Key Wealth Matters Podcasts

August 14, 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, August 14th, 2026. I'm Brian Pietrangelo, and welcome to the podcast. It's that time of year again when the kids return to school, both young and young adult, especially those returning to college for their experience. This week marks the end of summer, but not from a geological standpoint, but from the fact that the kids are not able to go to the pool anymore. So good luck to all those returning to school. In addition, tomorrow is actually National Shoe Donation Day. So if you got an extra pair lying around the house, it might be a good opportunity to donate that to somebody in need. But for today, more important on a fun fact day, it is National Creamsicle Day. Of course, the creamsicle is the wonderful ice cream on a stick treat that blends orange flavor together with vanilla. I like all types, including the push-up flavor, the blend on a stick in popsicle format and also the ice cream store that's in my hometown has a twist known as the orange swirl which combines the two flavors and it's just absolutely fantastic. So grab one if you can, nice flavor and a retreat from the heat in the summer that we're experiencing right now. 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 Question Article series addressing a relevant topic for investors. Also, we are excited that we're launching our periodical known as the Key Investment Perspectives article that is a quarterly periodical that takes a look at what's happening in the quarter for the markets and the economy and talks about an update including some really cool articles on some very specific topics. So we are relaunching that. It's available on key.com. Take a look if you want to see what's happening out there in terms of a quarterly update and we'll continue to launch that every single quarter. Finally, as we always say, 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, dare I say that the meeting was fairly calm on almost all fronts, including the stock market, which hit all-time highs. The bond market was fairly calm. We've got geopolitics also fairly calm. And then the overall economics, in terms of the releases that we're about to share, also fairly stable. We have three key economic releases for you and we will begin with inflation. Now this was certainly the most important economic release of the week and we got CPI or Consumer Price Index measure of inflation for the month of July. On a month-over-month basis, all items were up 0.1% and core, excluding food and energy, up 0.2%. Now those monthly numbers feed into the year annual, year-over-year numbers. All items were up 3.4% in July, which was down a little bit from June, headed in the right direction, and core, excluding food and energy, at 2.5%, which again was down 1/10 from June. So good numbers in the direction, but still lagging in terms of making significant improvements. On a year-over-year basis, still a lot of increases in the gasoline and energy areas, but more so inflation still elevated in a couple other areas, including food at 3%, including electricity at 4.2%, apparel at 3.9%, and shelter at 3.2%. So again, in summary, inflation down a little bit in a good way, but still significantly elevated over the Fed's preferred target, which will again have implications for the upcoming Federal Reserve meetings in the next few months. We also got information on the inflation side from the producer price index or wholesale pricing, which included some numbers that were fairly in line with expectations. And second, yesterday on Thursday, we get the weekly initial unemployment claims, which continue to remain extraordinarily stable around 200,000. And again, this is a good news as in one of the indicators in the employment market that continues to remain stable. Now we oftentimes don't report on continuing claims. because it's a coincident indicator rather than the leading indicator of initial claims, but it was interesting to see that the ongoing or continuing uninsurance or insurance claims for overall unemployment were under 1.8 million for quite a while now that has been above that number. So to see it dip below 1.8 million was again good news in terms of that data point. And finally, our third update for today came this morning from the Census Bureau in terms of retail sales, and the number for June came in at revised, which was 0.2%. But most recently, the updated number for July was negative 0.6%. Now, here are a few things to consider. Number one, this was the first time in nine months that the number was negative as the preliminary number that last occurred in October of 2025 when the number was negative. So we won't make much out of a single data point, but we will continue to watch the trend. In addition, it was somewhat expected as rising gasoline prices had a nominal effect on this number, so there was some expectation there may be a little bit of a pullback. Also, if you take the number, excluding auto and gas, it was only a decline of minus 0.2%, which is a little bit more palatable and a little bit more reasonable. So net-net, a negative report, but we will continue to watch it on a month-over-month basis to see the strength of the consumer in the United States. And coming up in the next few weeks, we've got next week the Federal Open Market Committee meeting minutes get released on 8-19 and then we go into 8-26 where we get GDP for the second quarter, second estimate, PCE inflation. And then on August 28th, we'll give you a preview that we'll be watching out for Kevin Warsh's potential statement at the Jackson Hole Economic Symposium on Friday the 28th. So let's get right to our panel where we'll have conversations with George, Rajeev, and Steve, of course, on their various areas of discipline in the markets. And we will begin with George with your general reaction to the economic data this week and what it might mean for the economy. George?

