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May 1, 2026

Brian Pietrangelo [00:00:00]

Rajeev Sharma [00:04:13]

The Fed really held the rate steady at 3.5% to 3.75%, and that was not really a surprise for the markets. I think the markets really felt that this was going to be a paused meeting. In fact, the market expectations for the Fed really have come down quite a bit. You know, many, many expectations before this meeting were pointing to no rate hikes at all for 2026. So this is the third consecutive cause by the Fed. The Fed continues to operate in some levels of uncertainty. You have inflation that is reaccelerating due to a 20 plus percent hike in energy prices tied to the Iran war. Labor markets are uneven, they're cooling. But overall, the inflation part of the Fed's dual mandate has stalled and is not moving towards their 2% goal. So there really is no urgency, if you will, for the Fed to really accurate now. So I think all of that messaging was consistent with this Fed meeting.

Brian Pietrangelo [00:05:14]

A great summary on that, Rajeev. What was interesting to me is there were four dissents and opinion on the statement. You want to explain that for our listeners, what the dissents mean and why they dissented?

Rajeev Sharma [00:05:26]

It's a great question, Brian, because the big story was not that the Fed paused. The big story was those dissents. There's more internal division than what's expected by the markets. You had four dissents. This is the first time since October of 1992, and that's a big deal. This split the committee. So on one hand, you have Stephen Miran pushing for a 25 basis point rate cut. He has done that consistently in the last several meetings. But then you also have Beth Hammack, Neil Kashkari, Lorie Logan. They're opposing to the inclusion of easing bias in the statement. So what that means is you've got three other members in the Fed that really don't think we should be easing at all or cutting rates right now at all. And even though the Fed didn't do anything for rates at this meeting, the level of dissent shows a very divided Fed at a moment in time where there are risks of rising inflation, geopolitical uncertainty, This is going to make Kevin Warsh's job a lot more harder going forward because he is going to have to, you know, rally the troops, if you will, and trying to get his mandate of, you know, let's let's do a rate cutting. Let's do a rate cutting cycle, continue with the rate cutting cycle. If you have more and more dissent in the Fed, it's going to be more and more difficult to to really get consensus on rate cuts.

Brian Pietrangelo [00:06:50]

Absolutely. So thinking about this big news, (Kevin) Warsh did pass through the Senate Banking Committee on the way to the full Senate. Usually everyone is now at this point in time, there will be full confirmation, which means as of May 15th, he will take over as the new chair from Jay Powell. But also probably the most interesting fireworks from the press conference in the FOMC meeting this Wednesday were Jay Powell's remarks that he's going to stay on as governor. You want to talk about that, what it means for the Fed, the committee, and what it means overall?

Rajeev Sharma [00:07:20]

I think Fed Chair Powell, in his last press conference as Fed Chair, I think that that was really, there were a lot of fireworks. You know, he used it as a platform to forcefully defend the Fed's independence. Fed Chair Powell warned that political attacks have battered the institution and said he will remain on board, on the Board of Governors after his term. as chair expires on May 15th. Now, this is a very rare move. Many have thought about past Fed chairs. They generally ride off into the sunset when they're done with their Fed chairmanship, and they could write books or whatever they want to do after that. But Fed Chair Powell is really sticking to staying on in the Fed, staying on as a Fed governor. This will add some level of continuity to the Fed, but the transition for Kevin Warsh might become a little more challenging Fed Chair Powell has a lot of goodwill within the Fed. And I think having him on board will defend against some of these thoughts that it's not going to just be, OK, the White House wants rate cuts, and it's just going to go through with that. Again, as I mentioned, you need consensus in the Fed to make those type of rate cut decisions. Having Fed Chair Powell remain on the board, remain as a governor, I think adds continuity, but also makes Kevin Warsh's job a little more difficult. And that's why I feel that this pause that we had was more of a hawkish pause because the markets, you know, realized that, okay, Fed Chair Powell’s gonna remain and that too indefinitely. So what he's trying to do is stay on until he really feels that there's no challenge to the Fed's independence. All the legal battles from the White House and the Fed are done. Who knows when that's going to be. So I think this is going to be very interesting going forward.

Brian Pietrangelo [00:09:10]

Great. Last question for you, Rajeev, and then we'll get George's comments on the recap of the FOMC meeting as well. What does it mean for rate cuts or maybe rate hikes for the remainder of the year? And what should investors think about all of this information and how should they react?

