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

George Mateyo [00:05:25]

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

Steve Hoedt [00:09:06]

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

George Mateyo [00:11:07]

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

Steve Hoedt [00:11:16]

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

Brian Pietrangelo [00:12:09]

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

Steve Hoedt [00:12:26]

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

George Mateyo [00:14:34]

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

Rajeev Sharma [00:14:58]

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

Steve Hoedt [00:18:09]

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

Rajeev Sharma [00:18:34]

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

Steve Hoedt [00:19:12]

What would cause you to become concerned?

Rajeev Sharma [00:19:15]

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

Brian Pietrangelo [00:19:47]

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

George Mateyo [00:20:05]

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

Rajeev Sharma [00:22:16]

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

Brian Pietrangelo [00:23:36]

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

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March 6, 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, March 6th, 2026. I'm Brian Pietrangelo, and welcome to the podcast. As we head into the weekend, you may or may not recall that this is daylight savings time weekend where we turn the clocks forward to actually spring forward for daylight savings time. So take a look at that and remember to turn your clocks Saturday night. We've got a lot to cover this morning in today's podcast, so I'd like to introduce our panel of investing experts here to provide 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've got a few reports, but more importantly, we will start with the geopolitical news that everyone is certainly aware of with the conflict in Iran and the military action from the United States that began over the past weekend and has carried throughout the entire week. As we end on Friday here, it continues on. We'll obviously have a discussion about what this might mean for the markets and the economy and everything else that we can give a perspective on, but specifically the markets and the economy with regard to oil, possible inflation, possible effects on the market and the economy. On the economic side, we've got three releases to talk with you on. The Institute for Supply Management, earlier in the week, instituted its release on the manufacturing side of the economy. And for the second straight month in a while, ending in February, the read came out that manufacturing continues to be in an expansionary territory. Now, this is good news. We'll continue to look at the cycle to see if it continues more than just two months, because the manufacturing sector has been in contraction for quite a long time nearing around five years. On the services side of the economy, same Institute for Supply Management report just came out on a different day, showed that the services sector continues to expand and has been in expansion again for quite some time, for about five years. So good news there on the services side of the economy. And second, we have the Federal Reserve's Beige Book report, which came out on Wednesday. As a reminder, this comes out roughly two weeks in advance of the next Federal Open Market Committee as a report on overall economic activity. And that report showed that there were slight to moderate increases in seven of the 12 Fed districts, while the rest of the five reported flat or declining activity. And finally, or third, just this morning at 8:30, we have the update from the Bureau of Labor Statistics on the Employment Situation Report, which includes new non-farm payrolls, the unemployment rate, and a number of other factors related to the employment. So, we will talk to our panel on all three of those items in addition to the market volatility that we have experienced due to the Iran conflict, and we'll also get our take from the panel on what that might mean. So, George, let's start with you for our listeners on your take on the summary of our thoughts on what the Iran conflict might mean for investors, for the market, for the price of oil, and for inflation in the economy. A lot to talk about there, George, so let's start with your thoughts.

George Mateyo [00:04:04]

Brian, I think the story of the week is, of course, the situation in the Middle East. But really quickly, just turning to some of the more recent announcements, that gave this week, just purely economic readings were pretty healthy overall until this morning's jobs report. We had a pretty good spate of numbers this week that suggests the overall economy was doing OK. But then again, the report this morning on the job side suggested something different. I look at things, for example, like ISM surveys, which we don't pay too much attention to because it's more anecdotal, but nonetheless, the market kind of gravitated towards those in the sense that we saw some good strength in the manufacturing stature. We also saw an initial report on the employment side that suggested things were okay. But then this morning's unemployment report, which was a bit negative, more negative than people expected. I don't think, frankly, anybody had in their forecast that we would see a negative print of almost 100,000 jobs lost, I guess just adds fuel to the fire. So I think overall right now, there's probably some questions around just a broader macro backdrop. At the same time, we have a big geopolitical event that seems to be intensifying. That's not a great combination for risk assets in general, and therefore, it's not surprising to see the market trade down this morning. I think if I kind of put this all in the context, though, again, I think the energy situation, I think the geopolitical situation is a real event. As we've said before, though, these events are man-made and they can change pretty quickly without little warning. And so as we said before, I think really what happens next is really going to be predicated on how long this conflict lasts, up until maybe just yesterday or so. I think the market was hoping and anticipating that the conflict would be short-lived. We've kind of long thought it would probably take longer than that. We were out, I think, earlier this week thinking this could be a conflict that lasts weeks or maybe a few months or so, but maybe it's not going to be over in a few days, was kind of the under we were taking. And we also have to recognize, I think, that what happens in the all-important Strait of Hormuz was something that was something we outlined on our client call on Wednesday, which, again, is a critical choke point for oil. And we'll talk to you, Steve, in a second to get your thoughts on that. But I think it's important to recognize that we don't want to have investors making some big abrupt shifts to their portfolio because things could change pretty quickly as well on the upside. I think it is going to be probably some significant headwinds. This morning, for example, Steve, I saw that the president was talking about insisting on unconditional surrender. So, it doesn't seem like he's willing to kind of concede pretty quickly. And again, this conflict can wage on a bit further. So if you think about this this morning, Steve, you kind of put us together, we see oil kind of, again, spiking higher. Any thoughts from you in terms of where maybe energy might be going or what things we should be looking out for to try and engage when this conflict might come to some resolution?

Steve Hoedt [00:06:45]

Yes, George, you know, my team and I, we spent a good chunk of the afternoon yesterday talking about how the energy markets hadn't really priced in much disruption yet. In fact, the market, if you kind of try to figure out what was implied, it was implying that the situation would end in the next four or five days. And, you know, when you look at the reaction this morning, I'm seeing crude oil spiking by 10% in New York trading. It seems that the market is starting to come around to our point of view, which is that this has all the hallmarks of something that's going to drag on for a little while. Now, that said, when you look at all of the major global players who are involved in this, it is to no one's benefit to have the Strait of Hormuz closed and to have oil not oil and gas, both, not flowing through there. The Strait of Hormuz is, at its narrowest point, about 21 miles wide. And no matter what the administration here in the U.S. says it's going to do by providing escorts and insurance coverage and all this, there is no global insurance company or shipping company that's going to send a loaded tanker through that strait while there is a conflict going on.