George Mateyo [00:06:42]

So I think it was somewhat calm, Brian, on the surface in terms of the economic reports. Didn't really surprise the markets too much. For the first time in a few months anyway, we actually saw reports come mostly in line with expectations, which is always nice to see that the market can kind of anticipate things and market participants can also anticipate things. And sometimes those two coincide. So as you mentioned, I think inflation was probably a little tamer than people expected, which is good news, at least at the headline number, same thing. So we've got two levels of inflation, of course, what we call consumer inflation and also producer inflation, which is kind of a fancy way of talking about business inflation. I think overall they were probably, again, in line with expectations overall. There are some, I think, things beneath the hood that we have to pay attention to still in the sense that inflation really hasn't gone away. And there are some concerns that maybe it does elevate itself again later this year. But for now anyway, the markets certainly braced that and as you mentioned, moved to new highs on the back of some quote unquote mellower inflation. We also saw jobless claims pick up a little bit. That's, again, not a worrisome trend. It's probably a little bit low, artificially low a few weeks ago. And so we're coming back to kind of a comfortable range as opposed to something really low. And then I think people are also looking at this morning's retail sales report and seeing that maybe there's some softness to consumer, but they also point out the fact that there are some calendar issues in the sense that what happened last month and last year are kind of actually kind of making the numbers this morning look a little bit softer than they otherwise would. So I think the overall takeaway is that the consumer is probably in okay shape. Things are slowing down a little bit for the consumer. And I think it's probably fair to say that inflation is maybe peaking a little bit, pausing. But again, we just really can't say we're out of the woods just yet. What it does do, however, I think it does buy the Fed some time. Talked a lot about recently that maybe the Fed is inclined to raise interest rates. And indeed, just about two weeks ago, there was about a 50-50 chance that they would be raising rates sometime in September. Those odds have now shifted materially and there's about a 75% chance that they do nothing, which kind of, I guess, coincides with our view. So that's good news. I think one thing that we probably need to pay some attention to also has to do with the fact that this past week, a new report, a new update on the deficit was unveiled. And I think it reached pretty much all time wide levels. So that's not really great news for the long term. And we've talked about the fact that The deficit is going to be a problem when it's a problem. We don't know if that's going to be two weeks or two years or two months from now. At the moment, it seems like the bond market's taking that somewhat in stride. We can look at long-term yields however they have moved up, and that actually is an interesting development by itself. Of course, we've also seen the deficit being impacted by lower tariff revenues, higher tax cuts, so less revenues coming in. At the same time, we're spending more on defense, as we all know, in other places in the world. So we put all that together, and I think the key takeaway is that bonds are probably in for maybe some digestion here. We also have to acknowledge that maybe there are things you can do in your portfolio to diversify around higher rates, which is important to think about. And at the same time, selectivity and emphasizing quality, I think it's going to be of a paramount concern in the back half of this year if we should see some slowdown in earnings and other things that are really supporting the overall stock market. But Rajeev, of course, as I mentioned, the Fed has now probably gotten a bit of time to kind of think about what they might do next. How would you actually kind of characterize what you saw this week and how it's actually impacting your outlook for the Fed in the latter half of 2026?

