see that the increase in June on a month over month basis was 0.1%, which is a little bit better than what we've seen in the prior months headed in the right direction, but still overall at a very elevated level above the Fed's preferred 2% that we'll talk about a little bit more today in the podcast. Now that 2% number is an annual number. The numbers I just gave you were monthly numbers, but overall the monthly lead into the annual numbers. So I think you all understand that in our audience. Overall though, however, we will continue to have an engaging conversation not only because of inflation, but overall Fed commentary from Kevin Warsh. So to put a number on it, the PCE price index on an annualized basis for June increased 3.3% from one year ago, and that is their reference that number continues to be well above the 2% target that the Fed has that I just mentioned. And speaking of the Fed, the Federal Open Market Committee did have their meeting this past week with a fairly decent conversation around a split decision with regard to what they wanted to do on the committee, whether they raise rates or not. We'll have a great conversation with our podcast committee today in terms of the Fed, along with George and Rajeev, Steve and myself. So we'll get right into that here shortly. And finally, we'll talk to Steve a little bit more in depth around Q2 earnings and some of the bigger releases that we have going on this week. So let's get right to the conversation with Rajeev. Rajeev, give us your recap of what happened at the Fed meeting today along with this week, I should say, along with the press conference from Fed Chair Kevin Warsh.

Rajeev Sharma [00:04:34]

So yes, we did have a FOMC meeting this week and everybody expected that rates would be held steady. But what was interesting was the FOMC was 9 to 3. to hold rates steady. So there were three dissenters. You had Beth Hammack, Dallas Fed, Lorie Logan, Minneapolis Fed, Neel Kashkari. They all voted for having a 25 basis point hike. And you know what's interesting about this is I think that Kevin Warsh as the new Fed chair, he actually welcomes these kind of dissents. I think he thinks that more discussion is better for the Fed. And so I really do think that a lot of people are looking at how Kevin Warsh is going to handle his second FOMC press conference. And the suggestion was that the Fed is going to switch to an approach of assessing inflation. Inflation is everything for the Fed right now. And what was very interesting is that Kevin Warsh came out and said that 2% is the goal and they are not going to rest until they get to 2% for inflation. So I think this is going to be very interesting for the bond market. There's not going to be a lot of forward guidance, and I really do think that every single data point is going to be extremely important for investors. So this is not Powell's Fed anymore. This is Kevin Warsh's Fed. The statement was very, very skimpy. There wasn't a lot of words in there, and I think the press conference was also very much about inflation and getting a 2%. So Kevin Warsh had a lot of great quotes, but the one that really stood out was, follow the ball, don't follow the referee. And I think what that means is you have to follow the data. So data has always been important for the markets, but now it's even more so important. So Rajeev, did you hear anything with regard to the absence of forward guidance within the undertone of Kevin Warsh's comments? Yeah, I mean, Kevin Warsh has never really been about forward guidance. And obviously last time when we had summary economic projections, he didn't really provide a dot for himself. And I think what's going to happen going forward is the Fed is not going to be the ones that are going to dictate where the market's going to go. I think the data is going to dictate it. And with lack of forward guidance, obviously it's going to cause more volatility in the bond market and we saw it right away. when he was doing his press conference.

Brian Pietrangelo [00:07:04]

George, did you have any additional comments on that?

George Mateyo [00:07:06]

So I think the bigger picture from my perspective is that it's not quite Warsh's Fed yet, to use Rajeev's term. I think it's more of like a Greenspan-like Fed, where I think the chair is trying to be a little bit vague in terms of his overall message. And he doesn't want to be the message, but yet because he's not the message, it's become the message, if that makes sense. So we have a new Fed chair, we've got a new message that he's trying to deliver with respect to inflation. But the market, I think, is grapping with how he's delivering that message, if you will. So that's a bit of a tortured explanation on my takeaway. I think the key takeaway, though, I would say is that there's really right now a bit of confusion with respect to how the Fed is likely to communicate what they're trying to communicate and how the markets probably need to maybe let the Fed step away and let the markets react to data, as Rajeev talked about. So to some extent, every meeting now becomes kind of a live meeting, as they call it, meaning every market meeting or every time there's an opportunity for the Fed chair to speak, the market's going to try and look for cues. And I'm not sure if he's going to provide those cues. So I think it's going to be a source of probably some short-term volatility until we get used to this new dynamic. I think at the same time, another big storyline was the fact that so many people dissented, which is probably, again, kind of a new reality for us to grapple with in the sense that there was a lot of consensus building And the market, I think, got used to that consensus building. And now that consensus, while to say it's not really a bad thing when you don't have consensus, I do think it's probably going to be one of these situations where there's going to be less consensus, at least optically speaking, than there was in the past. So I think the bigger takeaway, though, again, is that the economy is doing pretty well. Of course, GDP came out this week, and I think the headline number looked a little bit weak, but when you strip away some of the noise, The data suggested that things are still growing at a pretty good pace. Rajeev has mentioned that inflation is the primary concern for the Fed to try to get their heads around and their hands around. But the other key takeaway from that is that the labor market is still really quite strong and quite stable. And so in other words, the Fed doesn't have to worry so much about addressing the labor market or the economy from the jobs perspective, but they have to focus on inflation. So I think, Brian, those were some of the key takeaways for me as I saw it and really what the Fed might be thinking and how the economy is kind of processing all this uncertainty at the same time.

Brian Pietrangelo [00:09:29]

Great. Thank you, George. So back to you, Rajeev. How did the markets react on the bond yield?

Rajeev Sharma [00:09:34]

We had a very significant bearish deepener. The 230 spread widened up roughly about 15 basis points on the week because of this. And we did see the 30 year jump about 6 1/2 basis points on the day. So that is a big move. So we saw the 30 year get to 5.23%. The sell off continued on Friday. Today, 30 years now 5.26%. The front end became a little more anchored. The two year is actually lower on the week by about three basis points. And it suggests that the market did, you know, it viewed the Fed meeting as, okay, they're not going to raise rates right now. So it pushes it off to September, October, and the hold is being taken at face value on the short end. So you did see the front end actually lower on the week by three basis points. But overall, the yield curve did steepen. And I think that is something that the market expected because the market was really 33%. They were thinking there would be a rate hike at this meeting in July. It's not consensus. But once they found out there was not one, we did see the two year start to decline a little bit.

Brian Pietrangelo [00:10:47]

Great. Thank you, Rajeev. And George, on your comments for the FOMC meeting. Now we've got a couple other pieces of data that came out the following day, just yesterday with GDP and PCE inflation, George. So what do you think the economy is doing with regard to the GDP?

George Mateyo [00:11:03]

So Brian, I guess I would just refer back to what I said just a few minutes ago, which again, I think by my lights, the economy's in a pretty good position right now. There's a lot of noise in these numbers and they are backward looking as we have to acknowledge. But really, again, the overall backdrop is still pretty favorable, although I think to some extent it is becoming a bit more concentrated and levered towards what happens with the artificial intelligence boom that we're experiencing. And should that boom become, I wouldn't say a bust, but even should it slow down just a little bit, I think that could have some repercussions maybe later next year, probably more likely the year after that. So I guess it's fair to say that things are going fairly well right now. We've also seen taxes, tax cuts and so forth show up in the form of consumer spending, meaning essentially those refunds that we all got a few months ago, or some of us got at least, I didn't get one, but some of us got a few refunds. And that's actually still kind of coursing through the economy. And one reason why I think the consumer has actually been holding relatively well. We've acknowledged, though, that the credit card debt and other levels of indebtedness are rising. So we have to be vigilant around that. But for now, the consumers are still spending. Prices are still high, so they're probably spending more than they'd like to. But those things are still good for the overall economy in the sense that as people spend money, that's essentially income in other people's pocket. So I think overall the economy is in good shape right now, but it is very concentrated and driven largely by what happens with artificial intelligence.