George Mateyo [00:08:12]

And to put that in context, Steve, not to interrupt you, but I mean, just to kind of put that in context for our listeners, I think, what is it, like 20% of the world's oil flows through that body of water every day or used in any way when it was open? 20%, that's a big number, 20%.

Steve Hoedt [00:08:26]

Yeah, 20% is not an insignificant number. Now, most of the oil does flow east from there. Most of the oil flows to China and in Asia from there simply because of location. If you think about the LNG situation, all of the Qatari LNG gets shipped through there. The Qatari’s do not have pipelines to ship their LNG to global markets like Europe and Asia. It has to go on LNG. They have shut down all their LNG trains.

George Mateyo [00:08:59]

LNG, Steve, just again for our listeners, LNG is what?

Steve Hoedt [00:09:03]

Liquefied natural gas. So basically they have the largest gas field in the world, but they have to liquefy it in order to sell it into global markets. So all their LNG trains in order to liquefy that gas that they pump out of the ground have been shut down due to risk. I mean, you don't want to know what the hole in the ground would look like if something got blown up that consisted of LNG. So I think that The longer this goes on, the more disruption you're going to see in global energy markets. You're going to see people pricing probably $100 oil within the next week if this situation stays where it is. We, quite frankly, were shocked that we didn't get the $100 on oil quicker. That pain point will kind of start to push on policymakers to make decisions. I mean, you could easily see the Chinese pushing on the Iranians or frankly working with the Americans to do this. I've seen some speculation that part of the reason why the U.S. is doing this right now is to push back on the Chinese because they know that the Chinese have a need for Iranian oil just like we have a need for Chinese rare earth metals. So, it's kind of like a point of global geopolitical negotiations, but Look, at the end of the day, it's unfortunate some of the stuff that's happening, obviously, and we continue to watch it. Markets, we saw the S&P 500 breakdown from this box that it's been in for the last six months. It does look like that's opened the way to the downside a little bit for a little bit of a deeper potential correction here. We saw more concern for me this morning. is we saw the volatility futures curve invert. So, we watched this to start to see if there's panic creeping into the markets. And now for the first time, since the onset of the conflict in the Middle East, we've seen the volatility futures curve invert. That means that the near month is trading at a premium to the far month. That is something that is very unusual, and it only happens in times of market panic. So we're getting to a place where the market is dealing with this. But it is a process to put in a bottom, and we don't think that we're there yet. The 200-day looms about 150 points below where we're at today. We're at 67.50 as we talk right now. 65.80 is the 200-day moving average. It would not shock me in the least to see us test that, George.

George Mateyo [00:11:48]

So, Steve. I think, again, the word you use, the most important word I think for our listeners to pick up on is the word process. These things do take time. They're not really marked by one immediate event. Sometimes this does take a process to recover and find our footings here. Steve, are there any areas of the market though, any defensive areas that you would point to? I know you've been right for quite some time to be overweight energy in our portfolios that you manage, but anything that you would probably have our listeners think about in terms of places to hide or some type of place of

Steve Hoedt [00:12:20]

I think that you, you know, unlike historically the last 10 or 15 years where you wanted to put money into defensive technology and software names, I don't think you use that playbook this time because of the disruption that we've been talking about on this podcast and other places coming from AI. So I do think that you stick with the traditional defensive areas of the market, which is consumer staples, healthcare, utilities, that kind of stuff. The move that you can see in energy and materials, those kind of things, I think if you get, we think that the cyclical theme and the rotation that we've seen over the last three to five months based on the AI theme, we think that that rotation into cyclicals as well as defensives is durable. There are underlying fundamental reasons for it. So there may be a situation where, because of the market volatility, you get an opportunity to, if you did not have energy positions or positions in materials or industrials, you get a chance to buy some of that. On a pullback, we would be all for investigating those opportunities with your advisors.

George Mateyo [00:13:33]

Thanks, Steve. So, Rajeev, let's into this fun conversation here, talking about geopolitical events and talking about maybe a kind of a whiff of stagflation, right, which essentially means that we have this oil shock that all is equal probably mean higher prices, right? We'll probably see higher prices at pump. This is probably going to impact food prices and other things as well. If this persists, again, that's the key phrase. I think if this is something that's a really protracted engagement, we could see some elevated price pressures. At the same time as we talked about Rajeev this morning, the growth numbers on the employment side suggested maybe some softness. That's a tough environment for the Fed to navigate, right? I think they want to probably be responsive. I think they're probably still somewhat fearful of the inflation shock from just a few years ago, but at the same time, growth is slowing. And, oh, by the way, we've got a new Fed share probably coming into the next sometime in the next few months. So how does that actually kind of factor into your thinking about where the fixed income market is headed?

Rajeev Sharma [00:14:27]

