Subscribe
Share
Share
Embed
Key Wealth Matters, a podcast series hosted by the experts of the Key Wealth Institute, explores the biggest news of today to determine how these headlines can impact wealth plans, financial strategies, markets, and investments.
Join our team of advisors for unbiased, proactive advice about individual and family finances, estate and legacy planning, family dynamics, investing, as well as trends for business owners, nonprofits, and institutions.
To submit potential topics or questions to our experts, contact us via email at kpb_wealth_institute@keybank.com.
For more information, articles, or other insights related to wealth management, visit key.com/ourinsights.
_____________________________________________________
Key Wealth, Key Private Bank, Key Family Wealth, KeyBank Institutional Advisors and Key Private Client are marketing names for KeyBank National Association (KeyBank) and certain affiliates, such as Key Investment Services LLC (KIS) and KeyCorp Insurance Agency USA Inc. (KIA).
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.
The Key Wealth Institute is comprised of financial professionals representing KeyBank National Association (KeyBank) and certain affiliates, such as Key Investment Services LLC (KIS) and KeyCorp Insurance Agency USA Inc. (KIA). Any opinions, projections, or recommendations contained herein are subject to change without notice, are those of the individual author(s), and may not necessarily represent the views of KeyBank or any of its subsidiaries or affiliates. This material presented is for informational purposes only and is not intended to be an offer, recommendation, or solicitation to purchase or sell any security or product or to employ a specific investment or tax planning strategy. KeyBank, nor its subsidiaries or affiliates, represent, warrant or guarantee that this material is accurate, complete or suitable for any purpose or any investor and it should not be used as a basis for investment or tax planning decisions. It is not to be relied upon or used in substitution for the exercise of independent judgment. It should not be construed as individual tax, legal or financial advice. 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
©2025 KeyCorp®. All rights reserved.
Brian Pietrangelo [00:00:01] Welcome to the Key Wealth Matters weekly podcast, where we casually ramble on about important topics, including the markets, the economy, human ingenuity, and almost anything under the sun, giving you the keys to open doors in the world of investing. Today is Friday, July 11th, 2025. I'm Brian Pietrangelo, and welcome to the podcast. We were off last week celebrating Independence Day on Friday, July 4th. Hope you also had a good opportunity to celebrate it as well with family and friends and everything else American. And if you're a sports fan of summer sports, you've got two things going on for you that are really interesting. The first is Wimbledon tournament is in full swing and we've got the semi-finals today and the finals coming up on Sunday. Also in full swing is the baseball season for Major League Baseball for which the All-Star game will be coming up on Tuesday of next week on July 15th. So look forward to that if you're a baseball fan. With that, I would like to introduce our panel of investing experts. Some may say they're All-Stars in their own arena, 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 the market and economic calendar, the economic releases for this week were extraordinarily light so we're going to give you an update from this week and one update from last week. First, starting with last week on Thursday, July 3rd, the employment situation report came out from the Bureau of Labor Statistics and showed that the new non-farm payroll employment increased by 147,000 in June. Now this was a pretty solid number as it was slightly above expectations, but more importantly, as the report comes out every month, the report comes out for that month, and the prior two months are revised. And in this case, the revisions were a positive in an upward trend. That's not necessarily as normal as it has been the last six months, where the typical revisions have been negative. So good news there, as a testament to the employment market remaining fairly stable. And second, this week on the employment front, the initial unemployment claims report that came out just yesterday came out for 227,000 initial filers of unemployment for the weekend in July 5th. Now this is good news because it has receded and come down from the prior few weeks where it had been escalating and we asked the question whether this was a longer term trend or not. The answer right now is it is not a longer term trend and it has remained fairly constant and stable itself. And finally, the meeting minutes for the Federal Open Market Committee meeting from June 18th came out and had a good read on it. We'll get Rajeev's take on that in terms of an update on what's happening with the Fed. Now, in addition to our weekly conversation, we've got a special topic in our conversation with our panel today, where we will be revisiting our 2025 investment outlook that we wrote in November of 2024, now that we are here at the mid-year of 2025. We'll also get our panel's take on what the outlook is for the second half of 2025 in a variety of topics, touching the markets, the economy, tariffs, geopolitical stuff, and everything else that we wanna talk about. So let me begin with you, George, as we think about mid-year and we talk about the state of the economy where we are from your perspective, what our outlook is for the 2nd half of the year, in addition, trade and tariff discussions, and also now the economic implications of the One Big Beautiful Bill. So George, take it away.