Rajeev Sharma [00:10:27]

Well, George, the market's really interpreting every single piece of economic data. So you get the jobs numbers, CPI, PPI, and now we get the retail sales numbers. So it's removing the urgency for the Fed to tighten. The September meeting is effectively priced as a hold right now, and the long end is remaining under some pressure for the supply dynamics. So the steepening bias continues in the market. The market is viewing the front end rates as having more room to fall at a quicker clip than longer term rates. a steeping of the yield curve, a continued steepening. And the bond market is really rallying on the front end. You have the two year yields. That's the part of the curve that is most sensitive to monetary policy. They're trading around 4.13%, while the 10 years sits around 4.65%. And as you mentioned, George, the 30 years, well above 5% at 5.24%. So the curve continues to steepen. I think we're going to see more of that going forward. And what's really driving the move is that you get that software employment, Softer inflation data, that's been the primary catalyst. There's a lot of pressure on the Fed right now to just hold right now. There's no urgency to hike rates. July CPI came in around 3.4% year over year. That's the slowest pace since March, and I think that continues right now. You have July CPI, your PPI readings, they're all pointing towards a subdued PCE print, and it supports that September hold. That said, we do have some Fed officials that are coming out and kind of arguing for a more tighter monetary policy. You've got Richmond Fed President Tom Bark and he came out and said that, you know what, September should not be off the table. Susan Collins also has supported a September rate hike. But really I think you gotta go with the data. We don't have a lot of cues from the Fed right now. Kevin Walsh has not given us a lot to work with and I think every single economic piece of data is extremely important. So when you get these kind of economic data that's coming through, that's kind of pointing towards a softer labor market, a softer inflation print, you start thinking whether there's gonna be a hike or not at all this year and right now, All expectations for a Fed rate hike have been pushed out to December. Last week when we spoke, there was a 50/50 chance of a September rate hike. That's also gone off the table. And now you're going to start looking for other cues. So you have the Jackson Hole Symposium, which is going to be August 27th to 29th. Generally, the Jackson Hole Symposium is a good opportunity for the Fed chair to really start giving some cues to the market. This is gonna be the first time where Fed Chair Kevin Warsh is gonna be giving a speech at the Jackson Hole Symposium. The central question is gonna be, will he use it as a platform to signal a September hold, or will he keep the door open to a hike, or will he just not say a lot, which is what he's done in the last two meetings. So the Fed has held rates for the last five meetings. But I really think this is a good opportunity for Fed Chair Walsh to come out, kind of give an idea of where his thinking is. And I think it's gonna really lead to changing the probabilities of the September 16th FOMC meeting. Right now, there's about a 30% probability that we have a 25 basis point hike at the September meeting. The key risk is going to be if Kevin Walsh comes out and starts being deliberately vague, his message I don't think the market's going to like that at all. They need some kind of conviction right now.

George Mateyo [00:14:13]

Steve, when we ended our call last week, you talked about the fact that sometimes the market does things that people doesn't expect it to do in the sense that we have this lingering overhang of seasonality on the market weighing typically around this time of year where stock prices tend to be a little bit softer in August and September. And as I mentioned earlier, I think we've now notched our 27th new high this year. So are we in the all-clear mode right now where stocks just go one direction for the rest of the year? Or what do you think we're in historic war?

Steve Hoedt [00:14:41]