Rajeev Sharma [00:09:25]

So, you know, we started the year off, Brian, with a market that was really convinced that we are in a rate cutting cycle. We'll have five to six rate cuts this year. That quickly changed. We went to, okay, the Fed's latest dot plots pointed to one rate cut for 2026. The market continued to gravitate towards two rate cuts for 2026, started pushing back their expectations to the second-half of the year. I think those expectations have changed considerably as days go on. When we heard that The DOJ was going to drop their lawsuit against Fed Chair Powell. Expectations started rising again that, okay, we're going to have Kevin Warsh quickly nominated. He'll quickly become the Fed chair. We'll start seeing rate cuts. The market started gravitating towards one rate cut for 2026. Again, I think that's coming under question as we talked about with Fed Chair Powell remaining on the board. So right now, I think the market's really thinking about there's no urgency for rate cuts, most likely no rate cuts for 2026. There is growing, there's growing expectations that perhaps there'll be a rate hike, but rate hikes really are going to have a lot to do with how long this war goes on and the how long oil prices remain elevated and how far away from the disinflationary trend we start moving. You know, the Fed wants 2% inflation. If we don't get it, I don't see how the Fed can cut rates. If inflation starts getting stubbornly sticky, you start seeing those expectations of a rate hike. I think for our listeners, I believe that this year is going to be very tough for having any rate cuts at all.

Brian Pietrangelo [00:11:11]

George, anything to add from your perspective?

George Mateyo [00:11:17]

I don't know if dissents are a bad thing necessarily. I think it's probably appropriate that the discussion would be pretty Vigorous, I guess, is maybe a word I use because I think we have such tremendous uncertainty. So I think a little bit of discourse is probably not a bad thing. And I wouldn't do the Fed as being fractured. I think they're probably just a little bit unsure about really where things might play out from here. So I think some discourse and some debate is probably healthy as opposed to trying to get everybody to kind of conform with one central tendency point of view. So I think that's probably how I would characterize it. The market's going to have to wrestle with that, though, because the market is somewhat preconditioned now to expect the Fed to tell them what they're going to do before they do it. And that guidance, as we've talked about, might be less of a factor going forward. But I think it is fair to say that for now anyway, it seems like none and done might be the operative phrase where no cuts this year probably is the baseline for now, but we'll see. I mean, there's a lot of things to go either direction going forward. And I think probably the market took the news in stride about Powell's decision to stay on it for a little longer as maybe a victory for Fed independence, in the sense there were some concerns a year ago and even at the beginning of this year that the overall independent nature of the Federal Reserve might come into question. I personally think that central banks being independent is a good thing for the economy on a long-term basis. So the fact that the chair, the outgoing chair, or Jay Powell more specifically, is opting to try and stick around, does kind of wreak a little bit of the fact that maybe he's getting to the political ring maybe a bit too much for some people's taste, but I think that it is fair to say that maybe the notion that Fed independence is alive and well is probably a good thing and maybe somewhat calming for markets overall. But I think the bigger story that we've seen this week has to do with the, another, I shouldn't say the bigger, another big story rather, has to do with the overall narrative around the economy. And we've seen continued strength there too. We've seen GDP, which is somewhat backward looking, come in pretty much better than expected. There was some pluses and minuses. The trade numbers were pretty soft overall because imports rose so much. But consumer spending was a bit better expected. And what really, I think, kind of captivated the market's attention was just a big build out of capital spending as relates to AI. That kind of bleeds in earnings a little bit, which we'll talk to Steve in a second about that. The other thing I would caveat, though, with respect to GDP numbers, though, is that that's largely before the war broke out. So I think that you'd have to kind of put a before and after dividing line between that. And of course, we're just now in the beginning phase of getting real readout in terms of what the impact might be on the economy from the war. In other words, the consumer spending number talks about being better than expected, might see some softness. I wouldn't be surprised with prices at the pump here in Ohio, hovering around $5 a gallon. That's going to weigh on consumers a little bit. But for now, some of the near-term numbers that we look at, like jobless claims you've often talked about, Brian, were really quite low this past week. Wages were also a little bit higher than expected. So I think we're in a position right now where the consumer, knock on wood, cross your fingers, is still in a pretty good place. And maybe the other thing we have to think about in this environment going forward is in a period now of guns and butter, which is what we saw probably in the '60s, and most people are probably too young to recognize that, myself included, so I'm just looking at history books here. But that was a pretty interesting time where we saw inflation a bit higher than expected, but really what took hold essentially was a really strong capital spending environment, a lot of support from the fiscal side as well, so tax cuts and so forth. And that provided a lot of impetus for just a pretty good environment overall for commodities and stocks, maybe not so much bonds, but it was a pretty ripe environment where the economy was really humming along at a pretty brisk pace. As I said, the central banks were pretty accommodative, so we had a pretty interesting setup from that perspective. And then the fiscal side, again, the government itself was actually in a period of time where they were expanding domestic programs, and of course, also involved in a bit of a skirmish in Vietnam, to put it mildly, and that provided a lot of oomph for the economy as well. That's one thing that I've started thinking about more recently is that we have this period of time now where guns and butter are back. The other thing I would point out this time, though, that's slightly different is that it's not just pure guns. And Steve, I'll pull you into this conversation now because a lot of the spending right now is being devoted towards AI, artificial intelligence. And we saw, of course, some what I consider just extraordinary gains and developments in terms of earnings this week. I'm not sure if you'd characterize the same thing, but it's really been remarkable to just see how strong earnings have been this year on the face of some of these shocks we've talked about, such as the war and other things. So Steve, what's your assessment of earnings and kind of where we go from here?