Well, it's a lot to unpack, George. And you know, what's very interesting is that we ended February with the bond market posting the strongest returns it's had in the last one year. And so you go into March with this notion that, okay, where do we go from here? And where we went was yields went higher and we gave back a lot of those returns just in one week in March. And this is really a function of bond yields moving higher across the curve. I mean, just to think we ended February with the 10-year treasury note yield below 4%. We had been hovering around 4% for quite some time, probably since back in in December, but now we're here. We were here at the end of February below 4%. And now within the course of one week into March, we see the tenure above 4.17%. These are big moves. The Iran conflict has moved oil prices higher, as Steve mentioned, and in turn, it's questioned the impact to inflation. And that's kind of dictated the bond market moves. With higher oil, you have higher and more stubborn inflation, which then brings the Fed rate cuts back into question midweek. The market expectations for two rate cuts by the end of the year came into question, with the market now at that point in midweek, the market was anticipating less than two rate cuts for 2026. And that's even with the new Fed share taking the helm in June. So, this has caused a flattening of the yield curve, which has the market looking at higher oil prices in a longer than expected Iran conflict. That is a combination that has traders pricing in a worst case scenario that maybe the Fed just halts its easing campaign altogether. If we saw the Fed minutes from the last meeting, there were a few candidates that said, there were a few voting members that did say that maybe we should not cut rates at all anymore. In fact, there were some calls for hiking rates. So these are all coming to question midweek. And the difference between a two-year treasury note yield and a 10-year treasury note yield, or what we like to call the 2-10s curve, has reached a new low since November. That differential between a two-year treasury note yield and a 10-year treasury note yield is around 50 basis points today. Just at early February, that difference was around 74 basis points. So these are big moves. Yields have whipsawed around after the jobs report that saw U.S. employers cut jobs in February and the unemployment rate moved higher. This points to weakness in the labor market that many thought was stabilized. The jobs report now refocuses the Fed's attention back to the labor market and keeps the Fed in this wait and see approach that they've been in this holding pattern for some time now. Policymakers had somewhat shifted their focus to inflation because of the conflict in the Middle East. But now with the jobs report, the focus again goes back to their dual mandate, price stability and maximum employment. So we have seen yields whipsaw around. First with the jobs report, we did see yields start to reverse the earlier rise. We saw yields start to drop. But then again, with oil prices moving higher, yields are starting to go higher again with those inflation concerns taking over the market narrative. And then you add to that some other issues that are going to keep yields higher. You have a total of $119 billion in long end coupon supply coming next week. That only adds to the bias for traders to want to sell in this market. And then you add on top of that $60 billion in corporate bond issuance that's expected next week.

George Mateyo [00:17:47]

These are big numbers, Rajeev.

Rajeev Sharma [00:17:48]

These are very big numbers. Many corporate bond issuers decided that they were not going to come to market this week because the conflict had just started. They were going to wait and see that we get any kind of certainty of when this conflict can end. Now there's a backlog. So they have to come to market next week. $60 billion in corporate bond supply is going to also weigh itself on the bond market. This supply naturally causes some selling pressures as portfolios have to make room for it.

Steve Hoedt [00:18:15]

I was going to say, Rajeev, are you shocked that you haven't seen a larger of reaction by the short rate markets in terms of starting to maybe price in earlier Fed action. Because when I do my work go on Bloomberg, which shows those probabilities, we still haven't seen much change yet, even in reaction to that, you know, kind of very, let's call it lukewarm jobs report this morning.

Rajeev Sharma [00:18:49]

Yeah, it was completely masked, I think. The reaction happened fairly quickly, but the knee-jerk reaction was there where we saw yields move lower. But then immediately, oil takes precedence again. You start thinking about inflation, the impact of inflation. And then you have all these questions about a new Fed chair coming in. So I think the market really doesn't know how far to take this. I would think yields would be higher in the front end with some of this stuff coming out, oil coming out, how important that is for inflation.

George Mateyo [00:19:16]

Steve, going back to you on the commodity side, what do you think about gold these days? I mean, it's been kind of acting kind of oddly in the sense that sometimes it's been kind of viewed as a safe haven of some sorts, maybe again during geopolitical events, but it's been pretty volatile this week too. So any thoughts on gold?

George Mateyo [00:19:31]

Yeah, gold has kind of gotten all over the place last week. It's not exactly like what we saw at the end of January and early February, where we had a $1,000 range in three days, but we have seen almost a $400 range in a two-day span at the beginning of the week. And we've kind of settled into the bottom end of that range, just above 5,000, I should say, right now. I think that if you look at this price action, To me, it's been very constructive. The recovery off of the January-February lows shows that there has been legitimate buying pressure on that from whatever, whether it's central banks or individuals or investors allocating to it. And it seems to have retained its strength as a non-US controlled asset. Where do we go from here? It's a good question. I mean, we pulled back a little bit with some of the risk off nature of the tape at the beginning of the week, but we still are firmly above $5,000, George.

Rajeev Sharma [00:20:42]

Yeah, and to add to that, treasuries are also viewed as safety haven asset all through February. And that was as the conflict was building up. The conflict starts and the safety haven nature of treasuries goes out the window when you start seeing oil prices and a Fed that may not be moving anytime soon.

George Mateyo [00:20:59]

So lots going on for sure. I think we'll kind of end it there, but I'll just kind of remind people that, again, this is something that's one of these things that the fog of war creates a fog of markets, right? In the sense that it really kind of distorts a lot of cross-currents, and it's really hard to kind of navigate our way through this. It is tempting to some extent to probably try and get out of positions or sell things in your portfolio. That's probably the wrong thing to do, however, because over time, markets do tend to settle up. And what I mean by that is that we have history to kind of draw from. Not to say that every conflict is the same, and this will probably be different in many ways that we just can't anticipate. But given that, we really would encourage people not to make any bold moves. Steve talked about using this as an opportunity to maybe lean into some positions. I think Rajeev would agree with that as well. And so there are gonna be some opportunities that probably arise from this, and we'll probably be identifying some of those in the week ahead. So with that, please stay tuned. If you have questions, please reach out, and if we can be of help, please let us know.

Brian Pietrangelo [00:21:57]

Well, thanks 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 [00:22:33]

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

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February 27, 2026

Brian Pietrangelo [00:00:00]

Steve Hoedt [00:03:09]

Well, Brian, you know, when you look at the report out of Nvidia, you would certainly think that the stock would have been higher on the day, given the fact that we had more than what people had been looking for. People have been looking for a 2 billion beat plus on a revenue line and $2 billion plus in additional guidance. These two plus two quarters historically have generated really good reactions from Nvidia stock, but it just seemed like we were set up for what market participants call a sell the news reaction. So the stock had drifted up into the earnings announcement. And it feels like while quote unquote expectations were were exceeded, the real expectations the market had were higher than what the company was able to produce. So that's what you get how you get a sell the news reaction. You know, when you get positive price action running into a number, the number has to be significantly better than what people are truly expecting and not just the gamified kind of numbers that the sell side kind of puts out for expectations. So, you know, not really surprising. And then, you know, To put on my technician's hat, if you look at this stock, the stock has basically been bouncing between $170 and $200, give or take a couple of dollars either way, since last July. And we were up toward the top end of the trading range again. So it was going to take a significant beat to blow that stock through significant overhead resistance near $200. And while the numbers came in perfectly fine, they weren't strong enough to blow market participants away and get us running off to the upside. Now, that doesn't mean that the AI infrastructure trade has come off the boil or anything like that if you look at the numbers, at least underlying. But the stocks are certainly having a more difficult time here lately.