I mean, George, it really does feel like it. I mean, although I'm sure that by saying that, I'm going to jinx it. The market typically tries to figure out a way to confound the greatest number of people for the largest amount of time. But very clearly, we not only hit new highs last week, but we're hitting another new high this morning on the S&P 500. And the two things that jumped out of my attention this week regarding the backdrop in terms of market environment is not only have we seen the equity market move to new highs along with breadth making new highs, we've seen volatility pretty much collapse. So the CBO volatility index or VIX is at 14.6 as we sit here this morning. That's approaching the lows seen last December at 13.5. And keep in mind, just a little more than a month ago, we were at over 21 on some news events. And back in March, we spiked over 30. So the volatility continues to move lower here and that's normal in a bull market phase. But I think it would be meaningful if we break to new lows, if we were to take out the December low. So that's point #1. And then point #2 is, I don't know if, I'm sure Rajeev has been watching it, but like the double B minus triple B credit spread has collapsed to new tights for this cycle as well too. We sit here this morning at 91 1/2 basis points. The low in early or mid 2025 was 85. So we're only six basis points away from making new multi-year all-time tights on the BB versus BBB credit spread. That is not a sign of an economy that's in any kind of peril, right? You're taking, you look at that and that to me is an unabashedly bullish sign for the markets when you've got credit as as good as it is volatility collapsing during what should be a time when we start to see volatility rise because you've got lower liquidity in the summertime, you got people going on vacation, all the trading desks, the senior people are in the Hamptons, all that kind of business. And the bottom line is we're melting up during a period of time when we should be consolidating or going slightly lower. And that's something that I mentioned last week. When the market does something that you don't expect it to, you should pay attention. And that kind of tells me that we're in the phase where the market's likely going to surprise us to the upside over the back end of this year.

George Mateyo [00:17:36]

So Steve, I'm curious to get your take on one other thing, too, in the sense that bond yields, as I mentioned, at least really long-term bond yields have now risen as they say, as people have been fixated on towards, I guess, 20 or 25-year highs, meaning they're kind of back to where they were 2007, 2008. And just when you say there were 2008, people get a little nervous, but really they're kind of back to the long, really their long-term average. I think rates are probably somewhat artificially low coming out of the great financial crisis, but the long-term average for a 30-year bond anyway is about 6%. Today we're at 5 1/4 roughly. So we're maybe even a bit below average, but nonetheless, people have been wondering Gee, if I can get 5 or so percent on a bond, historically, stocks would give you 7, 8% or so. So maybe you actually would want to rotate out of stocks into bonds to actually have some maybe stability of your return on investment. That said, we've actually seen the last couple of years where stock returns have been well north of 7, 8%. Indeed, we've kind of seen this environment for the past, I don't know, five or six years where the average return has been close to 15% for just a really diversified portfolio. Do you think, Steve, though, here's my question. Do you think at some point investors might actually rotate out of stocks into bonds?

Steve Hoedt [00:18:50]

Do you want me to talk my book? Because I will. I would tell you that if you go back historically, the optimal allocation to bonds to maximize a portfolio's return is zero. Now, I know that's not what we recommend and there's a benefit to diversification. And I say that a little bit sarcastically because I'm an equity portfolio manager. But look, when you go back and you take a look at market history, the 1990s are a good example because you saw 30-year bond yields in the 6, 6.5% range back in the 90s. And we had the largest tech boom prior to the boom that's going on right now. So rates in the neighborhood where we're at today did not get in the way of having that occur. And I look at where we're at today and I feel like we've definitely had a regime shift, meaning that if you take a look and you look at the long-term correlations between bonds and stock returns, there was a period of time prior to the late 90s where the relationship moved in one direction, meaning higher rates were okay for stocks. And then if you look at from the late 90s till 2020, lower rates were what stocks wanted. And now we're in a regime where higher rates seem to be okay with stocks again. And I think that there are a lot of folks who are looking at the zero rate environment that we had in the 2010s and thinking that that's normal and it's not normal. Like I think that you just have to look back and take a look at the way that things that unfolded from like the 70s through the late 90s. And that to me is more of the period of time that we're in today. And higher rates were the norm then compared to what we had over the ZERP regime. And again, it didn't get in the way of stocks generating good returns. So I think that, do we believe that the market's going to continue to print 20% years every year? No, that's not going to happen. If you look again at market history, typically what you get is you get 20, 20, 20, minus 20 or minus 30. Like you don't get a bunch of 8 and 10% returns. You get a string of 15 to 25% returns with a minus 30 every now and then. Those minus 30s tend to come when there's some kind of an event or an exogenous shock that causes the market to go down, causes the economy to have a hiccup. Right now, we don't see that. So maybe we're going to be in a period of time where we have an extended run of 15 plus. I'm loathe to say that we're going to print 20% though every year. I don't think people should get used to that. But very clearly there's been a regime shift and I think that the bonds are going to be in a much higher range. in terms of yields than what they have been over the last 20 years.