George Mateyo [00:03:54] Well, Brian, as we turn the page, the second half, I guess it's fair to say that we're back in where we started the most, in the sense that we are talking about tariffs once again, tariffs are front and center. This past week, the administration sent, I think, up to 23 letters to various countries threatening tariffs effective August 1st, ranging from, I believe, 20 to 50%. Culminating, I guess, in a 35% tariff threat against Canada, although there's probably going to be some fine tuning with that. Maybe some carve-outs for the USMCA, which would probably be a pretty big carve-out. So the overall rate wouldn't be 35%, but it would still be significant. And of course, there's also possibly around a 50% tax on copper and up to a 200% levy on pharmaceuticals. Now, I think a lot of that, again, is kind of rhetoric. And, you know, as we've kind of seen before, we probably shouldn't take this too seriously. I guess I should say we shouldn't say it too literally, but we should probably take it seriously in the sense that if all these things do materialize, even not to the full extent that have been talked about, this will start to weigh on growth at some point. And this will start a kind of cause inflation to rise. And it's important to note that inflation and reports will be coming out next week. Again, it's probably too early to see some of that play out in terms of the overall inflation impact. But as we said before, Brian, a 1% increase in the tariff rate could probably result in a 0.1% increase in growth, or decrease in growth rather, and a 0,1% decrease in inflation. So in other words, if we started this year, with the overall tariff rate on the U.S. At about 2%, if that bumps up to, say, 12%, that 10% difference will probably translate into roughly a 1% slowdown in growth. And of course, if the economy is growing at 2-ish percent, you take one away from two and you get 1% growth. So in other words, it's gonna result in some kind of slowdown of growth and it'll probably have a pickup in inflation. And, you know, I think we also have to balance that the markets kind of shrug this off this far. I think there's probably a bit of skepticism as to whether or not some of these tariffs will stand challenges by the courts. That's still kind of an ongoing situation. There's probably been, of course, some back and forth in the past. And maybe the markets can look you through that thinking this might be more rhetoric. Um, and overall, I think it is kind of fair to say that the stock and bond correlation has actually picked up again too, meaning that as stocks and bonds kind of rise and fall together, your portfolio needs to be more diversified than just stocks and bonds because, you know, frankly, you can't have those, those two asset classes work together. It's definitely off at each other, uh, over printed volatility. So I think he is going to probably fair to see that, you know, as we kind of turn our page to the second half. Probably a slowdown will probably become more evident. As we said before, just because tarriffs haven’t impacted the economy doesn't mean that they won't. And that probably remains kind of our thinking going forward too. The other big thing, of course, has to do with this one big beautiful bill that was passed just prior to, I guess, on the 4th of July. And it was signed into law, I should say, on the fourth of July more specifically. And as we said, before, this is probably going to result in higher deficits. This is something that's probably been well telegraphed. And I think the market's kind of anticipated this to some extent. And so far, the market's taken in strides. But at some point, we do have to acknowledge that this is going to be a continuation of that crowding out theme, meaning more money will be spent on interest expense than will be spent on other more productive things for the economy. And that, again, is going to probably further suppress growth in the out years. And then it'll probably cause interest rates and inflation to be somewhat stuck with higher growth going forward also. So we don't think this is going to be a crisis moment. It could at some point. Maybe there will be a tipping point some point, but again, the markets have been in this for the most part. And that's why I think they're kind of taking this in stride. Now, whether or not the market deserves to be trading at 22 or 23 times earnings, it's probably a bigger question for us to debate later on the call. But overall, I think this, in terms of the economic impact, we'll probably see kind of a slowdown take place in the second half of this year. And my guess is that inflation will be staying somewhat elevated, which will probably again kind of keep the Fed in check before cutting rates aggressively in the back half of this year.
Brian Pietrangelo [00:07:58] So George, thanks for that update. Great call. I'm going to alert our audience listeners back to November of 2024, when we wrote our 2025 outlook for the year. George, you talked a lot about many of those same concepts. In particular, you talked about the possibility of an expanding debt or deficit, and we are exactly right there now with your summary on the one big, beautiful bill. So great call there in terms of your forecast for the year. In a similar fashion, we'll turn to Steve. Steve, you had a forecast back in November of 2024 that the first half of 2025 would be difficult to achieve any momentum, would be a lot choppy. And now that we are there, we experienced exactly that. So spot on with your call. We're now at some record highs, even though it was a climb back from some fallout during the middle of the first quarter. But where are we, Steve? And what's your outlook for 2025 second half?