Brian Pietrangelo [00:05:28]

Great, Steve, and we've got about 94% of the companies reporting for Q4. Any comments as we near the end of the season?

Steve Hoedt [00:05:35]

I mean, it's been a good earnings season, but it seems to have not been enough to get the market going to the upside. And it's been largely because the dynamics under the hood are more difficult for the market when you've got a heavy concentration in these mega-cap technology names. 40% or so of the market remains tied up in mega-cap tech. And mega-cap tech had earnings that were okay, but not good enough to exceed expectations, just like we had this conversation about Nvidia before. So those stocks have largely had negative reactions to their earnings announcements. And given their contribution to the index, it's kept the index capped. Now, what's been really interesting lately is if you look at the S&P 500 equal weight, the equal weighted index has moved to new all-time highs over the last two to three weeks as earnings season has progressed. And this is that broadening out trade that we've talked about for the last probably three to six months, where we've really seen things such as this year anyways, industrials, materials, energy, healthcare, staples take leadership roles as we've seen this rotation away from technology. That's something that we think is likely going to continue. What it creates is it creates a market where there's a lot of dispersion and returns across the stocks and sectors. And I think it's something that we think is likely going to persist here. It creates a situation where people will look at their headline number on television on CNBC or some other place and see the S&P 500 not moving around very much. But there's significant movement in stocks that are not necessarily large weights in the index.

Brian Pietrangelo [00:07:30]

Thank you, Steve. And final question for you this morning. There was an article, some call it a research paper, Some call it food for thought, some call it a prognostication. It's probably somewhere in between all of those that talked about the artificial intelligence threat to the economy and the employment front. Do you have any thoughts for our listeners on that article?

Steve Hoedt [00:07:50]

Yeah, you know, it was released over the weekend into a relative news vacuum at the beginning of the week. And I think it had a lot of, made a lot of people think about some stuff, but I don't think it's, And people need to take things like this with a grain of salt. There are some parts of it that I think had some disconnected thoughts. It didn't make a lot of sense, but I keep coming back to the fact that if you look historically, when we get technology leaps, it's led to more employment, not less. It's led to more jobs, not less. What I found fascinating about this is like it, the article talked about a lot of a lot of job disruption going forward, right? And I'm sure we're going to see job changes, but if you look over the last six months, there's actually been more job postings for software engineers than there were in the six months prior to that. So like if this was truly a case where these kind of jobs are going to go away, I think we'd be seeing other other things in the data right now, and we're just not seeing it. So, you know, it's food for thought. Anything can be a scenario going forward. And I encourage people to take a look at things like this to challenge their own thinking. And we did the same. But I don't think that it changes our our thoughts that this is in general a good thing for for the economy and for overall.

Brian Pietrangelo [00:09:32]

Perfect, Steve. Thank you. And on the concept of disruption a little bit, George, let's turn to you where we talk a little bit about tariffs and the changes regarding the IEPA ruling that we discussed last week this time on the podcast. But now there's a new series under a new provision of an act, and President Trump would like to implement them at a 15% rate. What are your thoughts, George?

George Mateyo [00:09:54]

Well, I think people have kind of moved on from Paris, honestly. I think people have kind of faded that a little bit and come to accept the fact that the overall tariff rate is probably going down, not up. And it just creates more uncertainty and markets don't care for that, but that's kind of the state we're in right now. So I think to some extent, based on, if you look at, you just mentioned, for example, Ryan, earnings calls and wrapping up the quarter that just ended. the mention of tariffs has really gone down considerably. So fewer companies are talking about it, not to say that they're not being impacted by it. And I still think there's probably some, you know, war room strategizing around what the new rates will do to their business and maybe again, some uncertainty around rebates of tariffs and so forth. So it is probably still disruptive, but it's probably far less disruptive than it was this time last year. I think the bigger narrative, as Steve talked about, though, is the fact that companies right now have reported really pretty solid earnings, but the market's not caring. And the market's focused more on the future as opposed to the present and the unknown about the future more specifically. I was really kind of struck by the fact that a company last night, which doesn't get a lot of attention normally, but it's an interesting company that sits in the payment industry. And they talked about shrinking the workforce by close to 50%. I mean, I think it's about a 10,000 employee company. They talked about taking their employee base under 6,000. And they're not doing that because, frankly, the business is suffering. I mean, they're doing it because they're doing it in spite of the fact that revenues actually were better than expected. They actually raised their outlook for the year ahead. but they're doing so because they're really leaning into AI. And they looked at a company like Twitter, I think it's now known as X. I think I heard recently that there's only about 30 people running the company, which is really quite startling in the sense when that company was actually taking over in, I think it was 2022, there were north of 2,000 people. So that's a significant reduction of workforce because of AI, not because the business is struggling or some economic force. So, I think that's really what people are probably really focused on. Steve is right to talk about the fact that this disruption usually kind of plays itself out in a more productive way, meaning we have these layoffs, we have this situation where businesses are being transformed almost overnight. But the net-net overall job gains are still pretty solid. But we're going to be in this awkward transition maybe where we see layoffs go down before we actually get to the other side of new jobs being created. And I think that's probably the bigger narrative around what companies are trying to struggle with and grapple with amidst the uncertainty of the tariffs that you talked about earlier. So, I guess, Brian, I could probably turn the table a little bit to you. You were on the road this week again, talking to clients, meeting with investors. What kind of things did you hear from investors from your travels on the road?