George Mateyo [00:22:04]

So by its definition, Steve, I guess we wouldn't see, we don't foresee an exotic shot because you really can't see one until it's right in front of you, I guess. True, very true. But fair point and really great observations. Rajeev, maybe I'll just close with you. Do you want to take the other side of that or how do you think about asset allocation and diversification with bond yields where they are today?

Rajeev Sharma [00:22:25]

Well, I really do think this is a time where bonds are attractive. And we've gone through a huge era of time where bonds were not attractive on a yield basis. There was not a lot of carry in corporate bonds. Yields were not where they should have been. And I'll tell you, if you want a diversified portfolio, you should think about bonds. And right now, you're first in line if something goes wrong. So I think bonds do give you a lot of security in your portfolio. I think you need it. And you can sleep well at night with these blue chip companies that offer you the yields that you just haven't seen for a long time. You don't have to go down the credit spectrum. You don't have to go into the lower parts of the market to really pick up yield. It's just not worth it. You can have blue chip companies with very solid yields, solid carry, solid coupons, something that the bond investors have been looking for for a long time. So it does diversify your portfolio and I'm all for bonds.

Brian Pietrangelo [00:23:22]

I'm going to borrow Kevin Warsh's phrase that he loves a good family fight at the Federal Reserve Federal Open Market Committee meeting. Sounds like we got a little one here in the Chief Investment Office here at Key Wealth. So that's a good thing. I see everyone smiling and laughing. So final words, George, for you for our audience and for our investors.

George Mateyo [00:23:39]

Sure, Brian. Well, again, a family fight is a good metaphor. But look, it's important to be diversified. I think Steve and Rajeev would both agree with that. irrespective of their own views on their particular area of expertise. But I think it is fair to say too that when you think you get too comfortable, you get too complacent, maybe that's about the time that you really want to have that diversification. And I think it is recognized that at some point there may be some surprises. The moment right now the skies appear pretty blue, but that's also the time that you probably just want to make sure your portfolio is diversified. As the old saying goes, know what you own and why you own it. And I continue to think that's really probably the best advice I can offer at this point.

Brian Pietrangelo [00:24:21]

Well, thank you for the conversation today. George, Rajeev, and Steve, we appreciate your perspectives. And before we close the podcast, we've got a program note for you. We will be off next week on August 21st. So be sure to join us when we return to our regularly scheduled program on August 28th. Again, we'll be off next week. See you in two weeks. thanks to our listeners for joining us today, and 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 [00:25:15]

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.

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August 7, 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, August 7th, 2026. I'm Brian Pietrangelo, and welcome to the podcast. As we head into the weekend, we've got a couple fun things going on nationally and internationally. On August 8th, we talk about International Beer Day and we also talk about National Pickleball Day, although I wouldn't combine the two. And if you're a big music fan, way back in the day of Elvis Presley, it begins Elvis Presley 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 activity, we'll talk to Steve about the market, but the economic releases were all related to the employment market, and we've got three updates for you. We'll give them right now. First up, earlier in the week, we got the JOLT report, the Jobs Opening and Labor Turnover Survey report from the Bureau of Labor Statistics, focusing on the job openings number, which came in at 7.4 million job openings. for the month of June, which was little change for the month of May. Again, this report is a two-month lag, but again, the good news is there that remains stable for employers looking to hire, at least on the JOLTS report. And second, just yesterday we got the weekly initial unemployment claims report where the data showed that it came in at a roughly 199,000 for the prior week, which continues to remain significantly stable. in terms of weekly initial unemployment claims, which again points towards a healthy jobs market, at least on this second of two indicators today. And third, the update just this morning also from the Bureau of Labor Statistics is the report known as the employment situation, which focuses on a couple key characteristics, the first being non-farm payrolls, which showed that there was a 23,000 decline in new non-farm payrolls for the month of July. So that was a little bit surprising given that the estimates were for 83,000 or so. So we'll take a look at that number as it continues to move forward in a slowing basis, which again is why I mentioned this is the third report for our podcast this week, that the first one showed a little bit of a negative sentiment in terms of the job market, that being the new non-farm payrolls. The unemployment rate ticked down to 4.1%. Again, that has remained fairly stable. So combining the three employment reports for this week, we had two that were fairly favorable and one not so favorable, that being the new non-farm payroll report. So we'll certainly talk to our panel about what that means for the economy, what that mean for the Fed, and what that might mean for the markets as we talk to George, Rajeev, and Steve. So George, let's get right to you in terms of your reaction to that data and other things that you might be thinking about with regard to the economy. George?