Stephen Hoedt [00:08:48] Thanks, Brian. Yeah, you know, the first half was quite the journey with a over 20% or 20% peak to trough decline and then followed by a rally of 20, 25% after that. So it's been quite the trip. Um, you know, when you look from here, where do we go? Right. And I think that that is a interesting question because we continue to make new highs here in the month of July, July, many people don't realize it because it falls squarely in the middle of the whole, um, kind of sell in May and go away thing. But sell in May and go away is not, um does not really how the market works. If you look statistically July is actually over the last. 10 to 15 years moved into the number one position in terms of seasonals if you look on a monthly basis it's actually a stronger month than December. So July here is playing out as we expected with a move to new highs. I think the more interesting question is where do we go from here because our call at the beginning of the year was that we'd have a stronger back half of the relative to the first half. Look, we had a bigger probably drawdown than if I was admitting in the first half, a bigger drawdown than what we probably expected we were going to have. And now as we sit at new highs as we're heading deeper into July, we don't see anything that's really going to derail this market near term. But I do believe that we're going to spend some time consolidating the gains that we've had from the April lows. So as we digest the strong seasonal period, likely my is that it'll work its way modestly higher through August and then September, October. We'll end up with some indigestion as we usually do for the market. And a lot of that will coincide with some of that discussion George mentioned earlier about where earnings are gonna be and where multiples are gonna to be. This rally's been driven both by earnings over the last few couple months and multiple expansion. As opposed to just multiple expansion as we saw off the lows and the real issue is that we're up at 22.5 to 23 times earnings now on a forward basis and essentially if you try to figure out back into what the numbers need to look like to generate a typical average, you know, say eight to 10% return, you've got to have some, you essentially have to return to bubble 2000 multiples for the market in order to get 10% returns from here. So I think the market has embraced this pivot to growth that we've seen out of DC and has really pushed down to discount some good things. And now we're going to have to start to see those good things come through. Otherwise, the market's going to be disappointed.
Brian Pietrangelo [00:11:53] Great, Steve. Any quick thoughts on Q2 earnings? I know it's in the rear view mirror, not necessarily a forecast for a second half, but anything you see?
Steve Hoedt [00:12:02] I think that it's going to be interesting to hear the commentary from the companies on tariffs. We actually started to see some, I would say, relief from what we saw earlier in the year because there was a ton of uncertainty earlier in a year. The uncertainty seems to be lifting. The one that I would point to that this past week was Delta. Full disclosure, we don't recommend Delta stock, not likely going to. And I would tell you that, you know, when you look at that name, because it's it's levered to both consumer spending and on a leisure travel basis and it's leverage to business spending. And the fact that they were willing to come back in and reinstate guidance where they had taken guidance away before it gives, I gave I think the market some confidence that the, the fog is clearing regarding, the future state of what we’re going to be seeing as we head into the back end of the year. So I actually thought that that. That release in particular carried a little bit more weight with the market than it usually would. And I think it was something that people should pay attention to that message.
George Mateyo [00:13:14] Steve, I'm glad you mentioned that. I mean, we featured, I think another airline company a while ago. And again, as you recommend, as we mentioned, we don't recommend airline stocks explicitly, but I think there is kind of a macro read through some of those reports looks well. And we were talking about at the time that particular company actually issued a range of guidance. You probably remember that, right? They had a guidance range between I think down 50 and up 70. And, you know, I guess that investors probably think, what do we do with like that where you've got that big of range. So it is kind of somewhat reassuring that a company that's kind of at the epicenter of the economy and actually has a probably good breakthrough for the state of consumer, both consumer and business travel, I guess, you can kind of see a bit of confidence coming back in the corporate sector as well. So I think that's a great call out.
Brian Pietrangelo [00:14:00] Great. Thank you, George and Steve. And in a baseball analogy, batting cleanup today, we've got Rajeev to give his overview of what's happening in the second half of the year. But also before we do that, we'll go back to the 2025 outlook that we wrote in November. So we're three for three gentlemen, great to hear that we're on target with some of our calls. And Rajeev, you wrote that there would be some uncertainty regarding tariffs and also uncertainty around inflation as it comes to fed policy. And you might have about two cuts. And they might be pushed to the second half of the year. And here we are. Rajeev, what are your thoughts?