Brian Pietrangelo [00:12:42]

George, thanks for the opportunity. I was in Albany this week for a client event, Syracuse for a client meeting, and then a couple of weeks ago in Rochester and Buffalo. So I'm kind of hitting the I-90 corridor out there in upstate New York, but the great news is twofold. One, the clients are engaged. They ask a lot of questions. And so that's always very, very good in the travels that I have. The second part of the good news is that most of the questions come in the form of topics that we discuss regularly in not only the things that we're writing, but also the things that we talk about on this podcast. Examples would be, are we headed for a recession? What's happening in the employment market, especially from small business owners? what's going on with certainly artificial intelligence and the volatility in the market. Business owners and others are a little bit more in tune to what's going on with tariffs rather than the general public for obvious reasons. But here's a couple others that make sense. People want to know what's going on with gold. Why does it continue to have a rally? And then the question that I get asked probably 98% of the time at the client events is what's going on with crypto and what are our thoughts? So pretty wide-ranging, but again, for most, if not all of those other than crypto, we continue to talk about these topics on the podcast. So thanks to the team for doing so. And the clients really appreciate that content. So, Rajeev, finishing with you, we'll talk about the bond market. What's happening in the bond market this week?

Rajeev Sharma [00:14:10]

Well, the bond market seems to be shrugging off a lot of the latest economic data. Specifically, yields fell on the PPI data that we saw. Overall, there's this risk-off mood that is still supportive of bonds. And this is all with almost everyone expecting nothing coming out from the Fed until the second half of the year. Fed minutes were released last week. They signaled a bias to hold rates steady due to improved labor picture and inflation that is stubbornly around 3%. If we speak about how yields did, yields are down across the treasury curve with the 10-year breaking through the resistance level of 4%. We often look at that 4% number as a psychological number that once we breach that number, we can go further down or we can stay around those levels of do buyers start to pull away, but they do not. And if I look at my screens right now, the 10-year is around 3.97%. So safe haven demand is what continues to push yields lower. In fact, US bonds are wrapping up their best monthly performance in a year now. And you can point to rising global risk or increased demands for bonds as a catalyst. But the safety haven play does put the $30 trillion US government bond market back into focus as a safety play. Treasuries clocked in returns at 1.5% for February. That's the best run since we've had this time last February. And if you look at long-dated US government debt, they've shown returns of 4% in one month. So again, when you see other markets flashing warning signals on AI and its disruptive nature or worries about hidden dangers of private credit, you will see traders move towards US government debt. For the first two months of 2026, over $16 billion have flown into the Treasury market. But for even all of these gains, the Treasuries will still need to break out of this range that they've kind of traded in since last September. Specifically, the two-year Treasury note yield, which is most sensitive to Fed policy, has traded between 3.4% and 3.6% for the last several months since September. And as I said, the 10-year has finally breached the 4% yield mark, but we've been hovering around that 4% point for months now. So you will really need something else to firmly move in one direction or the other. That could be the payrolls number that comes out next week. The market still expects two rate cuts for the year. And if you look at spreads, they've been some modest widening on a risk-off type mood in the market. We did see investment grade spreads move out about 3 basis points this week. Same with high yield, about 3 basis points. Not very pronounced moves, but it's something to keep an eye on because if you look at the credit default swaps market, we see a little more pronounced move there. So it's going to be interesting to see how credit behaves. Again, investors continue to follow for blue chip, very high quality companies. You're getting decent yields on them and they have very strong balance sheet is going to be very important. Credit metrics are extremely important for corporate bond investors. The amount of supply that's coming into the market has been very pronounced, but it's been doing very well. These deals are getting done, and investors are really looking for those high-quality names and putting money to work.

Brian Pietrangelo [00:17:15]

One final question for you, Rajeev, while we have you. There's an interesting dynamic in that 30-year yields on the long end of the curve have actually been going up, not even coming down, but now we see some data this week that mortgage rates have come below 6% for the first time, the average 30-year mortgage at 5.98%. Could you reconcile that for us?

Rajeev Sharma [00:17:37]

Sure. I think the mortgages have really They were lagging last year for a big part of last year. And I think what happened is they were the trade that everybody jumped into at the end of last year. And you did see this idea that mortgage rates could go down with some of the news headlines that were coming out, that perhaps there'll be some government intervention that would bring rates down in mortgages. The third-year, as you mentioned, nobody's really going further out in the curve to take on that risk. So mostly the intermediate part of the curve has really seen the performance. But you do see those 30-year rates coming down, and it has a lot to do with the fact that there could be some government intervention to bring those rates down, even if you hear headlines about blocking institutional companies from going out and buying homes, I think all of that works in favor for the mortgage rates to come down.

Brian Pietrangelo [00:18:27]

Great. And we'll leave the last comment to George, as he always provides us with the overarching comments on the markets and the economy. So, George, any closing thoughts for today?

George Mateyo [00:18:36]

Oh, Brian, I guess it would probably sound a bit cliche, but I'll say it anyway. I think given all this uncertainty and all this chaos that we're experiencing on a daily basis now, I think we continue to reiterate the fact that really being diversified makes the most sense, right? And I think because the future is just uncertain, we just don't know what's going to happen next. And there is a lot of uncertainty. We've talked about the AI trade for quite some time and discussing the fact that maybe there was this notion that companies are spending too much money chasing too little demand. And now that's kind of pivoted big companies not spending enough. But at the same time, maybe this AI trade has become too good that it's bad, meaning that we're starting to see some negative implications for that as well. But irrespective of that, I do think over a long period of time, we'll probably see some great productivity benefits. We'll see a lot of uncertainty. At this point, we'll probably see some unfortunate job losses and transition. But despite that fact, I still remain of the view that on a long-term basis, we really wanted to remain fully entrenched in the optimism trade, meaning that it usually kind of bears fruit. The pessimistic narrative always seems to be more alluring and more appealing, but usually optimism prevails, and I think that's going to be the case this time too.