Steve Hoedt [00:16:20]

Yeah, I mean, the numbers have been really, really good. There's no other way to characterize it. I think I mentioned on an internal call earlier in the week that if numbers had continued to come in at the pace that they had been up to that point that we were staring at a probably a 20% year over year first quarter. And then we saw numbers, especially out of Alphabet, which were just fantastic. And, you know, we saw good numbers from the most of the other mag seven names that reported this week absent for Meta, which kind of disappointed the street. But I mean, it's very clear that for these companies that offer cloud services, that they are definitely seeing a huge tailwind from AI spend and AI adoption, in fact, because that's what you see when you're talking about cloud services. It's AI adoption by clients. It's not just the spend that the cloud companies themselves are having to make for semiconductors and and server boxes and data centers and all that good stuff. So, I think that when you look at the earnings numbers that people had for this year, they were low double digits. And typically, you see those numbers decline as you go through the first quarter, and they have not declined this year, George.

George Mateyo [00:17:51]

What's the backdrop, Steve, as we think about a year forward, if we can? I mean, I know we there's some problems. I guess there could be some parallels if we look too far ahead. But if you think about just how much burns growth has really been concentrated in some of these companies and particularly things like semiconductors, which are still, as I would see it, somewhat of a cyclical industry, right, kind of subject to booms and busts. Is there a concern as you think about next year, maybe, Steve, that maybe earnings growth will come down quite a bit or maybe are we just overdoing it or is this something that's really sustainable that has a year or two more left in the tank?

Steve Hoedt [00:18:31]

Well, I mean, I think that if you go back and you start to think about the parallels to the early 2000s, The real question comes when we think about what's real and what's not with these companies, right? Because there was a tremendous amount of double ordering back then. And I think that we saw all kinds of mayhem when the bubble finally did pop. This, to me, feels a bit more real and grounded. I'm sure there's probably some double ordering somewhere in the supply chain. But as of right now, it feels like the build out of these data centers to support this AI adoption is likely going to continue to move forward a pace. Where are we at a year from now? Probably in a similar place where we're at today. Although I would tell you that we're dealing with something where there's constant innovation, right? So, two years ago, basically people thought that Nvidia was the only way to play this in semiconductors. And then over the last 12 to 18 months, people figured out, okay, well, Nvidia plus Broadcom, because custom silicon is going to be a way to play it. And now this last week, we saw Qualcomm, another semiconductor name, throw their name in as somebody who could be providing custom silicon. And my point about this is, that we don't know a year from now, how many of these or which one of these is going to be the new thing or the big thing, right? There's just a tremendous amount of innovation going on. And I think investors are just going to have to pay attention because you could be an investor in Nvidia today and 12 or 18 months from now, they could be displaced by some custom silicon solution. And we don't even know what it is today. And I'm not positing that that's going to happen. I'm just saying that we're in an environment where things are moving really fast and you have to pay a lot of attention to what's going on with this. We spend probably an inordinate amount of time on it here in our research team, but I would tell you that I think this this is is here to stay is a theme for at least for the next two or three years, because this this infrastructure is not going to get built in a day. These data centers are huge. You drove past one in southern Ohio this week. I have one going up six miles down the road here. Like these facilities are gigantic and they take a little while to get built when they do start building them. And, you know, I think we're just going to we're going to be watching this. in awe probably for the foreseeable future here for two, three years. And it's going to drive numbers for these tech companies, no doubt.

