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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.
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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.
Key Wealth, Key Private Client, Key Private Bank, Key Family Wealth, and KeyBank Institutional Advisors are brand names used by KeyBank National Association (KeyBank). Key Wealth and Key Private Client are also brand names used by Key Investment Services LLC (KIS), member FINRA/SIPC and SEC-registered investment advisor.
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.
The summaries, prices, quotes and/or statistics contained herein have been obtained from sources believed to be reliable but are not necessarily complete and cannot be guaranteed. They are provided for informational purposes only and are not intended to replace any confirmations or statements. Past performance does not guarantee future results.
Brokerage and certain investment advisory services are offered through Key Investment Services LLC (KIS), member FINRA/SIPC and SEC-registered investment advisor. Insurance products are offered through KeyCorp Insurance Agency USA, Inc. (KIA) and underwritten by third party insurance carriers not affiliated with KIS. KIS and KIA are affiliates under the common control of KeyCorp. To learn more about KIS’s investment business, as well as our relationship with you, please review our KIS Disclosure page. Check the background of KIS on FINRA's BrokerCheck.
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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, July 31st, 2026. I'm Brian Pietrangelo and welcome to the podcast. And if you are a music fan, you might take note, there may or may not be tickets available to the annual festival known as Lollapalooza in Chicago over this weekend for four days. The Chicago edition of this festival includes more than 170 bands on 8 stages during four full days of music, founded back in 1991. Organizers of the festival try to deliver meaningful engagement programs and create positive impacts in the city year-round and from the festival. 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, Rajeev Sharma, Head of Fixed Income, and Steve Hoedt, Head of Equities. As a reminder, a lot of great content is available on key.com slash wealth insights, including updates from our Wealth Institute on many different subjects and especially our Key Questions article series addressing a relevant topic for investors. We also publish our Federal Open Market Committee recap article after the Fed meets every time, including this week, so check that article out as well. 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 three economic releases to share with you this morning. Starting off first with the initial weekly unemployment claims continue to be very favorable, just under 200,000 for the prior week. So that's good news there. And second, also yesterday, we received the first estimate, also known as the advance estimate, for the second quarter of 2026 gross domestic product, GDP. The quarter rate came in at 1.5% growth for Q2, which was down from Q1, which was at 2.1%. So a little bit of a slowdown. Now that being said, consumer spending within the GDP report continued to remain strong or resilient in addition to some of the private investments. However, the number in aggregate was dragged down a bit by overall net imports being negative and overall government spending being a little bit slower than it was in the prior quarter. So net-net, I would categorize it as a fairly neutral report. And third, we also got the PCE or personal consumption expenditures measure of inflation for the month of June and we actually saw a decline on the overall PCE price index on June at minus 0.1%. Now a lot of this did have to do with the decline in gasoline prices in a very major way. So when we go to the next component, which is PCE price indexes, excluding food and energy, we see that the increase in June on a month over month basis was 0.1%, which is a little bit better than what we've seen in the prior months headed in the right direction, but still overall at a very elevated level above the Fed's preferred 2% that we'll talk about a little bit more today in the podcast. Now that 2% number is an annual number. The numbers I just gave you were monthly numbers, but overall the monthly lead into the annual numbers. So I think you all understand that in our audience. Overall though, however, we will continue to have an engaging conversation not only because of inflation, but overall Fed commentary from Kevin Warsh. So to put a number on it, the PCE price index on an annualized basis for June increased 3.3% from one year ago, and that is their reference that number continues to be well above the 2% target that the Fed has that I just mentioned. And speaking of the Fed, the Federal Open Market Committee did have their meeting this past week with a fairly decent conversation around a split decision with regard to what they wanted to do on the committee, whether they raise rates or not. We'll have a great conversation with our podcast committee today in terms of the Fed, along with George and Rajeev, Steve and myself. So we'll get right into that here shortly. And finally, we'll talk to Steve a little bit more in depth around Q2 earnings and some of the bigger releases that we have going on this week. So let's get right to the conversation with Rajeev. Rajeev, give us your recap of what happened at the Fed meeting today along with this week, I should say, along with the press conference from Fed Chair Kevin Warsh.