Brian Pietrangelo [00:19:45]

Well, thank you for the conversation today. George, Steve, and Rajeev, we appreciate your insights. Before we close the podcast, just another quick reminder. We gave you the same reminder last week. So again, the last opportunity to remind you of our national client call coming up on March 4th, next Wednesday. And it is a call with regard to navigating the noise and finding meaning with a conversation with Brian Portnoy and Tom Jarecki from Key. Brian is a guest speaker and an expert in the area of behavioral finance and how the markets work with the mind. Very interesting topic. If you have an invitation, please attend. If you don't, please reach out to your financial advisor to get that invitation. And again, Wednesday, next week, March 4th at 1 P.m. Eastern and 10 A.m. Pacific, Navigating the Noise with Tom Jarecki and Brian Portnoy. Well, thanks for 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 next week to see how the world and the markets have changed and provide those keys to help you navigate your financial journey.

Disclosure [00:21:06]

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

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

February 20, 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, February 20th, 2026. I'm Brian Pietrangelo, and welcome to the podcast. I was on the road this week at an off-site meeting for our Key Wealth group and it was a tremendous opportunity to spend time with our colleagues as we focus on our teams and our ability to serve our clients in an exceptional manner. So what a great opportunity to get together with our team this week. And speaking of great teams, what a congratulations to the Olympic team for USA Women's Hockey as they won the gold medal yesterday in an overtime victory over Canada. What an exciting opportunity and again, sincere congratulations to the USA Women's Hockey team for taking home the gold. With that, I would like to introduce our team here on the Chief Investment Office as panels of investing experts who are 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 economic and market activity, it was a pretty light week in terms of economic releases until we got to today, so we have 3 updates of which we will cover those two from this morning at 8:30 here in our update of our top three. So first, beginning earlier in the week, we had the update on industrial production, which is covering the manufacturing industry, and we did see that there was some pretty positive signals coming out for the month of January, where industrial production was up 0.7% for the month. Now this is the preliminary estimate, but it's still pretty favorable at 0.7% because December's was at 0.2%, which was again a little bit above 0, obviously, and it was the third month in a row where we had positive activity in terms of that report. So industrial production fairly decent for the month of January. Now the other two updates were much larger in terms of their impact on the economy in terms of readings, so the second update we have for you is the GDP report that came out this morning at 8:30 (AM EST) from the Bureau of Economic Analysis, and it is the advance estimate or the first estimate for the fourth quarter of 2025. Now this report has been delayed due to the government shutdown that occurred in 2025, so we finally got the data here on February 20th. Now the report for real GDP came in at a 1.4% number for the fourth quarter of 2025, which was down from the third quarter of 2025, which was at a 4.4% number. So it looks like a pretty big drop in terms of activity in terms of overall real GDP. Consumer spending continued to be the largest driver of the overall GDP report in terms of its components, while government spending was a significant deceleration and a decline on a negative attribution to GDP. Now, some say this has something to do with the government shutdown back in the fourth quarter of 2025, obviously. I'm not so sure exactly what those numbers are correlated to, but again, it is part of the equation. And third, also this morning at 8:30, we also received the Personal Consumptions Expenditures Report, which includes not only consumer spending, but the inflation on the read there, also at 8:30 this morning. So PCE inflation came in a little bit hotter than expected on a month-over-month basis, not only for all items at 0.4% for the month, but core, excluding food and energy, also at 0.4% for the month. That also translates into the year-over-year number for the month ending in December, which showed a 2.9% all items increase and a core, excluding food and energy, at 3% increase. So both of these were up, which is not a favorable sign, hotter than expected, but not dramatic. So December's all items were 2.9%, which was up from 2.8% in November and 2.7% in October. The core, excluding food and energy, was up 3% year over year in December, which was up from 2.8% in both November and October. So inflation continues to be persistent and headed in the wrong direction. We'll talk with our panel about that and what it might mean for the Fed and the economy. So let's turn to you, George, for your commentary on those data points and what it might mean for the economy and additional thoughts that you might have. George?

George Mateyo [00:04:58]

Well, Brian, we're sitting here in Northeast Ohio, and I think overall the economic data kind of reminded me of the weather where it's just a bit soggy. And it doesn't mean that things are terrible or really rosy either. It just feels like kind of an overhang of kind of some soggy news where I think the numbers suggest that the economy is doing okay, maybe a little more sluggish than people thought. And I think, at least based on some of the growth numbers, but I think The inflation numbers also probably are somewhat soggy in the sense of probably a little bit heavier and a little bit hotter than people expected to. So I don't think anything is really falling apart, but I do think things are just in a state of sogginess, I guess. I'll just use that term again. And I think probably more than that, the market seems to be going through a series of questions about the ongoing strength of things. We've seen the weakness more recently in part to the credit market, particularly private credit. And I think that's one thing that's going to be an ongoing theme for much of this year. Private credit was a part of the market that grew a lot in the past several years, and now people are coming to realize that maybe some of that growth has some consequences. Importantly, from our perspective, I think credit, and in general anyway, is pretty solid, but I think it really is going to be contingent upon solid underwriting, and not everybody's going to come out pure from that. So I think there's going to be some choppiness there. We still have this ongoing situation around AI and what does that mean? That continues to be a source of disruption for many industries and companies. And that's probably going to be lingering for quite some time. It's also somewhat concerning or maybe causing people to question rather, what does AI do for the overall strength of the labor market and whether or not maybe as many jobs will be needed going forward because of AI. And then lastly, of course, geopolitically, we have a lot of things that we're trying to navigate our way through. It seems like tensions are starting to rise up again in the Middle East. And that's always been a source of volatility for the markets. So I think net-net, I just feel like there's a lot of general sogginess. I wouldn't call it anything worse than that. But I think the market's probably in for a bit of churning, as we've talked about for the last couple of calls here. And of course, we have to just navigate our way through that. So the best thing I think we probably would recommend doing is just being very diversified, knowing what you own, knowing why you own it, and being prepared for volatility, because it seems like that's going to be here for quite some time. At the same time, Rajeev, one thing I did mention, of course, is the ongoing uncertainty about the Fed and who's going to be leading the Fed. And that's still unresolved, I think mostly, at least he's not been confirmed yet. So, what do you think about this? And how do you think the Fed is actually processing what's happening more at the macro level from your perspective?