Brian Pietrangelo [00:21:30]

George, let's get the final question for you in this week's podcast. For the last seven weeks, we've put Iran up front and getting your commentary on it. Dare I say, things were calm enough relatively that we could put it on the last part of the podcast, given other items that were more important this particular week. So George, what are your thoughts on updates on Iran and what's going on there?

George Mateyo [00:21:53]

Well, I wouldn't know if they're positive enough to really mirror the fact that other things have taken some airtime Iran. But I think things have been more in the status quo category more recently. And I think there's been some pockets of escalation, some pockets of de-escalation. So to me, it feels like it's been kind of a push this week in terms of the overall impact. But that doesn't mean it's gone away. And the longer this conflict, this war persists, the risk that literally dents the economy because of elevated energy prices and so forth is real. And I alluded to earlier, when we see gas at some pumps, five plus dollars a gallon, at some point, that is going to creep into demand destruction, meaning it's going to cause businesses and consumers to slow down usage of fuel, for example. And that's going to cause the economy to slow. That doesn't happen quickly, I would think. I mean, there is some reaction function. There's some time for that to actually take hold. But if we're still sitting here a month now and we start talking about Memorial Day, I guess the holiday driving season is typically associated with Memorial Day. And if that kind of causes a significant retrenchment, perhaps then we'll have to talk about a bigger slowdown in the economy. And as I mentioned earlier, we have to bookend the recent quarter and first quarter GDP report with the fact that that was, as I said earlier, somewhat pre-war, if you will, we didn't really see much of an impact there. What's striking, and as Steve mentioned, this dynamic with AI is happening at the same time. So to some extent, those two might be offsetting each other. It's hard to say for sure. And it's not lost to me that AI is also going to be a big consumer of energy, and utility prices are kind of a direct output of that. And I think we're probably in a position right now where it's kind of an elongated period of stalemate, which needs probably some resolution at some point. But again, I think the bigger question for the market has to do with some of this AI spending. I don't think that the midterms are going to be much of a factor for the market. That's another thing people are asking about. But I think the overall situation with Iran right now is not great, but it's not terribly either. And I think some of the shock has probably worn off, but the impacts are still there. We just have to wait to kind of see if they take hold and how they play out.

Brian Pietrangelo [00:24:15]

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.

Disclosure [00:24:48]

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April 24, 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, April 24th, 2026. I'm Brian Pietrangelo, and welcome to the podcast.

For all of you football fans, you're pretty happy as yesterday kicked off the NFL Draft, the annual opportunity for teams to recruit new individuals to hopefully promote them for success in the next coming years for the NFL team. It is being held in Pittsburgh this year and I'm sure all the Yinzers there are having a great time. It also provides the young athletes making the transition from college to professional sports to be a fit with their team that selected them and also weighed into the opportunity to become a professional athlete and succeed on the field and in life. So good luck to all the teams and the draft picks as they conclude the NFL draft in the next coming days.

With that, I would like to introduce our panel of investing experts. Some might say they're top draft picks in their own right. 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 have two key updates on the economic release front, and then we'll talk about some other factors happening this week. First up, we've got the overall weekly and initial unemployment claims report, which showed very stable results at 214,000 claims. And again, this has been stable for roughly the past two years, which is one of the strongest indicators that we have right now for the labor market. Second, also this week, the Advanced Consumer Report came out, known as Advanced Retail Sales, and showed a very strong increase for the month of March, which was a positive 1.7% increase over the prior month. Now this doesn't sound like a big increase, but it is on a month-over-month basis. The caveat, however, is that the number is a nominal number, meaning that it includes price increases, and a lot of price increases came through in auto and in the price of gasoline, obviously, given the oil shock with Iran. So if you knock that down and exclude autos and gasoline, the month-over-month price increase was only about 0.6%. Now that number is still good, and it comes off the heels of last month's report, which showed a 0.7% increase month over month in February. So 2 decent months in terms of showing the consumer spending still has legs, and we'll continue to watch this as a health indicator of the overall economy.