Rajeev Sharma [00:04:34]
So yes, we did have a FOMC meeting this week and everybody expected that rates would be held steady. But what was interesting was the FOMC was 9 to 3. to hold rates steady. So there were three dissenters. You had Beth Hammack, Dallas Fed, Lorie Logan, Minneapolis Fed, Neel Kashkari. They all voted for having a 25 basis point hike. And you know what's interesting about this is I think that Kevin Warsh as the new Fed chair, he actually welcomes these kind of dissents. I think he thinks that more discussion is better for the Fed. And so I really do think that a lot of people are looking at how Kevin Warsh is going to handle his second FOMC press conference. And the suggestion was that the Fed is going to switch to an approach of assessing inflation. Inflation is everything for the Fed right now. And what was very interesting is that Kevin Warsh came out and said that 2% is the goal and they are not going to rest until they get to 2% for inflation. So I think this is going to be very interesting for the bond market. There's not going to be a lot of forward guidance, and I really do think that every single data point is going to be extremely important for investors. So this is not Powell's Fed anymore. This is Kevin Warsh's Fed. The statement was very, very skimpy. There wasn't a lot of words in there, and I think the press conference was also very much about inflation and getting a 2%. So Kevin Warsh had a lot of great quotes, but the one that really stood out was, follow the ball, don't follow the referee. And I think what that means is you have to follow the data. So data has always been important for the markets, but now it's even more so important. So Rajeev, did you hear anything with regard to the absence of forward guidance within the undertone of Kevin Warsh's comments? Yeah, I mean, Kevin Warsh has never really been about forward guidance. And obviously last time when we had summary economic projections, he didn't really provide a dot for himself. And I think what's going to happen going forward is the Fed is not going to be the ones that are going to dictate where the market's going to go. I think the data is going to dictate it. And with lack of forward guidance, obviously it's going to cause more volatility in the bond market and we saw it right away. when he was doing his press conference.
Brian Pietrangelo [00:07:04]
George, did you have any additional comments on that?
George Mateyo [00:07:06]
So I think the bigger picture from my perspective is that it's not quite Warsh's Fed yet, to use Rajeev's term. I think it's more of like a Greenspan-like Fed, where I think the chair is trying to be a little bit vague in terms of his overall message. And he doesn't want to be the message, but yet because he's not the message, it's become the message, if that makes sense. So we have a new Fed chair, we've got a new message that he's trying to deliver with respect to inflation. But the market, I think, is grapping with how he's delivering that message, if you will. So that's a bit of a tortured explanation on my takeaway. I think the key takeaway, though, I would say is that there's really right now a bit of confusion with respect to how the Fed is likely to communicate what they're trying to communicate and how the markets probably need to maybe let the Fed step away and let the markets react to data, as Rajeev talked about. So to some extent, every meeting now becomes kind of a live meeting, as they call it, meaning every market meeting or every time there's an opportunity for the Fed chair to speak, the market's going to try and look for cues. And I'm not sure if he's going to provide those cues. So I think it's going to be a source of probably some short-term volatility until we get used to this new dynamic. I think at the same time, another big storyline was the fact that so many people dissented, which is probably, again, kind of a new reality for us to grapple with in the sense that there was a lot of consensus building And the market, I think, got used to that consensus building. And now that consensus, while to say it's not really a bad thing when you don't have consensus, I do think it's probably going to be one of these situations where there's going to be less consensus, at least optically speaking, than there was in the past. So I think the bigger takeaway, though, again, is that the economy is doing pretty well. Of course, GDP came out this week, and I think the headline number looked a little bit weak, but when you strip away some of the noise, The data suggested that things are still growing at a pretty good pace. Rajeev has mentioned that inflation is the primary concern for the Fed to try to get their heads around and their hands around. But the other key takeaway from that is that the labor market is still really quite strong and quite stable. And so in other words, the Fed doesn't have to worry so much about addressing the labor market or the economy from the jobs perspective, but they have to focus on inflation. So I think, Brian, those were some of the key takeaways for me as I saw it and really what the Fed might be thinking and how the economy is kind of processing all this uncertainty at the same time.
Brian Pietrangelo [00:09:29]
Great. Thank you, George. So back to you, Rajeev. How did the markets react on the bond yield?
Rajeev Sharma [00:09:34]
We had a very significant bearish deepener. The 230 spread widened up roughly about 15 basis points on the week because of this. And we did see the 30 year jump about 6 1/2 basis points on the day. So that is a big move. So we saw the 30 year get to 5.23%. The sell off continued on Friday. Today, 30 years now 5.26%. The front end became a little more anchored. The two year is actually lower on the week by about three basis points. And it suggests that the market did, you know, it viewed the Fed meeting as, okay, they're not going to raise rates right now. So it pushes it off to September, October, and the hold is being taken at face value on the short end. So you did see the front end actually lower on the week by three basis points. But overall, the yield curve did steepen. And I think that is something that the market expected because the market was really 33%. They were thinking there would be a rate hike at this meeting in July. It's not consensus. But once they found out there was not one, we did see the two year start to decline a little bit.
