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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.
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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, October 31st, 2025. I'm Brian Pietrangelo and welcome to the podcast.
And today is Halloween, so we want to wish everybody a happy Halloween and a program note. If you're out there driving around the time of Halloween tonight, be careful on the streets. There's a lot of kids out there celebrating the holiday. Not sure what your favorite is, but mine as a kid was the mini $100,000 bar candy bars. It was a great taste: a combination of a lot of good flavors in there. Not sure what you're giving out, but whatever you do, try to make the kids happy.
With that, I would like to introduce our panel of investing experts here to share their insights on this week's market activity and more. Steve Hoedt, Head of Equities, Rajeev Sharma, Head of Fixed Income, and Cindy Honcharenko, Director of Fixed Income Portfolio Management. As a reminder, a lot of great content is available on key.com/wealthinsights, including updates from our Wealth Institute on many different subjects and especially our Key Questions article series addressing a relevant topic for investors. In addition, if you have any questions or need more information, please reach out to your financial advisor.
Taking a look at this week's market and economic activity, the light week was due to the fact that the government shutdown continues on day 31, so we have a full month. Without getting updated economic data. In particular, the government shutdown has occurred about 15 times since 1980. Most lasted a few days. The average was about a week, and the longest occurred back in 2018 at 34 days. So we're basically going to probably get to surpassing that as the longest shutdown in history here in 2025. Not much on the horizon in terms of resolution, so we'll have to keep you updated on a day-to-day or a week-to week basis. As a result, we did not receive any initial unemployment claims data in that regard. Also, yesterday we were supposed to get the first estimate for the third quarter of GDP from the Bureau of Economic Analysis, as well as PCE or Personal Consumptions Inflation today at 830. Again, that was delayed due to the government shutdown, so, we don't have that data.
President Trump was in China and met with President Xi and agreed to the truce on tariffs with respect to bringing those rates down to be more palatable and a year-long truce. So we'll talk about that with the panel today. We've also got Steve here to give us an update on Q3 earnings, some pretty big announcements this week. But also most importantly was the Federal Open Market Committee meeting this past Wednesday where the Fed delivered a 25 basis point cut. We'll talk more about that with Cindy here, upcoming on the podcast. So let's get right to our panel, starting with Cindy, to get an update on the Fed meeting this past week. And Cindy, what's your characterization? Do you think the Fed delivered some tricks or some treats, Cindy?
Cynthia Honcharenko [00:03:20] So Brian, the Fed definitely dealt us a trick this past week. The committee lowered the target range for the federal funds rate by 25 basis points to 3.75 from 4%. It also announced that it will end the monthly runoff of treasuries. So it will conclude the reduction of the aggregate securities holdings starting December 1st. And the vote at this meeting was 10 to two. Two members dissented: Stephen Miran preferred a larger 50 basis point cut, and Jeffrey Schmid from Kansas City preferred no change at all.
So what did they say in the press conference? Powell emphasized that policy is not in a preset course and that any future adjustment will depend on incoming data, the outlook, and the balance of risks. He also warned that a rate cut in December is far from guaranteed in light of elevated labor market uncertainty and elevated inflation, and also the government shutdown, which also reduced the data availability. He acknowledged that the labor market shows signs of weakening, inflation remains somewhat elevated and that the committees attended the risks on both sides of his dual mandate.
So looking at the two dissenters, why they voted differently, Stephen Miran preferred a 50 basis point cut, arguing that weaker labor market signals justified more aggressive easing, whereas Jeffrey Schmid preferred no rate change, reflecting concerns that inflation remains too elevated and that the monetary policy already seems adequately accommodative.
So what does the outlook and likelihood of further rate cuts in 2025 look like? With the Fed signaling optionality rather than a predetermined path, and given the dissents and uncertain data environment, the probability of another cut in December is moderate, but not high. So I would say right now the base case is that a 40 to 60% chance of a December cut is likely, and that'll bring the Fed funds target range to three and a half to 3.75% by year end. Rajeev. I'd love to get your take on this week's Fed meeting and announcement and press conference.