Outside of that, not a lot going on in economic releases this week, so we'll talk about three other topics. Certainly we'll get an update from Iran with George and his comments on what's happening there with the Strait of Hormuz, other extensions of the ceasefire, and what's going on with oil and overall effect of the war. Also, we come back to the tariff topic, which has not been in the headlines recently with everything else going on, but it was interesting that the U.S. Customs Agency launched an online portal earlier this week that allows businesses to request refunds for tariffs that were collected under the International Emergency Economic Powers Act, which was the act used for the tariffs under President Trump about a year ago and was struck down by the Supreme Court. Now the key there is it's not everybody. It's only the businesses that were importers that actually filed the tax return to pay the import tax known as the tariff under the IEPA law. And so they'll have to see how that flows through, but it could amount to about $166 billion in refunds, and we'll try to give you more details as this unfolds over time. And lastly, probably most interesting, Senator Warren had some pretty good comments for Kevin Warsh within the Senate Banking Committee confirmation hearing for Kevin Warsh, who again was appointed and nominated by President Trump to be the next Fed chair within the Federal Open Market Committee, but you have to go through the confirmation process in order to make it through. So we'll talk a little bit about that with Rajeev in addition to the fact that coming up next week is the Fed's ongoing and regularly scheduled Federal Open Market Committee meeting on Wednesday where it's highly likely that they won't do anything with interest rates, but we'll continue to get a read from Jay Powell before his supposed exit next month when his term as Fed chair is supposed to expire on May 15th, whether it does or it doesn't based on whether Kevin Warsh gets confirmed before that or not. We'll also talk to Steve about Q1 2026 earnings and how that's going. But as we always do in the last couple weeks for about a month and a half now since the Iran war began, give an update from George as to what his thoughts are on the Iran war and what's happening in the general economy. So George, let's start with you.

George Mateyo [00:05:18] Well, on the economic side, Brian, it was kind of a late week, I think, overall. I think the biggest headline economic release came out this week was retail sales, frankly, which is something we don't talk a whole lot about. But it was a pretty decent report. And of course, it's kind of notable to talk about what's happening with respect to the consumer, given the fact that there is a significant amount of pressure, the setting of the consumer at the pump, at the supermarket and other places as well. You know, ongoing pressures and stresses around affordability are real. And despite that, though, the overall numbers for March retail sales were pretty solid. You have to kind of come through a lot of noise because there's a lot of things that are including that number or some things aren't. Of course, the biggest component or the biggest change in overall prices had to do with what happens at gasoline prices. And that's another element of the overall retail sales number in the sense that gasoline prices, of course, were quite elevated. And that kind of caused the price numbers and also those sales numbers to lift. If you strip that out and look beneath the headline, you'll see essentially a pretty good report overall in the sense that sales across the board came in faster than expected. And there were things like furniture and general merchandise and even things like e-commerce sales were all pretty healthy. And maybe that's somewhat because of tax stimulus and other things of whatnot. But overall, I think it's fair to say that the consumer seems to be, for now anyway, in pretty decent shape.

Now, we can't overlook the fact that we have seen some significant changes in the past few weeks or so because of the situation in Iran and the Middle East. We're seeing companies starting to ration back certain items and certain services. Notably, the airlines that are probably feeling the pain most acutely are talking about rationing flights. And that's just going to cause prices to go higher. And that's going to probably cause consumers to pull back at some point maybe later this year. So I think it's still TBD. I think the war itself continues to kind of drag on a little bit. It's really not quite clear exactly how we might get some ultimate resolution here. But I think we're kind of working towards kind of some kind of stalemate maybe where there's probably some lessening of tensions, if you will, but really not a lot of clarity around overall resolution. And that's just going to probably create maybe some overlying kind of headline risk and some volatility in the short term as we get some closure perhaps later this summer. So we'll see. Hope it doesn't quite last that long. I think both sides, frankly, have reason to negotiate and try to reach some resolution, but it's unclear exactly how we might get to that in the near term.

The bigger issue, as I kind of teased earlier, though, I think has to do with what happens next in the labor market. And I think there were some interesting headlines this week from many companies that are really at the forefront of AI. particularly a few companies in the technology sector and software more specifically, companies that actually announced some pretty notable layoffs. And again, we have to talk about this in the context of the broader economy. These are certainly big numbers for the individuals involved and the companies involved, but we still have a labor market of some 160 million people. So when we're talking about a few thousand jobs, that's kind of thumb all in routing sense, but I think it matters nonetheless. And then directionally, Steve, I'm kind of curious to get your thoughts on this kind of overall believes within software. And think of those companies that were at the forefront of these layoffs are in the software space and they're kind of moving towards AI. So if you think about this, is this more of a profit kind of motivation story? Are these companies trying to protect their margins or is this really more of a fundamental shift towards AI and away from physical labor?