Brian Pietrangelo [00:12:29]

And speaking of artificial intelligence, Steve, Q2 earnings continue to march on in this week and we've got a couple of big reports. What do you see with those reports and also the overall market performance for the week?

Steve Hoedt [00:12:41]

Yeah, the big one today is Amazon stock up really nicely on the results for their AWS unit, yet again, the cloud for this particular hyperscaler driving the results and surprising the street. That's been a name that has been out of favor relative to some of the other mega cap tech names over the last couple of years. So not all that surprising to see it play some catch up here. When we look at the Earnings numbers for the S&P 500 overall, a couple of things that caught my eye. And some of it goes back to the theme that George and I have talked about on these calls before that maybe the bubble isn't in price, but the bubble's in earnings. If you take a look at the EPS line for the S&P 500 forward right now, it's at 381. we're very clearly on path to exceed 400 by the end of the year. We came into the year thinking 400 could be a possibility, but it's going to blow that number out of the water right now. But what caught my eye as we've come through earnings season, and in fact, if you go back and look at how things recovered off of the March lows, We're almost back to the March lows from a multiple perspective on the S&P 500. We're back to 19.5 times, which is roughly the average for the last 10 to 15 years or so. we're not extended in terms of valuation anymore whatsoever. And valuation off of the March low only got back to 21 times. We didn't get anywhere close to the 23 that we saw during 2025. So as the earnings numbers have climbed higher and higher here and it's actually accelerated, the market's been marking down the multiple on that. So I think that when we think about what that means, I think it to me means that the move higher and potentially the broader market seems fairly sustainable to us. It's like the market has taken a look through the hyperscaler numbers that are kind of pushing these headline EPS numbers for the market, maybe with some stuff that's a little bit unsustainable. And they've marked down the multiple they're willing to pay for that accordingly. And as we see the rest of the market have the numbers come out and surprise to the upside and do pretty well because the economy all together seems to be doing pretty decently. I think it gives us the ability to see this broadening trade with industrials, financials, consumer, other things, maybe take the baton from those Mag 7 names and help push this market higher here. So I think as we look into the back end of the year, that's what we're going to see. And I feel better about the market having a multiple of 19 and a half with this earnings acceleration that I did when it was in the low 20s.

George Mateyo [00:15:45]

So Steve, one thing that you and I have also been talking a lot about the past several quarters now, if not, you know, well north of a year has been, I think, trying to get people to maybe position their portfolios in such a way that they were benefiting or maybe positioned to take advantage from the AI adopters versus the pure AI enablers, meaning that the companies that you referenced, the hyperscalers as they're known as, you know, those became a really dominant part of the market indices, something like 40 plus percent. And we suggest that there's probably opportunities in the other 60% of the market, if you will. And that seems to be working fairly well this year. I think that theme is actually rolling through the market right now in a pretty decent pace in the sense that we've seen value outperform growth. We've seen small caps, large caps, and other things as well in terms of that positioning. I agree with you that valuations have become a bit more tolerable, I guess, if you will. And at the same time, some of those fears we had earlier around overbuilding and excess capacity have, I wouldn't say gone away, but I think they've become a little bit more known and better understood. How are you thinking about positioning the portfolio for the latter half of this year and into next year?

Steve Hoedt [00:16:53]

Yeah, so I think that we've continued to look for opportunities. We've been tilted fairly pro-cyclically in our core strategy. all year, and that has been to our benefit. When you talk about pro-cyclical, it's the old economy stuff, whether it's industrials, materials, energy, all these things have had a bit of a tailwind because of the AI infrastructure build that's helped push on them, but we're not really just playing AI exclusively through that stuff. Like we have other angles that we're trying there. But I would tell you that one of the things that as a seasoned investor, it's kind of caught my attention is just how good the banks have been performing, right? When you look at the financials, the old axiom in the market is that you don't need financials to lead, but you can't have them lagging materially if you're going to have a bull market. And the fact that we've got Financials doing well, led by banks here. That's again, a pro-cyclical signature that to us signals that it's a pretty healthy bull underneath. And then the other thing that we've done is we've pivoted towards some of the stuff that is, I don't necessarily want to say defensive in nature, but it's a different kind of growth. So healthcare has done really well this year, George, underneath people's radar. And it's been a major beneficiary of the rotation out of some of the mega cap technology names that capital has to go someplace in the market. And it's not just going to stuff like SpaceX, it's going to stuff like Pfizer and bristol-myers and AbbVie and other things in the biotech space. I mean, it's just, you're seeing this rotation in the things that have been left for dead. because healthcare has underperformed for a number of years now. So the fact that we've seen relative performance turn there and it seems to have caught a fairly material bid is something that's caught our attention to. And we've been looking for things like that in the market in terms of places to deploy capital as well.

Brian Pietrangelo [00:19:11]

thanks, Steve. As we often do, let's get closing remarks from George that might be of interest to our audience. George?

George Mateyo [00:19:18]

So we've covered a lot of ground. We've talked about the Fed. We've talked about artificial intelligence. We've talked about market rotations. And I think that often fits with the narrative that really the underlying theme in our work right now is really trying to emphasize diversification, which again, is an often probably overused term. But I think it is important to recognize some of the exposures in your portfolio these days are probably interlinked. We've talked, for example, about the connectivity between the credit markets and the AI trade. and really how those companies are using credit to really finance their growth. We've talked now a little bit about the economy doing well, but again, it's very concentrated in artificial intelligence. And I think to some extent, investors, in my opinion, will continue to be well served if they think about diversification beyond just a handful of companies and a handful of names. So I think again, our prevailing view, Brian, is really to really make sure that your portfolio is positioned for different market environments and really positioned for the ability to withstand certain shocks and really remaining disciplined to your approach and also being diversified as ever.

Brian Pietrangelo [00:20:20]

Well, thanks for the conversation today, George, Rajeev, and Steve. 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.

Disclosure [00:20:55]

We gather data and information from specialized sources and financial databases including but not limited to Bloomberg Finance L.P., Bureau of Economic Analysis, Bureau of Labor Statistics, Chicago Board of Exchange (CBOE) Volatility Index (VIX), Dow Jones / Dow Jones Newsplus, FactSet, Federal Reserve and corresponding 12 district banks / Federal Open Market Committee (FOMC), ICE BofA (Bank of America) MOVE Index, Morningstar / Morningstar.com, Standard & Poor’s and Wall Street Journal / WSJ.com.

Key Wealth, Key Private Client, Key Private Bank, Key Family Wealth, and KeyBank Institutional Advisors are brand names used by KeyBank National Association (KeyBank). Key Wealth and Key Private Client are also brand names used by Key Investment Services LLC (KIS), member FINRA/SIPC and SEC-registered investment advisor.

The Key Wealth Institute is comprised of financial professionals representing KeyBank National Association (KeyBank) and certain affiliates, such as Key Investment Services LLC (KIS) and KeyCorp Insurance Agency USA Inc. (KIA).

Any opinions, projections, or recommendations contained herein are subject to change without notice, are those of the individual author(s), 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 and it should not be used as a basis for investment or tax planning decisions. 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.