George Mateyo [00:03:33]

So of all the employment reports issued this week, Brian, I think the big report that markets matter most towards is the report that came out this morning here Friday morning around the job situation for the past month. And of course, this was a big one in the sense that the first time in a long time, we've actually seen a negative surprise only I guess the last few times we had a decline, it was probably over a year ago or so in the sense that people were expecting something like 80,000 jobs added for the prior month and it said roughly 23,000 jobs were lost. So that's a big deviation from the overall consensus estimate. I think there's an open question as to whether or not this is driven by supply forces, meaning are there just fewer jobs in general or is this more of a function of demand? employers aren't hiring as many workers. And I think it's a bit of both. It's probably a bit of both. And I think the supply situation is a little bit probably more of a bigger influence, but it's hard to say for sure. I think there were probably some interesting things behind the scenes a little bit that deserve some attention in the sense that historically, and maybe going back now for the past several months, we saw the health care sector represent a significant portion of job gains. That didn't happen this past month. We also saw a decline in leisure and hospitality. And we've talked about this, I think, for the past few weeks anyway, in the sense that maybe some of those numbers in the prior months actually were boosted by the World Cup. And that seems reversing. And the other thing we have to note in that sense that overall government workers actually shrunk a little bit as well. So there's a lot of moving parts there. I think the other thing that markets are paying attention to this morning has to do with the fact that the unemployment rate declined. But it declined for what they call the wrong reasons in the sense that it really wasn't a function of more jobs being added. It was fewer people that are in the labor force in general are showing up. So again, the overall job situation is probably just net-net a bit softer than people expected. And I think this is probably good news in the sense that the markets are embracing this this morning, it seems like, but it's good news in the sense that maybe the Fed won't be so inclined to hike rates when they get together in September. So again, there are probably a lot of puts and stakes with the overall report. I think the key takeaway from my perspective, again, is that the inflation situation is not getting out of hand. The labor market is probably a little bit softer than people thought just a few weeks ago. And I think if anything else, the market is going to be mostly focused on inflation when we come to next week. So Rajeev, if I were you, I'm thinking about maybe the bond market now kind of embracing the fact that maybe the Fed is going to be a little less hawkish. But probably again, we have to pay attention to the employment report next week. What are your thoughts about that important report thinking about the week ahead?

Rajeev Sharma [00:06:13]

