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March 27, 2026

Brian Pietrangelo [00:00:00]

George Mateyo [00:02:44]

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

Steve Hoedt [00:05:35]

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

George Mateyo [00:09:21]

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

Steve Hoedt [00:09:57]

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

George Mateyo [00:11:34]

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

Rajeev Sharma [00:12:28]

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

Brian Pietrangelo [00:17:01]

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

Rajeev Sharma [00:17:18]

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

Brian Pietrangelo [00:18:03]

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

Steve Hoedt [00:18:14]

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

Brian Pietrangelo [00:19:36]

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

George Mateyo [00:19:42]

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

Brian Pietrangelo [00:21:18]

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

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March 20, 2026

Brian Pietrangelo [00:00:00]

Cindy Honcharenko [00:03:39]

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

George Mateyo [00:08:06]

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

Brian Pietrangelo [00:10:08]

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

David Harvan [00:10:37]

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

Brian Pietrangelo [00:11:30]

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

David Harvan [00:11:36]

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

Brian Pietrangelo [00:15:23]

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

David Harvan [00:16:05]

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

Brian Pietrangelo [00:17:00]

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

Steve Hoedt [00:17:24]

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

Brian Pietrangelo [00:20:06]

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

Steve Hoedt [00:20:19]

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

Brian Pietrangelo [00:21:48]

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

Steve Hoedt [00:22:20]

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

Brian Pietrangelo [00:24:15]

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

Disclosure [00:24:50]

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

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.

Disclosure [00:24:10]

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

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.

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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