Stephen Hoedt [00:08:41] So, George, I think there's a couple of things going on here. So first, like when you look at Meta and Microsoft, those are the two names that we're talking about. The Meta has historically gone through a period where pretty much every year or every two years, they literally decimate the workforce, using the Roman term for culling the bottom 10%. And like I... I don't know that I would really draw too many more conclusions from the meta piece of this, other than they're proceeding with what they always do, which is try to push out underperformers. I mean, they're very vigorous in how they rank their people, and you know, maybe it's possible that AI is making it easier for them to do that than in the past, but you know, meta, I think, is one piece. Microsoft is a bit of a different one because It's very clear that when you look at all of these software companies and Microsoft is no, isn't immune to this, the impact of AI on software jobs is one of the areas that is ground zero for determining how this technology is going to be adopted at an industrial level across the economy. It's, and we're starting to see that. Now, how quickly that's going to happen elsewhere, I don't know. And you could argue that this is kind of just a minor step forward for a company like Microsoft, because they still have quite a large number of employees, right? But at the margin, they're all spending a lot, a lot of money on the infrastructure for this. and they need to see a return on it. And one of the ways that they're going to get a return is through cost cutting internally.

George Mateyo [00:10:43] We also saw, Steve, a pretty interesting bounce, if you want to call it that, or something maybe more pronounced in semiconductors. And so one company in particular is Intel that's getting a lot of press these days. Is that real? Is that the kind of a shift that kind of speaks broadly about the AI build-out, or is that more something that's company-specific to Intel?

Stephen Hoedt [00:11:02] It's kind of funny. I mean, I do think that Intel has been a bit backstopped by the US government. So there's a different dynamic at play there. And very clearly, when you look at the geopolitical situation, it does kind of bring home the idea that, you know, we're going to see these global supply chains become less globalized as we move forward. And Intel's a beneficiary from that. So there clearly is legs to that story. When you look at it from a markets perspective, leadership has been reasserted by tech and communication services over the last month. Like this rally off of the lows post-Hormuz crisis onset has been led largely by semiconductors, which is driven tech. We've had a bounce in software over the last two weeks, and it's been driven by communication services stocks. So those two things, I mean, that had been, they had not been market leadership from the beginning of the year through April. So we did, so we saw a rotation coming through this crisis period, And what I always tell people is when you go through a crisis period, whatever emerges as leadership on the other side is likely going to be leadership for the next leg of the market cycle. And I do have to say, I admit I've been a bit surprised by it because we had seen cyclicals take over leadership at the beginning of the year. And those have really come off the boil during this bounce in the market. So you've seen industrials financials led by banks, material stocks, not just energy. I mean, you'd expect energy to sell off when price of oil drops by 20 or $30, but the rest of these industrial stocks have come off and so has consumer discretionary. So like you've had a very pronounced rotation once again into the tech and the, for lack of a better way, of putting it the high beta part of the market. And I think again, it's caught people off guard. This market has found a way to catch people off guard pretty much for the last six months running. You know, every time you think you've got something that you can latch onto as an investment theme, the market rotates and you get caught out on the other side.

George Mateyo [00:13:31] So sticking with the AI theme for a second, Rajeev, I'd love to get your thoughts on this. There's been some interesting, I guess, for lack of a better term, research that has been published by a couple notable think tanks, one on the West Coast, one on the East Coast, won't name names, but I think it's interesting because they talk about AI. They talk about the fact that this really could materially increase productivity in a major way, but the games themselves would be pretty uneven. And they kind of have talked about maybe bifurcation for those companies and those organizations that actually adopt AI would actually probably see some real benefits. Those that don't will probably be left behind. And it's not just putting some software in, it's really trying to integrate this into workflows that can capture some bigger benefits. So my question to you, Rajeev, this has to do with the Fed Reserve and how they might think about productivity. Of course, we have a potentially new Fed chairman that's going to step in who's been talking a lot about this too. And I wonder, do you think that to some extent the Fed is focused on the disruptive nature of AI, or are they just going to focus on other things for the moment?