Rajeev Sharma [00:07:35]

Well, George, I think the Fed remains data dependent. I don't think we get any rate cuts under Fed Chair Powell anymore as his term is going to come to an end. But if you look at the data, and we saw the GDP numbers, we saw the PCE numbers, and I feel that the market is much more concerned with the PCE number. If you think about the upside surprise to inflation figures, that could be a concern for bond investors. If we look at the GDP figures, that should support treasuries. We did see a downshift in the U.S. economy, but it's all about the government shutdown, the impact on growth there. So the bond market didn't really look at the GDP numbers and really react too much to that, yields were slightly lower when that print came out. But the market was very fixated on PCE data because they know that the Fed, that's their preferred measure of inflation. And really, that changed everything with investors starting putting more weight on the hotter than expected inflation report. We saw yields move higher in the front end, and overall, the yield curve bear flattened. And if poor PCE stays around this 3% level, it's going to be increasingly difficult to get Fed consensus for two rate cuts for 2026. Again, one report doesn't make a trend, but I do think it changes expectations. And that's why yields are higher post the inflation report. And the PC report somewhat validates the Fed's emphasis on being data dependent and their continuing narrative for patience. Already heading into the inflation report, we saw demand for duration start to fade. And this is likely to be the first week of this month where we see yields higher across the curve. And then we also had the release of the FOMC minutes this week from the January FOMC meeting. And if you parse through those minutes, you will read that the Fed remains confident that it can somehow engineer a soft landing. The broad opinion was to keep rates where they are, keep it steady. And there seems to be little urgency to cut rates before having the supportive data to do so. Now, to be noted is that there's increasing divergence amongst Fed members. Some officials argued for a pause. And there were actually other members that argued for a rate hike if inflation re-accelerates. And that's noteworthy because the markets are pricing one direction right now. That's an easing path. So anything that changes that narrative, I think, does impact the bond market quite a bit. The minutes pushed back on the one direction of the Fed that we're going to be cutting rates. Cuts are not off the table, but the bar remains high. You need more disinflation to get that to happen. And on the other side of the bond market, if you look at credit spreads, investment-grade spreads, they were tighter on the week by one basis point, and high yield was tighter by five basis points this week. But for investment-grade, preparations are already underway for about $50 billion in new issuance next week. Add to that $183 billion in treasury coupon supply, and that's going to happen between Tuesday and Thursday. It's going to be concentrated on the two-year, the five-year, and the seven-year. So you could start to see rates start to move higher in the front end, primarily because you're going to have all the supply coming to market. And so I think that's going to be something important to keep an eye on.

George Mateyo [00:10:35]

I think, Steve, the other source of uncertainty, again, has to do with this AI issue, I guess I could call it broadly. We've seen certain industries really fall apart lately, and it seems like there's been some sort of great concentration around how they'll actually fare if AI really is kind of lives to its full potential and we start to see some of these things really take hold. I don't know if you've got. got a view on certain sectors or certain industries. But it does seem like we have been seeing invest become more discerning around AI. We've seen probably more uncertainty about the implications of that. At the same time, many companies actually seem quite the benefit from it in terms of actually it would probably result in greater productivity. So are you thinking anything differently about AI as you kind of navigate your way through earnings season? Any thoughts that you might have on that would be helpful too?

Steve Hoedt [00:11:25]

Well George, when you think about this, what's been interesting to me is to look at the reactions that the market has had. And I think it just goes to show how confused people are by what's going on. And I mentioned it on the call on Monday. But it really does feel like we're in a period of time when more change is happening in a shorter period of time than we've likely experienced in our investing lifetimes. So literally, you've had paradigms turned upside down. It's not a shock to see these large rotations happening underneath the hood of the market. And it goes a long way to explaining why you've got cyclical stocks outperforming year-to-date tech and the mega-cap names basically going sideways and consumer staples up at the same time. Because, again, people are confused. And I think that what you look at, tech is very difficult to try to sort out. Clearly, some of the enabling technology things that are more infrastructure and semiconductors are likely going to be clear winners. But once you go beyond that, there's not much in tech that isn't impacted by AI one way or the other. And people are not sure that it's impacted positively anymore because you've got very profitable business models that could be disintermediated. And if that's the case, you know that that again that that creates all kinds of problems and I'm thinking about the software industry in particular there but you know it's been a movable shooting gallery in terms of every industry every industry seems to be under the potential for people to decide that it could be another new industry of focus for what could be disrupted here so people are migrating toward hard assets, namely things like energy, materials, industrials, places that have things that have factories. You can't replace a factory with a AI generated software program. So people are going there and people got to eat. So they're buying staples. So I think that the response by investors is very logical. Go to the stuff that you know is not going to be going to have problems here and avoid the stuff that does. But what that's created for the market is I just was pulling up the S&P 500 chart again this morning as I get ready to do our weekly chart pack. And it struck me that the S&P 500 right now is at the same level that it was at the end of October. Like literally, we've experienced four full months now almost of going nowhere. And that's not something that I think everybody is not necessarily paying all that much attention to. We're hanging right around a little less than 7,000, feels OK, but we haven't gone anywhere in four months now. So that's something that starts to become a bit concerning. The earnings line has continued to go up and to the right. So that provides some underpinning for the market. But the longer that we continue to hang around at these levels, the more potential there is for something to come along and surprise the market negatively and to see us roll over and have a bit of a correction here. So that's something that I'm starting to become aware of. I'm not calling it right now, but I'm telling you, I'm starting to feel like the fact that we've been churning here for four months is now not, I'm thinking it's more negative than positive. So we'll have to see how it goes as we move through the next few months. Clearly, we've got a lot of uncertainty. The tariff stuff this morning just injects a little bit more uncertainty into the market. Are there going to be refunds? Are there not going to be? What are they going to do next? So here we are back to the same stuff we were dealing with last year. And I think that we don't need that. You saw a little bit of a positive knee-jerk reaction in the market this morning to the tariff announcement from the Supreme Court. But we're only talking about an S&P now that's up three tenths of a percent. So I think the market is seeing through this again, too, and understanding that there's going to be an injection of more uncertainty here.