Rajeev Sharma [00:14:33] Yeah, I mean, it's a really good question, Brian. I mean where do we go from here? The market expectations at the start of the year were calling for four to five rate cuts for 2025. And as you mentioned, Brian, we never subscribed to that call. We stuck with our convictions of rate cuts being a second half of the years phenomenon, if you will. And now the bond market is coming to that realization as well, that the Fed really has no compelling reason to act fast and cut. Fed Chair Powell himself has characterized monetary policy as, quote unquote, modestly restrictive. And despite President Trump's public efforts to convince Fed Chair Powell that cut rates, monetary policy remains in this wait and see approach. Something that we thought about in the beginning of the year as well, that there's too many uncertainties in the market right now with inflation, the impact of tariffs on inflation, that why would the Fed try to get in front of that? Now, tariff policy remains uncertain. I think that's gonna remain uncertain for a while right now. There's been consistent changes to it. The timeline for resolution keeps getting pushed back. So the Fed really has no reason to be preemptive. And now we have an August 1 deadline, and that's exactly two days after the next FOMC meeting. So the odds of a rate cut at the July meeting are pretty much zero. The Fed has no, they haven't cut rates since last December. And the first rate cut, if we get one, would likely be months away. So I mean, people are looking at September as being the first rate cut. If we do get the September rate cut and we do follow the Fed's projections that they gave us in June, we'll be spot on for two rate cuts for this year as something we predicted back in January. Also the impact on tariffs in the US labor market and inflation has been quite limited to date. We will get a weaker labor market or higher inflation. Is that gonna happen? That's yet to be determined. So you have an easing of financial conditions. You have a resilient economy. And so monetary policy doesn't really need to exert any kind of restraint at this time. And the cost of a wait and see approach is pretty low. So as long as inflation and employment mandates remain balanced, I don't see the Fed really trying to get in front of this. What you do have, however, is a disparity amongst Fed members. And we saw that in the Fed minutes that were released this week. Seven members of the Fed had no rate cuts projected for 2025. And that's versus 10 that project two to three rate cuts for 25 basis points for 2025. So you have Michelle Bowman, you have Chris Waller. These are two Trump appointees. They're advocating for a July rate cut. As I said, I don't believe that's even gonna remotely happen. Now, rate cut projections are influenced by a couple of things from the Fed members. One, what is the outlook for trade policy? I think that's something to be very important for the second half of the year. What is the impact of tariffs on inflation? And also what is the current state of monetary policy. So this will all become more clear once we get an indication of tariff policy and whether higher prices lead to higher inflation expectations. Then we might once again see Fed members getting, gravitating back to the same page, but right now there is disparity. And politics plays a big part here too. Bowman and Waller, they continue to advocate for looser monetary policy, and then you have leading candidates that are trying to make their pitch to succeed Powell. You've got Treasury Secretary Scott Besson, you've got National Economic Council Director Kevin Hassett, you have former Fed Governor Kevin Warsh. They all seem to be auditioning for the job. So I think you're gonna see a lot more narrative coming out from Fed members in the second half of the year, and that's gonna impact the market for sure. You'll start to see changes on the yield curve based on some of this narrative. The impact of all this and recent jobs data can be seen on the Yield Curve today. We see yields moving higher across the board. We saw some pronounced moves in the front end of the yield curve. Rate cut expectations are continuing to evolve and you're seeing that you see the two-year back at around 3.9% as some people are finally coming to the realization that July will not be a rate cut. You see the 10-yearback to 4.40%. And if you look at credit spreads, there really is nothing to see here. Resilience is how I would characterize a corporate bond market. You have best for great spreads that are only wider by a basis point this week. High yield credit spreads are wider by five basis points this week, which is all very manageable. And buyers continue to find value in corporate bonds with attractive yields. So really, I think the positioning for the second half of the year is to continue with high quality corporate credit names over treasuries. I think you do get the income factor with the corporate bond market. And I think that's really where we're focused right now.
Brian Pietrangelo [00:19:11] Great, Rajeev, thanks for the recap. And just for our listeners out there, if you're having some summer fun, you also have the opportunity to take a look at our Key Wealth Institute summer reading list and also our podcast listing list. So if you are looking for content to keep in touch, take a looks at those lists. 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.
Disclosures [00:20:02] 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.
This material presented is for informational purposes only and is not intended to be an offer, recommendation, or solicitation to purchase or sell any security or product or to employ a specific investment or tax planning strategy. KeyBank nor its subsidiaries or affiliates represent, warrant, or guarantee that this material is accurate, complete, or suitable for any purpose or any investor. 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.