Rajeev Sharma [00:14:31] It's a great question, George. I do think that the Fed and many Fed members have been pretty vocal about how the impact of AI is going to resonate with their dual mandate being that of inflation and maximum employment. So I think there's a lot of sentiment in the Fed right now. A lot of Fed members feel that AI is not going to disrupt their dual mandate too much. They think that any type of inflationary pressures that we're starting to see and we're going to continue to see could almost be mitigated by advancements in AI. And I haven't heard a lot of Fed members really talk about the impact of these layoffs that we're hearing about and what impact that's gonna be on the employment numbers. It's almost as if Fed members right now are very focused on inflation and they're very focused on the war that's going on and the impact that it's going to have on inflationary figures and inflationary data points that come out. Because those data points are going to be elevated and they're going to be inflationary. And they're not going to be trending towards what the Fed wants to see, which is disinflation. So if we're moving further away from the 2% goal that the Fed has and You got to believe that that goalpost is not going to change right now because you do hear Fed members coming out and saying that advancements in AI should be able to actually help the inflationary picture. We don't know exactly how that's going to play out. So these unexpected uncertainties that are in the market right now, I think that continues to weigh on the Fed. But what it's all done, all this being said, what it's done is it's put a Fed on hold, at least in the near term, because the Fed's not going to cut rates if inflation's not going to come down, or at least start to show a disinflationary trend. There's no urgency by anybody to cut rates right now. If you hear the Fed members speak, none of them are really coming out there and saying that we should be cutting rates right now, except for one dissent that we had in the last FOMC meeting. We may see the same dissent in this upcoming meeting that we have next week. Nobody's anticipating a rate cut next week for the FOMC meeting. Rate cut expectations by the market have diminished. for 2026. As I said, we don't expect the Fed to do anything next week. Based on those market expectations, the Fed at best would have one rate cut this year, and even those odds are quite low. The FOMC meeting is going to most likely point towards economic data. And again, that data that we've been seeing leaves little room for a rate cut. The economy is fine, according to the Fed, but price increases have persisted, and even dovish Fed members are pointing towards having patience right now. So all of this has really taken its toll on the bond market as well. I mean, we saw back in March where the aggregate bond index was down very heavily. It was a very terrible month for the bond market. We snapped back to some of Steve's points. It's amazing how much resilience that we got back in April and how we snapped back in the bond market. We saw a lot of those tech-heavy companies not feel fearful about coming to market with new issues. They were being received very well by the investment community. And again, we saw yield start trend lower in the month of April. Now, last week, however, or this week, we did see that treasury yields have moved slightly higher. And you have a 10-year right now that's around 4.33%. We were getting close to 4.5% last month. 30-year is also around 4.92% right now. And you have a two-year that's around 3.7%. What that means is the front end is very impacted by monetary policy. and the shape of the curve is dictating that. So if you believe that the Fed's not gonna be cutting rates, there's really little reason for why front-end yield should go low. And because of that, we've had a flattening of the yield curve, which I've mentioned before is the pain trade in the bond market right now. Many, many investors are pointing towards a steepening trade, or they've had their money in a steepening trade, and the curve remains flat. This week, again, we've gotten a flatter yield curve. Now, the curve itself, if you look at the differential between a two-year treasury yield and a 10-year treasury yield, you're around 50 basis points. And we've been around this 50 basis points for quite some time now, a couple of weeks. We did get down to 48 basis points this week, but that was short-lived. The curve really wants to steepen, but the only way that's going to happen is if we get some kind of resolution on this war, we get some kind of Fed members that are pointing towards at least some rate cut this year. If we don't get that, we're going to see the front end continue to be elevated. And you're going to see the impact in other areas as well. I mean, we talk about money market funds. You don't see a lot of rotation out of those funds right now because why would you? You've got pretty decent yields in money markets right now, so that's not happening. So we need to see some kind of certainty in the market. We just haven't had it. And what we have had is the fact that we are going to have a new Fed chair at some point. We did have Kevin Warsh come to the Senate Banking Committee this week. He had a testimony. I thought that was very telling for the market. I think many people expected him to come out and really talk about rate cuts and we need to be cutting rates. And he kind of stayed away from that a little bit. He also pointed more towards how important central bank independence is. I think that was well received by the market. But there were some highlights in there that even though he talked about Fed independence, he talked about not being a sock puppet for President Trump. He did say that he's going to make the decisions that he puts forward are going to be in line with what the Fed is supposed to do, and that is supposed to be their dual mandate. But what really I think concerned the market a little bit was kind of his ideas about we should not be having a lot of forward guidance. And the market has become very accustomed to dot plots and forward guidance and where the Fed thinks rate cuts are going to go, where monetary policy is going to go. If we take that away from the market, you could expect more volatility around those timeframes when we have an FOMC meeting. So I think that's going to be very important to watch. So I think that did move the market a little bit.