Rajeev Sharma [00:05:43] Well, thank you, Cindy. I think the, you know, the biggest takeaways is exactly what you said. You know, I feel the market expected that 25 base square rate cut. But when Fed Chair Powell said that there is no foregone conclusion on a December rate cut, that really took the market for a loop. We had about 99% odds of a December 25 base rate cut and now those odds are 50-50, like you said, so. I feel the Fed right now is in a situation where this cut was okay, but I think the next cut in December comes into question with the government shutdown, with the lack of data. I don't think the Fed is in any rush to commit to a 25-base rate cut. And I think that the market got a little ahead of itself. So we've seen a reversal. We've seen yields move higher in in in that feeling that there are, first of all, no guarantees for a 25-base front rate cut in December, and also there's dissent in the Fed. The two differing opinions that you mentioned, I think are very important to understand, because the Fed is not going to be able to really have a unanimous narrative going forward, and I think that's gonna be very important. So I do feel that there's question marks now, and I do that when we got that CPI report last week, the market really gravitated towards, not only the rate cut for December, but the market, really gravitate towards four rate cuts by July of 2026, that's all changed now. So there's a lot of question marks that then the government shutdown’s gonna be very important for the Fed and should be important for markets as well.
Brian Pietrangelo [00:07:31] Speaking of those things, there were a couple analogies that Powell referenced in his press conference. One was when there's fog, you slow down in your decision-making process like you were driving. I thought that was a pretty good one.
But also there's some other additional uncertainty as we talk about Jay Powell's term is up in 2026. So that provides a little bit maybe of also going at a slower pace. And Scott Bessent announced as a reaffirmation of the five candidates that they are considering earlier this week for the potential Fed chair coming up in 2026. So when we talk about that, there were five individuals he mentioned. We've got Chris Waller and Michelle Bowman, who are current Fed governors. Then Kevin Hassett is the National Economic Council Director. Kevin Warsh is a former Fed governor, and Rick Rieder is a BlackRock executive who specializes in fixed income, who's got a pretty good reputation. So certainly, Rajeev and Cindy, any thoughts about those candidates as we try to migrate to a new chair in 2026.
Cynthia Honcharenko [00:08:30] I think it's going to be Kevin Warsh only because he was already a Fed governor, and he was a pretty—he was a voting member during the 2008 financial crisis. So I think with his background, and he seemed to be pretty well liked in the Fed, I think he's a strong candidate for the next Fed chair.
Rajeev Sharma [00:08:59] I think you make a lot of sense, Cindy, but I think that whoever it is, it's going to be somebody that's going be more dovish than Fed Chair Powell. I think it's something that's gonna impact monetary policy going forward. They always say, do not fight the Fed, but at the same time, if you have a dovish Fed Chair, I think, that person will have a lot power to continue cutting rates. In my opinion.
I think Christopher Waller has a really good chance to take that position. He has pretty much dictated the markets as we've seen going forward for the last several months where he's been able to make statements that change the market. I think Christoper Waller has that knack to be able to do that. So I think it's gonna be somebody that's going to be dovish, but my take is Christopher Waller.
Brian Pietrangelo [00:09:53] Great. Thanks, Rajeev and Cindy. Now moving to the stock market, Steve, there were some pretty big announcements in terms of Q3 earnings this week. You want to talk about that first, and then we'll have a couple other questions for you.
