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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, November 7th, 2025. I'm Brian Peter Angelo, and welcome to the podcast as we head into the weekend.
I would like to remind people coming up next week on Tuesday, November 11th is Veterans Day. Veterans day is observed as a Federal holiday, and it does fall on November 11th. It is designated as a day to honor the more than 20 million men and women who have served in the military. Now, this is slightly different than Memorial Day, which honors those that have died in service.
Veterans day is honoring those that are still living and have served. Veterans day was first observed on November 11th, 1919, known as Armistice Day, and honor the first anniversary of the end of World War One, which officially ended on the 11th hour of the 11th day of the 11th month in 1918. Later on, Congress called for an observance of the anniversary.
By 1938 and back in 1954, President Dwight Eisenhower officially changed the name of the holiday from Armistice Day to Veteran's Day. It is currently known today, so if you have an opportunity to thank a veteran this weekend and next week, and especially on Tuesday, I know that it would be much appreciated. Thank you everybody. With that, I'd 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 www.key.com/wealthinsights, including updates from our Wealth Institute on many different subjects and especially our Key Questions article series which addresses 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 very light week, given the fact that the government shutdown is continuing into day 38, and that means that the normal economic reports that we would receive this week, we are not receiving because they are on hold. In particular, the weekly initial unemployment claims report at a Federal level was not prepared, the job openings report from the Bureau of Labor Statistics and the Employment Situation from the Bureau of Labor Statistics, which include the new nonfarm payroll report we were supposed to get this morning, were also delayed due to the government shutdown.
So we look to alternate data, and some of that data begins with the initial unemployment claims at the state level, which normally gets aggregated up into the Federal level, and the reads from the state level. Reports show that there has not been a meaningful spike in any initial unemployment claims. So we look at that as somewhat favorable.
Second, ADP came out with their report this week that showed private payrolls increased 42,000 in the month of October, which was above consensus estimates. Again, we usually don't report on that because we use the Federal numbers from the Bureau of Labor Statistics, but it is worth mentioning, since the indicator that we have for this week.
And finally, the report from the employment firm known as challenger, Gray and Christmas showed that layoff was significant at around 150,000 in their report. And at the same time, it may or may not be overstated. We're not saying that it's inaccurate. We're simply saying that it does also include government layoffs that have included through the year.
However, we do mention it because it is noteworthy that it got a lot of press this week and also indicates that technology, industrials, and other automotive industries have been showing some particularly high layoffs. And last on the jobs data, the National Federation of Independent Businesses had their report for small business owners and showed that latest data had solid but slowing job growth. Small business owners are also facing challenges in that October, around a third or 32% of all owners reported that job openings that they could not fill in that current period. So again, there's still a little bit of a demand for workers in the small business arena.
Also happening this week, we continue to get a round of Q3 earnings. And on the tariff front, we had the Supreme Court of the United States hearing arguments from Solicitor General John Sauer in defense of President Trump's tariff policy. So we'll continue to get a little update on that. As we talked to our panel today.
With that, let's turn to George to start off our podcast with his thoughts on the economic data, the government shutdown and anything else on your mind today. George, what are your thoughts?
George Mateyo [00:04:55] So, Brian, I think it's probably time to recognize that I think the shutdown is starting to really have an impact on at least sentiment. I'm not sure if it's really having a profound impact yet on the economy. I think we'll probably get that later. And as we've talked about, typically when we see these shutdowns, the impact is kind of like the big weather event where, you know, you see some activity kind of slow down a little bit, and then when things reopen, you know, things actually kind of come back online and then maybe there's a bit of a bump because the activity was suppressed and then it resumes.
But this is a usual in the sense that this is an historically long shutdown. Now we're well into the 30 plus day. I think it's day 37 or so. And by all accounts, it looks like we're probably, you know, at least another week or two away from any resolution. So this is going to be, again, probably the longest shutdown on record. Just remind our listeners the average shutdown historically has lasted about a week. But typically shutdowns last a couple days. And there's one shutdown that actually lasted just a few hours. So again by just duration standards, this is somewhat unusual and lengthy. And again, I think it has kind of weared down sentiment.
I mean, you've talked about some of the the alternate data sources with respect to the labor market. I think we could continue to argue that things are not collapsing, but they're certainly cooling. I think they’ll probably kind of, you know, kind of meander for the rest of the year until we get maybe a bit of a lift in the early part of next year due to some, issues related to the One Big Beautiful Bill Act and other things we could talk about, perhaps later or in another call.
But nonetheless, for this time of the year where things are probably going to slow down a little bit and it'll probably be a little bit of a bumpy ride, given that slowdown we've talked about.
You know, there's other things we can look at. You mentioned a few of those, but I think the thing that caught my attention is that a percent of people who are actually currently employed, but are looking for additional jobs actually rose as well. So, again, these are things that we probably have to squint normally when we're kind of looking at a full slate of data. But since we don't have that full set of data, we're at the point right now where things are a little bit muddied and that we have to look for alternative data. And again, the data suggest to me anyway that things are not collapsing, but they're certainly cooling for sure.