Well, George, with that jobs report, we did see treasuries rally sharply on the print. We saw yields falling across the curve. We saw both steepening pattern. Front end and belly was really leading the curve. If you want to talk specifics, the two year immediately snapped down in yield by eight basis points to 4.18%. And the 10-year was down 6 basis points to 4.63%, which is a pretty big move on the day. I mean, if you look at the 2-10s curve and the 5-30s spreads, they've all steep into session highs and all wider as well by 1.5 and 3.5 basis points respectively. So what does this really do to the Fed? Monetary policy expectations have changed sharply just based on this one print. The weak print meaningfully erodes some of those Fed hike expectations that the market was having. The market is fixated on September being a rate hike. Around 11 basis points of September hike premium was removed right on the jobs print. The swaps market right now is pricing less than a 50-50 odds that we would have a rate hike in September 16th meeting. Money markets are still projecting one hike for 2026, but not before December. So this is how quickly things can change in the market. We had that FOMC meeting recently for the July FOMC, and at that point, the market has pretty much gravitated towards the September rate hike. Now that's kind of gone away. 50/50 odds of a rate hike in September are quite significantly lower than there were just a few days ago. So right now, I think the market is really trying to understand every single data print. We're going to get less guidance from the Fed. That seems to be the new the new regime for the Fed. So if you expect less guidance, that makes every single economic data point even more important, whether it's inflation or jobs. And what that's really done is you've seen rates be higher for longer. So bottom line is you get a decisively weak jobs current. It triggers a treasury rally, it triggers a bull steepening. The front end is outperforming. September rate hikes are cut significantly. And the curve dynamic and T-bill demand suggests the markets are leaning towards a prolonged Fed pause, meaning higher for longer. And that's something we've been forecasting with our listeners for some time now. If you'd want to look at other parts of the bond market, we can talk about corporate bonds. I mean, spreads have been pretty well behaved, but we have seen a lot of new issuance. This week, we did see heavy $80 billion worth of new issuance for investment grade. It was led by Alphabet's $25 billion bond deal. And the credit backdrop was described as pretty actionable on that data. A lot of people got involved with that deal. I think what's going to be really important is that you've got to look at investment grade supply this year. Every year we've had a record year as far as investment-grade supply is, and the demand for investment-grade corporate bonds remains unwavering. You have a lot of investors that really like the yield options you're getting right now. They like the coupons. They like the carry that you can get with corporate bonds. We're now forecasting very close to $2 trillion in new issuance for 2026. I think the initial forecast when we started the year off was around $1.6 trillion. Now we're thinking about 1.9 trillion to 2 trillion. Those estimates have gone up. And the reason they've gone up is you have AI related funding, which is much larger than had been expected. The five largest hyperscalers right now, they issued approximately $190 billion in corporate bonds this year. And that's just the first half of 2026. If you think about 2025, those same five hyperscalers issued about $100 billion in all of 2025. So half a year, we're close to $200 billion in new issuance for the five largest hyperscalers. It's not going to slow down. Hyperscalers have already surpassed Moody's full year estimates for debt year to date. And I think you're going to see those hyperscalers continue to come to the debt markets to finance their CapEx. The only difference is that after a couple of these deals, investors are expecting a lot more concessions on these deals. So you could see these deals come out with a little more spread on them, and I think that's going to entice investors to get involved. If you don't see the extra concessions, you will not see investors get involved. US non-financial corporate bond issuance for the first five months of 2026 totaled about $956 billion, again, up 43% year over year. So there's a lot of new paper coming to market and It's trying to satisfy that demand for corporate credit. We've been strong proponents for corporate bonds. over treasuries in this kind of rate environment. And I think so far this year, it's paid off.

George Mateyo [00:11:05]

Well, speaking of paper, Steve, there's a lot of paper gains that are going through the earnings statements these days in the sense that a couple of companies have reported massive increases in earnings, but a lot of that's on paper, right, in the sense that they have-- I don't call them real earnings. I guess they are to some extent, but there are a lot of unrealized gains on prior investments. What's your thought on the market kind of processing earnings that has just been spectacular, but again, maybe artificial at the same time?

Steve Hoedt [00:11:31]

Yeah, I think that the reaction to the market, to this earnings explosion, which has been driven by a whole host of things, but part of it is for sure what you just mentioned, the paper gains. It's been the mark, the multiple that they're willing to pay, that we're willing to pay for these earnings down. So if you look Back last October, the peak for the forward P multiple for the S&P 500 was just a little bit more than 23 times. And I think back at that time, we talked about how we thought that the market's valuation at that point in time was extended and we needed to see earnings pick up the baton. They certainly picked up the baton. But I think that the quality of those numbers is not necessarily what we would want to see. So the markets reacted to that rationally and has taken the multiple down. You might not realize it when you look at the S&P 500, but the multiple for the S&P 500 right now is trading in just a little less than 20 times. We're at 19 and a half about a week ago. And that was the same level that we were, George, back at the trough in March when the market sold off. We've seen the market rally as earnings have exploded, but we've seen the multiple remain pretty tame. And that, in our view, is a pretty rational response to what's going on in the earnings line.