The summaries, prices, quotes and/or statistics contained herein have been obtained from sources believed to be reliable but are not necessarily complete and cannot be guaranteed. They are provided for informational purposes only and are not intended to replace any confirmations or statements. Past performance does not guarantee future results.

Brokerage and certain investment advisory services are offered through Key Investment Services LLC (KIS), member FINRA/SIPC and SEC-registered investment advisor. Insurance products are offered through KeyCorp Insurance Agency USA, Inc. (KIA) and underwritten by third party insurance carriers not affiliated with KIS. KIS and KIA are affiliates under the common control of KeyCorp. To learn more about KIS’s investment business, as well as our relationship with you, please review our KIS Disclosure page. Check the background of KIS on FINRA's BrokerCheck.

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

July 24. 2026

Brian Pietrangelo [00:00:00]

George Mateyo [00:02:57]

So back in the headlines, of course, is the situation in Iran and unfortunately the headlines aren't all that encouraging of late. You know, I think it's fair to say that the so-called ceasefire MOU is officially over now. I don't know if the administration's called it as such, but I think it's fair to say that five months into this conflict and 100 days now until the midterms, by the way, things have really shifted. Just to recap and give our listeners a sense of where we are as of 9 o'clock on Friday morning, it's fair to say that hostilities have really intensified. I think the positions between the two parties have hardened. And probably more worrisome of all is the fact that the conflict has seemingly broadened. More notably in the last two days or so, I think the Iranian-backed Houthi rebels down in Yemen have opposed a blockade or have tried to impose a blockade of their own around the Red Sea. And that's going to be pretty notable in the sense that if our listeners remember when we talked about the Hormuz Strait initially, we talked about the fact that it was responsible for roughly 20% of the world's oil supply flowing in and out of that channel. Now, if the Red Sea is also at risk, that probably cuts off another 13% to 15% of global oil as well. So we're talking about roughly a third of the oil supply being subject to some type of blockade, which is probably the direct cause around why the price of oil has spiked up close to $100 a barrel again. I think it is fair to say that's going to have a big impact. We've seen that manifest itself not only in oil prices, but we've seen other commodity prices moving higher. Of course, the price we all pay for gas in our cars is moving higher. And interest rates are reflecting that as well. We saw some progress just last month around inflation, but now that progress has seemingly been wiped away. Where we go from here is anybody's guess. It doesn't seem like either party is really backing down. The rhetoric will likely intensify, and we'll probably see hostilities intensify as well. We'll have to see. Again, it's hard to say exactly how this plays out from here, given the fact that this is a very fraught and tense geopolitical situation. I still think both parties have a lot of incentives to try and walk this back. Their ratings remain fractured politically, from what I've been able to gather. At some point they probably have to acknowledge the significant amount of infrastructure damage and military damage that has already occurred. Here at home, Republicans are motivated to try and get a deal sometime before the midterms. So I think it's fair to say this is going to remain a very tense situation, at least in the near term. I think the other thing the markets are now having to deal with is the fact that infrastructure spending around artificial intelligence has also been a contributor to inflation. And we've seen that creep into market concerns about how much spending is too much. One thing we've been talking about more specifically in the last six to nine months is the fact that this shift in spending has really been pronounced. Many of these companies funding the buildout of AI infrastructure have been able to do so from their own cash balances, but now they're increasingly relying on debt and equity financing to pay these bills. That was really on display this past week, Steve, when we had a couple of marquee companies reporting earnings. I'd love to get your thoughts on both the oil situation and AI infrastructure spending and how that's manifesting itself in stock prices.

Steve Hoedt [00:06:50]

Yeah, we'll take them one at a time. The oil situation is very concerning from the standpoint that when we went into this back in late February, we were entering with relatively full global inventory levels. What you've seen over the last five-plus months is that the reason oil prices never had some kind of super spike was because inventories were there to absorb the shocks. In particular, the inventory that China had played a huge role in providing a global buffer to the oil shock. We've not really had an opportunity to rebuild inventories since the ceasefire. It normalized flows, but only at levels below where they were when the Strait of Hormuz was completely open. We really don't know as a global economy how things are going to function if we get to tank-bottom inventory levels. So that is a very large concern at this point in time. You're seeing it manifest itself in higher distillate prices and crack spreads. A crack spread is the amount of money that a refiner makes when they take a barrel of oil and turn it into diesel fuel, gasoline, and other products. You're looking at refining margins right now at over $70 a barrel. These are levels that we haven't seen literally ever, basically. And they're persisting at these high levels. That tells you how tight the market is. So I think we really need to be concerned here if this continues to be an issue for the foreseeable future. Unfortunately, I think this on-again, off-again conflict is likely the state of play for at least the next half a year or so. Whether the elections play into that or not, I don't know, but it's hard to see these parties getting together. On the hyperscaler side, the thing that flashed at me in bright red this week was the numbers out of Google. For the first time in recent memory, they posted negative free cash flow. When you look at the market reaction to them printing a negative free cash flow figure and talking about their spending plans, people are really starting to question how these hyperscalers are going to make money on AI. And I think that's a valid concern. The same thing applies when you look at the market's reaction to Tesla. Obviously Tesla and SpaceX have huge spending plans designed to make AI part of their future, and again the market reacted very negatively. The one AI winner for the week, as I look at my screen this morning at pre-market trading, is Intel, where investors still see the infrastructure play from the semiconductor side as something that has legs. You can look around and see plenty of carnage on the memory side over the last month or so, however, and these moves can be pretty fleeting. I think the market is discerning winners and losers with this technology now and is looking at potential returns with a far more skeptical eye. From our perspective, that's not a bad thing. We've been talking about it for months.

George Mateyo [00:10:42]

Indeed we have, Steve. Indeed we have. I think it's fair to say that the AI trade has definitely shifted, and it's now moving closer to where we expected it would eventually go. One of our themes has been to invest with the AI adopters—the long-term beneficiaries of AI—rather than just the pure builders. This is true of almost every major technology cycle. There is so much excitement around the technology itself and the process of building it that people can lose sight of the fact that eventually the market has to determine who actually benefits economically. Just because you build something doesn't mean people will come. And even if they do come, it doesn't mean they'll necessarily pay for it. So there are still a lot of unknowns. That doesn't diminish our bullishness around AI overall and what it could do for productivity. But in the meantime, it is clearly having some impact on inflation. Whether or not it ultimately has a meaningful impact on the labor market is still open for debate. I think it's fair to state that the Federal Reserve has clearly shifted its thinking and really isn't focused as much on the labor market anymore. This week alone, for example, we saw another update around jobless claims, which we often discuss on this podcast. Those claims declined to roughly a sixty-year low, which is astounding. It demonstrates that the labor market has not really experienced any meaningful disruption. So if I were the Fed, I'd probably be tempted to hold rates steady while maintaining an eye toward possible future tightening. With the Fed meeting coming next week, and I believe it's the second meeting under Kevin Warsh's leadership, what do you think the Fed is thinking right now, Rajeev, with respect to inflation and future interest-rate decisions?