At the same time, you know, I think some of the sentiment indicators, which historically are pretty volatile, also kind of reflect that, immediate, if you will. So the sentiment indicators such as consumer sentiment, their outlook for the economy continues to, to weigh a little bit. Again, it's it's at three year lows, I think on one survey.
So it kind of has to do has to get your attention. But again those things can change pretty quickly. And so I think it is fair to say that, you know, again, where we are right now is that things are going to be right around-people-I guess the one phrase is that, we're in the dark right now and people are often afraid of the dark, so we're kind of in this situation where we have to navigate through a lot of uncertainty.
But meanwhile, Steve, as I think about what you've been probably watching in the past week or so, is that their earnings story has been pretty solid. So the market up recently has been kind of ignoring some of the sentiment and the government shutdown issues, but focus more on earnings as you kind of get now through earnings season. I'm thinking we're probably roughly eighty or so percent of the way through earnings season. What do you think about the earnings season overall and where do we go next going forward?
Stephen Hoedt [00:07:47] Well George, you know when we look at where the earnings line for the S&P 500 and when we talk about that we're talking about 12-month forward earnings, which is what everybody focuses on. We actually hit a big round number this week. We hit $300. And I mentioned on a couple of these prior calls that, I think when, when I look at, our forecasts for 2025, we thought that we would exit the year at $300 per or, per S&P 500 index level. And you know, what's interesting to me about that is we got two more months almost to continue to see that line climb higher as we head through the rest of the year and flip the calendar to 2026.
So earnings have clearly come in, this year much better than people had expected. And I think it's part and parcel of why we've had a really good market this year. Absent kind of the, the tariff impact, coming out of February, March and April, which did cause a little bit of a of a dip in the earnings line before we continued to march higher. So, you know, at the end of the day, earnings higher, equal stocks higher on a long-term basis. And that's kind of been our mantra for quite a while. It remains very difficult to bet against the S&P from a long-term perspective, when you've got that earnings line moving to new all-time highs.
That said, you know, it's been very clear over the last month to month and a half that we've seen some froth building into the market. You've had a lot of meme stock stuff start to float to the top again. You've seen a lot of speculative activity. In my view, you've seen people get kind of two one sided on the market in terms of thinking that that they should just be all in on the AI and tech names and all that kind of stuff.
And, and what that results in, predictably, is the setup for the market to pull back a bit. So we've, we've seen the market pullback to the 50 day moving average this week. We're slightly below it in today's trading. But when I look at other indicators from whether it's credit market indicators such as, high yield CD spreads or things like where how the VIX is behaving, that's the Cboe Volatility Index.
I don't see anything right now that looks nefarious about this pullback. It feels to me more like it's just a reset of some of this kind of overly ebullient sentiment that we've seen kind of come into the market over the last couple of months. And, and, you know, it kind of will hopefully wash things out a little bit on the sentiment side and set us up for a strong run into year end.
And that that really is kind of the, kind of my base case between now and year end is that we, we do see the normal seasonality pattern reassert itself. We're into the strongest part of the year from that perspective. And when you've got again, earnings making new highs as we continue to go through this, there's clearly fundamental backing for the market to see that rally in the year end.
So definitely been an interesting week to see the numbers come out and to see the stocks be going down. But, at the end of the day, I think it's more just washing out some of that over-ebullience.
George Mateyo [00:11:06] Well, that's a great update, Steve, I appreciate that. I think Rajeev turning you, it's kind of curious to me, as I mentioned in my comments, that, we started we start to see, you know, again, this ongoing cooling in the labor market. Steve talked about AI. And actually, if you try to take out the impact from AI, the economy is going okay, but it's kind of, again, kind of sluggish overall. So again, AI, to Steve’s point, has really been responsible for a lot of the growth this year. And yet Rajeev, we actually had a couple of Fed presidents out this week talking about whether inflation is the bigger risk. And I think one of the Fed presidents actually talked about that inflation would need another 2 or 3 years before it actually reached their target. So how do you think the Fed is processing this level of uncertainty right now?
Rajeev Sharma [00:11:45] George, I think the Fed is trying to temper the market a little bit. I think the market, really got ahead of itself and started feeling that the Fed would let inflation run hot. Many Fed members are saying the most important thing is the cooling of the labor market. And, now I think the Fed is which said members that are speaking this week, I think they are really trying to remind the market that there is a dual mandate. Inflation is important. Inflation, if it runs hot, is not good for the economy.
And I think that, you know, it's tempering the market expectations on future rate cuts in future monetary policy. And so you're seeing right now that fixed income markets, they're seeing somewhat of a mixed performance this week based on those comments. And they're viewing the Fed as being a little more hawkish than they thought the Fed would be when the Fed starts cutting rates the market gets very excited. The markets started believing in a continuing rate cutting cycle. They start anticipating multiple rate cuts. And now you're seeing a couple of different factors happening in the market. First of all, the market for the Fed is not getting the data that they are expecting to get to make those rate cut decisions. And we heard from Fed Chair Powell the last FOMC meeting that without the data, December rate cut is not a foregone conclusion.