George Mateyo [00:12:59]

And how are you thinking about energy these days, Steve? I know that's also been an important sector in terms of earnings gains, but we've seen a lot of volatility there too, given what's happened in the Middle East.

Steve Hoedt [00:13:09]

Yeah, the situation there remains fluid at best. Tight supplies globally, we've eaten through a lot of inventories, price has moved up, I think that the magic number for the pain point tends to be somewhere north of 90, anywhere between 90 and 100, you start to see people squawk about it. It feels to us like we're just at the top end of this big trading range that we've been in for oil now, which is basically 65 to 95. And in between 65 and 95, energy companies mint money and people don't complain a lot. And if you get outside of those ranges, either higher or lower, it creates pain points either for the consumer on the high end or energy companies on the low end. and something happens to bring it back to that equilibrium. So we continue to exist in this area where the energy companies are being able to maximize their profits because the refining at current prices is just extremely profitable. we don't really see much that's going to take us out of there. I do feel like when you look at the inventory situation, though, it's going to have to be addressed in the next three to six months or else it's going to become potentially problematic for the global economy. We've... We've eaten through a lot of the buffer in order to keep prices from getting out of control. There has been some demand destruction, but most of that demand destruction has happened in China, where they've had a whole host of other things available to them and lots of levers to pull on for the Chinese to kind of control things much more so than in the West. So we'll just have to see how it goes. I don't think we're going to get some kind of a crazy super spike, though. I think that kind of thing is off the table.

Brian Pietrangelo [00:15:10]

So, Steve, one final question for you on the podcast. I'm going to tie a lot of things that we discussed today together. And when you think about the sort of slightly artificial gains on the paper that George talked about with corporate earnings with some of the hyperscalers, you talk about Rajeev and the additional debt issuance by the hyperscalers. You talk about the Fed reaction coming up in September, and you talk about September as usually an unfavorable month. So when you look out in the next 60 to 90 days, Steve, what are maybe some warning signals you're looking for in those corporate earnings that may be a little bit disruptive to the market?

Steve Hoedt [00:15:46]

Well, I don't know if it's just the earnings, but what's been funny to me to watch is that the two worst months of the year from a seasonal perspective are September and August. February is also pretty bad too, but August is not typically a good month, right? And I think a lot of people came into this month thinking that, okay, this is a month where we can go take a vacation. I know a lot of us have vacations planned and other things, but take a vacation, just not pay too much attention to what's going on. And then all of a sudden, we got a breakout to new all-time highs by the S&P 500 within the last week. And I think that that has caught a lot of people on the wrong foot who maybe were thinking that we were just going to consolidate here. I know I was one who thought we were going to consolidate for a while given the seasonals and the news flow that we've been talking about on this call. The breakout to new highs kind of puts that into a different perspective because you get the whole FOMO business, fear of missing out, where you have people decide to pile into stuff. So it's been a pretty good week for the market on the heels of that. And the question for us is, it gonna continue? And I think when you get a fairly benign jobs report today that takes the prospect of a Fed rate hike off the table, it gives us the opportunity to have that positive narrative continue to work in the market. And the earnings numbers have been plenty good. So if people are willing to focus on that, that gives you yet another reason to push the market higher here during a window of time when it typically doesn't. And I've talked on this call before that when the market behaves in a way that is counter to how it historically has and how it should, you should pay attention to that. So if the market says we're supposed to go down at this point in time during the year or we should be consolidating and it doesn't, That tells you just how strong the underlying bull market is.

Brian Pietrangelo [00:17:50]

Well, 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 [00:18:26]