Rajeev Sharma [00:12:08]

Well, it seems like anytime we have an FOMC meeting, regardless of whether the consensus expects a hold or a policy change, it's always an important meeting. We have that meeting next week, and we'll get the rate decision announced at 2:00 p.m. on July 29. The overwhelming consensus is that they won't do anything and will hold rates unchanged. You were right about the softer-than-expected June CPI print. I think that got a lot of people excited that perhaps additional rate hikes could be pushed further out into the calendar year. But I think there is going to be much more scrutiny on Kevin Warsh's press conference and what he says about inflation. He's already said that one CPI report does not dictate Fed action. They need more data—not just inflation data, but labor-market data as well. Right now, the odds of the next rate hike appear to center around September. This meeting is shaping up to be one of the least predictable meetings, not because of the policy decision itself, but because of the tone. Is it going to be a hawkish tone? That's what the consensus seems to be pointing toward. We saw that Kevin Warsh's first meeting was somewhat hawkish. There is also a clear reluctance to provide any real guidance. He has pretty much abandoned forward guidance as a policy tool. You've got eighteen non-chair FOMC members reportedly divided regarding where rates should go this year, and Warsh could ultimately be the deciding vote. So I expect the tone to be hawkish even if rates are held steady. Both the policy statement and the press conference will likely carry that tone. Warsh has repeatedly stated that the Fed has no tolerance for persistently elevated inflation. We're still not at the Fed's 2% inflation goal, and until we get there I don't think the Fed can do much other than keep rates higher for longer. We also had the June FOMC minutes showing a divided committee. I think it will be very important to watch the number of dissents in the rate decision announcement. But the real issue will be the language in the statement. If they begin reinserting any tightening-bias language, I think the markets will scrutinize that very carefully. Then there is Warsh's press conference. That is going to be his major opportunity to provide a signal regarding where the Fed may go next. If Warsh explicitly says September is a live meeting, then markets will increasingly view September as a potential rate-hike meeting. But if you look at the bond market taking all of this in, it's been a fairly broad-based selloff across the fixed-income universe this week. The resurgence in oil prices has reignited inflation concerns. Stronger-than-expected labor data has added to those concerns, along with mounting expectations for additional Fed tightening. We also had 30-year Treasury auctions this week, and the 30-year Treasury yield has remained above 5% for twelve consecutive sessions. That's the longest streak above 5% since 2007. All of this is keeping upward pressure on yields, and I anticipate that pressure will continue. The 10-year Treasury yield is currently around 4.5%, up roughly 13 basis points on the week. Investors are beginning to discuss 5% as a possible target for the 10-year yield, which is something we haven't talked about in a very long time. There's a lot going on in the market. The yield curve steepened modestly, but the major takeaway is that yields continue to face upward pressure. Credit spreads widened slightly this week, but there remains substantial demand for corporate credit, and that continues to support credit markets.

Brian Pietrangelo [00:15:43]

One of the other things I'm looking at personally is that a month from now, almost to the day, we'll have the Jackson Hole Economic Symposium. It's not an official Fed meeting, but I'm interested to see what happens because the Fed Chair usually gets time on the agenda on Friday. With Kevin Warsh's position against forward guidance, I'm not sure exactly what he's going to say. To your point, the next truly important meeting comes in September. Any thoughts on that?

Rajeev Sharma [00:16:05]

That's a very good point. Fed Chair Warsh has come out several times and said that he doesn't believe in forward guidance. He doesn't believe in the dot plots either. I think that's going to be a major issue for markets because markets have become accustomed to forward guidance. They're used to looking to Jackson Hole and other Fed communications for signals about future policy. Warsh is running a different kind of Federal Reserve. I think what you're going to see is Kevin Warsh pull away from providing forward guidance, which could create some near-term volatility in the bond market. As a result, every single economic data release becomes increasingly important. Every inflation report, every labor-market report, every economic indicator will need to be interpreted by investors trying to determine what the Fed might do next without the benefit of explicit guidance. I think that's going to contribute to increased volatility in the bond market.

Brian Pietrangelo [00:16:50]

Great, Rajeev. And George, as always, we'll finish with you. Any final remarks for our listeners and investors?

George Mateyo [00:16:58]

Stay patient. Stay disciplined, Brian. I think it's going to be a bumpy summer. We've talked about a lot of challenges today, but we still believe diversification is a winning strategy. That means examining your portfolio exposures and making sure you're not overly concentrated in any one area. To some extent, real assets have provided a measure of support during these volatile periods. They haven't necessarily offset all of the volatility, but certain real-asset exposures can provide some cushion and help dampen portfolio fluctuations during major geopolitical events.

Brian Pietrangelo [00:17:31]

Well, thank you for the conversation today. George, Rajeev, and Steve, 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. 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 [00:22:00]

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

July 17, 2026

Podcast Transcript

July 17, 2026

Brian Pietrangelo [00:00:00]

I'm Brian Pietrangelo, and welcome to the podcast. If you are a sports fan, there is a lot going on this week with a very diverse list of sporting events. First up we had the Major League Baseball All-Star Game in Philadelphia as a nod to the 250th anniversary of the United States where the American League won 4-0. We also have the FIFA World Cup final coming up this Sunday where Spain will be taking on Argentina for all the marbles. We also have the 113th version of the Tour de France underway which is taking on stage 13 of 21 as it rolls through the entire month of July. Always A fascinating observation of endurance at its best. Good luck to all the cyclists.

And also across the pond, we have the 154th version of the British Open, or as they say over there, they just call it the Open because it is version of the original major tournament for golf, this year being held at Royal Birkdale in England. And now outside of the sports world wanted to share a very cool and unique experience that I had back on Monday of this week. As we say every week on this podcast, we are huge fans of human ingenuity and technological innovations. So when we think about that, we had a really big one come through this past week. Some people have been following this closely and some people have not, but it is the train known as Big Boy number 4014, which is the world's largest operating steam locomotive, which had a significant journey across America to celebrate the United States' 250th anniversary. And the unique part about it is that the train stop and the tour across the country came right through Cleveland, Ohio. And the big boy engine and its entire train stopped on the west side of Cleveland within a 10-minute walk from my house. So it was a great opportunity to go down there, see the train, really observe the significant crowd that came to watch, which was a testament to all of those who significantly wanted to give a testament to what the United States has built and the innovation around what had happened along with the railroads way back when the steam locomotive was a significant innovation. The train actually stopped for about 30 minutes to give everyone an observation up close within 5 or 10 feet of the locomotive, and then they set their sails on the way for the remainder of the trip across back to the west coast. And as they got ready to depart, here's what it sounded like. So again, great observation to see up front, classic concept of innovation, strength, resilience in the United States of America as we celebrate our 250th anniversary.

And 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 Mateo, Chief Investment Officer, Rajiv Sharma, Head of Fixed Income, and Sam Snyder, Director of Equity Research. 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 four key economic releases to give you an update on, and we will begin first with the inflation update from the report known as the Consumer Price Index, or CPI. On a month-over-month basis for June, the number for all items came in as a negative at 0.4% negative, which the decline is good news. We haven't seen that in quite a while, but again, the caveat there is it does include the decline in gasoline prices. So the core number, which excludes food and energy, came in flat at 0.0% for the month, which again was some good news, lower than the prior two months of April and May. As that converts to the year-over-year number, the number for June, all items, was 3.5%, which was lower than May's, and the core, excluding food and energy, at 2.6%, also lower than May, which was again good news, but still elevated over that all elusive 2% target that the Fed has for core CPI. And speaking of the Fed, #2, Kevin Worst, the Fed chair, visited Washington, D.C. this week to give his testimony to the House and the Senate for the semi-annual report on monetary policy. Most of the questions that he received and he did answer were related to his thoughts on inflation still being elevated and continues to call the inflation that we are at right now unacceptable and will do what he can to contain that number. The other half of the questions that were received were around Fed independence and whether Kevin Warsh would operate without the executive branch and its oversight, so to speak, and any pressure on that. And Kevin remained fairly steadfast in his answers. that the Fed would be independent.