Stephen Hoedt [00:20:26] Hey, Rajeev, while we've been on the call, ABC News is reporting that the Fed is, or the DC district attorney is going to drop the charges on Powell probably as early as today.

Rajeev Sharma [00:20:43] Oh, that's, so that's, that's very interesting news. And I think to that point, you know, that again, you know, you're going to start seeing whether Fed Chair Powell stays on as a, as a Fed governor. I think In the past, we've seen a lot of Fed chairs pretty much right off into the sunset when their term's over. This time you did see Fed Chair Powell in the last meeting say that he would stay on. Many people thought as long as this DOJ subpoena's investigation was continuing, he would stay on. There's also that talk about Tillis, Senator Tillis saying that he would not allow for anybody else to be nominated as Fed chair as long as this was outstanding. So I think this also opens the road up for Kevin Walsh going forward. Very good news right on the fly. Thank you for that, Steve.

Brian Pietrangelo [00:21:26] Definitely. So for our listeners, all that commentary was around the prior comment that, again, for a reminder, everybody, Jay Powell's term is up May 15th. Kevin Worse has been nominated and has to go through two rounds. One is with the Senate Banking Committee and one is with the full Senate to get confirmed by that time. If he doesn't get confirmed by that time, Powell stays on and that won't be pleasant for President Trump. And Tom Tillis, senator from North Carolina, had threatened to block Warsh's vote and could because it was a 13 to 11 vote. And if it's 12 to 12 at the time, he might lose. Why did he say it? Rajeev, you said it. If the Trump organization or the DOJ doesn't drop the suit against the Fed for Jay Powell for building too much on the new building and the cost overruns, he would block Warsh's vote. With Jeanine Pirro saying she's going to drop that now and go over to the Inspector General rather than the DOJ, it might provide Tillis the opportunity to give the green light. Very interesting. Any other thoughts, Rajeev?

Rajeev Sharma [00:22:23] No, I do think it's very interesting. And I do think that, again, the market's looking for some kind of certainty, and uncertainty is not good for the market. So if this pushes in that direction, I think it's good for the bond market, good for risk assets.

Brian Pietrangelo [00:22:35] Well, thank you for the conversation today, George, Steve, and Rajeev. We appreciate your insights. And thanks to our listeners for joining us today. Be sure to subscribe to the Key Wealth Matters podcast through your favorite podcast app. As always, past performance is no guarantee of future results, and we know your financial situation is personal to you. So reach out to your relationship manager, portfolio strategist, or financial advisor for more information, and we'll catch up within next week to see how the world and the markets have changed and provide those keys to help you navigate your financial journey.

Disclosures [00:23:10] We gather data and information from specialized sources and financial databases including but not limited to Bloomberg Finance L.P., Bureau of Economic Analysis, Bureau of Labor Statistics, Chicago Board of Exchange (CBOE) Volatility Index (VIX), Dow Jones / Dow Jones Newsplus, FactSet, Federal Reserve and corresponding 12 district banks / Federal Open Market Committee (FOMC), ICE BofA (Bank of America) MOVE Index, Morningstar / Morningstar.com, Standard & Poor’s and Wall Street Journal / WSJ.com.

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

Steve Hoedt [00:06:32]

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

Brian Pietrangelo [00:08:17]

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

Steve Hoedt [00:08:28]

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

Brian Pietrangelo [00:10:07]

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

Steve Hoedt [00:10:31]

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

Brian Pietrangelo [00:15:49]

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

Rajeev Sharma [00:16:06]

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

Brian Pietrangelo [00:19:47]

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

Rajeev Sharma [00:19:55]

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

Brian Pietrangelo [00:20:51]

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

Disclosure [00:21:25]

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

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

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

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

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

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

Non-Deposit products are:

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

April 10, 2026

Brian Pietrangelo [00:00:00]

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

George Mateyo [00:05:51]

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

Steve Hoedt [00:10:15]

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

Brian Pietrangelo [00:13:03]

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

Steve Hoedt [00:13:11]

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

Brian Pietrangelo [00:15:10]

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

Tim McDonough [00:15:31]

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

Brian Pietrangelo [00:18:40]

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

Tim McDonough [00:19:06]

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

Brian Pietrangelo [00:19:52]

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

George Mateyo [00:20:00]

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

Brian Pietrangelo [00:20:45]

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

Disclosure [00:21:17]

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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