Brian Pietrangelo [00:10:47]
Great. Thank you, Rajeev. And George, on your comments for the FOMC meeting. Now we've got a couple other pieces of data that came out the following day, just yesterday with GDP and PCE inflation, George. So what do you think the economy is doing with regard to the GDP?
George Mateyo [00:11:03]
So Brian, I guess I would just refer back to what I said just a few minutes ago, which again, I think by my lights, the economy's in a pretty good position right now. There's a lot of noise in these numbers and they are backward looking as we have to acknowledge. But really, again, the overall backdrop is still pretty favorable, although I think to some extent it is becoming a bit more concentrated and levered towards what happens with the artificial intelligence boom that we're experiencing. And should that boom become, I wouldn't say a bust, but even should it slow down just a little bit, I think that could have some repercussions maybe later next year, probably more likely the year after that. So I guess it's fair to say that things are going fairly well right now. We've also seen taxes, tax cuts and so forth show up in the form of consumer spending, meaning essentially those refunds that we all got a few months ago, or some of us got at least, I didn't get one, but some of us got a few refunds. And that's actually still kind of coursing through the economy. And one reason why I think the consumer has actually been holding relatively well. We've acknowledged, though, that the credit card debt and other levels of indebtedness are rising. So we have to be vigilant around that. But for now, the consumers are still spending. Prices are still high, so they're probably spending more than they'd like to. But those things are still good for the overall economy in the sense that as people spend money, that's essentially income in other people's pocket. So I think overall the economy is in good shape right now, but it is very concentrated and driven largely by what happens with artificial intelligence.
Brian Pietrangelo [00:12:29]
And speaking of artificial intelligence, Steve, Q2 earnings continue to march on in this week and we've got a couple of big reports. What do you see with those reports and also the overall market performance for the week?
Steve Hoedt [00:12:41]
Yeah, the big one today is Amazon stock up really nicely on the results for their AWS unit, yet again, the cloud for this particular hyperscaler driving the results and surprising the street. That's been a name that has been out of favor relative to some of the other mega cap tech names over the last couple of years. So not all that surprising to see it play some catch up here. When we look at the Earnings numbers for the S&P 500 overall, a couple of things that caught my eye. And some of it goes back to the theme that George and I have talked about on these calls before that maybe the bubble isn't in price, but the bubble's in earnings. If you take a look at the EPS line for the S&P 500 forward right now, it's at 381. we're very clearly on path to exceed 400 by the end of the year. We came into the year thinking 400 could be a possibility, but it's going to blow that number out of the water right now. But what caught my eye as we've come through earnings season, and in fact, if you go back and look at how things recovered off of the March lows, We're almost back to the March lows from a multiple perspective on the S&P 500. We're back to 19.5 times, which is roughly the average for the last 10 to 15 years or so. we're not extended in terms of valuation anymore whatsoever. And valuation off of the March low only got back to 21 times. We didn't get anywhere close to the 23 that we saw during 2025. So as the earnings numbers have climbed higher and higher here and it's actually accelerated, the market's been marking down the multiple on that. So I think that when we think about what that means, I think it to me means that the move higher and potentially the broader market seems fairly sustainable to us. It's like the market has taken a look through the hyperscaler numbers that are kind of pushing these headline EPS numbers for the market, maybe with some stuff that's a little bit unsustainable. And they've marked down the multiple they're willing to pay for that accordingly. And as we see the rest of the market have the numbers come out and surprise to the upside and do pretty well because the economy all together seems to be doing pretty decently. I think it gives us the ability to see this broadening trade with industrials, financials, consumer, other things, maybe take the baton from those Mag 7 names and help push this market higher here. So I think as we look into the back end of the year, that's what we're going to see. And I feel better about the market having a multiple of 19 and a half with this earnings acceleration that I did when it was in the low 20s.