Third, we've also got an update from the Fed, which is its Beige Book report, which comes out every time, two weeks in advance of the upcoming Federal Open Market Committee meeting, which will occur on July 29th, two weeks from Wednesday of this week on to the 29th, and that's the normal cycle. In a pretty decent report overall for the 12 districts, economic activity increased at a slight or moderate pace in 11 of the 12 Federal Reserve districts. So one district reported no change. So that's been an increase overall in the last few Beige Book reports, so heading in the right direction. Several districts noted declines in spending on discretionary items because of the increase in previous months in gas prices, which again is no surprise. And the labor markets in the 12 districts was kind of a so-so report with just under half of the districts or five of the districts which reported modest or moderate solid gains in employment with the remaining 7 experiencing little to no change.

And finally the 4th update for the week is the report that came out known as the Advance Report on Retail Sales and the number for June 2026 was an increase of 0.2%. Now again, that number sounds pretty small, but it is fairly typical to be around that type of increase on a monthly basis as compared to last month, which was May, which was actually revised upward a little bit, but then it came in at a full 1.0%. Now, the caveat with this number, as we report to you every time it comes out, is that this is a nominal number which includes inflationary price increases, where we would rather see the increases coming from volumes of spending. So all in all, not too much of a surprise to see the number go back to a small increase in June after a big increase in May, also somewhat related to the decline in prices in gasoline. So if you exclude gasoline prices and prices in auto-related manufacturing, you've got a 0.4% increase for the month of June. So all in all, that's a pretty healthy dynamic from a spending standpoint. We'll continue to monitor this as we go throughout the year in terms of consumer spending remaining healthy as it does relate to GDP. So now let's turn to our panel, and we'll start with George to get his reaction on the economic data and ask the question, do you think that the United States economy has a position to steam forward like a strong locomotive, or will we slow down a little bit for a couple hazards on the tracks?

George Mateyo [00:08:43]

Well, it's interesting that you use that metaphor, Brian, to start our call today in the sense that many people are comparing today's AI build out a comparable buildup to what we saw in the railroad industry some 150 or 60 years ago or so. And I think there are some parallels in the sense that we are laying a tremendous amount of track, so to speak, to try and build out the infrastructure on AI. But your question, I guess, first and foremost, is the momentum poised to continue? I think in the short term, yes, I still think we've probably got some decent tailwinds behind us. Again, a lot of it is, of course, driven by artificial intelligence. And should we see some faltering or some maybe slow down in that momentum, if you will, that could probably be problematic for a lot of things because I personally think that AI is now driving the economy, it's powering the stock market, it's fueling the credit market, and it really has become a pervasive theme. And anytime when you have one pervasive investment theme, it rarely lasts forever. So I think we have to be mindful of that first and foremost.

The broader question you also asked about just kind of where we kind of stand with respect to certain indicators, I think things are, again, are in pretty good shape. The consumer seems to be holding in. Of course, you often reference jobless claims as kind of a near-term signal with respect to labor market trends. And there we saw some continued improvement there or continued support for the overall labor market, which is important because that is responsible for, of course, consumers and consumer spending. And people have jobs, they tend to spend money. And I mean, again, we saw that kind of play out in terms of some decent activity for retailers this past week.

But of course, the big thing that we have to watch, I think first and foremost, again, is the inflation situation. And again, I think as we saw this week, inflation did seem to cool off a little bit. I don't think it's the point where it's completely cooled because I think to some extent we're probably in this situation where we're unfortunately in this on again and off again situation with Iran that's probably having some implications for energy prices as well. I think inflation has been studied right in this year because of things other than energy. We've talked about this on this conversation in other places, too. And you know, to some extent that again kind of goes back to that kind of maybe just if you can stick around. AI. And I think, again, the build out of AI has been really responsible for things kind of boiling over in terms of inflation beyond energy. Now, this past month, again, we saw some of those prices come down a little bit. And I don't think that it's sustainable to see the prices increase that we've seen semiconductors and other places continuing for forever. So again, I would suspect some moderation might be likely there too. But again, we also have not seen price increases from some consumer tech companies, namely Apple, which of course is a big provider of cell phones, and they've talked about price increases as well.

So again, I think there's probably this notion that things are in pretty good shape right now. But again, I think overall inflation, in my view, is still somewhat sticky. It probably doesn't necessitate an action for the Fed right now, but I don't think the Fed's in a condition right now to cut either. So I think rates are probably on hold for a while longer. At the same time, we're likely to have some continued geopolitical events from time to time, which, again, feeds into our thoughts about rising nationalism and other things that are probably more on a structural basis. So again, Rajiv, if I were you and thinking about what the Fed might be thinking, I think the Fed is probably in a best position right now just to sit there and do nothing. And they would probably be perfectly fine with that, at least for the next few months. But how are you thinking about that? And also, what are your thoughts also, Rajiv, on the credit markets as relates to AI?

Rajiv Sharma [00:12:21]

I mean, really good points there, George. And I really do think that the Fed is looking at every single data piece that's coming out, especially inflation. They're focused on price stability. We've heard that from Kevin Walsh at the last FOMC meeting. So when we see this lower than expected CPI print this week, obviously the markets really took that in stride and they really ignored whatever is happening in the Middle East. any kind of upscale in military action was kind of a backseat when it came to the markets. The market really saw a positive tone this week with that CPI release, both headline and core inflation declining. This kind of like, seriously, this kind of made like the the Fed take notice of it as well. And those rate cut expectations also took notice of it.

You know, we had a July rate hike expectation of 40% before the CPI release. And immediately after the data release, the odds collapsed to just about 20%. Again, that is not zero, but it really didn't just move the July odds. It kind of pushed back the September and October hikes also. So now the market's really, you know, looking at one rate hike. Most likely they're fixated on October. But I think the Fed needs more than just one CPI release, and the Fed is going to look at a trend. If we don't see a trend, if we don't see multiple data releases, we've got the PCE coming out later this month. If we don't see a consistent theme that we're going on a disinflationary trend, the Fed, in my expectations, will keep rates elevated for longer.

And I do think that right now you're looking at a Fed that has Kevin Warsh at the helm, he's the chair. The CPI numbers came out, the market got really excited about it. Kevin Warsh had a testimony this week, and he basically said that it was a testimony before the House panel, and he came out and said that we really have no tolerance for persistently high inflation. And he also referred to the CPI data release and said, mission not accomplished. So I think that that proves two things for me. One, the Fed is going to be fixated on inflation as they should be. Two, Kevin Walsh is not moving the goalpost. He's still reiterating that 2% is where we need inflation to get to. And until we get there, I don't think the Fed can really do much. So we've talked about it before, that rate cuts are off the table. My opinion really is rate hikes are not really on the table until we start really seeing stubborn inflation remain the way it is. So we have to really see every day to report and

Even the market reacted to that. We got that CPI report, the two-year Treasury note, which yields are very, very sensitive to Fed policy. We saw the two-year rise about 11 basis points at that point and then come down. But for the month, rates have been really high for the two-year, the 10-year, and the 30-year. It's not been a market right now that's really considering that the Fed is going to do much right now, in my opinion. And I really do think that if you think about corporate spreads, they've been very, very, very resilient through all of this. And I think that's important to say too, because as long as the credit markets remain resilient and liquid, I think that it bodes well for risk assets.