And the market did not like that that narrative. You saw the odds for a December rate cut drop down to 50% where they were almost at 98% before that, before those comments. We’re slowly clawing back-the market again is starting to claw back towards a rate cut expectation in December. Around 72% odds right now. But it's again not a foregone conclusion.
And when you see Fed members talk about inflation, I feel like it reminds the market that there is a dual mandate. The Fed cannot make these decisions about rate cuts with just ignoring inflation. I do the Fed moves the goalposts and say we can operate at 3% or 3% plus inflation and continue well, or they stick with their targeted mandate of 2%. So that disconnect is causing volatility in the markets.
We did see Treasury yields move with some variability across the curve. Specifically we saw the front end of the yield curve move slightly lower by one basis point back in use rose by one basis point. The yield curve flattened this week. Because the market is now expecting tighter monetary policy based on some of the, the comments that we're hearing from Fed members.
And again, as I said, without economic data, there's a growing concern that the Fed may not reduce, that we may not have as many rate cuts as the market has anticipated. And so, the messaging is going to be very important by the Fed right now. There is a disconnect. You could see that in corporate credit spreads for investment grade and high yield, both spreads have widened this week. And what's going to be very interesting in the near term to the fixed income markets is the amount of supply from the Treasury that's going to be coming to the market. The Treasury will sell $58 billion in three years, and on three year Treasury notes on Monday, forty-two billion in 10 years on Wednesday, and $25 billion in 30 year Treasury notes on Thursday. So the market has to digest this amount of supply coming in. Now the bond market is closed on Tuesday for Veteran's Day, nut this corporate bond market is going to continue up to Tuesday and then into, Wednesday, Thursday, Friday of next week. We're anticipating corporate bond new issuance to be around 40 billion, which is a very, very, significant amount of supply that's coming to market.
So you have spreads widening. You have this uncertainty by the Fed of whether they're going to have rate cuts in December or not. And you're starting to see the ten year kind of reflect that. We're sticking around that 4% level. But I think that, there's a lot of factors here that's going to be very important - the government shutdown - it's weighing on the economic outlook, and I think that's going to continue.
What investors are thinking right now is, is a couple of different things right now. Obviously, the supply that's going to come to market is very important for the market to digest that. They're also thinking about the uncertainty surrounding the Supreme Court decision on the legality of these Trump tariffs. And, a ruling against the tariffs would actually be, a bearish move for the bond market. It would- might require more long end issuance. And that's weighing on the sentiment of the bond market right now. And you could see some other stresses in the bond market. Money markets is one of them. We've elevated funding costs and emergency Fed interventions.
They could be showing some liquidity strain to the money markets. We see the largest one day move of outside of a Fed rate hike cycle this week. And the, overnight financing rate. Add to that bank reserves are down by almost they're down to a point where they're below $3 trillion. That's the lowest level we've seen in four years.
So we're seeing some funding pressures in the bond market. Basically, short term liquidity is tight. Money market funds may face lower yields and even redemption pressure if this volatility continues to.
Brian Pietrangelo [00:16:31] So Steve, you mentioned the rally in the markets since the tariff related news in April. And Rajeev, you just mentioned the legality question about tariffs as well. And this week for our listeners, US Solicitor General John Sauer was in front of the Supreme Court of the United States talking about the legality of the tariffs. And the general perception is that this is a process. And even if there is some deliberation, there might not be some consensus on deliberation until January or May of next year. So, George and Steve, how do you think that affects the overall economy and the reaction in the stock market?
George Mateyo [00:17:05] I think it's an interesting question, and I don't think anybody really knows, to be honest with you. I mean, I'm sure Steve's got a couple views on that because it could be somewhat beneficial to the companies that actually a corporation is effectively that actually had to pay these tariffs. Right. So maybe to some extent that the tariffs and if they're unwound or deemed to be unconstitutional, maybe that money gets repatriated back to those companies. I don't know. You know, that's one of the things that Rajeev talked about that could have some implications for the Treasury if they have to drain their accounts to pay those companies back, that could be negative for the bond market and market, the stock market won’t like it if rates go up. So who knows. And I think at the same time, it's probably likely more than anything else that the administration would come back and find a new authority to use tariffs, right? They would find another way to get tariffs done basically. So I think it's going to be probably a real, jumbled mess, frankly, and maybe a lot of volatility. But I think at the end of the day I don't think is going to change too much, but I think some short term volatility might ensue. That's my thought. Steve, what do you think?
Stephen Hoedt [00:18:01] Yeah, I think to the- for the market impact, which is what we would be focused on that; that's the key piece that I think that it would, it could potentially increase volatility again as we get this potentially unwound. And you know it's just kind of it'll be fascinating to watch how the dynamics actually play out. Because if they actually have to go back and pay back the people who paid these tariffs, that's going to be, to quote Amy Coney Barrett, messy or a mess. So like I think that, the impact there would be, kind of all over the place. But to your point, I think it's 100% likely that they would find some other authority and try it all over again.
And that's what, to me would really increase the volatility. So, hard to hard to game it out other than to say that that maybe volatility levels next year as we head into the decision period will be higher rather than lower.
Brian Pietrangelo [00:18:57] Well, thanks for the conversation today, George, Steve and Rajeev, we appreciate your insight 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.