George Mateyo [00:15:45]
So Steve, one thing that you and I have also been talking a lot about the past several quarters now, if not, you know, well north of a year has been, I think, trying to get people to maybe position their portfolios in such a way that they were benefiting or maybe positioned to take advantage from the AI adopters versus the pure AI enablers, meaning that the companies that you referenced, the hyperscalers as they're known as, you know, those became a really dominant part of the market indices, something like 40 plus percent. And we suggest that there's probably opportunities in the other 60% of the market, if you will. And that seems to be working fairly well this year. I think that theme is actually rolling through the market right now in a pretty decent pace in the sense that we've seen value outperform growth. We've seen small caps, large caps, and other things as well in terms of that positioning. I agree with you that valuations have become a bit more tolerable, I guess, if you will. And at the same time, some of those fears we had earlier around overbuilding and excess capacity have, I wouldn't say gone away, but I think they've become a little bit more known and better understood. How are you thinking about positioning the portfolio for the latter half of this year and into next year?
Steve Hoedt [00:16:53]
Yeah, so I think that we've continued to look for opportunities. We've been tilted fairly pro-cyclically in our core strategy. all year, and that has been to our benefit. When you talk about pro-cyclical, it's the old economy stuff, whether it's industrials, materials, energy, all these things have had a bit of a tailwind because of the AI infrastructure build that's helped push on them, but we're not really just playing AI exclusively through that stuff. Like we have other angles that we're trying there. But I would tell you that one of the things that as a seasoned investor, it's kind of caught my attention is just how good the banks have been performing, right? When you look at the financials, the old axiom in the market is that you don't need financials to lead, but you can't have them lagging materially if you're going to have a bull market. And the fact that we've got Financials doing well, led by banks here. That's again, a pro-cyclical signature that to us signals that it's a pretty healthy bull underneath. And then the other thing that we've done is we've pivoted towards some of the stuff that is, I don't necessarily want to say defensive in nature, but it's a different kind of growth. So healthcare has done really well this year, George, underneath people's radar. And it's been a major beneficiary of the rotation out of some of the mega cap technology names that capital has to go someplace in the market. And it's not just going to stuff like SpaceX, it's going to stuff like Pfizer and bristol-myers and AbbVie and other things in the biotech space. I mean, it's just, you're seeing this rotation in the things that have been left for dead. because healthcare has underperformed for a number of years now. So the fact that we've seen relative performance turn there and it seems to have caught a fairly material bid is something that's caught our attention to. And we've been looking for things like that in the market in terms of places to deploy capital as well.
Brian Pietrangelo [00:19:11]
thanks, Steve. As we often do, let's get closing remarks from George that might be of interest to our audience. George?
George Mateyo [00:19:18]
So we've covered a lot of ground. We've talked about the Fed. We've talked about artificial intelligence. We've talked about market rotations. And I think that often fits with the narrative that really the underlying theme in our work right now is really trying to emphasize diversification, which again, is an often probably overused term. But I think it is important to recognize some of the exposures in your portfolio these days are probably interlinked. We've talked, for example, about the connectivity between the credit markets and the AI trade. and really how those companies are using credit to really finance their growth. We've talked now a little bit about the economy doing well, but again, it's very concentrated in artificial intelligence. And I think to some extent, investors, in my opinion, will continue to be well served if they think about diversification beyond just a handful of companies and a handful of names. So I think again, our prevailing view, Brian, is really to really make sure that your portfolio is positioned for different market environments and really positioned for the ability to withstand certain shocks and really remaining disciplined to your approach and also being diversified as ever.
Brian Pietrangelo [00:20:20]
Well, thanks for the conversation today, George, Rajeev, and Steve. 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 [00:20:55]
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.
Key Wealth, Key Private Client, Key Private Bank, Key Family Wealth, and KeyBank Institutional Advisors are brand names used by KeyBank National Association (KeyBank). Key Wealth and Key Private Client are also brand names used by Key Investment Services LLC (KIS), member FINRA/SIPC and SEC-registered investment advisor.
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.
The summaries, prices, quotes and/or statistics contained herein have been obtained from sources believed to be reliable but are not necessarily complete and cannot be guaranteed. They are provided for informational purposes only and are not intended to replace any confirmations or statements. Past performance does not guarantee future results.
Brokerage and certain investment advisory services are offered through Key Investment Services LLC (KIS), member FINRA/SIPC and SEC-registered investment advisor. Insurance products are offered through KeyCorp Insurance Agency USA, Inc. (KIA) and underwritten by third party insurance carriers not affiliated with KIS. KIS and KIA are affiliates under the common control of KeyCorp. To learn more about KIS’s investment business, as well as our relationship with you, please review our KIS Disclosure page.
Check the background of KIS on FINRA's BrokerCheck.
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