Stephen Hoedt [00:10:03] Absolutely. So yeah, Brian, it was a big week for earnings. Five of the quote unquote Magnificent Seven reported and if we just go through them one by one, um, Amazon and Alphabet, which is formerly known as Google. They had outstanding results and stocks responded with significant moves to the upside. Apple reported yesterday, had kind of what I would call a meh report. Stock was all over the place after hours. Tim Cook had some comments in the evening on the conference call and some other places that kind of stabilized things and the stock is flat today. And then we had two of them that were kind of not so good in Meta and Microsoft, where they were both perceived as maybe outspending the expectations on their AI initiatives. And this the investment community is a little bit more concerned about the bang for the buck that they're getting on their investments there, in terms of what it translated to through the earnings.
So kind of a mixed bag there, but when you look at the way that the numbers themselves impacted S&P 500 forward earnings, if we take this out to how it's impacting the big picture, all of those companies guided higher. And what we saw was the S&P 500 forward earnings jumped by almost $1.50 over the course of the last week. When we're just shy of $300 a share right now, we're at $299.20. And when I came into the year, our forecast was for the year to exit at $300. So earnings have come in above expectations for the year. You've got a little bit of a kink higher going through this reporting season as these numbers guide higher. And I think that when we bring it back down to core principles, earnings higher equals stocks higher, you're looking at earnings exceeding expectations over the course of the year now three quarters in a row. And it shouldn't be a great shock to everybody that the S&P sits at new all-time highs as the earnings line is at new all- time highs as well.
Brian Pietrangelo [00:12:25] We also had some big news this week with the truce with China and President Trump and President Xi Jinping on the tariffs. What's going on there, Steve?
Stephen Hoedt [00:12:35] Yeah, the market largely shrugged it off, Brian, but I do think that it is notable from the perspective of potentially lowering the geopolitical risk situation that the market's been dealing with all year, off and on, ever since we went through the initial tariff situation back in February through April, which caused a huge drawdown earlier this year. You know, the acronym TACO seems to be something people bring up with this, and that stands for Trump Always Chickens Out. And I think the real interesting thing with this is this is the first time that I can recall a global geopolitical peer basically calling our bluff and getting us to back down as opposed to it going the opposite way. So I don't know what that means for the future, but I think it's something that's very notable here. This is the first time the U.S. has really kind of backed off on something that somebody else wanted. It remains to be seen how some of this stuff will track down to the micro level. The fact that the Chinese have seemed to loosen up on some of the rare earths stuff, does that impact the administration's policies toward domestic, trying to favor some domestic production here? They've been inking contracts and doing things in other spaces like nuclear and other areas over the last two, three, three four months, um, to try to support domestic or North American, uh, resource construction. I don't know if this changes that or not. And the other thing to pay attention to really is the potential impact on Nvidia, because Nvidia is making, uh it would, would like to be able to sell their Blackwell chips into China, that is still something that I haven't seen that's been resolved 100%. So it's still something to watch as we go through this. And there are smart people on both sides of the debate whether it's a good thing to sell those chips to China or not.
Brian Pietrangelo [00:14:44] Thanks, Steve. And we'll finish the podcast going back to Rajeev to get an update as we normally do on how the markets are going on in fixed income with spreads and some normalcy or anything that you're seeing of interest, Rajeev.
Rajeev Sharma [00:14:58] Yeah, Brian, I really feel that, you know, there were maybe two to three basis points of widening and investment grade spreads this week. Um, and, but it's nothing to cause any alarm bells. I really do feel that credit spreads have been extremely well behaved. We've talked about this before, and I feel that that that bodes well for all risk assets. I really that, uh, you know, we've seen an investment grade. We've seen in high yield. There has been some widening after the Fed meeting, but one thing we noticed is that issuance has come down a little bit. Generally, you don't see a lot of issuers issue bonds on Fed Week, but I do think that that's gonna pick up again. We have a probably pretty robust November coming up with new issuance, but the supply demand technicals for investment-grade corporate credit continue to support the market. And I really feel that you're getting blue chip companies have very attractive yields and that should continue for that demand for investment credit.
Brian Pietrangelo [00:15:53] Thanks for the conversation today, Steve, Rajeev, and Cindy. 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 [00:16:27] 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.