But if you look under the hood and we talk about AI-related names, There is a lot of debt that's coming to market because of these AI hyperscalers. And it's kind of bifurcated the market for credit spreads. You have the AI hyperscalers and then you have the chip makers. And I think both are very different. But any bit of news, whether it be that AI hyperscalers want to raise more debt or whether there's a downgrade in the space, you will see the reaction throughout the entire sector. So this month alone, communications and telecom, communications and tech have done extremely, they've lagged the entire market. And this comes on the face of Amazon having a jumbo deal that came out, Oracle getting downgraded, just a notch above high yield. All of this really is, it makes the market very sensitive to these names. But you have to realize that AI hyperscalers and all these AI names are going to continue to come to market. They have the capacity to do so. They have the cash flows to do so. And I think that the market is ripe to see more and more of these issues come out. When they do, I don't think the investors are going to be able to play in the names unless they get significant concessions, which causes the entire space, the tech space, to widen them.

Brian Pietrangelo [00:17:23]

Great, Rajeev, thanks for that update on the fixed income market. And we'd like to bring Sam Snyder into the conversation. Sam is a director of our investment research on our equity team. Sam, what are your thoughts on what's going on in the markets this week?

Sam Snyder [00:17:34]

Thanks, Brian. So this week, as we stand now, the S&P 500 stumbled a bit down about 1.2%, but I think the bigger story is that the tech-heavy NASDAQ underperformed that down around 3.2%. as some of the AI-focused names really gave back a lot of their meteoric performance. Speaking of meteors, SpaceX went below its IPO price, and earnings season kicked off.

We've also seen outperformance in healthcare stocks, small caps, value, financials and industrials. It's all connected, and we think it's bullish for the real economy despite the volatility. We're encouraged that it seems as if industrial end markets are all growing together at the same time. The analogy that comes to my mind as a baseball team where every player is hitting and the pitchers are throwing well, that team's really unstoppable, at least in the short term or the intermediate term. We've seen this in the outperformance of smaller, more cyclical stocks.

Due to the construction of the S&P 500, which is market cap weighted, the overall index seems lackluster, but the outperformance of equal weight S&P and smaller cap indices tell the real story of the economy, at least from one perspective. Broadening out generally is good and should lead to a recovering consumer over the next few months.

Brian Pietrangelo [00:19:03]

Speaking of earnings, what's your read on the first week that we've got some big earnings for the second quarter?

Sam Snyder [00:19:03]

Yeah, so it's early. Early in the season just began to kick off with the banks. So we sift through the transcripts with the earnings calls and try to form our sort of own version of the Fed's beige book. Like I said, still early. Banks just began reporting this week, a couple of tech companies.

We like what we see so far, though. Banks came in strong. IBM stumbled a bit as some of the AI spending at corporations appears to be crowding out a lot of the traditional tech spending from CTOs and CIOs. And the consumer remains challenged in pockets, but overall pretty resilient, as George mentioned earlier. Banks benefited really from, and this goes to some of Rajiv's points, The one, there's a high equity volatility, but capital markets are wide open and the AI boom really has created a lot of debt issuance, equity issuance that's coming in the pipeline that's been super helpful for the banks.

So speaking about some of the AI names, the share price performance of the stocks in the AI ecosystem, it's stumbled a bit. We think part of that is flows from growth to cyclical old economy stocks. given the robust macro backdrop. It isn't really intuitive, but when the underlying economy is strong, growth stocks typically underperform. This is kind of called, people will call this a growth scare, and then value outperforms. The logic is that when the economic growth is weak, investors seek out returns in sectors that have growth of their own. But when economic growth strengthens, the natural part of the economy supports demand for cyclical stocks, which tend to be cheaper.

The other piece that we think is impacting AI related stocks is the increase in equity issuance of other players in the AI space. And that's foreign companies listing in the US, it's foreign companies listing in their domicile, and it's some of the IPOs that are coming down the pike in the US. And this creates a dynamic where the supply of ways to invest in AI simply outpaces demand. And there just aren't enough dollars to go into the new issues that come to market. Said another way, Some themes have what is called, investing themes have what's called scarcity value, value that materializes due to limited ways to invest in that theme. The scarcity value is, at least from our perspective, currently evaporating with the strong new issuance pipeline, at least for now. And some of that widening that Rajiv talked about is likely playing a role in the multiples that we're seeing in the equity market.

So moving on to SpaceX, the company fell below its IPO price. Partly due to some news last night that the company's planned launch was delayed. Prior to this, we're seeing short interest growing. The float's pretty low right now. It's going to increase over time as the IPO process sort of develops and unfolds and the stock becomes more seasonal. I think that, you know, this is an indicator that the market's betting against the stock. Short interest can be real rocket fuel, no pun intended, if there's a pocket of good news. Also known, this is called a short squeeze. And we note that even some vocal bears have decided not to short the stock, given how crowded the short trade is in SpaceX.

I also think the stocks. impacted by the dynamic I mentioned earlier, the interplay between growth and value stocks and how the underlying economy seems to be. Investors want to look for the highest risk reward. And right now, these stocks are priced for perfection. And as the real economy starts to pick up, some of these smaller cyclical value names will do better. And then, you know, really interesting.

Brian Pietrangelo [00:22:48]

Speaking of the underlying economy, Sam, what about traditional healthcare? What's your thought there?

Sam Snyder [00:22:55]

Yeah, so looking at healthcare, this is really kind of almost an anti-AI bet. It's an interesting phenomenon.

We've seen that these healthcare stocks have begun to really turn the corner. From our vantage point, a lot of growth investors are getting skittish about the high-flying AI names, and they've really sought refuge in biotech and healthcare stocks. We've noticed this yin and yang dynamic dating back a while now. We'll see if this persists, but we think there's plenty of room to run now in healthcare names. Just keep in mind that getting along health care has an unexpected and implicit bet against AI stocks, at least in our view.

Longer term, we think health care is going to be a huge beneficiary of AI adoption, could be a boon for new medical discoveries. But all in, look, there's a lot to think about. It's an exciting and dynamic time to be investing. We remain bullish on the overall economy and expect writing out to continue.

Brian Pietrangelo [00:23:50]

thank you for the conversation today, George, Rajiv, and Sam. 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.

Disclosures [00:24:27]