Brian Pietrangelo [00:15:51]

Let's take a pause, folks. On the panel, Steve, you just mentioned it. So for our listeners listening right at this time, we are recording the podcast as the news breaks the wire from the ruling from the Supreme Court on a six to three decision against most of the provisions on the IEPA tariffs. Those are the International Emergency Economic Powers Act tariffs that were implemented by President Trump and his administration back in 2025, known as Liberation Day. So there are some outcomes here from and again, we just got this on the wire. Thanks, Steve, for bringing it up. And we'll go to our panel. George, what's your reaction to this? And then we'll come back to Rajeev and Steve.

George Mateyo [00:16:29]

So, Brian, I think we talked about this. earlier this year, maybe even end of last year, when we started talking about our 2026 outlook. And you're right to call out the IEPA label in the sense that when the administration put forth these tariffs, they use a certain statutory provision that said that basically they, in their opinion, they thought that there was a national or maybe an international emergency that necessitated tariffs. And they use that statute because they could probably do that most efficiently and effectively, right? That was something they didn't have to get They could almost front run Congress, so to speak, and actually put on these tariffs in a very expeditious fashion. So now the Supreme Court has said, No, the administration, you probably went too far. You overstepped your bounds. You probably needed to consult Congress. I've not read all the ruling yet, obviously, but I think that was probably one key takeaway where it says to me that the Supreme Court ruled that the administration maybe on a procedural basis, probably kind of went about this the wrong way. And there's all kinds of interpretation of that, and that's not a judgment call, that's not a political statement, but I think that's just my fast, quick interpretation of it. I think what probably the bigger thing, as Steve mentioned, is that the market reaction will probably be somewhat muted. There'll probably be some sigh of relief, because I think the market was right to be somewhat concerned about tariffs last year, in the sense that when you impose tariffs, it's a tax. And when people are taxed, businesses are taxed, You know, spending usually goes down and the economy weakens, generally speaking. We didn't really see that in the second half of last year, even though there's a lot of discussion on tariffs. But nonetheless, I think many companies kind of grew through that. We still haven't really known, we really don't know, frankly, exactly that we've been paying these tariffs thus far. So there's still a lot of unknowns. But I think the bigger takeaway for our listeners is to recognize that the administration has other ways of actually imposing tariffs. And my suspicion, Brian, is going to be that the administration will come out with some statement maybe later today or maybe over the weekend or early next week, I think.

Steve Hoedt [00:18:29]

Already have, George.

George Mateyo [00:18:30]

Oh, okay, there we go. Well, didn't take that long. Well, you can read it to me, Steve, but I think...

Steve Hoedt [00:18:35]

No, Trump says he has a backup plan according to...

George Mateyo [00:18:38]

Well, there you go. Yeah, I think this is... This has been something that people have been expecting for about at least a month now that the Supreme Court would make the ruling sometime in January. Here we are in kind of mid-February, and now they've come out with the ruling. So not really surprising to see that, I guess. And again, I think the bigger takeaway is that what is this going to mean? I think it's probably going to mean probably a little bit less growth, a little bit more inflation. But again, the real question is who's going to pay these tariffs is the ongoing debate. And meanwhile, I think the bigger question, at least from the the fiscal side, meaning the governments themselves, is what's going to happen with their debt situation. And I think the government would probably prefer us to see these tariffs being imposed so we can actually get our deficit down a little bit. That's starting to happen really, really a little bit. You have to squint to see it, but it's happened just ever so slightly. But again, I think what Rajeev is going to be focused on, I would think anyway, is the bond market, because that'll probably be the real tell for us in terms of we're seeing any type of real fiscal pressures. So again, I don't think this changes the game too much. As Steve talked about from the market perspective, there's a lot of churning underneath the surface. And so again, I kind of came back to what I said earlier, where I think just being uber-diversified right now is going to be what matters most. That means owning bonds, that means owning international securities, that means owning value stocks. I mean, I think for the longtime, growth stocks were really all the rage. Maybe growth gets a bit on this news this morning. Growth stocks might actually do better in the second half of this year if things really start to slow down from the economic perspective. But we also have some stimulus that's coming out. We haven't even talked about that, but we still have this one big, beautiful bill impact that's all going to ripple through probably the first half of this year. So, net-net, I kind of think that, again, it's just going to be kind of one of these things where we end our way through this in the first half. And as long as the overall trajectory stays Positive with respect to earnings and overall economic growth, we'll be okay, but I think it's going to be kind of a choppy environment for some time.

Brian Pietrangelo [00:20:31]

Well, thank you for the conversation today, George, Steve, and Rajeev. We appreciate your perspectives. And before we close the podcast today, I want to give you a heads up on a national client call that we are having coming up on Wednesday, March 4 at 1pm in the Eastern. We have our head of financial planning, our National Director of Financial Planning, Tom Jarecki, bringing a guest speaker on, Brian Portnoy, where we're going to have a fantastic discussion around achieving true financial well-being and going through the process of how the mental brain thinks about what's going on in the markets and the economy and how you can apply that to your financial plan and to your financial well-being. So again, if you are interested and have not received an invitation, please reach out to your financial advisor or your relationship manager. Again, coming up on March 4 at 1 p.m. Eastern Standard Time, our national call, Navigating Noise, Finding Meaning, a conversation with Brian Portnoy and Tom Jarecki. So 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 again next week to see how the world and the markets have changed and provide those keys to help you navigate your financial journey.

Disclosure [00:22:03]

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

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

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