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

July 10, 2026

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, July 10th, 2026. I'm Brian Pietrangelo, and welcome to the podcast. And if you're an avid listener, that we were off last week in observation of the July 4th holiday. Happy Independence 250 for the United States of America. We hope you had the opportunity to spend time with family and friends and celebrate with each other and celebrate our country. And in the sports world this week, if you're an avid fan of soccer and tennis, you've got a handful of great competition, including the FIFA World Cup, with the United States men's national team going pretty far this year and ultimately having a good success track record before bowing out in their last game. And across the pond, we've got the Wimbledon tournament in full force. Good luck to all the competitors in that arena. 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 activity, we're going to pause and go back a week because we were off on the podcast last week for July 4th, so we want to bring you up to speed on that economic data from 2 weeks ago, which included two employment-related reports. So last week both reports were courtesy of the Bureau of Labor Statistics, and we have the JOLTS report, the Job Opening and Labor Turnover Survey report, which includes job openings, which came in at 7.6 million for the month of May, which was essentially unchanged from April, indicating that there's still a decent amount of employers looking to hire talent. And also that week, the second report is the Employment Situation Report, which includes non-farm payrolls, which showed a gain of 57,000 jobs for the month of June, which was half of what was expected. In addition, the number of jobs during the revision process, which is the normal process for the prior two months of April and May, were revised lower by 74,000 jobs. Now this cancels out the positive revisions from the prior month, so basically net net zero, and now we've got 4 consecutive months of declining growth rates in terms of new non-farm payrolls, and we'll talk about that with our panel in terms of what it might mean for the Fed. The second part of that report does include the unemployment rate for June, and it fell to 4.2% from the prior month of 4.3%. Not much movement there, but good news, in fact, that it is continuing to remain fairly stable. Now moving to this week, we've got two reports from the Institute for Supply Management's PMI indices. On the manufacturing side, the index has been in expansion territory for roughly 6 consecutive months, which is great for 2026. And on the services side, even though it was a small decline, that has been an expansion for two years consecutively, almost 48 months, however, on a non-consecutive basis where the services economy has been in expansion. So good news there. Also this week on the employment front, we get the weekly initial unemployment claims report, which continues to show very stable numbers at 215,000 for the week ending July 4th. Again, that has remained very, very stable for almost 2 1/2 years now. In addition, we also received the minutes release from the Federal Open Market Committee meeting back on June 17th, and the key themes there in the minutes were not a surprise. It continued to talk about the elevated concerns around inflation, but also talked about not necessarily tipping the scales for a rate increase yet, and certainly not in the upcoming July meeting. We'll talk about it with Rajeev and George and get the take for the panel. During the podcast, we'll also get Steve's take on what's happening in the stock market and thoughts on preview of Q2 earnings. But before we get to that, let's go to George and get an update on the Iran situation, given that there was some Differences of opinion this week and basically a crack in the peace deal. So George will talk about that in relation to what's going on in that area and also in the economy. George?

George Mateyo [00:04:48]

So Brian, I'm not sure if anybody's got a really clear crystal ball with what's happening in the Middle East, but to put it in context, I guess, for everybody at least level set where we are right now, at least where we think we are as of Friday morning around 10 A.m. Eastern. I think it's fair to say that the ceasefire appears to be collapsing. We all have seen evidence of that in the past few days or so. Rhetoric has actually been increasing. Escalation thus far has been somewhat contained. It hasn't been too widespread, but nonetheless, the conflict does appear to be escalating moderately, I'd say. And I think the key issue, of course, is the overall fate of the Strait of Hormuz and actually what happens there going forward. I think to some extent, the Iranians felt that there was maybe some leverage lost in the sense that You know, once the ceasefire was first announced, of course, the price of oil receded and that kind of took away maybe some of their economic leverage to some extent because that makes things a little bit easier for consumers when prices go down. At the same time, I think some of the hardliners in their country probably were emboldened and probably felt a little bit reinvigorated perhaps. following the funeral of their former leader. At the same time, I think it's fair to say that there's also a lot of ambiguity with respect to the ceasefire and the language over the Strait of Hormuz. I think the Iranians kind of interpreted the comments that both the Iranians and the Omanis would actually get together and determine the future of this rate as kind of a green light to actually kind of legislate actually how commerce flows through this strait. So that ambiguity, some of those other factors I just mentioned, probably suggested them that they felt like they had rights over the control of the state. And of course, that is completely at odds with the administration here in the US and how they see things. So where we go from here, again, as I said earlier, it's far from clear. I think it's probably more likely that, again, we'll probably see some new ceasefire struck in the next few weeks or so, because I think both sides probably have some vulnerabilities that they probably acknowledge internally. around kind of what happens next. I think the Iranians, of course, have still a very fractured leadership structure, of course. And I think here, of course, at home, the administration is getting ready to focus on midterms and the price of oil and inflation probably actually factors largely into that discussion as well. So my best guess is that we'll probably see some type of new ceasefire in the next few weeks or so, some type of formal agreement, perhaps, again, maybe another MOU of some sort. And that probably kind of keeps oil probably in that $60 to $70 range. That being said, I still think there's probably a risk that we actually do see the conflict re-escalated to some extent. Maybe there's another blockade, maybe there's another type of conflict, or maybe some kind of escalation going further. And if that happens, then again, we could probably see oil hover back towards $90 or $100 a barrel. So again, there's a lot to think about. I think it could probably create a lot of volatility, a lot of noise in the near term. I still think, though, that the themes that we were talking about and the overall notion that the US is now more energy independent, meaning, again, most of the energy that we consume is stuff that we actually make here. So that's probably a net benefit to some extent. We actually are probably less immune-- actually, sorry, more immune to some of the pressures there. And at the same time, much of the world is still less energy-reliant than they were in the past, meaning we use less energy than we have in the future. So that's not to say that we have to be cavalier about this, but nonetheless, I don't think it's going to be quite the shock that it was, say, several decades ago when oil was at the center of geopolitics and economic discussions. Well, for us as allocators, though, I think it's kind of fair to say that the Fed is probably going to be kind of chewing this for quite some time. Of course, we have a new Fed share, and he's already kind of signaled that maybe inflation is something to be concerned about. So I think, I guess, Rajeev, for you, I think, I'm kind of curious to know how you think the Fed is processing this. Of course, they've kind of shifted their stance from Perhaps some easing or some cuts this year and maybe a hike later this year. But again, as far as I see, a pretty fuzzy outlook going forward. But what's your best guess in terms of what the Fed is doing with respect to their outlook on energy and inflation more broadly?

Rajeev Sharma [00:09:01]

Well, fuzzy is a good word to use with the Fed right now. We did get a glimpse into the Fed's thinking this week, actually, when we saw the release of the FOMC minutes from the June meeting. And just to recap for everybody, the Fed held the federal funds rate at 3.5% to 3.75%, but it was also the first Fed meeting chaired by Kevin Warsh. And what we saw in the minutes was a hawkish tilt, a divided Fed. Some officials saw a case for hiking rates at the June meeting itself, but they ended up going along with the rest of the members of the Fed. who mostly called to keep rates where they are. Overall, though, the dominant theme was price stability, or in other words, inflation. Several members said that inflation was becoming more broad-based and higher costs are going to eventually come down to final goods prices. The committee marked up their inflation forecast for the year, as we all know, raising headline and poor PCE projections. Now, you did have some committee members calling out AI, some called out energy. as inflation drivers due to the demand on electricity and prices. But most committee members were okay with the labor market, and they kept those projections pretty close to current levels. Now, the committee did remove some of the easing bias in the statement, and the statement itself was notably reduced. That is the Warsh effect, reduced forward guidance. With less forward guidance, we have a market that's not going to be focused entirely on each and every economic data report that we see. And with the minutes, the market reaction was pretty swift. The market started feeling that the minutes were released, the market realized how much the Fed is focused on inflation. Inflation is stubbornly sticky. The market started pricing in about 38 basis points of rate hikes for the year. And I think there was about a 36% probability of a July hike in rates. Now, we did treasury yields move higher because of this. We saw the two-year move up to a yield of 4.22%, and the 10-year broke through that psychological level of 4.5% and ended up around 4.6% midweek. So overall, the market views the minutes as hawkish, and that's really the only glimpse we're getting from the Fed right now. I think there's going to be reduced communications. The case for rate cuts is off the table, and the Fed under Warsh is a little less predictable, in my opinion. It's all going to be about data going forward. And another thing we heard about from Kevin Warsh this week was the appointment of these task force. He has five task forces that he has announced, Kevin Warsh has announced. This is communications, balance sheet policy, data sources, productivity and jobs. and an inflation framework. These are all task forces that will be co-led by three external experts and supported by the Fed staff. So they are really going to be providing findings to the FOMC. And again, the market is viewing this as Warsh's bet on a couple of different things. One, Warsh's bet on AI as a key economic force, and that's going to be the Productivity and Jobs Task Force. He's included Marc Andreessen and Xbox CEO Asha Sharma. Also, the group of appointees also in different task forces suggest that there might be some effort here to maintain a standing with the Trump administration, as Warsh is kind of drawing individuals that have knowledge about the markets, about economic signals. So I think that's something important to keep an eye on. This is a new Fed. This is not a passing of the baton, really. It's a completely new framework for the Fed, and the market's going to have to get adjusted to it. And the near-term volatility is obviously going to be expected because we're not going to get the kind of guidance that we used to get. We know that Fed Chair Warsh doesn't really like to talk about dot plots and stuff like that. So there's going to be some differences, I think, with the Fed going forward. And again, as I mentioned, every single data report, economic data report, is extremely important. We did get the June non-farm payrolls numbers. They kind of came below expectations that did drive the two-year yields lower by about 10 basis points right on the release of the data. And they did take down the July rate hike expectations. As I mentioned, they had gone to 38% that we couldn't get a rate hike in July. Now they're down to around 18% after the release of that data. So we are going to be seeing each and every data report dictate where the market thinks the Fed is going to move next. And I do think that this is going to be very important. Data has always been important for the markets, but even more so now if we start seeing a Fed that's departing from forward guidance.

George Mateyo [00:13:44]

So I'm glad you mentioned AI is part of the overall focus of the Fed, not only in terms of the productivity benefits that could accrue down the road, which I think is still significant and probably to be determined, frankly. But at the same time, they're also mindful of inflation and the impact that AI spending is having on some of the inflation numbers that we also look at as well. Steve, if I think about what you might be thinking about with respect to equity prices and kind of what's happening inside the equity market, it's curious to me that we've probably seen now at least a few months of rotation from some of the companies that initially were building out this infrastructure, spending gobs of money, frankly, on AI-related stuff, we'll say. And now the companies that are probably-- those companies now are betting that there are some price pressures there, right? They've actually started to raise prices. They're seeing their margins erode. They're seeing their cash flow erode. And now other companies like the semiconductor companies we talked about in prior conversations are really kind of taking some of that market share, if you will. So how are you thinking about AI as relates to the equity market and portfolio positioning within your portfolios?

Steve Hoedt [00:14:49]

Well, really, it's come down to that whole game of who are you investing in? Are you investing in the hyperscalers who are spending on this to be able to provide services or are you investing in the infrastructure? We've had kind of a couple of different phases to this so far. And what's been interesting to me is that after seeing semiconductor stocks basically be the be-all end-all for the market over the first six months of the year, but really accelerating in earnest in Q2, since June 25th, we've seen actually the MAG 7 outperform the market by 1,000 basis points, so that's 10%. So we've seen a bit of a rotation back. So it seems like this earnings season is going to be quite interesting. I think that the... Semiconductor stocks are likely going to beat expectations, but will they beat expectations by enough? We saw Micron beat expectations here a couple of weeks ago, and the stock actually reversed off of that. So you're starting to get to a point where the market maybe has marked up the expectations of how great this is going to be. And when we're seeing a company like Meta say, hey, we're going to build a business like Amazon Web Services to sell excess cloud capacity, it starts to make you wonder, are these guys overinvest? Have they overinvested in the in the infrastructure? So and there's a whole host of things going on. I'll tell you, George, the thing that keeps coming back to me about the market is we have seen this this idea that the market's broadening out, that it's more than just the tech stocks here lately, which is the pet has been a theme that we've been harping on for a while, that that would be healthy for the market. And we have seen that we've got earnings that are going to start to come out next week. You've got the large financial concerns that will be out toward the end of next week. The earnings for the S&P 500 came into 2026 on a forward 12 month basis at 310. We're at 371 right now. Our forecast is that we exit the year around $400 for the S&P. And the thing that we've talked about on this call and in every other forum that we have is that when that red line for the S&P 500 is going up and to the right, meaning the earnings line on the chart that we use. Over and over and over again, that it's really hard to bet against the market. And when you look at where the earnings line is likely to go over the last six months of the year, it's going to be up and to the right. So I think that we're likely going to see some backing and filling as we get some rotation maybe out of the hot semiconductor stocks, maybe a little bit back into the MAG 7. But I'll tell you, if people rotate weight into the MAG 7 and out of semis a little bit, that'll help drive the market higher too, because those MAG 7 names are 40% of the S&P 500. So we've got this broadening out theme that has been good. And we've seen the equal-weighted market moving higher. We've seen small-cap stocks moving higher. I think as we head in the back half of the year, we think things are likely going to continue to play out favorably for equity investors.

George Mateyo [00:18:16]

To what extent, though, Steve, do you think that earnings might be a little bit overextended, too? I mean, we can talk about valuations being extended, but is there a concern that maybe earnings themselves are overextended to some extent?

Steve Hoedt [00:18:28]

I think that's the truth, George. So when you look at valuation, valuation has come back in on the forward multiple. Late last year, in the fourth quarter, we were up around 23 times forward earnings. And right now, we're hanging out right around 20. So we've taken three turns out of the market multiple. The long-term average on forward earnings is not much further south from where we're at. It's around 19, 19 and a half. So we're around a normal multiple, frankly. And When you look at earnings, it does feel like, you know, when people talk about a bubble, where's the bubble? Well, maybe the bubble is in earnings. It's not maybe in stock prices right now. And when you look at some of the AI driven earnings numbers and, you know, you've pointed out before, you know, when you go start to go under the hood of the mag seven earnings numbers and you look at the other line and all these kind of things, it does kind of give you some pause that maybe the earnings numbers are not as sustainable as what people think they are. So, we'll have to see how that plays out over the course of the year. I don't disagree with your premise that that it does feel like the earnings numbers are not just pure earnings numbers that are coming straight from companies selling a product like there's other stuff that's kind of under the hood where you've got gains because of public offerings and other things like this.

Brian Pietrangelo [00:19:59]

So speaking of public offering, Steve, how about a comment or two before we close the podcast on today's?

Steve Hoedt [00:20:05]

Yeah, so SK Hynix has listed some ADRs here in the US. SK Hynix is one of the two largest memory makers in South Korea. If you've taken a gander at the KOSPI index or the South Korean stock market this year, it's kind of gone crazy. It's been driving the returns in the emerging market indices. because really it is a market that's driven by a couple of stocks that are levered to this memory theme. It's like if you can imagine Micron and those names basically being 50% of the market, that's what South Korea is. I mean, they decided to tap U.S. liquidity by listing some ADRs here. We're seeing that offering be fairly well received today and we are seeing tech stocks in the U.S. sell off a little bit. My guess is that there's some rotation where people are raising some capital in some of these semi-names that they've made a lot of money on here in the U.S. and now accessing SK Hynix because Hynix is probably a better quote unquote pure play than some of these other ones that maybe people have been playing other than Micron. So something to keep an eye on now that that's easier for people to access here. But at the same time, I tell you, we don't recommend that for any of our listeners or our clients at this time.

Brian Pietrangelo [00:21:26]

Thank you for the conversation today, George, Steve, and Rajeev. 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 [00:22:00]

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

More Episodes

Have Feedback or a Topic Idea for Our Podcast?

Email Us

MARKET INSIGHTS

Get the latest research and insights on today's market trends.

Listen and subscribe to Key Wealth Matters on your favorite apps.

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

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

Let's Get Started

Looking for the best private bank?

Know What's Next

Preserve Your Wealth

Key Wealth Matters Podcasts

Latest Episodes

Have Feedback or a Topic Idea for Our Podcast?